Masons (A Firm) v WD King Ltd & Anor [2003] EWHC 3124 (TCC)

“In the event the PM is of the opinion that the Contractor’s rate of progress in carrying out the works is likely to prejudice completion of the works or any section by its date for completion, and to the extent that in the opinion of the PM this is due to a cause which is not listed in Condition 36(1), the PM, acting reasonably, and taking account of the Contractor’s representations may instruct the Contractor as to the measures he requires the Contractor to take to retrieve the position and the Contractor shall comply with the same at no cost to the Employer. Without prejudice to the generality of the foregoing, such instructions may include the requirement to re-sequence works, to accelerate completion of the works and/or require the Contractor to increase his on and off site resources”

“14 The following were express and/or implied terms of Masons’ said retainer and/or retainers: (a) Masons would draft and/or advise King upon the drafting of the agreements necessary to secure (i) the development of the Site by the construction of four accommodation blocks and associated external works; (ii) the letting of the said development to the University; and (iii) …… (b) when requested to do so by King, PGBL or PWA on their behalf, Masons would provide legal advice and/or services in connection with other aspects of the development; (c) whether or not requested to d by King, PGBL or PWA on their behalf, Masons would advise King and PGBL on all matters relevant to their retainers(s), insofar as such advice was and/or appeared to be reasonably necessary; (d) in so drafting, advising or acting, Mason would: (i) take all reasonable steps to further King’s objective of avoiding risk where possible and otherwise minimising risk where it was unavoidable; and (ii) take due account of King’s lack of experience of and expertise in a development of this size and nature; (iii) warn King and/or PGBL of any significant or material risk to them in the contracts they would be entering into. 15. Further, it was an implied term of Masons’ said retainer(s) (either implied by operation of law and/or in order to ensure business efficacy) that Masons would exercise the care and skill reasonably to be expected of solicitors with specialist experience and expertise in the areas of commercial property (including development finance) law and construction law in performing the said retainer(s). 16. Further, or alternatively, Masons owned to King and to PGBL (and to each of them) a duty of care at common law in the tort of negligence, which was both co-extensive and concurrent with the said implied contractual duty of care. 17. In purported performance of their said retainer(s): (a) Masons drafted and/or advised King and PGBL upon the draft terms of: (i) the Development Finance Agreement (“the DFA”); (ii) the Agreement for Lease (“the AFL”) and (iii) the Building Contract (“the Building Contract”), which said agreements are further particularised below (and to which King and PGBL will refer for their full terms and true effect); and (b) Masons advised PWA, on behalf of PGBL, upon the terms of Project Manager’s Instruction No 003, which PWA issued under the Building Contract on 17 May 2000. …. 67 (i) Masons failed to draft the building contract and/or to advise [WDK] that the building contract should be drafted as expressly to permit PGBL to recover unliquidated damages in the event that Jarvis was in breach of an acceleration instruction issued by the Project Manager under Condition 38. For the avoidance of doubt, as pleaded in the Reply, King’s and PGBL’s case is that Masons ought properly to have drafted the building contract so as to expressly to provide for unliquidated damages to be recovered by the employer in respect of the failure to mitigate and/or to eliminate delay by acceleration as instructed by the Project Manager.. 67 (ii) At the least, Masons ought properly to have warned of the risk of the irrecoverability of the principal (delay) loss which [WDK] were likely to incur as a result of any breach of Condition 38. …” 67A. In the alternative, PGBL would not have entered into the Building Contract with Jarvis if it had been advised that there was a significant risk and/or a material possibility that a breach by Jarvis of its obligation in respect of acceleration under clause 38 would not give PGBL the right or might not enable PGBL to recover unliquidated damages for failure to mitigate and/or to eliminate any delay by accelerating, where so instructed by the project manager, in addition to any right to recover liquidated and ascertained damages. 67B. Further and in the further alternative PGBL lost the opportunity to decide whether or not to proceed with Jarvis as contractor, whether on alternative terms, or at all. 68. Masons’ failure (either in breach of contract and/or negligently) so to act or advise caused PGBL to lose the opportunity to contract with Jarvis on the basis that Jarvis would be liable to pay unliquidated damages in respect of loss caused to PGBL by Jarvis’ breach of condition 38. King and PGBL contend that Jarvis would have contracted on that basis had PGBL required it to do so, since: (a) under condition 38, Jarvis would be required to comply with an acceleration instruction only if the same were issued reasonably and taking into account Jarvis’ representations in respect thereof; (b) liability for unliquidated damages for breach of an acceleration instruction would not have undermined the liquidated and ascertained damages provisions of the Building Contract. On the contrary, unliquidated damages would have been recoverable only in the event that Jarvis failed to take the measures expressly specified in an acceleration instruction. Unlike Jarvis’ liability to pay liquidated and ascertained damages under condition 55, its liability to pay unliquidated damages would not necessarily arise in the event that the contractual completion dates were missed as a result of delay for which Jarvis was responsible. Rather, provided that Jarvis took the measures specified in an acceleration instruction, no liability whatsoever for unliquidated damages would arise, even if such measures were wholly and/or partly ineffective to retrieve delay. In the premises, the risk that Jarvis would be in breach of an acceleration instruction would have been a risk wholly within Jarvis’ own control and Jarvis would have accepted the same if invited to do so. PGBL’s loss and damage 69. By reason of Masons’ said breaches of contract and/or duty, PGBL has suffered loss and damage. PARTICULARS OF LOSS AND DAMAGE Masons’ said breaches of contract and/or duty in relation to the terms of the Building Contract caused PGBL to lose: (a) the opportunity to recover unliquidated damages for delay from Jarvis for Jarvis’ breaches of condition 38 of the Building Contract. The value of such opportunity was equal to PGBL’s losses as set out at paragraphs 49 to 58 inclusive above and as more fully particularised in Substitute Appendix D herewith and Appendices F to G hereto; and (b) the legal and associated costs of PGBL’s reasonable attempts to mitigate its said loss by its claims against Jarvis in the adjudication and in the arbitration. Such costs amount to £309,580.52 (excluding VAT), as more fully particularised at Appendix H.” (i) the development of the Site by the construction of four accommodation blocks and associated external works; (ii) the letting of the said development to the University; and (iii) …… (i) take all reasonable steps to further King’s objective of avoiding risk where possible and otherwise minimising risk where it was unavoidable; and (ii) take due account of King’s lack of experience of and expertise in a development of this size and nature; (iii) warn King and/or PGBL of any significant or material risk to them in the contracts they would be entering into. (a) Masons drafted and/or advised King and PGBL upon the draft terms of: (i) the Development Finance Agreement (“the DFA”); (ii) the Agreement for Lease (“the AFL”) and (iii) the Building Contract (“the Building Contract”), which said agreements are further particularised below (and to which King and PGBL will refer for their full terms and true effect); and (b) Masons advised PWA, on behalf of PGBL, upon the terms of Project Manager’s Instruction No 003, which PWA issued under the Building Contract on 17 May 2000. (a) under condition 38, Jarvis would be required to comply with an acceleration instruction only if the same were issued reasonably and taking into account Jarvis’ representations in respect thereof; (b) liability for unliquidated damages for breach of an acceleration instruction would not have undermined the liquidated and ascertained damages provisions of the Building Contract. On the contrary, unliquidated damages would have been recoverable only in the event that Jarvis failed to take the measures expressly specified in an acceleration instruction. Unlike Jarvis’ liability to pay liquidated and ascertained damages under condition 55, its liability to pay unliquidated damages would not necessarily arise in the event that the contractual completion dates were missed as a result of delay for which Jarvis was responsible. Rather, provided that Jarvis took the measures specified in an acceleration instruction, no liability whatsoever for unliquidated damages would arise, even if such measures were wholly and/or partly ineffective to retrieve delay. In the premises, the risk that Jarvis would be in breach of an acceleration instruction would have been a risk wholly within Jarvis’ own control and Jarvis would have accepted the same if invited to do so. Masons’ said breaches of contract and/or duty in relation to the terms of the Building Contract caused PGBL to lose: (a) the opportunity to recover unliquidated damages for delay from Jarvis for Jarvis’ breaches of condition 38 of the Building Contract. The value of such opportunity was equal to PGBL’s losses as set out at paragraphs 49 to 58 inclusive above and as more fully particularised in Substitute Appendix D herewith and Appendices F to G hereto; and (b) the legal and associated costs of PGBL’s reasonable attempts to mitigate its said loss by its claims against Jarvis in the adjudication and in the arbitration. Such costs amount to £309,580.52 (excluding VAT), as more fully particularised at Appendix H.”

“My overall impression of Mr Whitley was that he was an extremely intelligent man, with a good deal of knowledge not only about the construction industry as a whole but also about the meaning and significance of contract conditions. He was in this respect someone who I would class as having knowledge and understanding which went beyond that of many architects. My view of him in this respect was supported by the extent to which he involved himself in the drafting process, commenting upon detailed provisions and requiring amendments to them.”

“Further to our conversations on Friday and yesterday, I am pleased to enclose details of the services that WD King are likely to need from us in relation to preparation of the tender documents and building contract conditions for this project. I have set a fixed fee against each individual part of the services which I hope will give you the information you want. I have also specifically set out what is excluded from the fixed fee on the basis that at this particular moment it is difficult for me to gauge the extent of work that might be required to deal with the excluded matters, and I would therefore have difficulty calculating a price for them. I have included details of our hourly rates for matters falling outside the fixed fee, although this is not to say that all further work would necessarily be charged at the hourly rates. If further work became necessary, and provided we were able to make a reasonable assessment of the extent of work required, we would be happy at that stage to discuss with you a fixed fee for that further work. If you have any queries on the enclosed note, please do not hesitate to telephone me to discuss them. If the fee is acceptable to WD King then I hope that your commitments permit our provisional meeting in Bath next Monday to go ahead. We can then put together a timetable for the process of drafting and revision of amendments and fix a date for a further meeting to go through the first draft of any amendments to the contract and Supplementary Conditions.”

“1. Attending out Paul Whitley and Andy Platts, the latter from Bucknall Austin at the Frances Hotel, Bath. Andy Platt was there around 8.45 am and Paul came in about 9.30 am. We finished around 12.45 pm. Andy told me a bit about the project before Paul’s arrival. Bucknall Austin are the quantity surveyors advising WD King on the tender documentation. I am not sure what their role will be, if any, under the Building Contract, but suspect they will be QSs. Andy said that there were a couple of major risk items in connection with the project, the first being ground conditions, the second archaeology. Certain archaeological discoveries have been made on the site and there has been talk of a full open dig. It is hoped that there will be a small enabling contract, let on the advice of Bucknall Austin only and very straightforward, under which a reduced level excavation will take place. These enabling works will be done before the main contract is let so that there is an opportunity to see the extent to which there is risk in relation to archaeological finds but even if nothing were to be revealed by the reduced level excavations, there is still a prospect of something being found later, for example when the foundations are piled (at this stage of the meeting it was thought they would be piled). It is believed that the Employer will want the Contractor to take the risk of any archaeological finds and that an Archaeologist will still have a supervisory/monitoring role whilst the works are being carried out. Presumably he would advise the PM under the contract and the PM then act – so he may not need a mention in the conditions. Consequently, there will need to be provisions in the contract to cover this, at least to the extent of requiring the Contractor to provide estimates of delay and additional cost where there is a stoppage caused by a particular find and also estimates of acceleration costs to try to reduce whatever delay and disruption might be caused. The works are being carried out on a sloping site that will need stabilising. It was for this reason that piles were thought to be required (but later in the meeting Paul Whitley said that the foundations will be raft or strip and that a mistake had been made previously by the structural engineers they had advised the need for piling). The idea is that the Contractor is to be responsible for the ground conditions, the adequacy of the reports that have been done on behalf of the Employer by a structural engineer in Bath, for any extras or any inadequacies, etc. It was thought that a Contractor would be more likely to take the risk of archaeological finds if, as its anticipated to be the case, certain enabling works are undertaken before the main contract is let, those enabling works being to reduce levels (see above). 2. Andy said that the Employer’s Requirements were 95% there, and the first stage tender would be on the basis of prelims, overheads and profit and design costs. The Contractor’s will also be asked to suggest their project management method, staff and submit outline design proposals for that 10 or 20% of the project (largely structural apparently) that has not yet been designed. Paul Whitley Architects (who is also associated with the developer, W D King) is the project Architect. He will be the PM under the building contract. He has prepared the 80% of the design that has thus far been undertaken although there is also a structural engineer. The Contractor is to take responsibility for all of the design work undertaken by Paul Whitley Architects and to have no rights back against Paul Whitley in the event the work the latter has done was to prove to be inadequate or defective in any way. MAC questioned this (the absence of a novation) but the idea apparently is that the Contractor’s will have adequate time and opportunity to look at all work undertaken by Paul Whitley Architects, check it is ok, so that they will be happy to take responsibility for it. Hmmm. The position is not the same in relation to the structural engineer. Here the Contractor is indeed responsible for work undertaken by the structural engineer but is to stand in the shoes of W D King in relation to the engineer’s appointment. 3. It was said that the planning permission contains some constraints that will be relevant to the construction contract. This will be sent to MAC. 4. The agreement for lease was looked at on Paul Whitley’s arrival but it is not yet agreed. Paul was apparently expecting to see LADs in the agreement for lease but there are none. The works are to be completed by July 2000, specifically by 28 July 2000 with hand over to the University under the agreement for lease occurring on 23 August. This would then leave about a week or so before the start of the autumn term Osborne Clarke are acting for the University of Bath on property matters. There are about 220 rooms within the student buildings which are 4 in number. All of them are different. The construction works are likely to cost around £5½m to £6m. the Employer is to be Prospect Gardens (Bath) Limited, MAC raising the question of the potential need for comfort in relation to payment on the part of the Contractor. There will be a 10% default bond and a Parent Company Guarantee. Design liability will be based on reasonable skill and care. 5. Paul then joined the meeting and he handed over to MAC a copy of the intended tender drawings, draft preliminaries and the agreement for lease, the latter a draft. The first thing Paul did was to ask for confirmation of acceptability of his letter of 14 January which confirmation MAC gave although he could not help wondering whether we are going to be doing rather more work for £8,500 than might at the outset have been imagined! The agreement for lease is not completed and I was given certain other correspondence that results from the latest draft of the agreement which includes certain comments from a Michael Taylor (the other joint venture partner) and some correspondence from Dibbs. Paul is obviously thoroughly frustrated with Dibbs and has decided that he will sack them. He wondered whether Masons had quoted for the property work, with MAC being uncertain. He said he wanted to instruct Masons on the property work and I am to go back to him today on this. 6. As to design, the Contractor is to be responsible for all of the design without ovation of rights against the Architect (Paul Whitley Architects). Paul said that he would be giving (as Architect) a warranty to the University. This appeared to be superfluous, or very likely to be superfluous but in any event Paul is happy to give it and wishes to give it and my instructions are that he will give it. However, I am not to draft it. 7. As to completion and liquidated damages, there was quite a discussion. There will be one completion date but damages are a little difficult and uncertain where the University does not wish to be obliged to take possession if practical completion occurs after the start of the autumn 1990 term. The position is that there are 4 blocks. Block 4 could be taken and used by the University at Christmas 2000/2001 but the other 3 blocks do not want to be taken by the University until the following academic year if they cannot be taken at the beginning of the previous one. There is some agreement whereby the University will use its best endeavours to get students into the completed blocks during the academic Year 2000 and it might be the liquidated damages (levied on the basis of some £150,000 per year each block) would be repaid to the extent rent was incoming from the students during academic year 2000. MAC wondered what commitment was made by the University to its students. He anticipated that the University would be committing take students well before it might be known the accommodation would not be ready for the academic year 2000 and he speculated that the students would go into temporary accommodation for the period of delay and this would be the basis of the calculation of liquidated damages. MAC is to hold fire drafting anything in relation to this on the basis of the difficulties inherent with it. No Contractor is going to be able to assess the risk of having levied against him some £600,000 worth of LDs is he is more than about 4 weeks late. No Contractor will know how likely or otherwise it is that the University will be able to fill the accommodation during the academic year 2000. The size of the penalty, whilst it might be a reasonable pre-estimate, would invite disputes. The Employer (W D King’s) loss in the event of delay would not only relate to liability to the University in the agreement for lease (in respect of which Paul said there was no provision for liquidated damages; no aspect of the agreement Paul was describing that he had reached with the University concerning delay seemed to be reflected in the agreement for lease) but would also constitute funding costs. See also clause 5.2 of the agreement for lease. 8. As regards dispute resolution, Paul wishes adjudication to take place as per the CIC draft procedure with appointment by the RIBA. See his letters of 14 and 18 January. He does not like the Courts as the final forum for the resolution of disputes. He wants an Arbitrator who is legally and technically qualified (query what this means), appointed by the RIBA and he would prefer the same person to sit as both Adjudicator and Arbitrator. MAC explained the potential absence of wisdom of this and in any event said that he thought the CIC rules precluded the Adjudicator acting also as Arbitrator subsequently This has go to be researched. His thinking is that if you have the same person you would not have to go to arbitration! MAC explained that he did not think this was a very good idea where we were here advising an Employer. No doubt this point needs to be made in correspondence. As to disputes concerning the achievement of practical completion or completion, Paul wanted some joinder provision that would mean that any dispute under any contract in respect of whether completion had taken place would be heard by one person whose decision would be binding on all. Paul, as project manager, is to decide the issue using his professional opinion, deal with it impartially and allowing matters that are de minimis (whether they relate to the preparation of manuals, as built drawings, etc or defects or outstanding works) and any dispute about practical completion has to be fast tracked, something along the lines of the CIMAR rule 7. Paul anticipates deciding the question of practical completion under every contract including the agreement for lease 9. MAC briefly mentioned the conflict that Paul might feel he had in relation to acting as both developer and project manager. 10. As to warranties, the Contractor is to give one, as are sub-contractors with design responsibilities and the professional team, that is designing professionals. This will include the structural engineer but I am not sure who else is involved. Warranties will be given to the two funders and the University. We discussed when the warranties would be given, the conclusion being that it would be a precondition either to the achievement of practical completion or possibly a condition precedent to first payment under the construction contract (in the case of the Contractor) and something similar in respect of sub-contractors. As to the definition of completion, we wanted to include the provision of as built drawings, manuals, the health and safety plan, etc and the de minimis points referred to above would apply to this also. In the agreement for lease, there are certain obligations post practical completion, first the completion of defects that are outstanding as at practical completion, these to be identified in a list and carried out as soon as possible but in any event within a month if possible. Second there are those defects that arise in a defects liability period where defects will be made good by way of listed items at the end of 12 months save formatters that are said to be of an emergency kind. Defects that are made good during the defects liability period are not to involve any excessive or undue disruption. As to insurance, we talked about PI cover and Bucknall Austin will come up with the amounts that might be necessary to be included by sub-contractors and we thought that £10m would be the most the Contractor would be asked to come up with. Apparently it is £1m vis a vis the University under the agreement for lease. 11. We are going to have a meeting next Wednesday morning at 9.30am in London if I can make it. MAC to confirm. 12. Two other points. There is to be no early hand over, that is not obligation on the Employer to take the building prior to July or may be we might consider doing so if there were suitable provisions in relation to security and provide we did not suffer any loss up the line. The intention is the hand over will be back, to back with the agreement for lease. There would need to be a hand over procedure drafted that would include the giving of necessary notices to all parties to inspect, etc. As regards insurances under the construction contract, the client is taking out insurance for all of the work. 13. Some other things were discussed. See my manuscript notes.”

“Damages currently not quantified in Agreement for Lease, but loss of rental income likely to be a total of approximately £600,000, assuming all rooms remain empty for whole year awaiting the new intake of students. University cannot give commitment to fill rooms if buildings handed over late.”

“I attach: 1. A copy of the GC/Works/1 Contract Conditions marked up with certain suggested amendments. 2. A commentary giving some explanation of certain of the amendments I have suggested to the conditions. I also identify one or two areas where instructions are needed and/or further discussions. 3. Draft parent company guarantee (to follow by fax tomorrow). 4. Draft warranties (to follow as above). 5. Draft default bond (to follow as above). Please treat all of the enclosures as first drafts; there remains much to be done – in particular dependent upon the final terms of the Agreement for Lease. …… I am sending you all the attached as I promised that you would have something by Friday. I hope to be able to take things further over the next few days before our meeting on Wednesday.”

“I have made no amendments to the liquidated damages provision as yet because I am waiting to hear from you once you have spoken on this topic to the University.”

“I have today spoken to Mark Collingwood at Masons regarding the “no risk” policy, i.e. a guaranteed maximum price no matter what, that we are adopting with the contractors. It was his view that we may find that several of the contractors may not wish to tender on the basis that they are taking all the risks on everything. We do need, in my view, to carry out some more in depth contamination studies and possibly further ground tests as this will be required, not only by the contractors, but particularly by the funders and eventual purchasers. We will, at the end of the day, have to make a commercial decision once we have found out the sort of premium that the contractors are loading onto their tender price because of this “no risk” policy and weigh it against us bearing the risk, having carried out all necessary tests. Please phone me to discuss this as a matter of urgency.”

“Delete 38(3) and insert new 38(3):- “38(3) In the event the PM is of the opinion that the Contractor’s rate of progress in carrying out the Works is likely to prejudice completion of the Works or any Section by its Date for Completion, and to the extent that in the opinion of the PM this is due to a cause which is not listed in Condition 36(10), the PM may instruct the Contractor as to the measures he requires the Contractor to take to retrieve the position and the Contractor shall comply with the same at no cost to the Employer. Without prejudice to the generality of the foregoing, such instructions may include the requirement to re-sequence works, to accelerate completion of the works and/or require the Contractor to increase his on and off site resources”

“Dear Jayant Re: PROSPECT GARDENS, BATH Further to our telephone conversation today, may I write to request that you URGENTLY turn your attention to the following tasks. Some of these I raised in the reminder I recently sent you in relation to the queries on the preliminaries. I have not received anything on that yet. I now in particular need your response on the following. Liquidated and Ascertained Damages We need your and Michael’s commercial decision on what LAD to insert in the building contract. At the meeting that Michael and I had with the bursar of the University, we agreed with them a provision that they will not charge damages until after the 7th September, although the date due for completion of the works is 23rd August. Brian Thomas has expressed that he did not wish to accept the accommodation after the 7th September. However, we did not definitively define with him whether he would nonetheless be obligated to accept it during the middle of the academic year, save for his willingness to receive one of the buildings at the 31st December. I have a different interpretation of the situation from Michael in this lack of definition on this point. I infer the situation as follows. If BT says that he will not accept an obligation to pay the full rent if it is handed over late, but will simply carry out his best endeavours to fill the rooms and pay us accordingly, then this means that – if those “best endeavours” comes to nothing – then that means that we would lose a year’s rent (less the rent received on the one building handed over at Christmas). The result of this inference is that we would lose somewhere about £750,000 in lost income, interest, additional fees etc, if the contractor was 1 week late beyond the 7th September date. Michael has a different interpretation of the agreement, and – as this interpretation of the agreement is in our favour – this is what our lawyers have been instructed to provide for in the Agreement for Lease. The hope is that the University either may just go along with it, or else may not notice that this Agreement does not prevent handover of the premises in the middle of the academic year. You may remember that the Dibb Lupton Agreement for Lease (which we were advised had been agreed by Osborne Clarke) neither prevented handover in the middle of the academic year, nor did it provide for LAD should we had over late. I think I understand Michael’s interpretation as follows. If we are late, then the University will have to accept it whenever we hand it over, and pay the full rent thereafter, but that they would impose LAD on us, at the rate of £40.00 per week per student. On this interpretation, if we handed the premises over one week later than the 7th September, then we would suffer just 3 weeks loss of rent on the whole premises (pro-rata to a year that would be around £40,000), together with 1 week of damages, (around £9,000), totalling £49,000. Beverley Pike of Masons tells me that she will be completing her second draft of the Agreement for Lease on Tuesday next week (16th) and will put that to Osborne Clark at that time, with the covering letter that she is still awaiting her client'’ final instructions on the matter, in order to give herself some room for manoeuvre thereafter. I therefore guess that we will not get the University'’ response for perhaps a fortnight. In the meanwhile the tenders are going out on Monday, and I need to tell the contractors the fundamental issue of what the LAD will be. We have agreed with the University that we can tell them as late as the 31st May that we will be late, and if we do that then we can hand over the premises a year later. This will give the contractor the knowledge when he is tendering, and assessing his risk of what LAD he may have to pay if he runs late, that he can make a final judgement on his likely completion date 2 months before he is due to finish and with most of the risks behind him. At this stage, he could accelerate 3 of the 4 buildings, to finish by the 7th September and complete the 4th by Christmas. Under these circumstances, I estimate that we would lose – on both Michael and my interpretation – about £60-70,000 loss of rent only. You should check all these figures for yourself to satisfy yourself on them, and I am only raising them to you to give context to my question. I now need to turn to the amount of LAD that a contractor would possibly accept in the contract, if he were not to simply add it on as an additional premium of the same amount on to the contractor sum. Bucknall Austin tell me that if the total likely LAD that he suffers is more than about £200,000 then the surplus will just be added to the tender price. The usual arrangement for the LAD in a building contract is £X per week. I need not to remind you that the legal definition of LAD is that it is genuine pre-estimate of the damages you are likely to suffer, whether you actually suffer them or not. Would you and Michael please urgently address this question and advise your decision to us and to Any Platts at Bucknall Austin. …. Your urgent attention is appreciated.”

“JS is ok with the principle of total LAD not exceeding £200k. JS suggests that the contractors should be persuaded to hand over the building early to reduce the risk of late delivery.”

"Given that the [Ernest Ireland] proposal for GMP is [£]6.8 [million], [Jeffrey Rosenbaum] really cannot see how we are going to proceed any further."

“As part of the decision making process I would like you to consider the following points. 1) Cost Control Throughout the four years this project has been underway actual costs have always massively exceeded original predictions, revisions and re-revisions and estimates of important factors such as building costs have varied wildly. Good examples are the fees for architects and other professionals. The original quote from PWA was £120,000 and current expenditure is over £500,000 and still rising. This is an overspend of £380,000 plus. At our meeting of 23/9/98 Paul Whitley announced the then latest QS estimates of building costs had risen from circa £5.5 million to circa £6.5 million. At the time you pointed out that early estimates were circa £4 million. This is a fluctuation of £2.5 million. Are we really expected to believe that it is an acceptable developers risk to jeopardise a profit of £1.5 million on costs of £2.5 million (a profit of 60% on cost) in an attempt to make an additional £0.5 million knowing our poor record on cost control and prediction? 2) Time Control Discounting the ill-advised attempts to win consent for a cinema complex on the site, it has taken well over two years to reach the position that we now find ourselves in. As with cost control, the project’s record on meeting targets is appalling, although I do recognise that some of this can be attributed to BANES and the complex multiparty negotiations that are necessary to proceed on a project of this nature. Again I refer to firm predictions made in last September’s meeting. Paul Whitley advised the meeting that it was indeed possible to construct the entire complex in time for an August 1999 delivery and yet we are now only at the tender stage in March 1999. Michael Taylor advised the same meeting that the lease to the University would be signed up well before Christmas (1998) and negotiations still continue today. I do not think therefore that the project has demonstrated the ability to deliver the finished complex on time. I therefore perceive a high risk of financial penalties being incurred. In addition to the obvious additional cost, such as late payment penalties due to lenders and extra interest costs, I am particularly concerned that a whole year's rent may be lost by failing to meet the August 2000 deadline. Bath University have already made it clear that if the project is not complete on time they will not be obliged to commence paying rent part way through their academic year. This will mean that WD King or the interim funder will have to stump up the first years rent in order to complete the sale to Sanwa. This will result in a reduction in profitability of about £700,000. Once again the risks in this area are far greater than the possible future rewards.”

“Q. At this stage, do you recollect whether there was any understanding on your part as to what the position was going to be in relation to recovering those sorts of losses from the contractors? A. Well, at the meeting where all this was discussed I was shouted down, if you like, or I was persuaded that the contract with the preferred contractor, Jarvis, was going to be written in such a way that it would tightly control them and there was every chance that the building would be delivered on time. JUDGE LLOYD: The problem would be avoided but in a different way? A. Yes.”

“I went away from the meeting and I felt so strongly about it that I decided I would have one last stab at putting my points more clearly in writing, because, as you know, in some meetings things get quite heated and figures were being bandied around and I felt it was fair to all concerned to set things out in a more logical fashion.”

“Telephone in Mr Block who is at WD King. He wondered whether I needed a structure of WD King and in particular whether I knew that Geoffrey Rosenbowne [sic] was the sole proprietary [sic]of all of the companies associated with WD King and that he was concerned to preserve his capital. Basically, Mr Bloch was asking me whether it could be said that the risk in relation to this job was limited to the contract sum which was fixed price. I said that it was not, that I thought however that contract documents had been prepared but transferred as much risk as it was probably viable (and maybe beyond) that which it is possible to pass to the Contractor. Nevertheless, I said that whilst the contract was fixed price it was fixed price subject to adjustments and obviously everything depending upon whether the Contractor was prepared to take the risks that we have suggested be transferred to them. I mentioned changes being an area of risk, insolvency of the Contractor, and basically that whilst 80 or 90% of risk had been transferred over to the Contractor in the draft documents, there was still 10 or 20% risk at least that remained with the Employer. He was going to speak to Paul Whitley to find out when tenderers were to be returned, then to see whether the Contractors were prepared to take the sort of risks that we were asking them to take.”

