Common sense is not always so common

We take a look at the decisions in Bloomberg LP v Sandberg and others and Dorchester group Limited v Kier Construction Limited to see what can happen when litigating parties are advised to strengthen their position but overlook the need to retain pure and simple common sense.

Voltaire said, “common sense is not so common”, and the recent case of Bloomberg LP v Sandberg and others proves this. It involved an unsuccessful attempt by a contractor, Malling, to strike out a Part 20 claim. Malling had carried out cladding works to a building in Finsbury Square that was subsequently leased to Bloomberg. Malling was required to provide a collateral warranty which included a clause stating that:

“…no proceedings shall be commenced against [Malling] after the expiry of twelve years from the date of issue of the last written statement by the Client that practical completion of the Project has been achieved under the Contract [ie, 29 August 2000]”.

In July 2013, a cladding tile fell from the building. This led to Bloomberg undertaking extensive remedial works to make the building safe. Having failed to get an action off the ground against Malling, Bloomberg pursued two engineering companies (Sandberg and Buro). Sandberg issued a Part 20 claim against Malling. Malling applied to strike it out on the basis that the contribution claim was time barred by operation of the clause in the warranty referred to above.

In his maiden judgment in the TCC, Mr Justice Fraser had no difficulty in finding that the wording of the relevant clause only covered proceedings brought by Bloomberg against Malling. It did not extend to contribution claims by third parties. In dismissing the application, the judge noted that if Malling’s argument was correct, parties could effectively contract out of the statutory provisions of the Civil Liability (Contribution) Act 1978. While an interesting judgment therefore, the result reached is unlikely to raise many eyebrows.

Dorchester group Limited v Kier Construction Limited illustrates the potential issues facing a litigant who strives to increase its reward (in an adjudication) but in so doing pushes the boundary of common sense too far and fails in its attempt.

The underlying claim concerned undeclared discounts that Kier obtained from their M&E sub-contractors, Mitie. Contrary to the contract Kier failed to pass on those discounts to Dorchester. The sums in dispute were the difference between the sum identified in the adjudication of circa £686,000 and Dorchester’s claim for circa £766,000, 15 per cent of the cost of variations and a further 3.75 per cent for early payment discounts.

Dorchester brought two applications. We look at the first which was an application for judgment pursuant to CPR14.1 entitled “Admissions made after commencement of proceedings”. They sought to persuade the court that Kier’s very specifically worded open offer to settle the dispute of 21 September 2015, amounted to a concession and an acceptance by Kier, that it was liable to account to Dorchester for any discount granted by Mitie for early payment and that all issues of waiver were no longer live.

Ironically (considering the necessary criteria to succeed with such an application) Dorchester sought clarification from Kier whether a concession had in fact been made in its letter. Kier confirmed that it had not. The letter was simple and clear. Dorchester continued with its application which came before Mr Justice Coulson. His approach was refreshingly straight forward.

In finding against Dorchester, he said that the letter: “…contained a package of terms which Dorchester could either accept or reject…it would be contrary to [the overriding objective]…if the recipient…could pick over its terms, accept parts and reject others, and thereby ensure that the litigation continues...that is not the purpose of an offer of this sort…”

He endorsed the earlier decision of Technistudy v Kelland. That had confirmed for judgment to be entered under rule 14.1, any admission had to be clear and unequivocal. While that was the case here as far as had been clarified by Kier and understood by the judge, Dorchester were not asking for a judgment based upon the clear terms of the offer letter as presented but were seeking to change the meaning of its terms into something else.

The discussions surrounding the interpretation of the content of the offer letter make interesting reading. The arguments are certainly imaginative. Nevertheless one is left with an overwhelming feeling that any other outcome would have been wrong. On this occasion common sense justly prevailed. We do not elaborate upon the second application for specific disclosure save to say that this too failed on the grounds of proportionality. Kier had already reviewed several thousand documents and spent £500,000. There is perhaps a need therefore to pause and consider the wider implications of advising clients to seek further relief in such circumstances, particularly where the success of the application may well depend upon stretching the boundaries of common sense.

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