KC LEGAL UPDATE - Keating Chambers

 
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KC LEGAL UPDATE - Keating Chambers
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
KC LEGAL UPDATE - Keating Chambers
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–
KC LEGAL UPDATE - Keating Chambers
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–
KC LEGAL UPDATE - Keating Chambers
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–
KC LEGAL UPDATE - Keating Chambers
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–
KC LEGAL UPDATE - Keating Chambers
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 –
KC LEGAL UPDATE - Keating Chambers
(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 –
KC LEGAL UPDATE - Keating Chambers
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 –
KC LEGAL UPDATE - Keating Chambers
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.

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KC LEGAL UPDATE - Keating Chambers
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

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