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Articles 17th May 2023

Travis Perkins Commercial Focus – Spring 2023

Case Law

Legislation

News


Case Law

Supplier found liable to contractor for supplying unsatisfactory quality materials

BDW Trading Limited v Lantoom [2023]

In this case, the court found that a supplier was liable to a contractor for supplying stone of unsuitable quality for its intended use on the development.

The court also considered whether delivery notes amount to a counter-offer.

The court decided that delivery notes do not amount to a counter-offer to a purchase order and therefore the supplier cannot rely on their own terms and conditions.

You can read the full judgement here.

Comment: The implication of this case is that a heavier burden will be placed on suppliers to comply with the terms of the purchase order in procuring the materials they supply. This was further qualified by Jefford J obiter by indicating that the Sales of Goods Act 1979 would have required the materials to be fit for purpose and of high quality even if these had not been express provisions of the purchase order.

For further details, please contact Louise Wilson and Josh Middleton.

 

Wright v The Person or Persons Unknown

[2022] EWHC 2982 (SCCO)

A person unknown, who refused to disclose their identity during a claim for breach of copyright, was prohibited from challenging a bill of costs unless they disclosed their identity during the proceedings.

Issues

The claimant issued proceedings against the defendants for infringing his copyright. The claimant alleged, in particular, that the defendant made a copy of a literary work entitled ‘Bitcoin: a Peer-to-Peer Electronic Cash System’ which was available on a website operated by the defendant.

The defendant refused to identify themself and therefore proceedings were issued against persons unknown. As the defendant did not file a Defence, the claimant applied for default judgment. The court found in favour of the claimant and an application was filed by the claimant for an order that, unless the defendant identified themself within seven days, the defendant would be prohibited from participating in the detailed assessment proceedings relating to costs.

Decision

If the defendant wanted to challenge the claimant’s bill of costs, the defendant had to identify themself. It was held to be a fundamental principle of civil procedure that anybody wishing to participate in legal proceedings should identify themself at the outset of their involvement in those proceedings.

You can read the full judgement here.

Comment: This case is likely to be an authority of wider impact, particularly given the increase in litigation against persons unknown, and establishes that parties will need to identify themselves to challenge proceedings for costs made against them.

For further details, please contact Louise Wilson and Josh Middleton.

 

Consulting Concepts International Inc v Consumer Protection Association (Saudi Arabia)

[2022] EWCA Civ 1699

The Court of Appeal upheld the strike out of a breach of contract claim as time barred, as it had been commenced more than six years after the cause of action first accrued. The court confirmed that a ‘special term’ containing clear words is required in a contract to change the usual position that the cause of action, for payment of services, accrues when the work is completed.

Issues

The appellant, Consulting Concepts International Inc (a consultancy firm), contracted with the Consumer Protection Association in June 2013 to provide research and consultancy services. The contract specified that Consulting Concepts would submit invoices to Consumer Protection payable “within 90 days”. Consulting Concepts provided consultancy services, as per the contract, between June 2013 and not later than 17 December 2013. During this period, Consulting Concepts issued a number of invoices which were not paid. On 27 December 2019, Consulting Concepts issued its claim form in the Commercial Court. Consumer Protection subsequently applied for strike out of the claim on the basis that the claim was time-barred. This application was granted in March 2022 and subsequently appealed by Consulting Concepts.

Decision

The Court of Appeal held that the claim was time-barred, because the six-year limitation period (at s.5 of the Limitation Act 1980) ran from the date the services are performed – not when payment of the invoices was due. As the services had been supplied by 17 December 2013, the claim issued on 27 December 2019 was out of time.

The Court accordingly upheld the principle laid down in Henry Boot Ltd v Alstom Ltd [2005] EWCA Civ 814: “[W]here A does work for B at B’s request on terms that A is entitled to be paid for it, his right to be paid for it (ie his cause of action) arises as soon as the work is done ‘unless there is some special term of the agreement to the contrary’.

It was held that the contractual provision of invoices being payable within 90 days was not a ‘special term’ to disapply the usual six-year limitation period.

Comment: When issuing a claim for breach of contract, claimants will need to consider carefully the date on which the services were performed (i.e. completed) – as this is the date on which the limitation period begins.

For further details, please contact Louise Wilson and Josh Middleton.

 

RiverRock European Capital Partners LLP v Harnack

[2022] EWHC 3270 (Comm)

A claimant was denied a remedy on the basis that, while certain events might have constituted breaches of contract, none were material.

