The issue in this case

The parties had agreed terms on an amended form of a JCT Design & Build 2016 contract for works to the Cotteswold Dairy in Gloucestershire (the Contract). During the course of the works, questions arose as to whether it was the Employer's or Contractor's responsibility to complete the design of the works up to RIBA stage 4 and BSRIA stage 4(i) (referred to in the judgment and throughout this article as Stage 4/4(i)).

The issue was whether the Employer had provided a warranty as to the level to which it had progressed the design pre-Contract (thereby giving the Contractor potential entitlement to more time and money should the design not be as far progressed as warranted) or whether the Contractor had taken on all design responsibility regardless of what design was included in the Employer's Requirements (the design liability issue).

The Contractor was successful on the design liability issue in adjudication proceedings. The Employer then issued Part 8 proceedings in court seeking declarations on this issue.

The Contract terms

The parties' bespoke amendments significantly altered the standard terms of the JCT Design & Build Contract 2016 in that the Contractor was not only required to complete the design elements of the works, but the Contract also explicitly provided that the Contractor had examined the Employer's Requirements (the ERs) and had agreed to accept full responsibility for the design contained in them. The Contractor was also under an unqualified obligation to "complete the design for the works".

The ERs (at paragraph 1.4) also stated (in the first part of that paragraph) that the Contractor would be fully responsible for the complete design. However, the second part of paragraph 1.4 provided: "Significant design has been developed to date which has been taken to end of RIBA Stage 4 with some parts of contractor specialist design elements together with Services to Stage 4(i)…".  The Contractor's position was that this wording amounted to a contractual warranty that the existing design had been completed in all respects up to Stage 4/4(i) so that there was no need for the Contractor to satisfy itself that this was indeed the case and that the fact that some design was not up to this level gave rise to a breach and/or a 'Change' under the Contract.

The Employer's position was that the contractual provisions were clear and unequivocal and placed all design responsibility on the Contractor regardless of what design was included in the ERs.

What did the court decide?

Having considered the Contract as a whole, Judge Stephen Davies decided that, aside from the second part of paragraph 1.4 of the ERs, the relevant terms of the Contract all pointed to the Contractor being responsible for all aspects of the design. As to the wording in the second part of paragraph 1.4, the court decided that it was "nowhere near sufficient" to amount to a warranty that the existing design had been completed in all respects up to Stage 4/4(i) such that there was no need for the Contractor to satisfy itself that the existing design was sufficient or so as to require other unequivocal contractual provisions to be read as heavily qualified.

The court concluded that the Contractor had contractual responsibility for completing any and all necessary works to complete the design of the works up to Stage 4/4(i).

Implications for contracting parties

This case highlights the importance of ensuring consistency throughout the terms of a contract and of being wary of the potential impact of terms which could undermine the intention of the parties. When it is an element as important and costly as design responsibility, the parties need to ensure that the terms of the contract are consistent with the intended allocation of design responsibility. Whilst the wording in the ERs in this case was not sufficient to amount to a warranty, the decision in this case certainly leaves it open to argument that with clearer wording an Employer could inadvertently provide a warranty in the ERs as to the stage of design that has been prepared pre-contract.

Practical Tips

When interpreting contracts, the court will focus on the contractual documents and consider the terms of the contract as a whole.  Parties should therefore ensure that the contract terms are clear and consistent and reflect their intentions and that any statements made at the pre-contract stage which they wish to rely upon are set out clearly in the contract.

Attention should be paid not just to the conditions of contract but also any terms in other contract documents (such as the ERs, as was relevant in this case) to ensure that there are no provisions which could give rise to uncertainty or have unintended consequences.

In this case, there was enough uncertainty on the design liability issue to result in two adjudications and court proceedings, at considerable cost to both parties.

Procedural guidance

This case is also of interest for the procedural issues which were grappled with, chief amongst which was the suitability of the Part 8 procedure. Part 8 of the Civil Procedure Rules is an alternative procedure for claims which provides a simpler and quicker determination of claims than the process available under the more commonly used Part 7.  We have written about the Part 8 procedure previously (see our article: "To Part 8, or not to Part 8, that is the question…") and in this case the court provided the following guidance:

• The court encouraged parties to comply fully with guidance previously given by the courts as to how Part 8 cases should be conducted, which has the aim of those cases being dealt with in a cost effective and proportionate manner.
• Where a defendant to a Part 8 claim disputes the suitability of Part 8, it should clearly identify and articulate the reasons for its position at an early stage, setting out, for example, the disputed matters of fact.
• Where there are fundamental disagreements between the parties as to the suitability of Part 8, they should consider applying to the court for directions.

In addition:

• This case illustrates the importance of distinguishing between cases which are, and which are not, within the category of "adjudication application" cases. In this case, despite the fact that the proceedings were connected with a previous adjudication decision, the exemption for "proceedings in the TCC relating to adjudication awards under Section 9 of the TCC Guide" did not apply.
• The court took the opportunity to highlight the desirability of using regional TCCs wherever possible. Here, the claim had been issued in the Technology and Construction Court (TCC) in London but the judge considered that it would have been more appropriate for it to have been commenced in Bristol or Birmingham which would likely have resulted in the matter being heard by the court sooner. This aligns with the general encouragement from the courts to alleviate the pressures on the London TCC by using regional TCCs wherever appropriate.