Case Law Updates - April 2022

IBM United Kingdom Ltd v Lzlabs GmbH & Ors [2022] EWHC 884 (TCC) 

The Claimant and Second Defendant entered into an agreement in 2013 (“the Agreement”), by which the Second Defendant was licensed to use aspects of the Claimant’s Mainframe Software.

The First Defendant is a supplier of software including a Software Defined Mainframe platform ("the SDM"). The Second and Third Defendants, are completely owned subsidiaries of the First Defendant.

It was the Claimant's case that the SDM was constructed utilising knowledge gleaned from the Claimant's Mainframe Software through reverse engineering, in breach of the conditions of the Agreement.

The Fourth and Fifth Defendants are officers of the First-Third Defendants who were alleged to have induced the Second Defendant into breaching the terms of the Agreement.

The Fourth and Fifth Defendants applied to strike out the claim against them, pursuant to CPR Pt 3.4(2)(a) or (b), or in the alternative, seek summary judgment pursuant to Pt 24. This was argued on the basis the case against them was inadequately particularised and failed to disclose a tenable cause of action. Additionally, they were acting as directors of the Second Defendant and following the case of Said v Butt [1920] 3 KB 498, they cannot be liable for inducing a breach of contract by the Second Defendant unless shown to have been acting in bad faith or outside of their scope of authority.

The Claimant accepted the case is set out in broad terms but says it provides sufficient detail where the relevant dealings were all within the private knowledge of the Defendants, and that there were sufficient prospects.

Decision

CPR Pt 3.4(2)(a) sets out that the striking out of a statement of case applies if it "discloses no reasonable grounds for bringing or defending a claim".

Mr Justice Eyre found that the Amended Particulars of Claim adequately identified the matters relied upon as to the Defendants' knowledge of the agreement and fact that a breach would result from the actions of the Second Defendant. The Judge was satisfied that the allegation that these Defendants intended the breaches to occur was sufficiently pleaded and found it to be ‘just sufficient to avoid being struck out under Pt 3.4(2)(a) or (b)’, provided the cause of action is properly established in other respects, the sparse detail included did not mean it did not disclose reasonable grounds for bringing the claim.

It was however, found to be ‘simply unrealistic’ that, in the absence of clear evidence, to suggest that in directing, instructing, or requesting the Second Defendant to breach the ICA the Fourth and Fifth Defendants were acting other than as directors of the Second Defendant. It followed that this part of the Amended Particulars of Claim had no real prospect of success and the Fourth and Fifth Defendants were entitled to summary judgment.


John Graham Construction Ltd v Tecnicas Reunidas UK Ltd [2022] EWHC 155 (TCC)

The Claimant was hired as a subcontractor by the Defendant under a subcontract ("the Subcontract") for the construction of the Tees Renewable Energy Plant Biomass Power Station. The parties had a number of disagreements, which resulted in four adjudications and two arbitrations. The first arbitration finished in early 2021 and reached a final determination of topics presented to the arbitration tribunal through two partial awards. The second arbitration is still in progress. The adjudicator's ruling in the first adjudication was reversed by Award 1.

The Defendant had not paid the Contra Charge awarded because it claimed it was a separate and distinct component of Adjudication 4 and that the Adjudicator exceeded his jurisdiction by deciding that the sum was payable by the Defendant. Despite the fact that the decision in Adjudication 1 was reversed by Award 1, the Adjudicator made the mistake of concluding that the decision in Adjudication 1 "protected the Claimant from culpability for breach of contract." In doing so, the Adjudicator went beyond his authority.

The Claimant therefore claimed that the Defendant engaged in Adjudication 4 without reserving its position and has relinquished its right to contest the Adjudicator's jurisdiction, and that the Adjudicator did not exceed his jurisdiction in any case. The Defendant has not paid the Contra Charge because it claims it is a separate and distinct component of Adjudication 4 and that the Adjudicator exceeded his jurisdiction by deciding that the sum was payable by the Defendant. Despite the fact that the decision in Adjudication 1 was reversed by Award 1, the Adjudicator made the mistake of concluding that the decision in Adjudication 1 "protected the Claimant from culpability for breach of contract." In doing so, the Adjudicator went above his authority.

Decision

The Adjudicator determined, among other things, that the Defendant was not entitled to levy the Contra Charge in a Decision dated April 16, 2021. Section 6 of the Decision deals with the subject of the Contra Charge. In section 6.1, after summarising the parties' arguments.

