Commercial Disputes Weekly – Issue 18214 November 2023

Construction
Lendlease was contracted to design and build a new oncology centre at St James’s University Hospital in Leeds and in turn subcontracted Aecom to provide mechanical and electrical consultancy services. Lendlease was found liable for defective work and sought to pass that liability on to Aecom. The claim failed for a number of reasons, the first of which being that Aecom’s obligations under the consultancy agreement were not back-to-back with Lendlease’s obligations up the line. Further, a number of alleged defects had already been dealt with by a settlement agreement between the parties entered into shortly after disputes arose at practical completion. In relation to the settlement up the line, although it had been reasonable for Lendlease to reach a settlement, it had not demonstrated that the settlement figure was reasonable. Finally, in spite of defects in execution, the consultancy agreement had been entered into as a deed. However, the limitation period for the claims had elapsed by the time proceedings were commenced in May 2019.
Lendlease Construction (Europe) Ltd v Aecom Ltd [2023] EWHC 2620 (TCC), 1 November 2023

Sanctions
The claimant made written demands under bonds relating to the design and construction of a fertiliser plant. The banks refused to pay on the basis that the claimant was part of the EuroChem group which was closely associated with a sanctioned Russian billionaire. The claimant applied for the monies to be paid into court or a frozen account pending the trial in January 2025. The application was refused because the court was not satisfied that the claimant would obtain judgment at trial, nor could the money be said to be ‘relevant property’ that was identifiable, distinctive and capable of preservation. There was no ringfenced fund to be secured and an injunction was not necessary or appropriate as damages would be an adequate remedy, nor was there any suggestion that the defendant banks would not be good for the money if the claimant won at trial.
LLC Eurochem North-West 2 v Societe Generale SA and others [2023] EWHC 2720 (Comm), 3 November 2023

Fraud
The Danish Customs and Tax Administration brought a number of claims in England against parties said to have submitted fraudulent applications for tax refunds to which they were never entitled in relation to dividends from Danish companies. The defendants challenged the claims on the basis of a rule of private international law which provided that the English courts do not have jurisdiction to enforce the tax law of a foreign state (the ‘revenue rule’). The Supreme Court rejected the defendants’ appeal against the Court of Appeal judgment that the claims did not fall within the scope of the revenue rule. The Danish Administration’s claim was not for unpaid tax but rather for reimbursement of sums to which the defendants were not entitled. It claimed as a victim of fraud.
Skatteforvaltningen (Danish Customs and Tax Administration) v Solo Capital Partners (In Special Administration) [2023] UKSC 40, 8 November 2023

MAC clauses
The purchasers of a software system design company alleged that the sellers were in breach of a warranty that the financial and other records of the company did not contain any material inaccuracies and there had been no material adverse change in the turnover, financial position or prospects of the company. The company had not performed as well as expected after the purchase. The Court of Appeal found that the first instance judge had erroneously interpreted the material adverse change clause. Rather than assess the company’s prospects at the two relevant dates, he had assessed the actual position of the company at the completion date against the expectation that a reasonable buyer would have had when it first viewed the company accounts. This differed from the pleaded claim and so the sellers had not been given a fair chance to address these points. Further, the purchasers’ notice of claim did not satisfy the contractual requirements and so the claim was dismissed.
Decision Inc Holdings Proprietary Ltd v Garbett [2023] EWCA Civ 1284, 3 November 2023

Should you wish to discuss any of these cases in further detail, please speak with a member of our London dispute resolution team below, or your regular contact at Watson Farley & Williams: