Recent case highlights need for care in drafting sub-contracts in the construction industry

20 June, 2017
by: Cripps Pemberton Greenish

The recent case of GB Building Solutions Limited v SFS Fire Services Limited (t/a Central Fire Protection) (2017) EWHC 1289 is of great interest for those concerned with construction matters in that it demonstrates the importance of understanding how the JCT’s insurance provisions operate and identifies the key authorities on what constitutes practical completion as a matter of fact.

 

In this case, the Manchester District Registry of the Technology and Construction Court (TCC) decided as a preliminary issue that flooding on a construction site occurred after practical completion of the sprinkler system sub-contractor’s works.

 

Whilst this judgment focuses on a construction sub-contract, its comment on contract interpretation will be of wider interest.  This is because it clarified that contract interpretation involves looking at contractual wording and the commercial consequences of each suggested interpretation.

 

In this case, where the court found competing interpretations were plausible, it conducted an iterative process by which each suggested interpretation was checked against the provisions of the contract and its commercial consequences investigated.  In particular, the judgment:

 

  • Illustrates the risk of confusion where a sub-contract refers to practical completion of the sub-contract works and also to practical completion, which referred to the main contract.  However, the sub-contract still used the term “practical completion” in lower case in several provisions.  This was at the core of the argument about when the sub-contractor’s protection as a co-insured party ended; was it on practical completion of sub-contract or practical completion of the main contract?
  • It demonstrates the importance of understanding how the JCT insurance provisions operate.  The JCT insurance regime is not easy to follow, meaning that the scope and period of cover for each type of insurance is not always clear.
  • It shows the court’s approach to notices under the JCT contract, the court finding that references to specific contract clauses were unnecessary, so long as a practical completion notice conveys a clear statement that the sub-contractor believes that he has done all that is required of it to achieve practical completion on the date so notified and the only additional proviso was that the notice must clearly state the date on which the sub-contractor believes that the sub-contract works are practically complete.

 

Parties often amend standard form contracts by adding references to key events under the main contract and this judgment illustrates the importance of clarifying which aspects of the sub-contract are affected by those changes through the use of precise terminology.

 

The judgment is worth detailed consideration by all those involved with sub-contracts.