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KC LEGAL UPDATE Spring 2021 In this issue... Challenge to HS2’s £1 Billion Procurement Defeated on Multiple Fronts By Sarah Hannaford QC, Simon Taylor and Ben Graff The Interpretation of Contracts Under UAE Law By Richard Harding QC Halliburton v Chubb By Paul Buckingham and James Thompson
WELCOME to the Spring 2021 Edition of KC LEGAL UPDATE CONTENTS 04 Challenge to HS2’s£1 Billion Procurement Defeated on Multiple Fronts By Sarah Hannaford QC, Simon Taylor and Ben Graff Richard Fernyhough QC Richard Fernyhough QC retired from “At that time there were 15 members of chambers, no silks and 0 The Interpretation of Contracts Under UAE Law By Richard Harding QC Chambers, with effect from 1 January the Head of Chambers was a retired army officer who did a lot of 14 2021. Richard started his career as a criminal work in Surrey. It was a modest common law set which did Interview with Samuel Townend QC pupil at Keating almost 50 years ago, every conceivable type of common law work, but very few “building serving as Head of Chambers between cases”, as we called them. 1997 and 2002, cementing his place in our history. He took silk in 1986, sat as a Deputy High Court Judge from 1992, was a former chair of TECBAR’s Now there are 31 silks and 35 juniors in chambers and we are known as the pre-eminent set of barristers’ chambers specialising in Construction Law. It is true that the Bar has gone from strength 16 The Gutting of Section 106 of the Housing Grants, Construction and Regeneration Act 1996 Part 2. predecessor, ORBA, and later became an internationally to strength over the past 50 years, but even so the story of the By Abdul Jinadu renowned Arbitrator. transformation of a modest common law set into Keating Chambers is a remarkable one. Former Head of Chambers, Marcus Taverner QC, had the following words to say about Richard: It would not have happened without the late Donald Keating QC to whom we owe an enormous debt of gratitude. Donald looked upon 20 Keating Cases A selection of reported cases involving members of Keating Chambers “Richard was part of the group that built the solid foundations on chambers as an extended family of like- minded individuals. And 22 which Chambers now stand, and most importantly he nurtured today, even though that family has grown rather more than anyone Halliburton v Chubb its ethos and culture. He was pupil master to many of us, myself expected, that same ethos still persists. By Paul Buckingham and James Thompson included, and he taught us not just about the law but the traditions and practice of the Bar. Those who were privileged enough to see I would especially like to thank the clerks, past and present, him on his feet in court were more than impressed and influenced. To many, over the years, he remained not just a friend and confidant the admin staff and all the other people in chambers who have contributed so greatly to the success of chambers. I have always regarded representing others as a real privilege, and I consider 27 A New Benchmark for Waiver in Adjudication? By Harry Smith but the benchmark of the right approach to all the dilemmas a myself the most fortunate of men to have been able to do that from 30 barrister faces during professional life. Richard is a man of thought, Keating Chambers.” Interview with Charles Banner QC intellect and wisdom. He grew to become the ultimate ‘Eminence Grise’. Most importantly, Richard promoted kindness and courtesy. Head of Chambers, Alexander Nissen QC has since announced that Richard will remain a part of the Keating family as one of our I extend our warmest congratulations on a fabulous and successful career and our very best wishes for the future ahead.” Honorary Associates, as voted upon by the whole of Chambers. “On behalf of everyone past and present at Keating, I would like to 32 Public Procurement After Brexit By Simon Taylor In his announcement to chambers, Richard reflected on his career thank Richard for his friendship, support and leadership. We are which started in late 1971 at 11 King’s Bench Walk and extended his delighted that he will keep his association with us and look forward thanks to all those who have been part of his time at Keating: to being able to celebrate his career in person when we can.” –2– –3–
CHALLENGE TO HS2’S £1 BILLION PROCUREMENT DEFEATED ON MULTIPLE Bechtel Limited v High Speed Two (HS2) Limited [2021] EHWC Finally, Bechtel alleged that the winning bid and the contract entered into with the winning bidder had been unlawfully diligent (RWIND) tenderer would interpret them. Equally the views of a Claimant witness on how its bid or another bid FRONTS 458 (TCC) Judgment was handed down on 4 March modified and that reassurances as to resource levels provided by BBVS at a post tender meeting were impermissible. should have been evaluated will not be of relevance to the Court’s determination of the issues. 2021 by Fraser J in the claim arising out of Bechtel argued that changes made to the the HS2 procurement for the construction project programme due to the passage of The Judgment By Sarah Hannaford QC, Simon Taylor partner contract for Old Oak Common Station (one of the two Southern Stations time between the anticipated contract start date and the actual start date (about 1 year) Fraser J rejected substantially all of and Ben Graff on the HS2 network), a project with and overall HS2 project changes ought to Bechtel’s arguments and its case failed an ‘incentive target’ cost of over £1bn. have led HS2 to invite revised bids. completely. The contract was awarded to BBVS, a consortium of bidders including Balfour HS2 denied all allegations and argued that Evaluation, moderation and scoring Beatty Group Ltd, Vinci Construction (UK) the claim did not cause any loss because Ltd, Vinci Construction Grands Projets Bechtel would, if it had come first, have The issue of whether there was manifest and Systra Ltd. An unsuccessful bidder, been disqualified from the competition error in the scoring of E001 came down Bechtel Ltd, challenged the outcome of the anyway by HS2 for failing to remove a to the difference in the scoring guidance procurement. fundamental qualification from its bid. between a finding of ‘significant risk’ (Concerns) and ‘substantial risk’ (Major Bechtel scored 73.76% compared to BBVS’ The trial on liability and causation took Concerns). This was held to be a subjective score of 75.38% and was ranked 2nd but place in person in October to November judgment of the HS2 evaluators based on had a substantial bid qualification. The 2020 before the 2nd Covid lockdown. 18 their expertise and experience and it was Judge noted that Bechtel scored 5.76% on witness were called over a 3 week period. not the role of the Court to interfere with the ‘Lump Sum Fee’ bid (overheads and judgment calls reached after hours of margin) as compared to the maximum 10% awarded to BBVS. In effect, this accounted The Court’s Role discussion at a consensus meeting. for the ranking. Bechtel scored higher on Fraser J commented on the nature of Bechtel sought to elevate the importance quality but lost overall due to its price. judicial oversight in procurement cases, of the draft initial scores reached by the noting that it is exercised with restraint. evaluators and objected to its scores on The Issues Proceedings are not an appeal against the those questions where the draft score of tender outcome of the decision and the one or other evaluator was higher than the Bechtel alleged that there were manifest Court will only interfere with evaluation moderated score. Fraser J found that this errors in scoring and inadequate records of if there is manifest error. This is a high was how moderation was designed to work the assessment and moderation process threshold and another way of expressing – assessors discussed their views of the in breach of the transparency principle. irrationality. The