Careless Drafting of Construction Contracts
25 February 2011
There is a costly lesson to be learned from the recent English case of Walter Llewellyn & Sons Ltd & Rok Building Ltd v Excel brickwork Ltd and that is... Fill in the blanks
Walter Llewellyn & Sons Ltd ("WLSL") were appointed as the main contractor in a project to design and build 121 timber framed houses in London. WLSL appointed Excel Brickwork Ltd, ("Excel") as sub-contractor to carry out brickwork and blockwork at the site. Damage was discovered in various properties which was attributed to Excel's work. WLSL raised court proceedings against Excel. Excel sought suspension of the court proceedings on the grounds that there was an arbitration agreement between the parties. At issue was whether or not the sub-contract used by the parties provided for arbitration for resolution of disputes.
The form of sub-contract entered into by the parties comprised the Standard NEC Engineering & Construction Contract Conditions November 1995, Second Edition, Incorporating Option A and bespoke amendments (the "Sub-Contract"). The amendments were said to take precedence over the standard form to bring the payment regime into line with sections 110 and 111 of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA).
Excel's application to have the court case suspended to pursue arbitration failed on the basis that there was no arbitration agreement in the Sub-Contract. Excel were ordered to pay WLSL's costs.
Mr Justice Akenhead held that, simply as a matter of construction of the Sub-Contract documentation, the parties had not agreed on arbitration as the method of or forum for dispute resolution. The parties had not signed the standard NEC form or completed Part One of the Sub-Contract Data, ("Data provided by the Contractor") which identified the tribunal as being arbitration and the applicable arbitration procedure. The court said there was nothing in the Sub-Contract that demonstrated the parties had made "any express or conscious agreement that arbitration was the ultimate dispute resolution process". In addition, the NEC standard form did not provide for arbitration, it simply referred to "the tribunal" in clause 93. It was for the parties to define what tribunal meant by completing the Sub-Contract data. There was only a tribunal if the parties had selected one.
This case highlights the importance of properly completing contract documentation accurately to represent the parties' requirements and avoid unnecessary disputes and costs.
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