“Dear Mark PROSPECT GARDENS, BATH I refer to the above and to our telephone conversation of 15 March. As I explained to you it has always been Jeffrey’s desire to minimise the risk element in the event of our carrying out the building works. We discussed the extent to which we could rely on the existence of a fixed price contract but I understood you to say that, even where the chosen contractor accepts the form of contract as drafted by you, there is still a 10% to 20% risk that the price will rise. You mentioned that, predominantly, this could arise from variations which may be required e.g. because of the archaeology or for some other reason, and that these variations could then have a knock-on effect, possibly increasing the time required for carrying out the works. You also mentioned that the greater the risk the contractor is required to take on board, the higher the price that he is likely to quote. In effect, I understood you to say that there is no such thing as a risk-free, fixed price, contract. I appreciate that we have to make a commercial decision as to whether we take that risk on board and, in so doing, it would be helpful if you would confirm my understanding of the position and amplify on it in any way that you consider necessary, so that we can have the full benefit of your views in reaching any decision. Yours sincerely Max Bloch THE W D KING GROUP”

“Many thanks for your letter. As you appreciate, no construction contract is without risk to the employer under it, no matter what its terms might be. However, the contract which Paul and I have prepared minimises the risk of out turn cost significantly exceeding whatever will be the fixed price tender sum. Save that the percentages I referred to on the phone (your first paragraph) were not meant by me to be writ in stone and that (your second paragraph) the present draft contract places risks relating to archaeology on the Contractor, I would agree that your letter is a fair summary of the points I made on the telephone. As I say, a good deal of risk has been passed to the Contractor. He is responsible for all aspects of design (whether actually undertaken by him or not). Risks relating to archaeology and ground conditions are the Contractor’s and if the Employer’s Requirements prove to be inadequate – in so far as discrepancies within the Requirements are concerned – the Contractor is responsible for them; even though the Employer’s Requirements is an employer’s document. Again, if there are changes to statutory requirements during the project, the Contractor carries the risks of these. Matters entitling the Contractor to further time are very limited and likewise his potential entitlement to addition by way of disruption costs (please see conditions 36 and 46) On the other hand, losses could be suffered if there were to be Contractor insolvency or the Contractor to grossly fail to perform and fail to remedy the position such that determination might be necessary. (There again, however, you will have a bond and parent company guarantee to provide recourse). Changes could lead to additional liability, mismanagement of the contract likewise. Nor do I believe we have yet achieved a position where the employer’s potential liability to the University in respect of delay is covered under the construction contract. (I may be wrong about this. In any event, I do not know how damages for delay were ultimately dealt with in the invitation documents). The agreement for Lease with the University does little to affect the position outlined above. The Landlord undertakes to obtain all necessary consents for the development and then to procure that the works are carried out in accordance with the Building Contract. The University has the right to suggest “minor” variations to the works, and consent to these variations cannot be reasonably withheld if the Project Manager considers that the variations would not delay the issue of the Certificate of Completion of Works. The University are obliged to reimburse you any consequent increase in the overall costs of such variations (including any increase in professional fees, loss of profits and interest etc). Accordingly, there should be no risk to the employer, provided the University do not default on their obligations. The Agreement for Lease contains provisions permitting substitution of material which are not procurable within a reasonable time or at a reasonable cost, but this is subject to obtaining the University’s prior consent to any substantial substitutions, and in addition, there will be a list of particular materials and products which will not be capable of variation. This could lead to delay in the event of any of the specified projects not being available within the requisite time scale. As you will be aware, the University require the completed premises to be available before commencement of the Autumn term (one building may be handed over during the Christmas vacation). The Agreement for Lease contains provisions for notice to be served on the University in May specifying which parts of the premises are anticipated to be completed by August of that year. In the event of the premises specified in the notice not being available, liquidated and ascertained damages will be payable at the rate of £40 for each student bed space, but, of course, it is intended to pass the risk of payment of liquidated and ascertained damages on to the Contractor. One final risk which arises from the Agreement for Lease is the possibility of the University failing to complete the Lease, whether because of delay in the works beyond the ultimate long stop date of 23 August 2003, or the University effectively becoming insolvent or ceasing to exist. In these circumstances, the fund will not make payment to you for the development, and the property will remain unlet, with no income being received. However, as one hopes with most of the other potential risks identified in this letter, all of this is somewhat unlikely to come to pass.”

“Telephone in Paul Whitley who said that the deal in relation to liquidated damages was £200,000 flat after 31st August, £10,000 per week for any delay between the completion date (28th July and 31st August). This is what I am meant to be drafting. He also thought there were one or two other points that Beverley might have come up with at the last meeting relating to the agreement for lease that might impact upon the construction contract. I need to speak to Beverley. Subsequently speaking to Paul Whitley again when he said he would send me a fax of various things that he thought were outstanding and in respect of which Jayant was to come back to him. He is asking me to chase Jayant on these matters and I said I would. He says that the losses in respect of delay to the University if buildings are completed late will be some £3 quarters of a million, rather more than £200,000 liquidated damages included in the contract. I told him about Max Bloch’s letter and my letter back and promised to send him a copy. It is obvious that there is a big exposure to risk in relation to damages up the line under the agreement for lease that will not be covered under the construction contract.”

“As can be seen, when I wrote my letter of 19th, it was not clear whether delay related damages potentially to be suffered by the Employer would be compensated by liquidated damages under the building contract. It became clear that the anticipation was that they would not in a telephone conversation that I had with Mr Whitley later on that same day. I refer to my attendance note….. . During this call, Mr Whitley told me that liquidated damages were likely to be considerably less than the actual damages likely to be suffered by PGBL if the Works were delayed. I do not think Mr Whitley knew what actual damages might be for matters were not sufficiently advanced in the negotiation with either University or funders and no doubt there would have been various calculations dependent, for example, on how late the project might be. He told me however that it was likely that actual losses for delay would exceed what would be included in the building contract for liquidated damages. The only explanation I have as to why I did not write again to Max Bloch immediately following Mr Whitley’s telephone call to me was that I did not think to do so because I regarded Mr Whitley as my client so that if he was telling me that there was the likelihood of this substantial shortfall, then I did not need to tell him. I anticipated that knowledge which Mr Whitley had was either knowledge that the Employer had or would be knowledge that would be passed on by Mr Whitley to W D King.”

“Q. There was a commercial decision taken after this, which again is covered in the evidence and the court has seen, which resulted in assent being given to the liquidated and ascertained damages provision by Mr Sanghvi and Mr Taylor? A. Yes. Q. Were you involved in the commercial decision which Mr Bloch is referring to here? A. Because I did not understand the project that well, I did not think I was the best man to throw my weight around even if it was my money at stake. I was surrounded by experts who understand this project far better than I do, I will go by their advice, Mr Sanghvi being a very good accountant, as I understood. I regard him as a genius. And Michael Taylor being a very successful entrepreneur with me, in the years we had done business together, the preceding six years or so. Q. Again, it would really be Mr Taylor and Mr Sanghvi who were primarily involved in that side of things? A. Yes, although unfortunately I was the one to lose the money, if there was any money to be lost. Perhaps I should have tried to understand it better, but then it is hard when you do not have the experience behind you.”

“The most appropriate penalty/damages regime is a bit complex, given all the handover permutations, and I set out the following for your consideration. 1. Handover all between 28 July – 30 August (4½ weeks). Proposal is £20,000 pw penalty. (WDK to be advised that there will be continuous professional fees during this period to be charged on a quantum merit or pro-rata basis, but no damages from the University, they will make a significant “profit” on this penalty. 2. Handover of all buildings after 30 August. Proposal is £250,000 LAD (note loss will be more like £700,000-£750,00). 3. Handover of 2 buildings between 30 August – 31 December (17½ weeks). Handover of 1 building between 30 August – 31 December (17½ weeks). Proposal not formulated. There needs to be an incentive on the contractor to try to get as many done by 30 August, therefore penalty of damages should be between £90K (4½ weeks of £20,000) + £250,000. Loss of rent to WD King is at £3000/pa/student (i.e. £57.50 per week) assuming that the University fills none of the accommodation on best ………Basis in a period before 31 December if, therefore, say we had Building 4 with approximately 60 students then loss approx. £60,000. The University will not accept more than 1 booking of approximately 60 students at Christmas, therefore if 2 buildings not finished, each of say 60 rooms, then loss is therefore (3000 x 60) + £60,000 = £240,000. We need to make a big initiative for the contractor not to incur the £250,000 LAD (as the effect is so disastrous for WD King, and so suggestion is that: If 1 building is handed over between 30 August – 31 December, penalty is £120K. If 1 building is handed over between 30 August – 31 December, LAD is £160K. Please phone me to discuss any thoughts or queries you have urgently. If I am not here, please speak to John Munro. I am in the midst of negotiations with 2 contractors and I need your instructions on this as soon as possible. The letter may not have reached Masons. In any event it was not regarded by Mr Whitley as an instruction since on 18 May he sent by fax a long note on the issues that he wished to discuss with Mr Collingwood that day, which included the following:: “Abstract of Particulars of the Building Contract A draft of this, prepared by Bucknall Austin is attached. Masons are requested to comment on it, for consistency with the rest of the contract, and for conformity with any relevant University Requirements, and to include any relevant protection to the employer so as to minimise his risk. …. A payment regime for compensable late completion, incorporating both LAD and “penalty” elements has been agreed – in principle – with the contractor and by WDK. This is set out in PW’s letter of the 23rd March to Jayant Sanghvi, a copy of which is attached. Masons are requested to consider this in principle proposal, and to prepare a draft contract condition to cover this matter, incorporating other ramifications as necessary.”

“I attach draft amendments to Conditions 37 (Partial Possession) and 55 (Liquidated Damages). The purpose of the amendments is to seek to incorporate what I believe you are seeking to achieve in respect of liquidated damages. In order to make things a little easier for you, I also attach the GC Works 1 Edition 3 Conditions 37 and 55 as previously amended by me so that you can see how the new suggested amendments fit it. It will also be necessary to amend the Abstract of Particulars but this is only a matter of mechanics. I have not yet been through the other Conditions to check whether further consequential amendments need to be made. I will do this as soon as possible. Having a fixed sum for liquidated damages regardless of the extent of the Contractor’s culpable delay, is, of course, no incentive on the Contractor to complete once he is in a period of delay. The Contractor might conclude that if his maximum liability for delay is £270,000, he may just as well not complete the work but you are protected in this eventuality by the determination provision. In other words, the Employer could employ others to complete the work and seek to recover the cost of so doing from the Contractor. New Condition 37(4) needs to be completed. I have yet to conclude how best to go about describing the four buildings that are referred to. I should be grateful if you would please go through the suggested amendments very carefully and let me know if you think they work and achieve what you wish them to achieve.”