Court will give “suitable response and arrived at a consensus score. The focus of its case was that the BBVS’ recognition to the institutional competence The fact that it might be different to their bid ought to have received a score of of decision-makers” and recognise the draft score did not matter and certainly did ‘Major Concerns’ for a question relating competence of the Subject Matter Experts not establish manifest error. The process to organisation (E001), rather than the (SMEs) charged with the evaluation of was set out in the Invitation to Tender score of ‘Concerns’ awarded, because the bids. Procurement law does not impose (“ITT”). proposed level of resources was too low. a counsel of perfection on contracting Had BBVS been scored as Major Concerns authorities. On the evidence and documents, Fraser J for E001, this could (and Bechtel said held not only that HS2 made no manifest should) have led to its disqualification The judge also commented on errors in the evaluation of bids, but also under the tender rules. Bechtel argued confidentiality and redactions in particular, that it made no errors at all and there were that the relatively high scores for the other noting the importance of transparency no instances of breach of equal treatment technical questions were inconsistent with and the need to minimise and explain or transparency in the evaluation of bids. the Concerns over BBVS’ resourcing. (in a schedule) any redactions made to The alleged errors were no more than documents and witness statements. While subjective disagreements from Bechtel and Bechtel also alleged unequal treatment he considered that some documents relied there is “no judicial remedy for subjective in the evaluation of certain questions and on at trial had been over-redacted (certain dissatisfaction at losing a procurement that there was ‘downward pressure’ exerted redactions were removed during the trial), competition”. He rejected Bechtel’s by moderators and legal advisers (by way he did not consider that this interfered with argument that evaluators ought to have of a moderation assurance process) on the fair disposal of the issues. considered the ‘practical achievability’ of certain Bechtel scores. It claimed that the BBVS’ response to the various technical winning bid was abnormally low due to a On the Bechtel evidence, Fraser J referred questions in light of the scoring of E001 lack of resources and ought to have been to Healthcare at Home v Common Service as this would change the entire scoring disqualified. Agency [2014] UKSC 49, noting that methodology. the evidence of a particular tenderer’s understanding of the tender documents is irrelevant. What matters is how the reasonably well informed and normally –4– –5–
Record-Keeping, Moderation Assurance Abnormally Low Tender that tendered for in terms of programme “The temptation of an and the Clarification Meeting dates, this was entirely to be expected. The There was no basis for any finding that the fact that tenderers might have submitted On record-keeping and transparency bid was abnormally low. The concept of an different bids had they bid against different unsuccessful bidder to pursue generally, Fraser J considered the standstill abnormally low tender has to be considered project dates was hypothetical and letter issued by HS2 to be “extraordinarily by reference to the particular contract to irrelevant. comprehensive”, the evaluator training be awarded, the work involved and the to have been very thorough and the records of the evaluation process to be sufficient. The moderation records did way that costs and prices are calculated. While resources were an element of the tender they did not feed into the price bid. Qualification Fraser J also found that in the event that litigation because it disagrees not for example need to be verbatim accounts. He found that there was no duty Furthermore, HS2 had set a ‘fee collar’ or lower limit on the lump sum fee in the ITT Bechtel had been ranked as the winning bidder, it would have been disqualified from the competition by HS2 for failing to with the scores awarded should of ‘good administration’ on HS2 and that and the BBVS’ fee was above that limit. HS2 the procedural burden on authorities is balanced and limited by the EU principle of had also performed a review of the staff rates bid. There was no discernible error in remove a fundamental qualification from its bid, despite repeated requests to do be resisted.” proportionality. HS2’s finding that the BBVS’ tender was not so. That qualification would have shifted abnormally low. the financial risk profile of the Contract HS2’s record keeping was held to fall substantially to the detriment of HS2 by below the required standard in only one Material Change giving Bechtel the right to terminate the respect, in that it failed to keep a proper contract after the station design had written record of a post tender clarification On the alleged material changes, Fraser been completed if it then felt unable to meeting with BBVS. This was a technical J agreed with HS2 that the ITT permitted deliver the contract to the incentive target. breach of the transparency principle but changes to project dates and noted Bechtel’s case therefore also failed because had no causative effect and did not assist that it would be extraordinary if it did it could not show that any loss had been Bechtel’s claim. It was markedly different to not, given the nature of the project. The caused by the alleged breaches given the widespread failure of record keeping on judge accepted HS2’s submission that that it would have been disqualified in any the evaluation of bids in Lancashire Care the Utilities Contracts Regulations 2016 event. NHS Foundation Trust v Lancashire County (“UCRs”) allowed flexibility in the conduct Council [2018] WHC 1589 (TCC). There of negotiations with the preferred bidder. was no basis here to set aside the award While the project was slightly different to decision based on this ‘de minimis’ breach. To do so would be disproportionate. Fraser J rejected the argument that the ‘moderation assurance’ checks carried out interfered with or applied downward pressure on the scores as there was no evidential basis for this allegation either in the emails or the cross examination of HS2’s witnesses. As to the clarification meeting, he Commentary Third, the principle of proportionality Fifth, if an authority sets an ‘anomaly concluded that this was provided for in imposes sensible limits on the procedural threshold’ (here a ‘fee collar’) in its tender the ITT and permissible. Given the score of Every case is decided on its facts and this burdens imposed, and lengths to documents it will be difficult to argue Concerns for E001 it was sensible for HS2 procurement was, as Fraser J concluded, a which contracting authorities must that a bid which exceeds that threshold is to seek clarifications on resource levels, but competition working fairly. However, there go, in recording its evaluation process. abnormally low. Clearly, if the claim is that the score was not conditional upon those are a number of points that can be taken Comprehensive reasons were provided to the threshold is irrational, the claimant has clarifications as the scores were already from this judgment. These include: Bechtel (a 104 page standstill letter) setting to challenge the tender documents within finalised. out the rationale for its scores and those of the relevant limitation period. First, the temptation of an unsuccessful BBVS. No contracting authority is required bidder to pursue litigation because to take verbatim notes of evaluation or Finally, a claimant who caveats its bid with it disagrees with the scores awarded moderation sessions. Isolated lapses a commercially unacceptable qualification should be resisted. A claimant has to (such as the failure to minute a meeting) may struggle to convince a court that