Issues

The claimant, an investment firm, appointed a company (Manager) to act as its consultant and appointed representative in connection with its investment fund. However, difficulties were encountered in sourcing investors for the funds and securing investment opportunities for the funds. This led the claimant to consider changing the Manager, but for this to happen, there had to be contractual grounds for termination.

Against this background, the Manager omitted to file a confirmation statement with Companies House. The Registrar of Companies accordingly struck the Manager off the companies register and it was dissolved. The claimant terminated its agreements with the Manager, on the basis of alleged material breaches arising from the Manager being struck off and dissolved and claimed repayment of fees already paid.

Decision

The court noted that the meaning of a ‘material breach’ depends on context and is dictated by reference to the consequences which would flow from a finding that one has occurred. ‘Materiality’ is assessed according to the details and impact of the breach (which must be ‘substantial’ or ‘serious’).

The court cited the factors mentioned in Phoenix v Cobweb Information [2005] 5 WLUK 424 in determining whether a breach was material: in particular, the actual breaches, the consequences of those breaches for the innocent party, the breaching party’s explanation for the breaches and the significance of the breaches in the context of the parties’ agreement.

It was held that there was no material breach through the strike-off and dissolution of the Manager, because the dissolution was due to an oversight and was capable of remedy (restoration of the Manager, as a company, had already been put in motion).

You can read the full judgement here.

Comment: This case shows that the court will assess the ‘materiality’ of a claimed material breach, in determining whether a contract has been terminated lawfully.

For further details, please contact Louise Wilson and Josh Middleton.

 

French Advisory Partners LLP v AA Ltd (formerly AA PLC)

[2023] EWHC 108 (Comm)

Two parties had been engaged in lengthy negotiations and a great deal of work had been carried out between them. However, in the absence of a signed engagement letter, the judge concluded that there was no binding contract between them. The judge also considered whether there was an implied contract or a claim in restitution.

Issues

The AA (Defendant), a home and car insurance business, had substantial debts in 2018. In July 2018, the Defendant approached Fenchurch (Claimant), who is a M&A specialist in the insurance sector, to assist in the sale of its home insurance business.

The Claimant produced an Information Memorandum for the sale which was later put on hold in November 2018. In February 2019, the Claimant was then instructed to assist on the sale of the Defendant’s entire insurance division. A draft engagement letter was produced, but it was never signed, and ongoing talks were held in relation to fees. Work was nonetheless completed to an advanced stage, but in November 2020, the Defendant decided not to proceed with the project.

The Claimant issued a claim against the Defendant for their fees in relation to work done and alleged that a binding contract had been formed. The Defendant argued that there was no binding contract, as the engagement letter had not been signed and it did not incorporate all of the terms.

Decision

In reaching his conclusion that there was no contract, the judge drew upon RTS v Molkerei [2010] UKSC 14. In this case, it was held that performance of a draft contract demonstrated an intention to contract on the terms of the draft, notwithstanding it was stated to be subject to contract. In the AA case, it was held that whilst both parties expected there would be a binding agreement at some point, they did not intend to be bound immediately. They were, in effect, still finalising the terms of the agreement.

The judge rejected the Claimant’s argument for there to have been an implied contract, on the basis that it would be artificial to imply that the Claimant would be paid a reasonable fee for its work (Benedetti v Sawiris [2013] UKSC 50).

The Claimant did, however, succeed in its claim in restitution for unjust enrichment. Applying the principles of MSM Consulting Limited v United Republic of Tanzania [2009] EWHC 121 (QB), the judge concluded that the Defendant had received a benefit at the Claimant’s expense; namely the vast amount of work it had done.

Comment: Although no new legal principles arise out of this case, it reaffirms the need for clarity in showing that there is a binding contract, especially in a commercial context. Practitioners engaged in negotiations are reminded to explicitly agree the terms on which they want to contract.

For further details, please contact Louise Wilson and Josh Middleton.


Legislation

New secondary legislation defines ‘higher risk buildings’

The Building Safety Act 2022 (BSA 2022) introduced more stringent safety regimes and regulations for buildings classed as higher-risk. This included drawing a distinction between higher-risk buildings in the design and construction phase and those in the occupation phase of a building’s lifespan. The Government has affected this change through secondary legislation, namely the Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023 (HRB 2023) which came into force on 6 April 2023.

