John Sisk and Son Ltd v Capital & Centric (Rose) Ltd

Factual and Procedural Background

This judgment concerns a Part 8 claim brought by the Plaintiff contractor ("Plaintiff") against the Defendant developer ("Defendant") regarding the proper construction of a clarification clause in a contract dated 20 May 2022. The contract, a JCT Design and Build Contract 2016 with bespoke amendments, related to the design and construction of substantial works at a development site ("the Site"). The dispute focused on the allocation of contractual risk concerning the existing structures on the Site, specifically their suitability to support or facilitate the proposed works.

The Plaintiff had previously been unsuccessful in adjudication proceedings on this issue, where the adjudicator ruled in favor of the Defendant. However, that decision was only temporarily binding, and the court was tasked with making a final determination. The Defendant did not file a formal defense but submitted witness evidence. The hearing proceeded without cross-examination, relying on written and oral submissions from counsel for both parties.

Legal Issues Presented

1. What is the proper construction of clause 2.42 and item two of the contract clarifications regarding the allocation of risk for the existing structures on the Site?
2. Does the risk of unsuitability of the existing structures, including their ability to support or facilitate the proposed works, lie with the Plaintiff or the Defendant?
3. Are the tender submission clarifications part of the contract clarifications and thus relevant to the interpretation of the contract?
4. Should pre-contractual negotiations be admissible and considered in interpreting the contract?

Arguments of the Parties

Plaintiff's Arguments

• Contract clarification two designates the existing structures risk as an "Employer Risk," meaning the Defendant bears the risk of additional costs or delays arising from the state of the existing structures.
• The term "Employer Risk" should be understood in its ordinary construction contract context, entitling the Plaintiff to extensions of time and additional payments if such risks materialize.
• The tender submission clarifications document merely records initial negotiations and is not part of the final contract clarifications; therefore, the contract clarifications document governs the risk allocation.
• Pre-contractual negotiations are not admissible for interpreting the contract, and the Plaintiff did not plead that the tender submission clarifications were not contractual documents.

Defendant's Arguments

• The tender submission clarifications form part of the contract documents and reflect the parties' agreed position that the Plaintiff bears the existing structures risk.
• The Plaintiff attempted to divest itself of the existing structures risk, but the Defendant rejected this unequivocally.
• If any ambiguity exists in contract clarification two, it should be resolved in the Defendant's favor by reference to the tender submission clarifications.
• The pre-contractual negotiations show the parties' objective understanding of risk allocation and fall within exceptions to the general rule excluding such evidence.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396	Summary of principles of contract interpretation, including admissibility of pre-contractual negotiations.	Used to frame the general principles of contract construction and to assess the admissibility of pre-contractual negotiations.
Oceanbulk Shipping & Trading SA v TMT Asia Limited [2010] UKSC 44	Guidance on the scope of admissible factual matrix and pre-contractual negotiations in contract interpretation.	Referenced to determine limits on admissibility of pre-contractual negotiations and to guide the court's approach.
Merthyr (South Wales) Limited v Merthyr Tydfil County BC [2019] EWCA Civ 256	Clarification on the demarcation line between admissible background facts and impermissible use of pre-contractual negotiations.	Applied to emphasize the court’s caution in admitting negotiation evidence for interpreting the contract.
R. (on the application of Counsel General for Wales) v Secretary of State for Business, Energy and Industrial Strategy [2022] EWCA Civ 181	Guidance on confidentiality and embargo of draft judgments.	Referenced in relation to a breach of confidentiality embargo concerning the draft judgment in this case.

Court's Reasoning and Analysis

The court commenced by reviewing the relevant contract clauses, notably clauses 2.42.1 to 2.42.3, which broadly allocated all risks relating to the condition of the Site and existing structures to the Plaintiff. Clause 2.42.4 introduced a qualification referencing item two of the contract clarifications, necessitating close examination of that document.

The court distinguished between two documents: the contract clarifications worksheet and the tender submission clarifications worksheet, both part of an excel workbook. It concluded that the contract definition of "Clarifications" referred solely to the contract clarifications worksheet, not the entire workbook, thus excluding the tender submission clarifications from the contractual definition.

Contract clarification two stated that the Defendant was responsible for insuring the existing buildings and obtaining a warranty from the consultant (Arup) regarding the suitability of the proposed works, labeling this as "Employer Risk." The court interpreted "Employer Risk" in its natural meaning within construction contracts as the Defendant bearing the contractual risk associated with the existing structures' suitability.

The court considered the practicalities and likelihood of Arup providing such a warranty, finding no evidence that such a warranty was obtained or enforceable. It reasoned that the provision likely reflected a responsibility on the Defendant to procure any such warranty rather than transferring risk to the Plaintiff.

In assessing the tender submission clarifications, the court found it was not referred to in the contract documents as part of the contract clarifications and was absent from the printed contract. It noted ambiguities and lack of clarity in that document, concluding it could not be given the weight the Defendant urged.

The court rejected the Defendant's attempt to rely on pre-contractual negotiations to interpret the contract, adhering to established legal principles limiting such evidence's admissibility. It found that neither party had pleaded estoppel or rectification, and thus pre-contractual negotiations could not be used to resolve ambiguities.

After a detailed review of correspondence and negotiation history, the court found that the parties' positions evolved, and the final contract clarifications document reflected a change in the risk allocation compared to earlier drafts. The court concluded that the Defendant accepted the risk of the existing structures' unsuitability, consistent with the contract clarifications.

Holding and Implications

The court held that the risk of the unsuitability of the existing structures, including their ability to support and facilitate the proposed works, lies solely with the Defendant.

The court granted declaratory relief reflecting this interpretation and indicated that further submissions would be invited to finalize the precise terms of the declarations and any consequential matters.

This decision directly affects the parties by clarifying contractual risk allocation but does not establish new legal precedent beyond the application of settled principles of contract interpretation.