“Dear Sirs PROSPECT GARDENS, BATH 1. We confirm that it is the intention of W.D. King or its nominee company, Prospect Gardens (Bath) Ltd, (“W.D. King”) to enter into a capital fee contract (the “Contract”) with you in due course to carry out certain works as described in the tender enquiry documents and subsequent amendments to those tender documents in Appendix III to this letter (the “Contract Documents”). It is intended that the conditions of the contract (the “Conditions”) will be substantially in the form of GC/Works, Edition 3 Single Stage Design and Build but incorporating the amendments set out in the Contract Documents and further amendments. 2. We further confirm that it is anticipated the Contract will incorporate provisions, which provide for a Guaranteed Maximum Price in the sum of £5.65 million. 3. As to liquidated damages in the event of delayed completion, we confirm that, under the Contract, if you are in culpable delay beyond the dates specified in Appendix II, then you will be liable for the damages as set out therein, in the circumstances of your being in delay beyond 30th August, that liability being in the same sum, regardless of whether the period of delay is 1 day or more. 4. We further confirm that it is intended that W.D. King will enter into an agreement, supplemental to the Contract with you, as set out in Appendix 1 (the “Supplemental Agreement”). This provides for the payment of further sums to you in relation to a target savings fund arrangement (the “Target Savings Fund”) together with costs or cost liability, should they be incurred, associated with the failure to achieve certain planning consents (the “Planning Risk Cost”). 5. It is anticipated that the programme of works, currently being carried out by the archaeological contractor, BAT, will be completed during week commencing Monday 14th June 1999. You have advised us that you wish to take possession of the site on Monday 21st June, and we confirm that this is acceptable to us. 6. In the meantime, with a view to ensuring that construction activities can proceed in accordance with your intended programme to completion of three buildings on 18 August 2000 and the fourth building on 28th August 2000. Please accept this letter as authority for you to proceed with the works as set out in the Contract Documents. 7. The authority contained in this letter extends to 19th July 1999. In any event W.D. King’s total liability to you in respect of the matters authorised by this letter is limited to reasonable costs or cost liability incurred, including preliminaries and the due proportion of main office overheads + VAT but excluding any profit. These main office overheads will be calculated and the whole liability capped at the weekly cost levels as set out in Appendix IV. Any work carried out or other costs, expenses or liabilities incurred by you after that date or in excess of the financial limit will be entirely at your own risk. 8. In carrying out work pursuant to the authority contained in this letter you will in all respects comply with the requirements of the Contract Documents save to the extent the same are inconsistent with the terms of this letter. Moreover and without prejudice to the generality of the foregoing you are to comply in every respect with any technical, qualitative, time and/or performance requirements of the Contract Documents. 9. In the event the Contract and Supplemental Agreement is entered into, it shall have retrospective effect so that all their terms and conditions shall apply to all work carried out pursuant to the authority contained in this letter. You will credit us under the Contract to the value of any payments made hereunder. 10. In the event no Contract and Supplemental Agreement is entered into, W D King will reimburse you all expenditure or cost liability reasonably and properly incurred as a direct result of your complying with this authority. The level of this is to be ascertained by Paul Whitley Architects on an ‘open book’ basis (and for that purpose you shall make available to Paul Whitley Architects all and any documents and/or information as they may in their absolute discretion deem necessary in order to carry out that ascertainment) but subject always to the limitations as to time and money set out above. 11. In the event that for whatever reasons the Contract and the Supplement Agreement is not entered into you will have no entitlement or claim against us save for the reimbursement of expenditure reasonably and properly incurred as aforementioned. 12. This letter of intent may be terminated upon 24 hours simple written notice by ourselves to you and in the event such notice is served you will immediately upon the expiry of the 24 hours cease work and deliver to us the product of all work undertaken pursuant to this letter (including copies of design documentation). 13. Please note that notwithstanding what is said in the Conditions it has now been agreed between us that if the Contract is entered into you will be responsible for taking out and maintaining all insurances of the type envisaged in the conditions. You are to ensure that all such insurances are in place to cover all work carried out pursuant to the authority contained in this letter. 14. The payment/guarantee provisions of the Contract, Supplemental Agreement and under this letter are as follows: i) W D King themselves will pay the sums due under this letter and any sums in excess of £150,000 due under the Supplemental Agreement, and they or their nominee company will pay any sums due under the Contract. ii) Capital Bank plc will provide a letter of comfort sufficiently guaranteeing the payment obligations of W D King under the Contract. iii) W D King will provide a solicitor’s letter prior to the signing of the Contract, confirming that £150,000 will be held from the receipts from the investment bank at completion, in an interest bearing Escrow account, to be released to you upon the terms of the Supplemental Agreement. 15. We confirm that it is anticipated you will be appointed the “Principal Contractor” pursuant to the Construction (Design & Management) Regulations 1996, and that you will perform such duties of Principal Contractor as are necessary in respect of the work authorised by this letter. 16. Finally, if any dispute arises between us under this letter it shall be dealt with in accordance with the dispute resolution provisions set out in the Conditions. Would you please acknowledge receipt of this letter and acceptance of its terms by signing and returning the enclosed duplicate copy. Yours faithfully 18 June 1999 J ROSENBAUM Signed on behalf of W D King Ltd” (Jarvis was subsequently to confirm its acceptance of these terms.) PROSPECT GARDENS, BATH i) W D King themselves will pay the sums due under this letter and any sums in excess of £150,000 due under the Supplemental Agreement, and they or their nominee company will pay any sums due under the Contract. ii) Capital Bank plc will provide a letter of comfort sufficiently guaranteeing the payment obligations of W D King under the Contract. iii) W D King will provide a solicitor’s letter prior to the signing of the Contract, confirming that £150,000 will be held from the receipts from the investment bank at completion, in an interest bearing Escrow account, to be released to you upon the terms of the Supplemental Agreement. Yours faithfully J ROSENBAUM Signed on behalf of W D King Ltd”

“I understand that the Building Contract provides that every risk is with the Contractor, and that should the Employer not impose any variations, then there is no provision for increased costs to the contract whatsoever. Perhaps MC might confirm this to [Mr Taylor]”

“I refer to our meeting on 2 July which was, of course, with regard to a totally separate issue. I did, however, at the time raise with you the fact that the above project is of a type which is beyond our previous experience both as to its very nature and also its complexity. As I explained to you we are, therefore, very dependent on our legal advisers and on the team generally to ensure that everything possible is done to cover any exposure that there may be to us and absolutely minimise any risk insofar as this is practically possible. You confirmed that you are all too well aware of the mass of documentation which exists, at present, but that before anything is finally signed you and your team will double check that our position has been safeguarded. I would ask that where you feel there may be an element of exposure, which could prejudice our position, any such situation be brought specifically to our attention. ….”

“I was playing tough with them back because they were playing hardball with me.”

“Q: In the context of this contract, would Jarvis have been prepared to have entered into it on the basis of a liability for unliquidated damages for delay? A: No.”

“Further to your letter of today’s date, our subsequent conversation and my conversation with Rob Terry I would confirm as follows the response of W.D. King. My Ref Comment Action ……. 8 Regarding liquidated damages, these are not negotiable, and indeed do [not] represent the genuine pre-estimate of the losses. If we do not complete by 30 August, then we lose a year’s rent at approx £0.75m. The University has agreed only to reasonable endeavours to fill those rooms, and the Bursar has told us that it is likely that he will fill hardly any at all. We are therefore expecting our losses to be in this order. Jarvis actually are lucky in that we have agreed to carry around £450k of losses even if we do get your £300k. You told me that Michael Taylor has advised you that there was room for flexibility on this point. I have since spoken to Michael Taylor, and have to report to you that there isn’t. In any event, this sum was discussed and agreed in the negotiations with your contracts manager and with your operations director, and we have accepted the additional price of the contract resulting from those negotiations. This is therefore an agreed sum and is not negotiable. 9 Regarding the extension of time claim, I am not aware that we have a dispute. A claim has been made, and in my capacity as the PM, acting impartially on the basis of the contract we have between us, I have refused it. I have advised Jarvis that if they have any further evidence or legal argument to put to me then I will consider that. 10. Regarding the “acceleration at no cost” concern. I have discussed this in detail with Tony Ward and have written to him to confirm that the intention of the contract is not as may be interpreted in the schedule amendments to the contract issued with the tender. This was mistaken in omitting the wrong clause, which gave the possible interpretation that the PM had the power to impose acceleration at the contractor’s cost when the contract was in delay for reasons of the employer’s responsibility. The intention is that if the contractor is in delay, for whatever reason, the contractor should propose measures to accelerate to complete on time, and if he doesn’t, or doesn’t do so to the PM’s satisfaction, then the PM may require him to carry out acceleration measures. The costs of that entirely depend upon the reasons for the delay. If they are for reasons for which the contractor is responsible, then he pays, and if it is for reasons for which the employer is responsible then the employer pays. That would depend upon any relevant extension of time claim. If the contractor disagreed with the PM’s extension of time decision then he should go to the adjudicator to decide that issue. In any event, any dispute regarding who may be responsible for the delay should have no bearing on the duty to accelerate to make up for any delay. Neither the employer nor contractor can afford to argue about the point when the cost of delay is so huge. Let the adjudicator resolve that while we work together to finish the building on time. Masons (MC) 11. Regarding adjudication, it is proposed only that the adjudicator’s decision on completion of the Works would be binding without the ability to appeal to arbitration or litigation. You may like to remember that there was not even this tier of appeal in the documents upon which we agreed the negotiation leading to the letter of intent. Originally it was the PM’s decision which was binding without any further appeal. Masons (BP) The University would be similarly bound. This is a chain of contracts. If there was a dispute between the Landlord and University, or between the employer and contractor on this issue it is important that all parties are rapidly bound by the decision of that independent third party, as otherwise everyone will suffer. If any pair of parties were in dispute we have to have the University to be bound to accept the decision, so that the funder will pay, so that the employer has the money to pay the contractor. 12 Regarding insurances, if the provisions in the contract are genuinely uninsurable, then that is in nobody’s interest. I have sent the previous correspondence from your broker, Bishop’s to W.D. King’s broker, Risk Advice Management, and have asked him to liase with your broker. Masons may have to amend the contract wording accordingly. I have given these details to Rob Terry, and would confirm the details as: JCUK Masons (MC) Danny Bailey Risk Advice Management 53 Worcester Crescent Mill Hill London NW4 4LP Tel: 0181 201 1573 e-mail: riskadvice@aol.com That deals with all the matters in your letter. May I emphasise that there is a great pressure now to conclude these agreements rapidly, as otherwise they will not happen at all, which would be disastrous for all the parties concerned. May I therefore request that you ensure that Jarvis handle the action matters that I have set out with the utmost urgency, and I will try to do the same for the parties for whom the employer is responsible.”

