Construction Law Updates - Buckingham Group Contracting Ltd V Peel L&P Investments and Property Ltd [2022]

Buckingham Group Contracting Ltd v Peel L&P Investments and Property Ltd

Citation: [2022] EWHC 1842 (TCC)

Authors: Hiba Irshaid & Dan Hughes

Introduction

The England and Wales Technology and Construction Court ("TCC") addressed the case of Buckingham Group Contracting Ltd v Peel L&P Investments and Property Ltd, where the Contractor sought declarations and issued Part 8 Proceedings concerning liquidated ascertained damages (“LADs”) provisions, alleging that the LADs provisions were inadequately drafted and thus, the provisions are deemed to be void and/or unenforceable.

The TCC reiterated the judiciary reluctance in rendering poorly and erroneously drafted contract conditions as void and unenforceable due to ambiguities arising from tender documents. This case also reinstates the court’s decision in interpreting contractual clauses based on the parties’ intent.

The Facts

Peel L&P Investments and Property Ltd (the “Defendant”), a property development company, engaged Buckingham Group Contracting Ltd (the “Claimant”) as its contractor for the design and build for the development of a new plant for the manufacture of corrugated cardboard at Ellesmere Port in Merseyside, in Northwest England.

The works were pursuant to an amended JCT Design and Build 2016 contract (the “Contract”), subjected to a schedule of bespoke amendments. The Contract provides that the schedules form part of the agreement, which shall have full effect as if set out in the full body of the agreement. The schedule was a tender document, which was eventually appended to the Contract without modifications to it. Further, the Contract stated in the event of any difference, discrepancy, or conflict between the Schedule of Amendments and the JCT standard form contract terms, the former shall prevail.

The Contract particulars explicitly referred to a bespoke liquidated damages schedule, Schedule 10. The Date for Completion stipulated in the contract was on 01 October 2018, with a sum “Contract Sum” of circa £26.2 million, and a regime for the payment of LADs stated in Schedule 10 of the Contract. It is important to note that it has been reiterated in the Contract particulars, on several occasions, that “the completion by Sections does not apply”.

Schedule 10, on which the proceedings turned, provided that in the event of conflict or inconsistency between the wording of this schedule and the Contract, the wording of Schedule 10 shall take precedence. Schedule 10 comprised, inter alia, a table setting out:

• A list of seven milestone dates, up to a ‘Practical Completion’ date of 30 November 2018 (this contradicts the Date for Completion stipulated in the Contract particulars).
• A proposed Contract Sum Analysis (“CSA”), i.e., a proposed Contract sum of circa £25.7 million (which contradicts the Contract Sum defined within the Contract particulars).
• Two sets (two columns) of LADs rates for each milestone date defined in Schedule 10 were outlined in the form of a table, which were calculated on the basis of both, daily percentage rates and weekly lump sums. The first left-hand column was headed “LADs as Per Tender Schedule 10” and the second right-hand column was headed “[Buckingham] LADs Proposal ref BAFO Ltr 13.9.17”.
• A LADs cap for general damages for delay is circa £1.9 million.

The works were significantly delayed, and the parties disputed the financial liability of the delays. Accordingly, the Defendant issued a Pay Less Notice, notifying the Claimant of its intention to deduct the LADs sum that would have otherwise been capped to circa £1.9 million. The Claimant sought declarations to this effect in Part 8 Proceedings, seeking the court’s decision that LADs provisions were void for uncertainty and the cap on the LADs is only applicable as a remedy on their liability for general damages.

The Claimant submitted that the LADs provisions were rendered as void and/or unenforceable due to the following alleged drafting errors in the Contract:

1. Dates for Completion

The Claimant stated that there were two contradicting completion dates set out in the Contract, both of which were equally plausible. The Claimant submitted that a clause on how LADs accrue, if works are not completed by a specified date, cannot be considered clear and certain, particularly when two completion dates were provided without further justification to resolve which date applies.