The definitions of a higher-risk building are identical to those proposed in prior draft versions of the secondary legislation, chiefly:

  • buildings of at least 18m in height or seven stories that comprise two or more residential units will be listed as higher-risk;
  • excluded from this definition are secure residential institutions, hotels, and military barracks.

Functionally, the difference in definition between higher-risk buildings in the design and construction phase and occupation phase of a project is that care homes and hospitals fall under the former but not the latter. This results from care homes and hospitals being classed as workplaces during occupation, thus falling under a different statutory regime.

For further information, please visit this Practical Law article.

Comment: The main implication of introducing these definitions is that a greater number of buildings will be caught under the new regime which was recommended in the wake of the Grenfell tower tragedy through an independent review. Furthermore, it will allow for care institutions to be listed as higher-risk buildings across a longer period, ensuring more stringent standards across the entirety of the project’s lifespan.

For further details, please contact Chris Holwell, Richard Adams, Paul Burnley, or Amy Morley from the Construction team, or alternatively Louise Wilson or Josh Middleton for a litigation perspective.


News

‘Carbon Neutral’ Advertising Guidance

The ASA has updated its Advertising Guidance regarding “misleading environmental claims and social responsibility” to cover the use of ‘carbon neutral’ and ‘net zero’ claims.

The updates draw on certain key principles in the CMA’s guidance on environmental claims on goods and services.

As with much ASA guidance this is rooted in the need to avoid misleading consumers. It suggests that the best way to do so here are to:

  • Qualify claims: Qualify ‘carbon neutral’, ‘net zero’ and similar claims by setting out the basis for the claims you are making.
  • Verifiable strategy for future claims: Don’t refer to your goals to reach ‘net zero’ or ‘carbon neutrality’ unless you can demonstrate how you will be achieving those goals.
  • ‘Reducing’ versus ‘offsetting’: Make it clear where your carbon emission claims are based on: (a) verifiable reductions in emissions; and (b) carbon offsetting.
  • Evidence for offsetting claims: As with all advertising claims, you must be able to back up any statements you are making about how offsetting will be achieved and provide details of any relevant schemes.

Now this guidance has been given we can expect the ASA to take more proactive measures to address unqualified ‘carbon neutral’ and ‘net zero’ advertising claims.

Comment: Greenwashing claims are coming under increasing scrutiny both from regulators, NGOs and the public at large. The ASA’s guidance provides some welcome guidance on what is (and more importantly, what is not) acceptable when it comes to shouting about your green credentials.

For further details, please contact Rebecca Howlett.

 

Climate Change Glossary

Are you confusing your Scope 1, 2 and 3 emissions, do you want to understand whether your Transition Plan contains Paris-aligned targets, or do you need to decipher some VERS, VCMs and RMUs?  Practical Law has published a useful glossary to help you begin to understand climate change terminology in the UK.

Comment: The technology behind, and regulation of, environmental standards is one of the most rapidly developing areas of law today. As such, it is useful to have a touchstone available to make sure you can give yourself some clarity on the various concepts involved.

For further details, please contact Rebecca Howlett.

 

Reorganisation of Governmental departments

The Government has reorganized various Government departments, principally:

  • the creation of a new ‘Department for Energy Security and Net Zero’, tasked with “securing our long-term energy supply, bringing down bills and halving inflation”;
  • the creation of a new ‘Department for Science, Innovation and Technology’;
  • the creation of a combined ‘Department for Business and Trade’ (incorporating the previous Department for Business, Energy & Industrial Strategy); and
  • the “re-focusing” of the existing Department for Culture, Media and Sport.

Comment: Whilst the impact of this reorganization remains to be seen, it is important to have it on the radar.

For further details, please contact Rebecca Howlett.

 

Contract Variation Toolkit

Practical Law has updated its useful Contract Variation Toolkit. This includes a range of relevant resources, including sample clauses detailing how and when contracts may be varied, precedent agreements / deeds for such variations and relevant guidance throughout.

Comment: Contract variations are an ever-present requirement, making this “one stop shop” of guidance notes and standard documents a very useful reference point.

For further details, please contact Rebecca Howlett.

 

Consultation on changes to building control procedures and the roles of building control professionals under the Building Safety Act 2022

A consultation covering different aspects of the building control procedures and the roles of building control professionals under the Building Safety Act 2022 (BSA), closed on 14 March 2023.