"I also confirm the instruction that it is not intended to change the LAD arrangements in respect of refunds following the 30th August date. The whole LAD issue has been long and hard negotiated and any change to that with Jarvis at this stage would create a further crisis of confidence. In any event, the amount payable for LAD is only a fraction of the overall losses suffered and therefore whether we provided a £20,000 or £40,000 refund when buildings 3 and 4 are handed over at Christmas is irrelevant to the overall equation. …. Mark had previously structured the LAD so that the £2,250 per day was payable in respect of late completion of section one up until 30th August and £750 per day in respect of section two. In practice this will now be £1,500 each (£750 per building per day)"

“Dear Alyson Re: Prospect Gardens, Bath I am writing further to our extended telephone conversation yesterday. I was raising a number of issues with you that Masons had not previously addressed in the building contract, and you were getting quite exasperated with my requests. However, my comments have all flowed from the original overriding brief to Masons. You appear not to have understood the overriding brief that Masons have in relation to this process, and in which respect all my comments over the past few months have followed. This brief, which overrides everything else is that of risk elimination – where possible – and risk minimisation where not. This is the brief given to us by Jeffrey Rosenbaum and which Michael, Jayant, Max and myself are working to. In this context, I have been charged with the briefing of the detailed contractual matters with Masons to achieve this end. W.D. King do not want to be placed in a situation where the stakes are high, and the contractor can justifiably argue for more time or money, or just does not finish on time thus causing W.D. King potentially huge further losses. This risk management may be characterised in a number of ways, which include: i] Making sure that the Employer / Developer / Landlord remains transparent in any obligations or decisions that pass through the chain of contracts. ii] Putting every risk upon the contractor, including neutral and statutory ones, and following that principle, fill potential gaps in the contract. We want to put the full responsibility on the contractor to fulfil the product that the University want, so that should there be a problem we have 1 point of reference at which to point the responsibility and we are holding the performance bond to defray costs. We do not want to be in a situation of looking to see who else may or may not be responsible, and how many professional indemnity insurers we want to end up in a legal battle with. We have been clear from the outset with the contractor that this was the intended objective, given him the tools to assess and cost his own risk, and accepted the higher price resulting from that. iii] Giving the PM the tools to effectively monitor the contractor’s compliance with his obligations, particularly in respect to time and quality. In respect of the tools necessary in respect of time, I would draw your attention to John Barker Construction Ltd v London Portman Hotel (1996) CILL 1152 to illustrate the absolute necessity of carrying out a proper logical delay analysis. iv] Making the building contract easily understandable and clear in its intent, so as to avoid potential arguments as to how it may be interpreted later. This includes being as specific as possible within each clause, rather than simply relying upon the catch all clause 20, and also adding “avoidance of doubt! Riders where you believe the clause may not cover the intended result. I have had to write hundreds of comments to Masons over the past few months, much or most of which has been to achieve the aim of the overriding brief. It should not be up to me: i) to continually draw Masons attention to the lack of transparency ii) to point out the gaps where the contractor could construe the contract as entitling him more time or money in a particular situation. iii) to teach you what those effective monitoring tools are iv) to guess where the clauses may not be sufficiently clear to have the intended result. You commented several times during our conversation yesterday, that you would make some specific change to the contract only if I really required it, but that is missing the point. I should be relying on your advice and proposals to get to the end result of satisfying the overriding brief, not trying to persuade you to make the change. Please take this on board. I am trying to work with your lead as how to achieve the brief, and not to feel I am having to remind and persuade.”

“Thank you for your fax of 25th August. I apologise if I appeared exasperated during our conversation yesterday. As you know, I am feeling rather below par at the minute and was struggling with the telephone conversation in the context of having virtually no voice: I have to confess that it did rather take the energy out of me! I understand perfectly the overriding brief (as does Mark). Your intention is risk elimination where possible and risk minimisation where not. That is what we have been working to achieve in the contract amendments. My reservation about presenting Jarvis with new amendments comes from the fact that on a number of occasions that matters which we have been instructed by you have been agreed with the contractor (and which we have consequently spent considerable amounts of time documenting) have not been so agreed. An example of this was the Supplementary Agreement. It therefore seems to me, (and I made this point during our conversation) that it is unproductive at this stage in the process, when the intention is that the documentation is to be finalised this week, to insert amendments into the contract which have not been agreed in principle with Jarvis and which are not vital in terms of the “big issue” of risk transfer. Neither Mark, nor I, thought that some of the amendments that were raised in your correspondence were necessary ones and we had not therefore incorporated them into the draft previously. Examples of this were inserting into the requirements for the performance bond and guarantee the requirement that they be executed at the time of entry into the contract. Since this as a matter of practicality will be done any way, it is not a vital amendment. Other amendments you required – such as the insertion of the obligation to comply with statutory requirements – are, I think, justifiably made in that they do improve the clarity of the existing contract wording. I have to say, however, that of the 8 amendments resulting from our conversation of over an hour yesterday, 3 were not significant to the meaning of the contract as a whole (the amendments to Clauses 46, 66 and 67), and one was the reinstatement of the programming clause which was deleted by agreement at the meeting with Jarvis. There were, therefore, 4 amendments which arose from your original fax to Mark which have clarified the existing wording or the extent of the contractor’s obligations. In that context, your comments in your fax seem rather harsh. So far as the programming issues are concerned, and your point abut carrying out proper logical delay analysis, you will recall that it was agreed at the meeting with Jarvis that Clause 33(4) should be deleted since it was already covered in the preliminaries. You told me on the telephone yesterday that in fact this was wrong and we would need to renege on that agreement and reinstate the clause or similar obligation. I have done this, and have amended the clause in accordance with your requirements as explained on the telephone yesterday; I cannot therefore understand why Masons are under fire in respect of the conditions regarding programming issues. I appreciate that you are concerned that the Contractor should not be given any opportunity to raise any claim for additional time or money other than in very limited circumstances. That is the object of the amendments that we have drafted so far. The contract quite clearly sets out those circumstances in which the Contractor is entitled to additional time or money in Conditions 36, 41, 42 43 and 46. I do not think that any of the comments that you raised affected this position. Sadly, that is rather different from the issue of the Contractor being able to construe the Contract as entitling him to more time or money in a particular situation. I think it is fair to say that no amount of drafting can prevent a Contractor “trying it on” with a claim. The point is that the Contract has been amended with the aim of preventing the Contractor successfully pursuing a claim through adjudication and/or arbitration other than for those matters specifically set out in the Conditions referred to above. I do not see how we can do more. You refer to “lack of transparency” and I am not clear what you mean by this, although I think that it forms part of a larger general point concerning the back to back relationship between the Contract and other project documents. I believe that Beverley has already addressed this point with you and with Michael Taylor. I am sorry that you feel that you are having to teach us what the “effective monitoring tools” are. I had believed from our conversation yesterday that I had made quite clear that I understood why you wanted from the Contractor the information on programming that you were seeking, and empathised with why you would want it. My only point was and remains that Jarvis is clearly very resistant to producing this information and that as a matter of general practice within the industry it is quite common for Contractors not to produce satisfactory programmes as a matter of course throughout a job, but rather to produce these programmes retrospectively at the end of a job when they actually begin to litigate or arbitrate over extension of time claims. I accept completely why you would want to change this position, and for this reason we agreed that we would adapt the existing Clause 33(4) (which is the one that was deleted during the meeting with Jarvis) in order to try and achieve the result that you want. However, I return to the point that since Jarvis were so resistant to this clause in the meeting, it might be more productive to try and get t the bottom of this resistance, rather than to continue producing this clause to them only to have them refuse to accept it. To the extent that you think that there are other “monitoring tools” that you specifically want to employ, then it is for you to tell us what those tools are. Neither I, nor Mark, can second-guess the way that you want to run this job. Finally, as a general point, I believe that the “catch all”

“Dear Rob Re: Prospect Gardens, Bath Thank you for your letter of 25 August, to which I reply. I first deal with the question of how the LAD have been calculated. In this case, the LAD is not an estimate of the whole of the damages that appear likely to be suffered by the Employer should the contractor be in culpable delay. The Agreement for Lease with the University provides that the University merely has a “reasonable endeavours” obligation under a license arrangement to seek to fill the student rooms should the project be handed over late. This license arrangement would continue for the whole of the academic year and the agreed lease provisions which provides for the payment of the full rent would only come into force at the beginning of the following academic year. The University will however, accept one building and pay the full rent for that at 31 December. The annual rent is a sum in the region of £680,000 and consequently if one credits the rent for the one building from 31 December onwards against the loss of that annual rent one is left with a loss in the region of £600,000. We are not assuming that we would receive any substantial credit in respect of the license fees, given advice from the Bursar, that despite the “reasonable endeavours” obligation, he does not expect to fill hardly any such rooms at short notice. In addition to the foregoing losses, the Agreement for Lease also provides that the University will charge us a penalty of £40 per student per week, which would equate to losses in the region of a further £400,000. The overall expected loss therefore, is in the region of £1,000.000. We made a commercial decision that a contractor faced with £1,000,000 of LAD for even a very short period of delay, would not quote for this project on a competitive basis and that we would pay an undue premium within the contract price should we seek to impose this as an LAD. We therefore judged that £300,000 was the maximum a contractor would be comfortable to face. This is what was proposed to the selected contractors with whom we were negotiating and accepted by both in their final GMP submissions to us. I then calculated the losses arising from the “best case situation” when the contractor is in culpable delay, this being (when only one building is handed over late but which is available to the University prior to 31 December) and proposed an LAD in respect of these circumstances to approximately balance those losses. As you can see, the loss of rent for one term of Building 3 is a sum in the region of £70,000 and if one adds the University’s £40,000 Per week penalty on top of that, this adds another approximately £45,000 of loss. The total losses therefore in these circumstances approximately £115,00. Regarding the various scenarios in between these two conditions of culpable delay, I have simply set out figures between the two extremes which provides for a gradually increasing incentive on the contractor to provide as many buildings as early as possible. These figures have no calculated basis. As offered to Jarvis previously, the Employer would be very happy to dispense with the LAD if the contractor wishes instead to pay the whole of whatever losses are suffered by the Employer should the contractor be in culpable delay. I now reply to the rest of your letter using your alphabetical references. (a) Agreed (b) (i) Agreed (ii) I will deal with the discrepancies in response to the penultimate paragraph of your letter. (iii) I believe the only insurance provision upon which Jarvis had difficulty was the proposal that Jarvis should take out insurance to cover any LADs they may suffer. I confirm that this is not to be a requirement of the project. Please advise me if there are any further insurance questions yet to be resolved. (iv) Regarding concurrency of delaying issues, we are now proposing to amend the original provisions in the tender documentation, such that a delaying event by the Employer is to be taken into account within the overall calculation of any further Extension of Time. It was also agreed at our last meeting that – whatever were the merits of the claim by Jarvis for an Extension of Time at the beginning of this project – that they agreed to formally withdraw that claim. You should now be in possession of the revised amendment of the conditions and side letter following our meeting. I would be pleased to receive any comments you have to make urgently. Regarding the arbitration provisions, I explained at our meeting the benefit for all parties including the Contractor for there to be a fast-track mechanism to resolve any dispute should it occur regarding the completion certificate. It is in everybody’s interests that the University will be bound by such a decision which would therefore allow the Funder to provide the finance for the Employer to pay the Contractor at that stage. I believe you and Duncan understood the point but wished also to think further about the question in case there may be other disadvantages for the Contractor. I trust you now agree with the proposal. We are therefore maintaining our proposal for fast-track arbitration at this stage only. This would not take away the right of either party to seek an adjudicated award although that may be redundant and unnecessary. (d) Agreed. My colleague, Peter Ashby, is also responding under separate cover on this matter. (e) Given the great difficulty of creating a definition of what “Completion” means, if one has got a potentially open-ended snagging list, we believe this would be a receipt for dispute, as the Contractor and the University are likely to take different positions. We have to have a clear definition of what “Completion” means, in order that the PM has a basis for certifying that. Our agreement made with you and Gareth at this office to consider your proposal of how we may give more time to the Contractor at Completion was on the basis that you would be bringing forward a clear definition. Peter Roberts’ subsequent letter on this issue accepted the difficulties of making that clear definition. We have therefore decided to simply exclude external works from the work to be completed by 28 August and for that to be in a separate section to be handed over two weeks later; this being 1 September 2000. You have referred to 14 September in your letter; I think this must be a mistake as the discussion previously has been only about a two-week extension to the previously set completion date of 28 August. (f) Regarding handover of Block 4, it has always been a requirement that any block handed over must have access to a lift. My proposal that Jarvis are allowed to hand it over on 28 August instead of 18 August takes nothing away from the previously agreed deal, but instead gives the Contractor ten days more leeway to complete Block 4. You seem to be interpreting that I have added the risk to Jarvis by this proposal when in fact I am reducing it. However, we are mindful of your pressures and are seeking to accommodate those where we can. I have therefore just agreed with the University that Block 4 may be handed over without the lift, provided that the lift is available to access that block by 11 September 2000. Effectively, I am now proposing that Jarvis would have 24 more days to hand over Block 4, together with lift access, than had been the deal at the time of entering the Letter of Intent. (g) Certain sub-contractors who have a design responsibility are being required to take out warranties and we have proposed P.I. levels in respect of each. Andy Platts is sending you another copy of this under separate cover. Regarding consultant P.I. levels, it has always been a requirement that they have a cover of £1,000,000 for each and every claim. I trust that this is now agreed. It is agreed that Capital Bank may pay Jarvis directly. Regarding the other comfort that Jarvis require from Capital Bank, the ball for this is in Jarvis’ court as your Paul Milner was talking directly to Capital Bank. I now turn to your penultimate paragraph dealing with the question of discrepancies within the documents. Your description regarding some requirements superseding others throughout the negotiation period is not a fair description of the Employer’s Requirements at any stage. The University’ Standard Requirements document has always been, right from tender onwards, a part of the Employer’s Requirements. It has also been one of the contract conditions, right from tender period onwards, that any discrepancy within the Employer’s Requirements shall be decided by the Project Manager in his own discretion without adjustment to the Contract Sum. At no stage, until our meeting two weeks ago, has anyone from Jarvis raised these agreed matters as being a problem to them. By raising it now, Jarvis is seeking to change the deal agreed between us. This is an all-risks deal. It was precisely in order to give the Contractor the ability to check the thoroughness of the documentation in order that he could bind himself to taking on all risks including the risk of discrepancies within the documentation, that the Employer agreed to pay for the Contractor’s design team fees whether a contract was successfully negotiated with that firm or not. You and your designers have now trawled through the documentation in great detail and have come up with a relatively limited list of discrepancies which we are presently discussing with you. I therefore submit to you that the risk of any further discrepancies arising is a particularly limited one. I would also note that we are allowing Jarvis to raise discrepancies at this stage and to seek to resovle them in a mutually agreed manner rather than simply imposing on them a decision which, under the contractual terms implied into the Letter of Intend, we would otherwise have the right to do. I trust you will see that we are therefore being accommodating to your concerns in seeking to bring these questions to resolution rather than simply insisting upon the deal as made. This is not an inequitable situation as you have stated it to be. It is simply allocating and pricing a risk and that is the agreed basis of the Letter of Intent. It is clearly essential that the University accepts, without reservation, the Employer’s Requirements, in order that they will accept the building that Jarvis builds for their occupation. They will only do so should this contractual provision allowing the PM to resolve discrepancies remain, and we therefore cannot negotiate this matter. My colleague, Peter Ashby, is responding to you under separate cover regarding your appendix to this letter dealing with discrepancies and your letter of 26 August making proposals for amendments to the Employer’s Requirements.”

“38(1) In the event the PM is of the opinion that the Contractor’s rate of progress in carrying out the Works is likely to prejudice completion of the Works or any Section by its Data for Completion, and to the extent that in the opinion of the PM this is due to a cause which is not listed in Condition 36(1), the PM, acting reasonably, and taking account of the Contractor’s representations, may instruct the Contractor as to the measures he requires the Contractor to take to retrieve the position and the Contractor shall comply with the same at no cost to the Employer. Without prejudice to the generality of the foregoing, such instructions may include the requirement to re-sequence work, to accelerate completion of a part of the Works and/or require the Contractor to increase his on and off site resources. 38(2) The PM shall give the Contractor notice in writing of an intention to issue an acceleration instruction no later than 5 working days before such instruction is intended to be issued, and the Contractor may submit to the PM representation in relation to the proposed instruction no later than 4 working days thereafter. In taking account of the Contractor’s representation, and in making a decision to issue an acceleration instruction the PM shall have regard to the progress of the Works against the completion date for the Works and each Section thereof current at the relevant time”

“55(6) The Contractor hereby irrevocably accepts and agrees:- 55(6)(a) that having regard to the purpose for which the Works are required and the Employer’s obligations and liabilities under the Agreement for Lease and the Development Finance Agreement, liquidated damages calculated in accordance with paragraph (2) represent reasonable pre-estimates of the loss and damage likely to be sustained by the Employer in the event the Works or Sections 1, 2 and 3 are not completed by the Date or Dates for Completion and in particular if the Works (except Section 3) are not completed by 30th August 2000. 55(6)(b) that no challenge shall be made or sought to be made to the liquidated damages by the Employer, or by the Contractor on the basis that they are a penalty or that they do not represent a genuine pre-estimate of the Employer’s losses arising from delay. 55(6)(c) that pursuant to paragraph (2) of the Abstract of Particulars, the Contractor’s liability to pay or allow up to the sum of £300,000 by way of liquidated damages accrues irrespective of the extent of delay beyond the Date or Dates for Completion where completion occurs after 30th August 2000”

“Compliance with agreements associated with the Works 20(1) The Contractor acknowledges receipt of a copy of those extracts from the Agreement for Lease and the Development Finance Agreement which are annexed to the Abstract of Particulars and covenants with the Employer to so design, carry out, complete and maintain the Works as not to put the Employer in breach of the obligations contained in the said extracts of the said agreements (including, without limitation, the Construction Requirements and the provision of evidence of compliance with the Construction Industry Scheme as set out in clause 24 of the Development Finance Agreement) and to do everything reasonably necessary to facilitate the Employer'’ compliance with its obligations under the said agreements. For the avoidance of doubt the Contractor shall however owe no obligation in connection with paragraph 8 of Schedule 1 to the Agreement for Lease. 20(2) The Contractor shall indemnify the Employer against any costs, loss, expense or damages arising from any breach by the Contractor of any of its obligations under this Condition 20, save in respect of costs, losses, expenses or damages arising from delay, which shall be dealt with in accordance with Condition 55 (Liquidated Damages)” (2). Condition 33: 49. “Programme (1). The Contractor warrants that the Programme shows the sequence in which the Contractor proposes to execute the Works, details of any temporary work, method of work, labour and plant proposed to be employed, and events, which, in his opinion, are critical to the satisfactory completion of the Works; that the Programme is achievable, conforms with the requirements of the Contract, permits effective monitoring of progress, and allows reasonable periods of time for the provision of information required from the Employer; and that the Programme is based on a period for the execution of the Works to the Date or Dates for Completion. (2). Subject to Conditions 35 (Progress meetings), 37 (Early possession) and 38 (Acceleration), the Contractor may at any time submit for the PM’s agreement proposals for the amendment of the Programme. The agreement of the PM to any proposal for the amendment of the Programme shall not relieve the Contractor of any liability which he has under the Contract. In particular, without limitation, the submission by the Contractor of any proposal for the amendment of the Programme showing a period for the execution of the Works extending beyond the Date or any of the Dates for Completion shall not constitute a notice from the Contractor requesting an extension of time for the completion of the Works or of any Section; and the agreement of the PM to any such amendment shall not constitute, or be evidence of, or in support of, any extension of time for the completion of the Works or of any Section.” (3). Condition 40 PM’s Instructions (1) The PM may from time to time issue further drawings, details, instructions, directions and explanations, all or any of which shall be treated for the purposes of the Contract as Instructions, including Variation Instructions. The Contractor shall comply forthwith with any Instruction. (2) Instructions may be given in relation to all or any of the following matters – (a) a change in the Employer’s Requirements; (b) the resolution of such discrepancies as are referred to in Condition 2 (Contract documents); (c) the removal from the Site of any Things for incorporation and their substitution with any other Things; (d) the removal and/or re-execution of any work executed by the Contractor; (e) the order of execution of the Works or any part of them; (f) the hours of working and the extent of overtime or night work to be adopted; (g) the suspension of the execution of the Works or any part of them; (h) the replacement of any person employed in connection with the Contract; (i) the opening up for inspection of any work covered up; (j) the amending and making good of any defects under Condition 21 (Defects in Maintenance Periods); (k) (not used); (l) the execution of any emergency work as mentioned in Condition 54 (Emergency work); (m) the use or disposal of material obtained from excavations, demolition or dismantling on the Site; (n) the actions to be taken following discovery of fossils, antiquities or objects of interest or value; (o) measures to avoid nuisance or pollution; (p) quality control accreditation of the Contractor as mentioned in Condition 31 (Quality); and (q) any other matter which the PM considers necessary or expedient. (3) All Instructions shall be in writing except those under sub-paragraphs (b), (d), (g) and (l) of paragraph (2), which may be given orally. Oral Instructions shall be immediately effective in accordance with their terms, but shall be confirmed in writing by the PM within 7 Days. Written Instructions shall be given to the Contractor’s agent. Oral Instructions may be given to such employee or agent of the Contractor as the PM thinks fit, but shall be confirmed in writing to the Contractor’s agent. The Contractor’s agent shall immediately acknowledge receipt of any written Instruction, and of every written confirmation of an oral Instruction. (4) (Not used) (5) The PM may include in a VI a requirement for the Contractor to submit to the QS not later than 21 Days from the receipt of that Instruction a written quotation of the lump sum total price of complying with it. The PM may make any VI conditional upon agreement of such a lump sum price, pending which agreement the Contractor is not to begin complying with the VI.”

