The Technology and Construction Tribunal (TCC) at Eco World – Ballymore Embassy Gardens Company Ltd v Dobler UK Ltd [2021] EWHC 2207 (TCC) applied a damages clause (DOD) which did not allow for a proportional reduction following partial possession of sections of a development. The TCC rejected the fact that the clause was a penalty and considered the argument that an invalid damages clause could still function as a valid limit of liability.

Background

Eco World (Eco) employee Dobler (UK) Ltd (Dobler) to design, supply and install facade and glazing works at Nine Elms, London (the contract). The contract was based on the JCT 2011 Commercial Construction Management Contract (with modifications). Dobler looked after three “blocks” of residential development (blocks A, B and C), together called Building A04. The revised completion date has been April 30, 2018. There was no partial completion in the contract, but there was a provision for takeover or possession prior to practical completion (PC). During the week ending June 15, 2018, Eco took over blocks B and C, but block A was exceptional. Eco has taken over the rest of the work on December 20, 2018, and PC has been certified.

Following the CP, a dispute arose as to the level of the applicable LDs

Mechanism of LD

The Contract provided for LOs in the event of Dobler’s delay (clause 2.32.1). It provided for an initial grace period of four weeks, then a capped weekly amount: “Lump-sum damages will apply thereafter at the rate of 25,000 per week (or pro rata for part of the week) up to a global maximum of 7% of the final sum of the commercial contract …“

The relevant contractual notice to be issued for the DLs to be collected should specify whether the DLs were to be paid at the contractual rate, or at a “lower rate indicated in the notice“.

Action before the Technology and Construction Tribunal (TCC)

Three arbitrations took place between the parties. These included arguments on the extension of time, assessment and GLs.

Following the third decision, Eco initiated Part 8 proceedings before the TCC to resolve the following issues:

Positions of parties

Eco argued:

Dobler argued:

Decision

The CCT held:

Alternative argument regarding the ceiling

Although not necessary in view of the above conclusion, the ICC also considered Dobler’s alternative argument that even if the DL mechanism was null and / or inoperative, the ‘cap’ of clause s ‘would still apply to all general or unliquidated damages. An important factor to consider in this context would be whether the cap was intended to limit liability for late fees. Considering the Contract as a whole, the ICC has determined that the 7% cap in this case “would work as a limitation of liability provision, even if the damages were nil or a penalty“.

Therefore, even if Eco had succeeded in arguing that the LD clause was null and / or unenforceable, its claim for general damages would still have been subject to the 7% cap.

Points to remove

The lessons to be learned from this case are:

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