its show manifest error (ie irrationality) in may breach the transparency principle alleged breaches have caused any loss. the scoring or some other breach which but do not assist the claim if they have no caused it loss. The court will recognise the effect on the tender outcome. Sarah Hannaford QC, Simon Taylor and expertise of the evaluators but the views Ben Graff acted for HS2, instructed by of the claimant’s witnesses on the correct Fourth, there is some flexibility under Addleshaw Goddard LLP. scores will not be of assistance. the UCRs to negotiate, clarify and finalise terms at preferred bidder stage This article was originally published by Second, moderation is just that. It is a and more so than under the Public Practical Law in March 2021. process by which the initial views and draft Contracts Regulations 2015. However, it is scores of evaluators are then considered certainly helpful to ensure that the tender in often lengthy discussion with other documents provide for foreseeable post SMEs. Those views are moderated and tender steps, such as clarifications and a consensus is reached. What generally negotiations, as HS2’s ITT did. matters is the consensus rationale and scores and the record of those, not the initial views or draft scores of the evaluators. –6– –7–
THE INTERPRETATION OF CONTRACTS UNDER I address here 10 main principles. may, in the interests of fairness to other parties or otherwise, limit the extent to • “ The objective factors which represent the apparent intention, are the source from UAE LAW (1) UAE Law on Interpretation Is which those intentions are given effect. which the inner intention is deduced.”¹³ Not Only Based on Egyptian Law. English law, on the other hand, mixes In other words, the apparent intention is up the ascertainment of intention with evidence of the inner intention. The civil code of the United Arab Emirates the rules of law by depersonalising the (“the Civil Code”) is based on both contracting parties and asking, not what • “ When interpreting clear conditions, Sanhouri’s Egyptian civil code² and the their intentions actually were, but what a the court of cassation does not allow By Richard Harding QC Ottoman³ Majalla. Sanhouri’s civil code reasonable outside observer would have taken them to be. the first instance court to depart from their clear meaning.”¹⁴ “But it is not to was based on the French civil code and concepts of Islamic law; and the Majalla be understood from this, that a clear was a codification of the principles of the (3) UAE Law Is Based on the expression cannot be interpreted. The judge may find that he needs to interpret Hanafi school⁴ of Islamic law. Parties’ Mutual Intention. such an expression, no matter how clear Sanhouri’s extensive commentary on his Although UAE law requires the it is, as clarity of expression is not clarity own Egyptian civil code, Al-Wasit, is the identification of the subjective intention, of intention. The expression itself may most authoritative work used to explain it is the intention of both parties together be clear, but the circumstances indicate the Gulf civil codes. However considerable that matters, not each one separately. If the that the contracting parties were wrong to care must be taken when relying on parties did not have a common intention use this clear expression. They intended Sanhouri’s writings in relation to UAE law, regarding their obligations, there would a meaning, but expressed it with words as the relevant articles may be based on, usually be no agreement, and no contract which were not right, as these words or influenced by, the Majalla, and therefore to interpret. clearly had a different meaning. In these have a different meaning and effect from circumstances, the judge does not take similar provisions of the French-influenced Article 258(1) of the Civil Code⁹ states: the clear meaning of the words, and must Egyptian civil code. deviate from this to the meaning that the .العبرة في العقود للعقاصد والمعاني ال لأللغاظ والمباني parties intended. In this way he interprets (2) Interpretation Under UAE the clear words, and deviates from their What matters in contracts is intentions apparent meaning, but without distorting Law Is Subjective. and meanings and not words and forms. their meaning in any way.”¹⁵ This part of Sanhouri’s explanation is often The official Commentary on the Civil Code The Commentary says in relation to this overlooked. It is commonly thought that says that “interpretation of a contract article: where a term of a contract is clear, it is means deducing the mutual intention of the not open to any interpretation. However contracting parties.”⁵ This is the same basic The meaning is that the intention of the the correct position is that the judge objective as French law⁶. It is a subjective contract is not to be found in the mere can deviate from the meaning of the approach. Although English common law words used by the contracting parties, words, and interpret them in light of all frequently refers to ‘the intentions of the but rather in their true intentions in the circumstances, provided that he/she parties’, interpretation is in fact objective, speaking the words that they spoke at does not simply distort their meaning. asking what a reasonable person would the time of the contract, because the have understood by the words used by the true intention is the meaning and not the However, the position under UAE law, as parties.⁷ words or the form used. Words are mere explained by the Commentary, is much less moulds for meanings...¹⁰ clear, and may be different from Egyptian In the English case of Chartbrook v law. This is what the Commentary says in Persimmon⁸, Lord Hoffman explained the Both the Commentary and Sanhouri relation to Article 266: difference between these objective and distinguish between apparent¹¹ intentions subjective approaches: and inner intentions. The apparent • “In Islamic jurisprudence, what matters intention is what is manifested by the in the interpretation of a contract is …French law regards the intentions parties, particularly by the terms of their the apparent intention rather than the of the parties as a pure question of contract, whereas the inner¹² intention is inner intention.” This is an unhelpful subjective fact… uninfluenced by the parties’ real intention. The Commentary generalisation. Sunni Islamic law any rules of law. It follows that any and Sanhouri attribute different consists of four orthodox “schools”, evidence of what they said or did… may importance to these two types of intention. with generally equal status¹⁶. Two of This article sets out the main principles of contractual be relevant to establishing what their the schools, namely the Hanafi and interpretation under UAE law¹. The differences from intentions actually were. There is in Sanhouri, explaining the Egyptian Civil Shafi’i, focus on expressed intentions, the common law are often under-estimated by foreign French law a sharp distinction between Code, said the following: whereas the other two, the Hanbali lawyers working in the region. The main points to note are the ascertainment of their intentions and Maliki, focus on the parties’ true that interpretation under UAE law is subjective, it is based and the application of legal rules which on the parties’ actual mutual intention; and although the contract terms are the primary indication of that mutual 2 ‘Abd Al Razzak Al Sanhouri (1895-1971) was the author of the new Egyptian Civil Code, issued in 1948. intention, other evidence is admissible, even if the terms 3 The Ottoman Empire (1299–1923) was centred in modern Turkey, and extended across most of the Middle East and into eastern Europe. of the contract are apparently clear. 4 One of the 4 “schools” or divisions of orthodox Sunni Islamic law. 5 Commentary on Article 266 6 Pre-2016 French Civil Code, Art.1156 7 See, for example, Sirius International Insurance Co v FAI General Insurance Ltd [2004] 1 W.L.R. 3251 8 [2009] A.C. 1101 9 Which reproduces Article 3 of the Majalla. 10 Whelan’s translation 11 ظاهر dhahir, which means apparent, manifest, evident 12 باطن batin, which means hidden, inner, secret 1 Most of the translations in this article are by the author. The rest are by James Whelan. 13 Al-Wasit, Vol.1, §386. All quotations from Sanhouri in this article are from this volume. 14 §390 15 §391 –8– –9–
