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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> GB Building Solutions Ltd v SFS Fire Services Ltd (t/a Central Fire Protection)  EWHC 1289 (TCC) (25 May 2017)
Cite as: 172 Con LR 18,  EWHC 1289 (TCC)
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QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
TECHNOLOGY AND CONSTRUCTION COURT
1 Bridge Street West, Manchester M60 9DJ
B e f o r e :
SITTING AS A JUDGE OF THE HIGH COURT
| GB BUILDING SOLUTIONS LIMITED
- and -
SFS FIRE SERVICES LIMITED
(t/a CENTRAL FIRE PROTECTION)
Timothy Killen (instructed by Kennedys Law LLP, London) for the Defendant
Hearing dates: 27, 28 March 2017
Supplemental closing submissions: 3, 5, 7 April 2017
Draft judgment disseminated 2 May 2017
Crown Copyright ©
His Honour Judge Stephen Davies:
"The Contractor shall, prior to the commencement of the Sub-Contract Works, ensure that the Joint Names Policy under whichever of Insurance Options A, B or C applies to the Main Contract is issued and/or endorsed in terms that, in respect of loss or damage by the Specified Perils to the Main Contract Works or relevant Section, work executed and Site Materials insured thereunder, either the Sub-Contractor is recognised as an Insured under that Policy or the insurers waive any right of subrogation which they may have against the Sub-Contractor; and that this recognition or waiver shall continue in respect of the Sub-Contract Works or such work in the Section up to and including the Terminal Date."
"The Sub-Contractor shall notify the Contractor in writing of the date when in his opinion the Sub-Contract Works as a whole or such works in a Section are practically complete and he has complied sufficiently with clauses 2.24 and 3.20.4 in respect of that completed work. If the Contractor does not dissent in writing, giving reasons, within 14 days of receipt of the Sub-Contractor's notice, practical completion of such work shall be deemed for all the purposes of this Sub-Contract to have taken place on the date so notified."
(1) The definition of Practical Completion in the schedule of modifications does not apply to section 6. Instead clause 2.20 applies for the purposes of ascertaining the Terminal Date in clause 6.1.
(2) The defendant gave a valid notice under clause 2.20.1 of the date of practical completion as being either 26 October 2009 or, if not, 1 December 2009 and, since the claimant did not dissent in writing within the specified period, practical completion was deemed to have taken place on that date.
(3) Even if, which I do not accept, it is relevant to consider whether or not practical completion in fact had occurred by either date, I am satisfied that it had occurred by 9 December 2009.
(4) It follows that the answer to the preliminary issue is that the flood occurred after the Terminal Date.
My reasons follow.
The first issue
The approach to construction
"10. The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds  1 WLR 1381 (1383H-1385D) and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen  1 WLR 989 (997), Lord Wilberforce affirmed the potential relevance to the task of interpreting the parties' contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations. When in his celebrated judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896 Lord Hoffmann (pp 912-913) reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham in an extra-judicial writing, A new thing under the sun? The interpretation of contracts and the ICS decision Edin LR Vol 12, 374-390, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree.
11. Lord Clarke elegantly summarised the approach to construction in Rainy Sky at para 21f. In Arnold all of the judgments confirmed the approach in Rainy Sky (Lord Neuberger paras 13-14; Lord Hodge para 76; and Lord Carnwath para 108). Interpretation is, as Lord Clarke stated in Rainy Sky (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause (Rainy Sky para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2)  2 All ER (Comm) 299 paras 13 and 16); and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest: Arnold (paras 20 and 77). Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms.
12. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated: Arnold para 77 citing In re Sigma Finance Corpn  1 All ER 571, para 10 per Lord Mance. To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.
13. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance spoke in Sigma Finance Corpn (above), assists the lawyer or judge to ascertain the objective meaning of disputed provisions.
14. On the approach to contractual interpretation, Rainy Sky and Arnold were saying the same thing."
(1) Clauses 1.34 – 1.38 made provision for testing to be carried out in the presence of the contract engineer and for test certificates to be prepared and recorded.
(2) Clause 1.40 made provision for maintenance and operating instructions for the installations to be prepared prior to the issue of the certificate of practical completion and handover.
(3) Clause 2.3 provided more detail as to the scope of the works, which included "the testing, setting to work and commissioning of the completed installations" and the "production for comment of the operating and maintenance manuals ("OMMs" for short) and as fitted drawings in draft form a minimum of 2 weeks prior to practical completion.
(4) Clause 2.4 provided more detail as to the extent of the works, explaining in summary how sprinkler protection was to be provided to specified areas of the building, and how a pumped water supply to the sprinkler heads was to be provided from a water storage tank in the basement, which would include an overflow. It also explained that the pipework was to be pressure-tested to 15.0 bar for a minimum 2 hour period, and made further reference to the record drawings and OMMs.
(1) Item 7.1.15 made reference to the OMMs to be provided in draft 4 weeks prior to practical completion of the subcontract works with 2 further sets to be issued 2 months prior to completion of the main contract.
(2) Item 10 was entitled "handover" and provided as follows:
"The Sub-Contractor shall give 7 days notice of the day the Sub-Contract works are considered to be complete and ready for handover to [the main contractor]. The site manager will then inspect the works and decide whether or not they are, in his opinion, complete. When the works are accepted, the site manager will certify, in writing, to that effect, and from that date, responsibility for the protection of the listed works will transfer to [the main contractor]."
(One of the issues which arises in this case as to how, if at all, this provision for handover fits in with the contract provisions for practical completion.)