It addressed a wide variety of points, including;

  • changes to initial notices and plans certificates for non-High Risk Buildings (HRB)
  • amendments to, and the eventual revocation of, the Building (Approved Inspectors etc) Regulations 2010 (SI 2010/2215). This regulation will become consolidated into secondary legislation with appropriate amendments such as the provision of greater detail on the carrying out of works; and
  • new processes for the transference of responsibility for building projects from a registered building control approver to another, without the burden automatically reverting to the local authority.

The recommendations of the consultation will not take immediate effect but will likely be introduced alongside the BSA as it is introduced but this is yet to be confirmed.

Comment: The Building Safety Act 2022 has been in force for some time but various changes intended to be brought in under it are subject to various secondary legislation. The consultation has now closed and we await the recommendations from the consultation to see its impact on the building control process.

For further details, please contact Amy Morley or Paul Burnley.

 

Third set of amendments to the NEC4 suite of contracts published

The NEC issued its third set of amendments to the NEC4 suite of contracts on 9 February 2023. These amendments cover a variety of clauses across the individual contracts, but a selection of the key amendments include:

  • secondary Option X22 has been amended to allow greater flexibility in its application across the project as it develops. This aligns with guidance from the NEC published last year;
  • secondary Option X29 has now been included in all main contracts, having originally been developed as a stand-alone clause; and
  • the Engineering and Construction Short Contract and Engineering and Construction Short Subcontract have been amended to limit the contractor’s liability to reasonable skill and care over presumed liability.

These amendments follow established guidance from the NEC and will have few unforeseen implications beyond the slight changes mentioned above.

For more information on  this topic, please visit this Practical Law article.

Comment: The few amendments introduced are to reflect guidance from the NEC that has already been in place or incorporate clauses that have previously been published as standalone clauses. The changes should have few unforeseen implications on projects.

For further details, please contact Chris Holwell.

 

Greater clarity on the role of the accountable person provided by the Government

The Government has issued a response to industry concerns over questions related to the role of the Accountable Person (AP), who is the person/organisation who owns or has control of the higher-risk building involved. This includes the responsibilities connected to the fire and structural safety of the building when occupied.

These clarifications include:

  • where the person/organisation owns the freehold but has no direct control over the building they will not be the AP;
  • where the AP holds a legal estate in possession or a repairing obligation, they will be responsible for that common area, including balconies where the AP holds possession or has an obligation over that part of the exterior of the building; and
  • the Government has said that certain information relating to the type and date of significant building work undertaken in a higher-risk building will be optional to refer to the Building Safety Regulator instead of being mandatory.

The response provides much greater clarity on important technical aspects of the law relating to AP’s and the extent of their influence over the higher-risk buildings they own/control.

Comment: The Government’s response on the role of the Accountable Person alongside secondary legislation (The Higher-Risk Buildings (Key Building Information etc.) (England) Regulations 2023 and The Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023) should allow those responsible for managing higher risk buildings to be clearer on their roles and responsibilities as well as the information they must maintain and provide the regulator in relation to higher risk buildings.

For further details, please contact Amy Morley.

 

Trade marks in the Metaverse

During the second quarter of 2023, the European Commission is likely to take its first steps into the metaverse (notably the first legal framework concerning metaverse came into force on 7 July 2022 in Monaco), proposing a non-legislative initiative on metaverse and virtual reality. The metaverse is set to be the next version of the internet in the coming years and is envisioned to be a collective virtual space, combining both physical and digital worlds.

With regards to use of trademarks in the metaverse, some companies have already started to file to trademark registrations for virtual goods. Common classes applied for now include class 9, for downloadable virtual goods, class 35 for retail store services, class 41 for entertainment services, class 42 for on-line non downloadable virtual goods and NFTs and class 36 for financial services, including digital tokens. Once examined by various trademark offices, the trademark specifications will become more standardised and will assist later applicants with protecting their rights in the metaverse.

Comment: TP should consider including a wider specification for its new trade mark filings to cover virtual goods and services which the Group may want to rely on in the future. Wider specification would bolster future trademark enforcement, aid any future licensing deals (which may be easier if registrations for virtual goods/services already exist) and send a clear signal to the market that TP is mindful of the need to protect its brands in the metaverse. The benefits of registration need to be balanced against budgetary constraints which are to be dictated by the importance of the brand and whether the brand lends itself to exploitation virtually.

For further details, please contact Lloyd Lane.


The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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