This article is phrased in the negative. It (2) the trust and confidence which should “Although UAE simply prohibits the judge or arbitrator from deciding that the will of the parties exist between the contracting parties; (3) current business practices. law requires the was something different from that indicated by the terms of the contract, by (8) “Doubt” Is Resolved in identification of the interpreting those terms (alone) to mean something other than their clear meaning. Favour of the Person Performing the Obligation. subjective intention, it But this does little more than state the obvious. The judge cannot deliberately Article 266(1) of the Civil Code says: is the intention of both misread the terms of the contract to give them a meaning of his choosing. .يفسر الشك في مصلحة المدين parties together that The Commentary appears to say that UAE law requires the same focus on the words (6) Evidence of Pre- and Post-Contracting Events Is However this article does not prohibit Doubt is to be resolved in favour of the matters, not each one of the contract, to the exclusion of evidence of the parties’ intention. But this would Admissible. reference to evidence of the parties’ mutual intentions from outside the contract. person who is to perform the obligation. separately.” contradict Article 258(1). The Commentary directly addresses this apparent Under the common law, evidence is In light of such evidence, the mutual intention of the parties may not be clearly Accordingly, the person who benefits from this article will depend on the nature of the generally not admissible as an aid to inconsistency, in its explanation of Article represented by those terms.²⁴ the interpretation of the terms of a applicable obligation. 266. Having said that “it is the expression to contract,²⁰ if it relates to pre-contractual which regard is had, and from which alone Article 265(2) then says: The Commentary says: “That which is negotiations²¹, or actions taken after the intention is deduced”, the Commentary certain is not removed by a doubt. Thus, if concluding the contract²². أما إذا كان هناك محل لتفسير العقد فيجب البحث عن continues… there is a doubt as to the indebtedness of النية المشتركة للمتعاقدين دون الوقوف عند المعنى a debtor, the certainty that he is innocent However there is no such prohibition under This is not lessened by the rule that الحرفي لأللفاظ مع االستهداء في ذلك بطبيعة التعامل the civil law²³, or the law of the UAE. Any of the debt will not be overcome by a matters are considered according to وبما ينبغي أن يتوافر من أمانة وثقة بين المتعاقدين relevant evidence of the parties’ mutual doubt about it.”²⁶ From this, it is apparent intentions, or that “what matters in intentions may be considered. But evidence وفقا للعرف الجاري في المعامالت that Article 266(1) is not really a rule of contracts are intentions and meanings, of the parties’ separate and subjective interpretation at all. Rather, it simply intentions. The classic example is a sale (4) The Contract Terms Indicate and not words and forms”… These intentions will not be relevant. However However if there is a reason for reflects the basic burden of proof, and of grapes. To the Hanbalis this would the Mutual Intention. rules do not mean that regard is had it will often be the case that evidence of interpreting the contract, then it is presumption of non-liability, unless liability be unlawful if the parties intended that to the inner intention. Rather, the aim words used, or actions taken, before or after necessary to look for the common is proved. wine would be made from them, whereas The interpretation of contracts under UAE is to have regard to the intentions and the contract was concluded, will be of little intention of the contracting parties, such an agreement would be lawful to law is primarily based on the intentions and meanings which are to be derived from practical relevance to the interpretation without stopping at the literal meaning But this rule can be applied in the context the Hanafis, without considering the meanings which are to be derived from the the expressions and text which are used, of the words which the parties actually of the terms, being guided by the nature of construction contracts, where certain intended use of the grapes. words which the parties agreed to use in or from objective evidence or material agreed. of the transaction and the trust and matters have not been agreed. Sanhouri their contract. The Commentary on Article indications. This does not go beyond an confidence which should exist between gives this example²⁷: “If a person is required • “Inner intentions have no status, as they 266 says: “The intention of the parties is to objective search, to a subjective search (7) External Factors May Aid the contracting parties in accordance to construct certain roads without it being are personal phenomena that do not be deduced from the indication given by the to try to discern what is in people’s with current business practice. determined how these roads should be concern other people. It is the apparent words used in the contract.”¹⁸ minds, or to discover the errors in their Interpretation. constructed, or who should maintain intention that is relied upon by the souls. This article does not simply relate to the them, then that person may perform his contracting parties in their dealings One of the most widely quoted, but with others. This is a social rather than (5) Other Evidence of the Mutual misunderstood provisions of the Civil Code position where the terms of the contract obligations in the way that is easiest for him, The Commentary makes clear in this last are not clear. Its words do not mirror a personal phenomenon, and it out of Intention Is Admissible. sentence that the aim of the law is not to is Article 265(1), which says: to lighten his burden.” Article 265(1). Instead, it says that it applies this that the contract is made.”¹⁷ This is try to work out what were the contracting Under the common law, when “construing إذا كانت عبارة العقد واضحة فال يجوز االنحراف عنها “if there is a reason for interpreting the consistent with the Majalla, but seems parties’ personal intentions. However the any written agreement the court is entitled contract”. That reason may be a lack of to be dismissive of the relevance of the contract is to be interpreted not only by .عن طريق تفسيرها للتعرف على إرادة المتعاقدين to look at evidence of the objective factual clarity in its terms, or it may be a conflict parties’ true mutual intention. reference to the words of the contract, background known to the parties or If the words of a contract are clear, the between the terms and other evidence but also, importantly, from an “objective of the parties’ mutual intention. In such From these parts of the Commentary, it reasonably available to them at or before will of the parties may not be ascertained search” of “objective evidence” and “material cases, Article 265(2) provides that the appears that UAE law places a greater the date of the contract… However, this does by an interpretation which deviates from indications”. The apparent discrepancy judge or arbitrator is not limited to the emphasis on the expressed intentions of not entitle the court to look at evidence of them. between Articles 266 and 258(1) is resolved literal meaning of the words used, and he/ the parties, than Sanhouri and Egyptian the parties’ subjective intentions…”¹⁹ The by the admission of evidence other than she can take into account three additional law do. However, as set out below, these principal reason for this approach is that the terms of the contract, provided that it is factors²⁵: (1) the nature of the transaction; differences may not be as great as they the exercise of interpretation is objective, “objective”, and it is not directed to what the seem. considering how a reasonable person parties each subjectively intended. would have understood the words used. 20 Lewison, Chapter 3, Section 9 21 e.g. Prenn v Simmonds [1971] 1 W.L.R. 1381 22 e.g. James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd. [1970] A.C. 583 23 See Lord Hoffman in Chartbrook, above. 16 These schools, or divisions, are known as madhhabs ( ) مذاهبand are dominant in different geographical areas. 24 It is for this reason that the civil law does not include a concept equivalent to rectification. It is not needed. 17 Whelan’s translation, slightly amended. 25 The Commentary has little to say on these factors. 18 Whelan 26 Whelan 19 Lewison, The Interpretation of Contracts, 6th ed., Chapter 3, Section 17 27 §400 – 10 – – 11 –
