Building Law Monthly

The Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900 has allowed an appeal from the decision of the Court of Appeal (on which see our June 2010 issue, pp10-12) and held that the claimants were entitled to claim payment from the defendant bank under the terms of the performance bond. The point of more general interest which emerges from the case is the conclusion that, where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.

In Multi-Link Leisure Developments v North Lanarkshire Council [2010] UKSC 47, [2011] 1 All ER 175 the Supreme Court took a robust approach to the interpretation of the contract between the parties and placed heavy emphasis upon the importance of adopting a construction which was consistent with commercial good sense. The court also stated that, in a case where the contract is poorly drafted, the imperative to give the words their ordinary and natural meaning is less strong than in the case where the contract is well drafted. In the case where the parties have chosen their words carefully, an approach which gives to the words their ordinary and natural meaning is likely to further their intention. This is less obviously so where the contract is poorly drafted and, in such a case, a court may be more inclined to depart from the ordinary and natural meaning of the words in favour of an approach which produces a commercially sensible outcome.

In Cleaver v Schyde Investments Ltd [2011] EWCA Civ 929, [2011] All ER (D) 285 (Jul) the Court of Appeal declined to reverse the finding of the trial judge that Condition 7.1.3 of the Standard Conditions of Sale (4th ed) was of no effect on the facts of the case because it failed to satisfy the requirement of reasonableness in s3 of the Misrepresentation Act 1967.

In Witney Town Council v Beam Construction (Cheltenham) Ltd [2011] All ER (D) 141 (Sep), [2011] EWHC 2332 (TCC), Mr Justice Akenhead held that there was only one dispute between the parties by the time of the service of the notice of adjudication and that only one dispute had been referred to adjudication. He therefore rejected the claimants’ challenge to the validity of the adjudicator’s decision and held that the defendants were entitled to enforce it. While the conclusion that there was only one dispute very much depended upon the facts of the case, Akenhead J helpfully sought to re-state the principles which should be applied by a court when considering whether a party has attempted to refer more than one dispute to adjudication.

In Systech International Ltd v PC Harrington Contractors Ltd [2011] EWHC 2722 (TCC), [2011] All ER (D) 240 (Oct) Mr Justice Akenhead held that the invalidity of a decision reached by an adjudicator did not have the consequence that there had been a total failure of consideration so that the adjudicator was not entitled to recover his fees from the parties to the adjudication. On the facts, the cause of the invalidity of the decision was a significant breach by the adjudicator of the principles of natural justice. It should, however, be noted that the breach was committed innocently and it is possible that an adjudicator might be unable to recover his fees if it is established that he has acted dishonestly, fraudulently or has otherwise acted in bad faith.