06/05/2010
In this month's digest we highlight the following recent developments of interest:
- The new Bribery Act - avoid criminal conviction for "failing to prevent bribery"
- Termination of contracts: deciding on grounds and drafting termination notices
- Interest on late payment of commercial debts
- Adjudication: "Multi-party joinder" and "Tolent" costs clauses
- The Third Parties (Rights against Insurers) Act 2010
- Adjudication: adjudicator's decision not to address a significant issue meant his award was not enforceable
- OGC guidance on e-tendering and 30 day payment clauses
All links are correct at the time of publication.
The new Bribery Act - avoid criminal conviction for "failing to prevent bribery"
The Bribery Act ("the Act") has received Royal Assent, and is likely to come into force in October this year. The Act consolidates previous bribery laws, and creates a new criminal offence which will be of concern to many: "Failure of commercial organisations to prevent bribery".
We have written a short article on the new offence, the defence of having "adequate procedures" in place, and guidance on adequate procedures. Click here to read the article.
Contractual termination, instead of rescission, costs Shell USD15m
The High Court decision in Shell Egypt West Manzala GMBH and anor v Dana Gas Egypt Ltd (formerly Centurion Petroleum Corporation) is a reminder that parties to a contract should be careful when deciding the grounds on which to terminate a contract and when drafting termination notices. Shell's actions left it with no right to recover USD15m paid under an agreement and no right to damages, despite Centurion having been in repudiatory breach of the contract, and in breach in a manner which entitled Shell to exercise a different contractual right to rescind the contract.Click here to read more
Interest on late payment of commercial debts: can you get away with less than 8% over base?
The Late Payment of Commercial Debts (Interest) Act 1998 ("the Act) requires commercial contracts to include a "substantial remedy" for late payment. If they do not then the statutory, penal, rate of effectively 8% over base will apply.
As noted in our January 2010 Update, in Fitzroy Robinson v Mentmore Towers (No 3), the Technology and Construction Court ("TCC") awarded a professional firm interest at 8% over Base Rate under the Act on unpaid fee instalments due under a contract.
In the recent judgment in Yuanda (UK) Co Ltd v W W Gear Construction Ltd [2010] EWHC 720 (TCC), the TCC considered the factors which should be borne in mind when deciding whether a contractual rate of interest provides a "substantial remedy". The TCC held that a contractual rate of 0.5% contravened the Act and had to be substituted by the statutory rate of 8% over Base Rate.
The judge said that a contractual rate would not necessarily fail to be a "substantial remedy" simply because it was below the statutory rate. He considered there was no reason why 5% over Base (as provided for in the JCT standard forms) should not be regarded as a substantial remedy. Further, a case could be made for saying that 3-4% would provide a substantial remedy for late payment, particularly if the rate had been specifically discussed and agreed between the parties
Adjudication: "Multi-party joinder" and "Tolent" costs clauses
In Yuanda (UK) Co Ltd v W W Gear Construction Ltd [2010] EWHC 720 (TCC), the Technology and Construction Court ("TCC") made important decisions on whether multi-party joinder was possible in adjudication proceedings and on "Tolent" costs clauses.
Click here to read more
The Third Parties (Rights against Insurers) Act 2010
The Third Parties (Rights Against Insurers) Act 2010 ("the Act") has received Royal Assent. The Act makes changes to the Third Parties (Rights Against Insurers) Act 1930 ("the 1930 Act"). A commencement date has yet to be fixed. We summarise the 1930 Act and the changes made to it in a separate note. Click here to read the note.
Adjudication: adjudicator's decision not to address a significant issue meant his award was not enforceable
In Pilon Ltd v Breyer Group plc [2010] EWHC 837, the Technology and Construction Court ("TCC") held that an adjudicator wrongly declined to deal with one of the most significant issues referred to him as part of the dispute he had to decide and that, as a consequence of this jurisdictional error and resulting breach of justice, his decision should not be enforced.
It is relatively rare for the TCC not to enforce the decision of an adjudicator and/or to stay any judgment, and the judge noted that there were relatively unusual circumstances in this case. Although the case was decided on its facts, the judgment provides a useful review of the law applicable when an adjudicator takes a mistaken view of his jurisdiction.
In this case the adjudicator took an erroneously restrictive view of his jurisdiction and failed to take any account Breyer's defence that it had made overpayments. This was not a situation where the adjudicator had inadvertently failed to consider an issue (which on that ground may have meant the decision was enforceable). The relevant work was divided into two separate batches, batches 1 - 25 and batches 26 - 62. The adjudicator's decision made it clear that he felt he did not have jurisdiction to consider Breyer's argument in relation to alleged overpayment on batches 1 - 25 because the notice of adjudication made plain that the dispute was limited to batches 26 - 62.
However, in its referral notice Pilon was seeking not only a valuation but also payment of any sums found due. The judge held that this, of necessity, involved a consideration of Breyer's defence based on an alleged previous overpayment in respect of batches 1 - 25.
The judge also considered that Pilon took a deliberate and risky strategy, by the drafting of its referral notice (limiting its claims to batches 26 - 62) and in its submissions in the adjudication proceedings, to exclude an important part of Breyer's defence. The judge said that Pilon's conduct in seeking a tactical advantage by putting forward an erroneous statement of the adjudicator's jurisdiction was a dangerous tactic to adopt. He said that a factor which may be relevant to the court's consideration of this topic in any given case is whether or not the claiming party has brought about the adjudicator's error by a misguided attempt to seek a tactical advantage.
30 day payment clauses in Government contracts
The Office of Government Commerce has published a Procurement Policy Note following the budget announcement that, from March 2010, it will be mandatory for all Government departments, agencies, non-departmental public bodies (and bodies over which they have direct control) to include a contract condition requiring their contractors to pay their sub-contractors within 30 days. The PPN provides guidance and an appropriate model clause to help the Government implement the new requirement. The scope of the requirement covers new contracts for goods and services only.
E-tendering in public procurement
The Office of Government Commerce has published a guide "Implementing e-tendering". This guide sets out some of the benefits which can be achieved for both contracting authorities and suppliers from the effective use of electronic tendering (e-tendering) in public procurement. It also offers guidance on implementing e-tendering solutions.
If you require any further information about any of the items mentioned, or if you have been forwarded this update by a colleague and would like to receive it direct, please contact David Kirkpatrick, Associate Solicitor and Professional Support Lawyer for the Construction & Engineering Department (0870 194 1663. email david.kirkpatrick@bevanbrittan.com).