(9) The Rules of Construction Are Limited. “Unlike the common law, which has numerous Unlike the common law, which has numerous rules as to how a contract is rules as to how a contract is to be construed, to be construed, the civil law and the law of the UAE rely to a greater extent on the the civil law and the law of the UAE rely to a judgement of the trial judge (or arbitrator) to decide what was the mutual intention of greater extent on the judgement of the trial judge the parties, as a matter of fact.²⁸ (or arbitrator) to decide what was the mutual However Sahouri refers to various “internal factors” which may be relevant to the intention of the parties, as a matter of fact.” interpretation of contracts . The following are a couple of examples: • “ Trust in business requires that a That which is generally accepted contracts may include obligations to co- person does not profit from ambiguity between businessmen has the same operate, and not to prevent completion. in the wording of a contract. Honesty in effect as contractual terms agreed Such terms may therefore form the basis business requires a contracting party not between them. for contractors’ claims for the costs of to take advantage of ambiguous wording disruption or prolongation³². as long as he was able to understand its The effect of this article is to add, as an true meaning, or could have understood obligation, anything which is recognized Summary³³ it.” Any ambiguity is therefore to be by those in the relevant trade or industry as construed in a way which assumes that being an obligation. The example given in This article has addressed the following both parties were honest businessmen/ the Commentary is this: “…where a person essential principles of contract women. This is the presumed intention of gives a thing to another for his use without interpretation under UAE law: the parties. discussing the cost of hire. The person making use of it must pay a fair amount for • UAE law on interpretation is not only • “ The words of the contract explain each it.”³⁰ This article may therefore be the basis based on Egyptian law. other. No expression can be interpreted for an obligation to pay a fair or reasonable separately from the other expressions, sum for work in respect of which no price • Interpretation under UAE law is but must be interpreted as part of the has been agreed. subjective. contract. A general expression may be limited by a preceding or following Article 246(2) adds obligations to those • UAE law is based on the parties’ mutual expression, and an expression may be which are set out in the contract. It says: intention. an exception to something which is mentioned before or after it…” A party وال يقتصر العقد على إلزام المتعاقد بما ورد فيه ولكن • The contract terms are the primary cannot rely on a single term of a contract, يتناول ايضا ما هو من مستلزماته وفقا للقانون والعرف indication of the mutual intention. where other terms modify its meaning. .و طبيعة التصرف • Other evidence of the mutual intention is (10) The Law Adds Obligations to A contract is not limited to requiring admissible. the contracting party to do what it Contracts. • Evidence of pre- and post-contracting says, but also includes the necessary requirements for the contract, in events is admissible. Not all of the obligations owed by one contracting party to the other, are accordance with the law, custom and the • External factors may aid interpretation. expressed in the contract. Certain further nature of the transaction. obligations are added by the law. • Doubt is resolved in favour of the person This article adds obligations which are a performing the obligation. For example, Article 264 of the Civil Code necessary part of the contract. As a result, states: they are broadly equivalent to what the • The rules of construction are limited. common law refers to as “implied terms”³¹. المعروف بين التجار كالمشروط بينهم Accordingly, under UAE law, construction • The law adds obligations to contracts. 28 As a result, there are few judgments of the Gulf courts addressing the principles of contractual interpretation. See Construction Law in the United Arab Emirates and the Gulf, Michael Grose, p.37. 29 §396 30 Whelan 31 See, for example, Keating on Construction Contracts, 10th ed., §3-055 to §3-087 32 See the author’s paper/slides on the SCL(Gulf) website: Delay and Disruption Claims - The Law in the Gulf, 30 May 2012 33 A more detailed version of this article is available on request from Keating Chambers. – 12 – – 13 –
INTERVIEW WITH • You are standing counsel for NHBC who you appeared successfully for in the Court • You have also been an elected local councillor, how did that work with practice at the Bar? • How does taking silk differ during COVID? SAMUEL TOWNEND QC of Appeal in the Herons Court case in 2019. What In all honesty it is difficult, though just about possible, to combine the two. To become a QC is the culmination of many years of work and even COVID hasn’t been able to remove that sense was the key finding in that From 2006 I was a councillor in the of achievement. Samuel Townend QC joined Keating in 2000. To mark him important case on the duties London Borough of Lambeth in which I was able to do some good for my I found out about the appointment becoming a QC on 15 March 2021 we asked him some questions of Approved Inspectors? a day earlier than anticipated when about his practice and route to silk. Sam is principally a High constituents and, in fact, I have stood for Parliament twice: In Reigate in 2005 an email was pinged through from Court and international arbitration practitioner specialising in On that appeal (together with Harry the QCA (QC Appointments) on a construction, professional negligence and energy fields. Smith) I acted for the building control and in Bristol North West in 2010; in neither case did I win. I was selected Wednesday evening a week before He has particular experience in working for NHBC, having been arm of NHBC, who had been pursued Christmas. Of course, it being lock standing counsel for them for the past 12 or so years. He has also under the Defective Premises Act 1972 for Bristol by the local Labour Party in June 2007, just a day before Gordon down there has been no going out to developed a specialism in offshore civils works, in particular work by owners of flats in Herons Court for celebrate. Earlier this year I received for and against international dredging contractors. He is called alleged breach of the common duty of Brown became the Prime Minister, the Conservatives and Liberal Democrats the loyal declaration by email, normally to the Northern Ireland Bar and, as in England and Wales, he is care found in s. 1. Following a successful spoken before the Lord Chancellor in frequently pitted against Leading Counsel on construction and strike out application before