Author: Tola Odedoyin and Justin Mendelle

We continue our look back at some of the more interesting or lesser reported cases from last year – in the spotlight this week, GB Building Solutions Limited (GB) v SFS Fire Services Limited (SFS).

Background

In 2009, GB Building Solutions Ltd (the main contractor) was engaged as a design and build contractor for an office development in Manchester. It engaged SFS Fire Services Ltd (the sub-contractor) to design and install the development’s fire prevention sprinkler system.  Both parties entered into an amended JCT 2005 design and build sub-contract.  Due to an apparent fault with the water sprinkler system, flooding at the site caused damage, with GB claiming in excess of £600,000 for losses incurred as a result of the flood.

Clause 6.6.1 of the sub-contract conditions contained within it, a provision which stated that the joint names insurance policy that applied to GB would also name SFS as an insured.  The joint names insurance policy would cover SFS up until the Terminal Date.  In bringing its claim, GB claimed that the flooding occurred after the Terminal Date and therefore SFS was liable for the losses suffered.  In contrast, SFS raised a defence stating that because the meaning of practical completion under the sub-contract is to be given the meaning of practical completion as defined within the schedule of modifications, the flooding therefore occurred before the Terminal Date.  A dispute arose concerning the correct interpretation of when practical completion was considered to have occurred, for the purpose of ascertaining whether the flood occurred before or after the Terminal Date.

The key clauses from the sub-contract in relation to this dispute centred on the definition of practical completion, as this confirmed when the transfer of risk moved from the main contractor to the sub-contractor.  Within the standard sub-contract conditions, clause 6.1 defined the Terminal Date as:

the date of practical completion of the Sub-Contract Works or, in respect of a Section, of such works in the Section as determined in accordance with clause 2.20” (emphasis added).

Clause 6.1 reads as the Terminal Date being when the sub-contract works are practically complete in accordance with clause 2.20 that the main contractor and sub-contractor have to go through in order to confirm practical completion of the sub-contract works has been achieved.  However, the design and build sub-contract conditions as modified by the schedule of modifications defines “Practical Completion” as:

the issue of the Certificate of Practical Completion pursuant to the Main Contract.” (emphasis added)

The issue for the court, was whether the undefined definition of practical completion in clause 6.1 could be interpreted to mean the same as the defined term in the schedule of modifications and what effect that would have.

Decision

The court agreed with the arguments raised by GB, pointing out that the uncapitalised definition of practical completion in clause 6.1 could not be taken to mean the same as the capitalised definition of “Practical Completion” under the schedule of modifications.  Despite SFS raising the argument that the schedule of modifications takes precedence over the sub-contract conditions and therefore the definition of practical completion in clause 6.1 should be given the same meaning as in the schedule of modifications, the court opposed this interpretation of the clause and concluded that practical completion was achieved when the sub-contract works were practically complete under clause 6.1.

HHJ Davies acknowledged that whilst there was some ambiguity presented by the bespoke amendments to the JCT standard form document in providing two contrasting definitions of practical completion, the usual tools of contract interpretation apply.  Specifically, relying on the recent case of Wood v Capita Insurance Services Limited, he stated that “the court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement.”  In saying this, HHJ Davies considers interpreting “such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type” and the “iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated.”

In reaching his judgment, HHJ Davies was content that there was no ambiguity between the two phrases as “they are not the same”, accepting the claimant’s submission that “it would have been perfectly easy to have amended clause 6.1 so that it defined the Terminal Date as “the date of Practical Completion”, if that had been intended,” but because that was not what had been intended, it was understood that each clause “simply applies in different circumstances.”  As such, he concluded that the flooding occurred after the Terminal Date and therefore the risk transferred to SFS.

Implications

It’s easy to say but difficult to achieve – say what you mean! Far too often, both clients and lawyers are guilty of over-complicating matters, drafting convoluted clauses or provisions which are inconsistent with each other. The advice is straightforward – aim for simplicity and always seek to phrase things in the most clear and logical way possible.