CONSTRUCTION CASE NOTES

KIM FRANKLIN

After completing a law degree at the University of Warwick, Kim was called
to the Bar in 1984. She trained with both Keating and Atkin Chambers and
quickly established a name for herself as a construction specialist. She has
practised from Crown Office Chambers since its formation in 2000 and
become an increasingly prominent figure in major infra structures projects
and other large scale domestic and international disputes.

Most recently she has acted in a lengthy ICC arbitration for a Japanese
company in a dispute arising out of a £30m contract for the construction of a
chemical processing plant in the UK.

Kim regularly writes the ‘Legal Matters’ column in The Architect’s Journal, which is published weekly. The
column seeks to explain a variety of topical construction law issues to the Journal’s non-lawyer readership of
around 13 thousand.

Below are three of her recent articles: ‘Hired Gun’, ‘Ransom Value’ and ‘Taking Adjudication to the Wire’

Employed Expert – Hired Gun? 11.6.07

‘When is an expert not an expert?’ Whilst this may conjure all manner of light hearted responses at the
expense of the expert community, (my favourite being, ‘when X is the unknown quantity and ‘spurt’ is a drip
under pressure’), the correct answer is ‘when they are not independent’. One of the fundamental requirements
of expert evidence, emphasised by the Civil Procedure Rules (CPR), is that the expert owes a primary duty to
the court, irrespective of the interests of their instructing party. The CPR reforms targeted excessive, partisan
expert evidence. Experts were suspected of being prepared to stride into the court room, saloon doors
swinging, dust swirling, Doc Holliday style, as a ‘hired gun’ to fight the party’s cause.

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Various proposals were canvassed to chase these mis-placed mercenaries out of town. The ultimate solution,
the single joint expert (SJE), a latter day Lone Ranger, did not solve the problem entirely. The courts were
reluctant to saddle the unsuccessful party with an adverse finding without the opportunity of testing it in court.
The net result was that the parties would need their own experts in order to challenge the SJE’s findings. Far
from reducing the amount of expert evidence, the SJE potentially increased the number of experts involved.
For this reason, whilst they are used to deal with straightforward money issues, the SJE is seldom involved for
contentious liability issues.

The limitations of the SJE have caused the parties to fall back on their own experts. With the CPR ringing in
their ears, party appointed experts are required to declare their independence and acknowledge their
overriding duty to the court. This put the tobacco company Gallaher in difficulty when they wanted to rely on
the evidence of Mr Goel. He was one of only a handful of senior executives in the international cigarette
industry with experience of building business in developing markets and preventing smuggling. The problem
was that he worked for them.

In Gallaher International v Tlais Enterprises (Judgment 8.3.07) cigarette distributors, Tlais, objected to Goel’s
evidence because he was employed by Gallaher. He was not, they said, ‘a suitable person’ to be an
independent expert in their dispute with Gallaher over a distribution agreement for particular brands of
cigarettes in the Middle East.

The court concluded that whilst it is always desirable for an expert to have no actual or apparent interest in the
outcome of the proceedings, the existence of such an interest did not automatically make their evidence
inadmissible. It was a question of fact and degree. The court held that Goel should be permitted to give
evidence, particularly as Gallaher had declared his employment and put him on secondment for the duration of
his expert involvement. As Goel’s expertise was so scarce it would be unfair to require Gallaher to find a
replacement. Ultimately Goel would be subject to cross examined as to his independence. Hired gun or not,
he would not be spared the shoot out at the OK Corral.

Ransom Value 4.6.07

In response to my eight year old’s request for a more sophisticated joke, I asked, ‘why do the goblins have big
ears?’ The answer, ‘because Noddy wouldn’t pay the ransom’ provoked an unexpectedly challenging debate
about the meaning of the word ‘ransom’. Whilst it seems that my children had an innate understanding of the
concept of ‘blackmail’ long before they knew the word for it, they struggled with the notion of holding someone
to ransom. The follow up questions including ‘How much did the goblins want?’ and ‘Why wouldn’t Noddy
pay?’ prompted ideas for a story considerably beyond the scope of traditional Enid Blyton fare.