Waksman already having picked their candidates. Little did I (or my opposite numbers) full regalia in Westminster Hall, and commercial cases. J. on the grounds that no such duty asked to print out, sign, scan and send was owed by Approved Inspectors expect at that point that we would be fighting a phoney war for three years back- not quite the same! This is so I (privatised building control), the owners can use the designation of QC from 15 sought and obtained permission before the short campaign (after a general election is actually called). March. Fortunately, there has been no to appeal on the grounds of public requirement for a Zoom swearing in importance and novelty. I was pleased What many may not know is that all the political parties demand immense time ceremony although Keating will mark that the Court of Appeal unanimously the day with a virtual celebration. The dismissed the appeal on the two main and commitment from their candidates from selection (roughly 3- 4 days every indications are that there will be a grounds I relied upon in submissions. ceremony at some point in the future First, on the natural wording of the week) unpaid (of course), but also with very little supporting resource. I had a and, of course, hopefully I can soon 1972 Act building control/Approved celebrate in person with colleagues, Inspectors are not carrying out work part-time campaigner assisting me for about the final year only. The rest is you family and friends. I am grateful to relating to the “provision of a dwelling”. all those who have supported my They ‘police’ the build, but do not and volunteers. It was exciting at times, but it exacted a heavy personal toll on journey to silk both professionally and positively contribute to the provision personally. Although an individual or creation of the dwelling. Secondly, my family life and an effective hiatus in my career at the Bar (until 2010). I have accolade, it is not something that can • Are you from a legal • You were described by of working, but with the advent of remote the speeches of the House of Lords be achieved without the strong support in Murphy v Brentwood DC are highly not been persuaded to stand again- background? one client as “a first-class conferences with clients from across the of others. persuasive and strongly suggest that a even if anyone would want me! globe, that is now to a degree greater advocate with the tenacity of than it was before. local authority inspector owes no such No. It really is not something in my background at all. My mother was a a pitbull and manners of an duty and no distinction can properly be English gentleman” – what Soft skills of cooperation, management drawn between the position of public stained-glass painter, my father (who will of teams, attention to individuals are building control and private Approved be coming to the ceremonial swearing other qualities do you think now essential aspects to practice. Gone Inspectors. in, whenever that might be) deals in are important for a modern architectural salvage. Grandparents are the days when a barrister could included a gas engineer, shorthand barrister? simply sagely hand down advice from writer and insurance clerk. I went to state on high. Getting on with professional Ha, I still have not found out who said and lay clients, building up their trust schools and studied history at university. that about me- they deserve the prize for in you, is as critical to obtaining repeat I originally thought that my future might creative eloquence rather than me! instructions as being right and effective lie in the civil service and, in particular, the FCO. Having passed the fast-track in court. In some senses this is a natural What sort of disputes are you currently working on? The demands of practice now require extension of an old skill that barristers exams, I failed to obtain an offer which, a host of qualities that the barrister I suspect, was down to my rather naïve have (or ought to have) being the • Cross-examining in an ICC Arbitration evidential hearing where the subject-matter is engineering services in relation to a two generations ago would simply not tailoring of presentation to what is most substantial infrastructure project in the Middle East. performance in interview: channelling my have understood, let alone accepted. inner 007. Following that failed attempt persuasive to the Judge or tribunal but On the whole they are qualities outside extending that to clients too. The ability • Attending applications and first costs and case management conference in the TCC in relation to a four-party high-end I then worked on demolition sites for the court room, the discipline of court to use technology is also increasingly a defective residential property dispute. about six months before committing to room advocacy has, I suspect, stayed the Bar. given! substantially the same. • Determining a dispute concerning an energy from waste project appointed as Expert under the turn-key ADR clause. What my haphazard start did, however, The first is the need for flexibility and • Acting for the solicitor defendant in a mediation of a solicitors negligence dispute in relation to the conduct of litigation in the allow me, was the ability to project a bit of experience of construction (writ joint working with solicitors and client. “Getting on with professional Isle of Man of a claim of negligence against an architect. Instructions now come in so many widely) at my interview at Keating. Back different forms. There is frequently and lay clients, building up • Advising (with Adrian Williamson QC) an NHS Trust in relation to an ongoing appeal against a rejection of a proof of debt in in 1999 I managed to hoodwink Philip Boulding, Richard Harding and Simon a need for immediate or very quick their trust in you, is as critical the liquidation of a Project Co. following the termination of a PFI contract in relation to the construction and maintenance responses. You often work together of a hospital. This has been transferred from the Insolvency court to the TCC and is, I believe, the first case of its kind and a Hargreaves (only the first of whom was from the start to define the ‘job scope’, to obtaining repeat instructions substantial one at that- one side says £120M should pass one way, the other party claims payment of £80M. then in Silk) into persuading Chambers to give me an offer of pupillage, which I prepare a joint ‘beauty parade’ or bid as being right and effective in with solicitors for the biggest cases and, accepted, and the rest is history. invariably, at the outset providing costs court.” estimates often all the way to trial. I think we have always been flexible as to times – 14 – – 15 –
THE GUTTING OF Parliament’s intention was clear. It intended the residential occupier exemption to apply SECTION 106 OF THE to any residence, including second homes or holiday cottages, which one party to the contract intended to occupy. HOUSING GRANTS, In more general terms, as the court accepted in St Peter Total Building Solutions Ltd v Michelle Rhodes [2020] CONSTRUCTION AND EWHC 2036 (TCC) “the overall intention of section 106 appears to be to concentrate adjudication upon commercial disputes and to leave out of account, as it were, disputes By Abdul Jinadu REGENERATION ACT 1996 which relate to ordinary members of the public” ¹. PART 2. (iii) Hansard 23 July 1996Volume 574 In this context difficulties have arisen Column 1336 on a third reading in regarding the application of Section 106 in the House: three scenarios: Earl Ferrers speaking for the (i) The construction works comprised government: works to areas or buildings which one of the parties intended to “ Turning now to Amendment No. 76, occupy and part which it intended to “I am glad to say that none of the there are two main changes here, sell or rent out. amendments in this group is at and I will look at the issue most odds with the principle of