Critical importance of clearly identifying scope of works

Clancy Docwra Ltd v E.ON Energy Solutions Ltd [2018] EWHC 3124 (TCC)

E.ON was required to install an underground heat network as part of a substantial residential development project in central London. It put out an invitation to tender (ITT), instructing that it required any proposal to address all civil works associated with the installation of network pipes and to identify possible exclusions.

Clancy Docwra (CD) was successful in securing the project and was then engaged to carry out the works. CD confirmed in an email attached to the tender that their offer was made on the basis that a feasibility study had been completed to determine an unrestricted corridor for constructing the heat network; that there was no provision for hand digging save for in areas where it had been expressly confirmed; and that there was no allowance for diversion of mains and services, disposal of contaminated materials and breaking out of obstructions in the trench.

A sub-contract was entered into by the parties and this email did not form part of it, but instead was appended to it along with post-tender review minutes which also referenced the exclusions.

In March 2017 CD encountered adverse ground conditions and a dispute arose between the parties about the extent of CD’s obligations. E.ON argued that CD was bound to carry out the works as defined in the sub-contract which included all civil works required in the installation of pipes and particularly referred to Clause 1.3.5, which provided that the sub-contract documents took precedence in the event that there were inconsistencies. This document clearly allocated the risk in respect of ground conditions to CD.

On the other hand, CD’s position was that the scope of its obligations and the allocation of risk under the sub-contract had been altered by the appended documents, such as the email setting out exclusions and the post-tender review minutes.

In July 2017, CD referred the dispute to adjudication and sought relevant declarations. The adjudicator found in favour of E.ON and refused to make any of the declarations sought. CD then issued proceedings against E.ON, which came before Mrs Justice Jefford DBE in the TCC.

Decision:

Jefford J accepted that the scope of works was broadly defined as all civil works involved in the installation of pipes, as set out in the ITT and the sub-contract. However, she recognised that the ITT also instructed tenderers to identify possible exclusions. By giving tenderers that opportunity, E.ON was clearly aware that any agreement could involve exclusions limiting the scope of the works.

Jefford J found that, on proper construction, the position in the sub-contract was qualified by the exclusions contained within the appended documents.

Case comment:

This case demonstrates the critical importance of clearly identifying the scope of works and reminds contracting parties that pre-contractual documentation is not only relevant when determining respective obligations and the allocation of risk, but may also have the effect of modifying the scope of the works set out in the contract itself.

The decision highlights the risks of appending supplementary pre-contractual documentation to construction contracts, as any exclusions contained within the contract may be operative despite not featuring per se in the contract itself. Parties should therefore consider carefully any statements, conditions or exclusions made during the course of pre-contractual correspondence to determine the true position before signing, and placing potentially mistaken reliance on, the terms enshrined in a contract.

 

Article submitted by Mark James, Partner – Dispute Resolution, Coffin Mew

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