The concept of ransom also troubled the courts in a case concerning the development of a derelict site within
London’s Paddington Conservation Area. The development involved buildings of up to 22 storeys including a
supermarket and 300 residential units. On the corner of the site, but outside of it, was No.283 Edgware Road
owned by MR Dean & Sons. Dean believed that No.283 was effectively a ‘ransom strip’. This belief was
supported by Sainsbury’s and the developers who were vying with each other to pay £5.6m, or twice the
market value, for the property. Dean had every justification for believing that if the developers wanted to
proceed they would have to pay them a king’s ransom.

Dean were not surprised therefore when, following an enquiry, the planning inspector found that retaining
No.283 would diminish the proposed development by its incongruity, by screening the supermarket and

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leaving the shops removed from the face of the development. Dean were far from pleased, however, when on
appeal, the Secretary of State found that it would, nevertheless be possible to tolerate No.283 remaining,
particularly if it was likely to be acquired and demolished in the foreseeable future. The Secretary of State
agreed that the potential ransom value disappeared with the grant of planning permission, but went on to grant
permission all the same.

In MR Dean & Sons v First Secretary of State (Judgment 11.1.2007) Dean challenged this decision. They
argued that ransom value does not only arise where land is required for access, but also to make a
development more acceptable in planning terms. They were therefore entitled to expect the ransom to be
paid. The Secretary of State had deliberately acted to make the ransom disappear and improve the likelihood
of acquiring No.283. This, they argued, was improper purpose and a breach of their human rights. Whilst the
judge accepted that ransom value was relevant for valuation purposes, he refused to accept that planning
decisions must maximise or preserve ransom value. Financial considerations could be relevant to planning
decisions only if they related to the character and use of the land. Any loss of value did not affect Dean’s
peaceful enjoyment of No.283. The decision to tolerate No.283 was therefore a planning judgment with which
the court could not interfere.

So one answer to the question, ‘why wouldn’t Noddy pay the ransom?’ could be, ‘because Big Ears wasn’t
worth it after all’.

Taking Adjudication to the Wire 17.5.07

Love it or loathe it, adjudication is nothing if not a seat-of-the-pants experience. The combination of the
truncated time frame, the procedural free for all and the compulsive tendency to put as much material as
possible before the adjudicator, favours the ‘have a go’ claimant. A claimant who believes, rightly or wrongly,
that they have lost out, can bamboozle the defendant and adjudicator alike with a dazzling array of documents,
statements, schedules and whizzy charts all leading inextricably to a big, juicy bottom line. There is barely
time to assimilate all this and no time at all to test it. Calls for clarification can descend into unseemly
squabbles about whether the witnesses are simply to be questioned or, heaven forbid, cross examined. An
unsuccessful claimant looses nothing more than their own costs of the exercise. If they are successful, and,
more often than not they are, because it takes a brave adjudicator to find that the claimant’s vast smoky edifice
has been generated without even a glimmer of a fire, they have an adjudicator’s decision in their favour. The
defendants may not like the decision; they may not agree with it; they may not want to pay up, but these days
an adjudicator’s decision is as good as cash in the bank and you ignore it at your peril.

This point was reinforced again by the Technology & Construction Court in Gray & Sons Builders (Bedford) Ltd
v Essential Box Company Ltd (Judgment 11.10.06). RIBA adjudicator, Ian Salisbury, decided that the
defendants had wrongly repudiated their contract with the claimant builders who were entitled to compensation
of £115,500. The defendants did not pay. Instead they took what the judge described as ‘a variety of
technical points’ and gave the appearance that they resisted the enforcement proceedings. At the eleventh
hour, on the day before the hearing, the defendants conceded that they did not oppose enforcement but
objected to paying the claimant’s legal costs.

The judge reiterated that the proper course for an unsuccessful party was to pay the amount ordered by the
adjudicator and argue about it in legal or arbitration proceedings later. He pointed out that it was
unreasonable for the defendants, who ought to have known that they had no defence, to give the impression
that the enforcement was resisted. Defendants who avoid paying up in accordance with an adjudicator’s

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decision until the last moment or beyond are trying to frustrate the statutory adjudication provisions and should
be penalised with indemnity costs. The last minute offers by the defendants to defer payment by instalments
were irrelevant. Ultimately, save for the odd taxi fare, the claimants were entitled to judgment for £115,500
and to be indemnified for their full legal costs of £12,500. The moral of this story is, good, bad or indifferent;
don’t take the enforcement of an adjudicator’s decision to the wire: pay up and argue later, or it will cost you.

KIM FRANKLIN

June 2007

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