having familiar to noble Lords first. Clause (ii) The construction works comprised This is the second part of a two-part article considering the unfortunate approach which the an exclusion for contracts with 105 excludes from Part II contracts works to areas or buildings which courts have adopted to the interpretation and application of the residential occupier exemption residential occupiers. We believe with a residential occupier, and the House will recall that, in Committee, one of the parties to the contract that such an exclusion is needed intended to occupy and part which contained in section 106 of the of the Housing Grants, Construction and Regeneration Act 1996 for two reasons. First, there is both the noble Lords, Lord Williams it intended for occupation by third (“the Act”). The first part considered the overly restrictive interpretation placed on the term already in place considerable of Elvel and Lord Howie of Troon, proposed amendments in the parties such as family members and legislation to protect the right of guests on a non-commercial basis. “residential occupier” and it demonstrated that the approach adopted by the courts was contrary the consumer. In this case, the search for the most effective way (iii) The construction works were to a to parliament’s intention in enacting the residential occupier exemption as part of Section 106. client will be a consumer as it is a of achieving this. During the Bill's passage in another place there single building which had been sub- household contract. Secondly, there is a small but significant risk that were still concerns that a client who divided into separate living areas unscrupulous contractors may try to was building an office block or a partially horizontally and partially This second article will consider the difficulties which are caused “flat” means separate and self-contained premises constructed browbeat those unfamiliar with the factory might include a dwelling vertically with the separate living by the interpretation placed on the requirement that the relevant or adapted for use for residential purposes and forming part of a new law into paying for shoddy work. so that the whole contract could areas to be occupied by members construction operations must be to a dwelling which one of the building from some other part of which the premises are divided be exempted from fair contract of the same family on a non- parties to the contract occupies or intends to occupy. horizontally.” The noble Baroness, Lady Hamwee, provisions. Although the Government commercial basis. asked whether "residence" means felt that this was rather unlikely, Section 106 provides as follows: Section 106 defines a dwelling by reference to the intention of one main residence. When the Bill since the exemption could only Each of these scenarios is illustrated by of the parties to a contract viz. a building constitutes a dwelling if refers to "residence", it means any apply to an individual owner and not a decision of the TCC. The first scenario “Provisions not applicable to contract with residential occupier. one of the parties to the contract intends to occupy the dwelling as residence. So it would include a to a company, we were persuaded is probably the easiest to resolve a residence. It expressly excludes from the definition of a dwelling second home or a holiday cottage.” to bring forward an amendment to and is represented by the decision in (1) This Part does not apply— house a building containing a flat but adds a definition for a flat viz. make sure that no such loophole Samuel Thomas Construction v J. & B. a separate and self-contained premises constructed or adapted (ii) Hansard 22 April 1996 Volume 571 existed. Developments, unreported, January 28, (a) to a construction contract with a residential occupier for use for residential purposes and forming part of a building from Column 949 on second reading in 2000. In that case the contract related (see below). some other part of which the premises are divided horizontally the House of Lords: Having looked at this carefully, we to the conversion of two barns, one for which falls within the definition of a dwelling. decided that the most equitable residential occupation by the defendants (2) A construction contract with a residential occupier means a Lord Lucas speaking on behalf of and the other for sale by them, as well and generally satisfactory way construction contract which principally relates to operations What was eventually to be Section 106 was considered on the the government: as the conversion of a garage block. of proceeding was to restrict the on a dwelling which one of the parties to the contract second reading of the Act and in debate in committee. The Disputes arose between the claimant exemption to contracts whose occupies, or intends to occupy, as his residence. legislative purpose of the section was clearly elucidated on behalf My Lords, we heard in Committee and the defendants, as a result of which primary purpose related to a of the government in the House: that the noble Baroness, Lady dwelling for one of the parties. This the claimant's invoices went unpaid. In this subsection “dwelling” means a dwelling-house or a flat; Hamwee, was concerned that the would still allow the exemption to The claimant referred the dispute to and for this purpose— (i) Hansard 28 March 1996 Volume 570 Column 1872 in reference to a residence in Clause cover contracts on second homes, adjudication, and was awarded £48,826.84. committee in the House of Lords: 104(1) might be construed as a which I know was a concern of the The defendants contended that the “dwelling-house” does not include a building containing a flat; reference to a main residence. My noble Baroness, Lady Hamwee, at claimant was not entitled to refer the and Earl Ferrers speaking for the government: noble friend Lord Ferrers reassured Report, and also to cover contracts dispute to adjudication, since the contract her on that occasion that when the where some of the work applied between them was not a construction Bill referred to a residence it meant contract for the purposes of the Act, to a separate flat, a garage or an any residence. I do not believe that outhouse. It would not, however, because it was a construction contract with there is any more that I can say or allow rich individuals to avoid the Bill a residential occupier which principally that can be added to the Bill to make by adding penthouse flats to their relates to operations on a dwelling which that clearer. office blocks.” (Emphasis added) one of the parties to the contract occupies, or intends to occupy, as his residence. 1 Paragraph 9 of the judgment. – 16 – – 17 –
HHJ Overend sitting in the TCC in Exeter found on the facts that although the works related to both barns, the works principally related to the barn and associated garage block which were to be sold, therefore the contract did not fall within the residential occupier exemption and was therefore not excluded from the application of the Act. It is submitted that on the facts this case was correctly decided albeit that the outcome was arguably harsh on the defendants. In hindsight the defendants would have The court held that the definition in Section debate in parliament. The intention was been best advised to have split the works 101 was irrelevant because (a) it only applied to exempt from the application of the Act into two contracts; one contract for their to Part I of the Act and had no application contracts which did not have a commercial residence and another for the works related to adjudication and (b) Section 106 purpose and if it intended to give effect to to the parts which they intended to sell. contained its own definition of dwelling. parliament’s intention, the court should have placed emphasis on this factor. The second scenario is represented by the decision in Shaw v Massey Foundation “This is a point