Accordingly, the Defendant accepted that “this was a modest inconsistency within the documents”; nonetheless, this can be reconciled. If the Claimant failed to achieve the seventh Milestone Date by 30 November 2018, it would be liable for LADs pursuant to Schedule 10.

2. Rates for LADs

The Claimant alleged that it was impossible to discern which sets of columns representing the LADs, if either, the parties intended to apply. Hence, the Claimant disavowed any positive case as to which applied. The Claimant also contended that Schedule 10 identifies as “LADs Proposal”, which might imply that an agreement on fixed LADs rates has not been finalised. The Claimant highlighted that one option of the LADs rates included a weekly cap of £200,000, whilst the other option did not. Hence, in the absence of clarity and certainty, the Claimant considered the LADs provisions void and unenforceable.

The Defendant’s argument was by the process of conventional construction, the Parties’ agreement had been reached and reflected on the right-hand set of columns. The Defendant maintained that “it was not an error but a mild ambiguity as to which set of rates applied”. 

3. Contract Sum

The proposed CSA tabulated in Schedule 10 was the amount used to compute the weekly rates for LADs.

The Claimant’s submission was that it is unclear whether the LADs shall be based on the daily percentage rate applied to the actual Contract Sum stipulated in the Contract particulars, or the lump sums weekly rates based on the CSA, although the weekly rates were calculated on a CSA that was different from the one ultimately agreed.

 The Defendant’s position was that there was no error to correct, and the Parties had simply agreed the weekly lump sums tabulated within Schedule 10.

4. Partial Possession

The Claimant also alleged the unenforceability of Schedule 10 due to its failure to provide a workable scheme for partial possession / sectional completion. The Claimant contended that the Parties must have intended to allow partial possession to be taken since that has been provided for within the Contract. The Claimant highlighted that the Contract envisaged partial possession of all the works, or in a contract which provides for sectional completion, partial possession of a Section. Accordingly, the Claimant submitted that ‘Sectional Milestones’ defined within Schedule 10 were intended to equate to ‘Sections’.

The Defendant’s position was that the clauses within the Contract did not refer to ‘Milestone Dates’, nor did it provide for completion by ‘Sections’ and on the contrary, it has been reiterated within the Contract particulars that completion by Sections does not apply.

Judgement

The TCC observed the Parties' competing positions and held in favour of the Defendant, where the Claimant was not entitled to the declarations sought.

On the question of whether the LADs provisions were void and unenforceable, the Judge referred to several well-known principles and cases and confirmed the court’s reluctance in considering a provision void for uncertainty. The Judge addressed questions of contractual interpretation, certainty, parties’ intention, rectification of mistakes in contracts and LADs provisions. If it is open to the court to find an interpretation that shall give effect of the parties’ intentions, then it will do so.

The Judge addressed the Claimant’s arguments concerning the alleged errors:

1. Date for Completion

The Judge noted that by introducing a comprehensive and bespoke Milestone Date regime with a bespoke clause in the Contract, which included a Practical Completion Date of the whole of the works and liquidated damages in respect thereof, the parties must have intended for that bespoke regime to operate as the sole regime, where the aforesaid clause did not entail any meaningful effect to the Parties. The Judge held that the different dates served different functions, and whilst the Claimant was obligated to complete the works by the earlier completion date, no liquidated damages attached to such breach. The date for which the liquidated damages applied was thoroughly formulated, which was the later completion date identified in Schedule 10. Under this regime, the Judge further noted that the Claimant was liable for not achieving a practical completion by 30 November 2018.

2. Rates for LADs

The TCC accepted the Defendant’s submission and acknowledged pre-contractual negotiations and the Defendant’s adduced evidence in the form of a witness statement as factual background which sheds light on why the parties included a table described as “LADs Proposal” within their executed agreement. The Judge held that it would be wrong to interpret the literal meaning of “proposal” within the document, and instead to consider the expression contextually, where the binding Schedule 10 which shall prevail the conditions of Contract.