The decision that the Defendant was not entitled to levy the Contra Charge, that the Adjudicator did not overstep his authority, and that the Contra Charge Decision was fully enforceable.


The Rugby Football Union v Clark Smith Partnership Ltd & Anor [2022] EWHC 956 (TCC)

The case relates to alleged defective renovation works carried out at Twickenham stadium before the 2015 World Cup.

The works involved the installation of High Voltage power cables in buried ductwork. This was to be done in accordance with works package A07.1 and the pulling of the cables was to be done pursuant to works package A07.2. This dispute related to the former package, which the Claimant engaged the First Defendant to design, and Second Defendant to install. Neither of the Defendants were involved in the pulling through of the cables following this.

The Claimant contended that there were defects in the ductwork which caused damage to the cables when they were pulled through, resulting in them incurring rectification costs of £4,440,909.45. The Claimant was indemnified by Royal & Sun Alliance Plc (“RSA”), in the sum of £3,334,405.26. The Claimant sought these sums from the Defendants.

The key issues in the dispute are as follows:

  1. Whether the insured losses sought by the Claimant and RSA in the sum of £3,334,405.26 are irrecoverable because RSA cannot exercise subrogation rights and/or because on a proper interpretation of the project policy and JCT contract, the Claimant/RSA are not entitled to claim the insured losses;
  2. If the answer to Question 1 is that the Claimant cannot recover its insured losses from the Second Defendant, does this prevent the First Defendant from claiming a contribution them under the Civil Liability (Contribution) Act 1978?

The Second Defendant argued that even if it was was not insured against the same risk to the same extent as the Claimant then Memorandum 1(f) of the insurance policy operated as a waiver of subrogation, preventing the Claimant from bringing a subrogated claim in respect of its insured losses.

Decision

The Judge rejected the Second Defendant’s argument and found that the waiver in Memorandum 1(f) only extends to matters in respect of which the Second Defendant was insured under the policy. Therefore, the Second Defendant was not co-insured with the Claimant to the extent of the losses in issue and the waiver of subrogation did not assist. This conclusion was also made in respect of the terms of the contract. In light of this finding, it was open to the First Defendant to seek a contribution from the Second Defendant.

 


Struthers & Anor v Davies & Anor [2022] EWHC 333 (TCC)

Facts

Mr Gavin Struthers and Mrs Stacey Struthers (the Claimants) appointed a main building contractor, Alastair Davies Building (the First Defendant) under a building contract dated March 2015, to carry out works at the Claimants’ residential property in Surrey.

Under the contract, completion was expected to occur by August 2015. However, the First Defendant failed to comply with this date and failed to complete the works. No extensions of time were applied for and the works remained incomplete in December 2015.

As a result, the Claimants served a notice of their intention to terminate the contract at the First Defendant’s residential address. This was followed by the Claimants termination notice in January 2016, which was served by both post and email.

Upon terminating the contract, the Claimants issued a claim against the First Defendant for defective works, and for the costs for completing the outstanding works.

Issues

The issues for the court were:

  1. To what extent were the works carried out by the First Defendant defective, and the costs incurred by the Claimants as a result;
  2. Did the Claimants validly terminate the building contract (in compliance with the contractual provisions); and
  3. What costs were the Claimants’ entitled to for completing the works.

Judgment

The court addressed each issue separately.

In assessing the quality of the works and remedial costs, the court considered whether it was necessary to demolish the extension constructed by the First Defendant, and reconstruct the foundations. The court relied on an independent expert’s evidence, which showed the works were defective and demolishing the initial extension constructed by the First Defendant was necessary.

In relation to termination, the court held the contractual termination was invalid for the following reasons:

  1. the notices were served by the Claimants and not by their architect (the Second Defendant) as required under the contract;
  2. the First Defendant did not acknowledge receipt of the notice of intention; and,
  3. the timescales for contractual termination were not complied with (the notice to terminate was served before the expiry of the 14 days after service of the notice of intention).

However, the court held the notice of termination was clear acceptance of the First Defendant’s repudiatory breach of the contract (failure to comply with the contract and failure to complete the works), and the costs incurred by the Claimants for completing the works were objectively reasonable.

Therefore, the court awarded the Claimants damages for the defective works and for the incomplete works.


Please note, these updates are for educational purposes only and should not be relied on as legal advice.  Barton Legal do not make any representations as to the legal validity of them and any claims that this is legal advice will be unsubstantiated.