of potential This is a point of potential public importance because the creation of and Pilings Ltd [2009] EWHC 493 (TCC). In Shaw v Massey the applicants (the public importance because the multigenerational homes is common Shaws) had engaged the Respondent creation of multigenerational and increasingly so due to economic factors and demographic change and (Massey) to carry out building works at a cottage separate to the main house homes is common and such dwellings are particularly common and which was some distance away from increasingly so due to economic in BAME communities. It is submitted that parliament’s choice in applying the main house where they resided. The contract did not contain a provision for factors and demographic the exemption principally not solely to the reference of disputes to adjudication change and such dwellings are operations on a dwelling which one of the parties occupies, or intends to occupy, and following disputes arising between the parties Massey commenced adjudication particularly common in BAME makes allowance for multigenerational flat because the works were intended to would still qualify as a residential occupier Conclusion proceedings and was successful. It was communities.” dwellings. This is consistent with the intent of the Act as recognised by the court Shaw create three flats. The defendant disputed because the contract with the claimant successful in the County Court in enforcing this. She contended that the works “principally relates to operations on a As with the scenario discussed above in the decision and the Shaws brought an v Massey which is to exclude disputes commissioned were to create three living dwelling which one of the parties to the respect of the facts in Shaw v Massey, appeal to the TCC arguing inter alia, that It is submitted that the decision in Shaw which relate to ordinary members of the areas for the three individuals who it was contract occupies, or intends to occupy, as the application or disapplication of the the adjudicator lacked jurisdiction because v Massey applied an overly restrictive public and contracts which contain no intended would live in the property, and [her] residence”. The fact that other “flats” residential occupier exemption based on they were residential occupiers within the interpretation to the definition of commercial element. that the works qualified as works to a single were created for a non-commercial purpose the definition of a dwelling house and meaning of the Act. residential occupier based on the distance dwelling because: as part of the works did not deprive the a flat have the potential to have broad of the property, which was the subject of The third scenario is illustrated by the facts defendant of the entitlement to rely on the implications for the general public. The In finding against the Shaws the court the works, from the main dwelling and that in St Peter Total Building Solutions Ltd v (i) the living areas were not separate exemption provided by Section 106. increasing number of multigenerational expressly recognised that there was no the decision ignored parliament’s intention Michelle Rhodes. In that case the claimant and self-contained premises homes makes it more likely that facts of commercial element to the contract in passing the section 106 residential had been contracted to carry out building because all three areas were freely Although the court acknowledged at the type which arose in St Peter v Rhodes (and it distinguished the decision in occupier exemption. The difficulties arising works on the defendant's property. The accessible from each other and paragraphs 9 and 10 of the judgment in will become increasingly common with the Samuel Thomas Construction on this from the decision in Shaw v Massey can purpose of the works was to convert one shared common services such as a respect of the definition of a dwelling effect that many consumers entering into basis). However the court found that the be demonstrated by a small adjustment large dwelling into a building housing three single boiler, single megaflow tank house and flat in Section 106 that it “seems contracts will find themselves unwittingly cottage constituted a separate building to the facts. If, for example, the cottage separate living areas for the defendant, and heating system, a single laundry to me that that section of the Act is capable subject to the draconian provisions of the and as there was no indication that the had in fact been a garage which was her mother and her daughter. Disputes room, supply and fit of internal of giving rise to some lively argument Act, not just in respect of adjudication but Shaws intended to occupy the cottage connected to the main building, but which arose between the parties to the contract doors only to all areas; as to what is and is not intended to be also as regards payment provisions. themselves, they did not qualify as was its own substantial structure, and the which the claimant referred to adjudication. comprehended within the exception” and residential occupiers. intention had been to convert the garage In seeking to set aside default judgment (ii) the living areas were not divided that the “present case illustrates a potential The somewhat inexplicable hostility of into a “granny flat” or self-contained living which had been entered by the claimant, horizontally as the defendant’s living difficulty in that the defendant’s contention the courts to the Section 106 residential In finding against the Shaws the court quarters for one of the Shaw’s children. the defendant argued that, as she was a area occupied the whole of the first by reference to various plans which I have occupier exemption is unfortunate because dismissed the definition of dwelling in Based on the reasoning in Shaw v Massey, residential occupier within the meaning floor and the rear of the ground been shown is that this house was intended it has and will likely increasingly result in Section 101 of the Act which provides that: arguably the Shaws would have qualified of Section 106, the adjudicator lacked floor; to be converted into a number of flats which consumers being subject to the provisions as residential occupiers because of the jurisdiction and there was no basis on were to be occupied by the defendant and of the Act, which is not what parliament “101. Minor definitions: Part I In this Part- which to enter judgment. (iii) planning permission was applied members of her family but … not on a basis intended. Unfortunately, it appears that proximity of the building to the main ‘dwelling’ means a building or part of and granted for renovation to a which meant that they were entirely self- the only solution will be legislative as there dwelling. If it is maintained that because a building occupied or intended to be The issue of whether the defendant was single dwelling only as per approved contained. Exactly which side of the line seems to be little appetite to course correct the Shaws themselves did not intend to occupied as a separate dwelling, together a residential occupier led to debate as to planning application drawings; that falls seems to me to be debatable…” in the courts. occupy the converted premises then they with any yard, garden, outhouses and the nature of the works which she had the court nevertheless found against still would not have qualified as residential appurtenances belonging to it or usually commissioned. The claimant contended The defendant contended in the alternative the defendant without, it is submitted, occupiers, then it is submitted that this enjoyed with it” that the works did not fall within the that if the separate living areas did grappling with this issue. ignores the principal purpose of the definition of works to a dwelling or a constitute separate flats, the defendant Section 106 exemption as is clarified by the – 18 – – 19 –
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