The Judge considered this alleged error as an act of informality and with brevity between the parties by copying the whole table, including the term “proposal” to the schedule. He took cognisance of the fact that the parties had unwisely and lazily taken a shortcut by copying and pasting the entire table into Schedule 10, without eliminating the parts describing the “proposal”. The Judge’s argument was on the basis that the parties executed the entire agreement as a deed, and hence, must have intended for Schedule 10 to be legally binding.

Furthermore, the Judge considered the question of which tabulated LADs rates within Schedule 10 shall be applied. The Judge found that the left-hand set of columns represented a tender schedule, and the right-hand column would have come later in time and represented the Claimant’s Best and Final Offer “BAFO”. Thus, the rates within the right-hand set of columns prevail.

3. Contract Sum

The TCC considered the two conflicting Contract sums and addressed the question on whether the LADs shall be applicable at a daily or weekly rate. The court held in favour of the Defendant’s submission that there is no error to correct.

The Judge found that the parties had intentionally incorporated the Contract sum within the LADs table set out in Schedule 10, with the awareness that the final Contract sum differed from the ‘Proposed CSA’. Further, there would have been no need to compute a weekly lump sum rate, if the parties did not intend to utilise it for the LADs calculations, albeit that the damages can be levied pro rata for part of a week. It was therefore possible for the Judge to find an interpretation that the parties had clearly intended to adopt the weekly LADs rates at the Contract Sum defined within Schedule 10. 

4. Partial Possession 

Lastly, the Judge noted that contracts which make provision for partial possession also provide a regime for an adjustment to be made to the rate of liquidated damages to reflect partial possession.

The Judge agreed with the Defendant that the Contract did not provide for sectional completion, which was highly understood by the parties given the several iterations of “Sections do not apply” within the Contract particulars. However, the parties did provide a regime for the achievement of milestone dates, which was explicitly set out in the bespoke clause in the Contract. When “Sectional Milestones” were referred to, the descriptions of the said term did not turn them into Sections, rather at most, they were an “inelegant expression”.

By virtue of the above, the Judge concluded that the LADs provisions in the Contract were in fact, certain and enforceable, where the Claimant was not entitled to the declarations sought with regards to the alleged errors.

Given the fact that the provisions were enforceable, the TCC found it is unnecessary to consider the Claimant’s contention that any liability it may have for general damages delay is capped at the amount stated in Schedule 10. However, the TCC found it appropriate to address it briefly.

The TCC was of the opinion that “one simply has to consider whether the language of the provision was broad enough to encompass any alternative liability that could arise in respect of general damages”. Hence, the Judge observed that the language of the provision was quite clear, and the cap was expressed as ‘Maximum LADs’, not on anything other than LADs. Accordingly, and based on the clarity of the language used, the Judge found no basis for concluding that the cap would have operated as an additional function of operating as a cap on the overall Claimant’s liability for delay.  

Omnium Resolve's Opinion

This case is a cautionary tale of the pitfalls associated with appending correspondences and tender documents by way of appendices or schedules. Particularly, drafting LADs provisions is not as straightforward nor clear cut as parties may intend. Poor and erroneous drafting raises ambiguities over the validation of contract schedules and appendices, which often become fertile sources of disputes between parties. Upon the use of bespoke amendments/clauses to a standard form of contract, the parties must clearly and concisely write bespoke amendments and carefully review them to avoid doubt on how they should be interpreted.

Omnium Resolve notes a common theme throughout the Court’s determination of the various ambiguities and discrepancies in the Contract which was to establish the parties’ ‘intention’ when negotiating such terms. The Courts are reluctant in rendering negotiated and agreed contractual terms as void and unenforceable. However, whilst Schedule 10 was clearly upheld and validated in this case, the decision is a reminder of the high threshold of measures taken by the court in relying on the parties’ intentions upon executing an agreement into a deed. 

*All opinions expressed in this article are solely those of the author for informational purposes only. The content should not be construed as legal advice.