The specific terms in relation to practical completion
"The issue of the Certificate of Practical Completion pursuant to the Main Contract".
(a) The date of practical completion of the Sub-Contract Works or, in respect of a Section, of such works in the Section, as determined in accordance with clause 2.20; or
(b) The date of termination of the Sub-Contractor's employment under this Sub-Contract, however arising;
Whichever first occurs."
"If the Contractor so dissents, then as soon as he is satisfied that such work is complete and that there has been such compliance, he shall as soon as practicable notify the Sub-Contractor in writing and practical completion of such work shall be deemed for all the purposes of the Sub-Contract to have taken place on the date notified by the Contractor or on such other date as is either agreed or determined in accordance with the dispute resolution procedures of this Sub-Contract. Such date shall in any event be no later than the date of practical completion of the Main Contract Works or relevant Section or part under the Main Contract. Any agreed date shall be confirmed by the Contractor to the Sub-Contractor in writing."
The competing arguments
Discussion and decision
(a) First, it is relevant to the apportionment of responsibility for injury and damage and for the respective insuring obligations pursuant to clause 6, which is of course what this case is about.
(b) Second, it is relevant to the apportionment of responsibility for delay.
(c) Third, it is relevant to the payment obligations under the subcontract, particularly to retention.
(d) Fourth, it is relevant to the commencement of the defects liability period.
It may also be relevant in other respects, for example the right of termination for subcontractor default under clause 7.4.1, but not in a way which is of any particular relevance so far as this case is concerned.
Defects liability period
Conclusion on issue 1
The second issue
The facts of this case
"Contract No: 20098
We hereby certify that work on the fire protection system for GB Building Solutions Ltd, installation number type and location: 150mm wet installation control valve, protecting all levels at Peel Court
Work has been completed.
Was left fully operational when our operatives left site. Valve turned off at tank.
On 26 October 2009.
Signed for Central Fire Protection 26 October 2009 Chris Follows Fitter
Signed by client 3 November 2009 S Morrison Site Manager."
(1) Two interface units and monitoring valves needed to have the status changed from normally open to normally closed. His evidence was that this was part of the process for connecting the sprinkler alarm monitoring panel to the main alarm panel. His evidence as I understood it was that this would have been done by him once the system had been connected to the main alarm system and thus would have been done when the system was made live at handover. His evidence was that because handover did not happen prior to the flood, for reasons I explain later, he did not complete this work until after the New Year. He explained that this was a simple job for an electrician to do.
(2) Two locks on the alarm panel needed replacing. He explained that locks had previously been fitted but had been broken by some unidentified person, so that the defendant had agreed to replace them free of charge as a goodwill gesture. He could not recall when this was done. In my judgment on the balance of probabilities it was something which must have been done on or by the 9 December visit, in circumstances where it was being chased by the claimant on 27 November and there was no subsequent reference to it being an outstanding item.
(3) The completion of the discharge pipes from the tank once the bund had been constructed. What this meant was that since the water supply tank was located in the basement there was a risk that if it overflowed water would flood the basement. The plan was therefore for the claimant to undertake, as builders work, the construction of a bund (essentially, a low wall) so that any water overflow would be directed into the area protected by the bund and not flood the whole of the basement. As Mr Ayling accepted in evidence, the contract required the claimant to provide the drainage facilities, so that it was simply a question of the discharge pipes being laid within these drainage gullies. The bund had not been constructed by the claimant and, until that was done, the pipes could not be run to this overflow location. That did not render the sprinkler system inoperational since, as Mr Gordon said in re-examination, the bund was designed to operate as a failsafe rather than as an essential part of the system. It did however mean that if the sprinkler system was operated and if – in particular – it was fully tested with the water supply fully operational - there was a risk that water would overflow onto the basement floor. There is no evidence that this bund was ever installed prior to the flood and Mr Ayling explained in evidence, after the flood there was a redesign of the basement area including a different bund.
"As discussed please find attached test and completion certificates.
Please confirm by return 9th December for sprinkler system handover to building management / maintenance company".
When if at all did the defendant give a valid notice under clause 2.20.1?
When if at all was practical completion in fact achieved?
Ms Colter referred me to:
(1) The decision in Jarvis and Sons v Westminster Corp  1 WLR 637, to the effect that practical completion means completion of all the construction work that has to be done.
(2) HW Nevill v William Press (1981) 20 BLR 78: practical completion can be certified where there are very minor, "de minimis" items of work left incomplete.
Mr Killen referred me to the judgment of the Court of Final Appeal of the Hong Kong Special Administrative Region in Mariner International Hotels v Atlas Limited FACV No 3 of 2006, at paras  –  to the effect that: "practical completion" is to be considered a "legal term of art" which means that "the works have been completed free from patent defects other than ones to be ignored as trifling".
(a) Practical completion means completion for all practical purposes, and what that completion entails must depend upon the nature, scope and contractual definitions of the Works, as they may have developed by way of variation or architect's instructions.
(b) De minimis snagging should not be a bar to practical completion unless there is so much of it that the building in question cannot be used for its intended purposes.
(c) Practical completion requirements can be relaxed by agreement between the parties.
(1) What happened after the date of the flood cannot be relevant to the question whether or not the subcontract works were practically completed as at the date of the flood.
(2) It is perfectly possible for parties to a building contract to proceed on the basis that additional works are to be undertaken as variations even though practical completion has already taken place. So long as they agree the contract can be varied accordingly, on a formal or an informal basis, but that does not have any retrospective effect as regards practical completion if it has already taken place unless the parties agree that it should, and there is no evidence whatsoever that they did in this case.