“Dear Jayant Re: Prospect Gardens, Bath I write to draw to WD King’s attention, for the avoidance of doubt, that the Developer’s obligations in the Development finance Agreement (DFA) and Agreement for Lease (AFL) are not fully mirrored in the Contractor’s obligations in the Building contract or the consultant’s obligations in the Consultancy Agreements. As such, the Developer will be in breach of certain of his DFA/AFL obligations, as the Project Manager/Architect will be administering the Building Contract according to their present terms and managing the Consultants according to their present terms. WD King’s brief in respect of these Agreements has been to eliminate all risk where possible, and where not, to minimise that. As you know, I have written dozens of letters to Masons, on WD King’s behalf, with hundreds of representations to various drafts of these Agreements, in order to seek to achieve this end. I am disappointed that the end result of these three contracts does not go as far down that line of risk minimisation as I would have considered possible and desirable. Although many of my representations have been reflected in the latest drafts, some have not. There are many issues in this category which do not allow the developer to be legally “transparent” in the chain of contracts. At this late stage I could not list them all as I understand that the other parties involved have pretty well agreed the respective contracts and we are about to have them all signed. WD King have been copied with all my letters to Masons over the past six months, which is where I make these points. Although the following by no means deals with all of these issues, you could get an idea of the current situation by reference to my letters of 21 September and 27 September to Beverly Pike regarding the AFL and the DFA respectively. In addition, I have also recently highlighted particular issues in the DFA in which I am in agreement with Gleeds (the funder’s Monitoring Surveyors) as to what ought to constitute the Developer’s obligations in the DFA in a letter to Kay Williams of 30 September, but which are not reflected in the latest draft. There are also other issues which I have previously raised but are not reported in those recent letter, for example the lack of Dispute Resolution procedures that bind the relevant parties. Let me give an example of what hypothetically could go wrong. The definition of Building Work Defects in the Building contract is different from that in the DFA. The Project Manager/Architect will be certifying completion according to the obligations in the Building contract although the Monitoring Surveyor will approve the application for funds from the funder arising out of that Certificate only according to the terms of the DFA. If there is a dispute as to whether a matter is a Defect or not and consequently whether completion has been achieved or not, then to compound the above problem, there is no single arbitration procedure binding on all parties. The Developer is therefore left in a no-win situation in the middle. In addition, although I have made many representations to Masons you should not assume that I have pointed out all the issues where the risk has not been minimised. My responsibility has been to brief Masons and to make representations to them “with due skill and care” to try to point out to them where I believe the latest draft may not have fulfilled that brief, but in the end it is Masons’ responsibility to draft those Agreements according to that overall risk minimisation brief and to point out to WD King what are any remaining risks. I have had conversations with you, Michael, William and Mark Collingwood over the past couple of weeks regarding a particular term of the proposed Project Manager/Architect Appointment (clause 5.1) which provides some responsibility on the consultant to facilitate the Client’s compliance with his obligations in the various Agreements. I have now agreed with Mark, the inclusion of a new Clause 6.2 which is intended to recognise the problems I have outlined in this matter and which qualifies my obligations under Clause 5.1. I enclose a copy of the latest draft of clause 5.1 and 5.2. You will note that 5.2 requires me to alert you of the likelihood of any failure of the client to comply with its obligations in these Agreements. I am here confirming to you not simply that there is such a likelihood but the certainty that in many respects the Client will be unable to comply with its obligations. I cannot foretell whether any of these failures will turn out in the implementation of the Project to be either a fundamental catastrophic problem or to be totally inconsequential. It all depends upon the actual circumstances that arise upon which that failure of the client to comply with an obligation is relevant and also depends upon the attitude of the Funder or Tenant as to whether they may wish to make an issue out of what otherwise may be considered merely to be a “technical” breach with no consequential loss to those parties. If you want me to trawl through all the past correspondence to Masons and summarise any issues which I have raised and which may still be outstanding, I will be happy to. However I understand the intention is to get the various Agreements signed within the next few days and consequently such an exercise would delay that. It is up to WD King to decide whether to take a commercial view, given an overall sense of the level of risks involved in their position, or alternatively to consider all the matters in details to determine if they are satisfied that each individual risk is worth taking. Whilst writing, may I also draw your attention certain risks associated with the Building contract not arising from the above “inconsistencies” issue which however have not been minimised or eliminated as much as I would like. Overall it is important to note that I am pleased with the general trust of this particular form of contract that Masons have prepared it is particularly unusual as to the extent it throws all the risks on the contractor. However I have not been able to convince Jarvis to accept all the provisions I would have liked for instance I wanted to more explicitly spell out the programming information that Jarvis must provide so that the project Manager/Architect could monitor the Contractor’s progress more effectively. I have a particular concern at present that Jarvis are behind programme and although they are formally reporting to me that they expect to complete on time, I do not have the relevant evidence form them as to why I could agree with that. If the Completion Date would otherwise be delayed, I do have the power to require the acceleration of the works and I can only effectively do this with that proper programming information provided by them.”

“We discussed this long and hard and we wanted it finished.”

“Liquidated damages – I asked him to explain the £1,500 for each of section 1 and 2 up to 30th August. He confirmed that they are indeed a complete penalty and that the only loss WD King might suffer up to that point is the £1 payable to the University or perhaps additional professional fees. I said that notwithstanding clause 55(6) in which Jarvis confirm their agreement that the liquidated damages do represent a genuine pre-estimate of loss, I could not guarantee that this provision would not be open to challenge. Paul said that he worked on the basis that there was nothing wrong with having a penalty in English law and I stopped him at that point and explained that there was and that was precisely the reason why liquidated damages do have to represent a genuine pre-estimate of loss. I said that my view was that because clause 55(6) in which Jarvis had specifically agreed the figures, they would find it quite difficult to raise a challenge to the liquidated damages at a later date. However, it was not impossible that they might do this, and might do it successfully. In short I could not guarantee that the liquidated damages provisions would work.”

“9. Paragraph 8 and 9: no comment, other than to say that on two long letters that Paul sent through to us, requesting various amendments to the Building Contract, I went through these with him by telephone point by point and dealt with each one, either by incorporating it where relevant and/or necessary, or by rejecting it as unnecessary. To our knowledge there are no outstanding points that he has raised.”

"It is arguable in theory that this last category means that Jarvis would have liability for amounts over and above liquidated damages. However, Jarvis were awake to this possibility during the negotiations and an amendment was made to clause 55 to prevent the employer challenging the liquidated and ascertained damages figure in order to offset the possibility that monies over and above the LADs figure may be claimed by the employer under clause 19 in respect of losses for delay. …"

"I pointed out that it had never been an option in the course of the negotiations that we would recover from Jarvis more than the LADs amount in respect of delay. That is just a quirk in this particular contract form that gives the potential to argue otherwise. He agreed that this was the case and it was of course the norm for LADs to represent the entirety of the amount that the employer could expect to recover from the contractor in the event of a delay in practical completion."

“[10] (iv) Since the ground movement event occurred, Jarvis have shown little evidence that they are progressing with dealing with the problem in accordance with their obligations in a diligent manner, and have – for much of the period – not accepted those obligations. In order to protect the Employer’s position in the evolving situation over the past 2 months, I have been regularly seeking Mason’s opinion on their interpretation of the respective parties’ rights and obligations, and keeping the Employer informed accordingly. I am now asking Masons for further opinions on the legal aspect of this document, and it is likely that their advice will be needed for the immediate foreseeable future, until the present problems are resolved. Arising out of this, there will be fees payable to Masons. 11. Insurance position: Contractor and Developer 11.1 Masons have confirmed to me that all the insurance obligations in the Building Contract are with the Contractor, rather than the Employer. These include the obligation to take out Construction all-risks Insurance against loss or damage to the works and public liability insurance for injury to any persons or damage to other property arising from or in connection with the works. 11.2 I understand from Danny Bailey that the Employer’s insurances include that against damage to third party property caused by certain groundworks, e.g. underpinning, lowering of ground levels, etc. We have sought confirmation from Danny Bailey that these are in place. It appears however that he has not got a copy of the policy and is having difficulty getting one from the insurers themselves. We are chasing him on this matter. 12. Losses arising out of Delay to Completion 12.1 The L.A.D’s only cover a proportion of the overall losses that would be suffered in the event of Delay to Completion. The level of L.A.D’s was set at being the maximum level it was judged that a Contractor would sign up to without adding a corresponding premium to the cost of the Contract and thus is an arbitrary commercial judgment rather than any reflection of the significantly greater losses. It is to be noted however, that Clause 19(d) of the Contract requires the Contractor to Indemnify the Employer for “any loss of profits or loss of use suffered because of any loss or damage”

“Dear Malcolm RE: PROSPECT GARDENS, BATH You requested me to set out the reason for my opinion that – in the decision of how to respond to the current situation on site and Jarvis’ response to that – one cannot treat making a deal with Jarvis and enforcing the contract as mutually exclusive options. 1.0 I should first highlight certain key facts on the current site situation: 1.1 Since the landslip event occurred, Jarvis have kept their statements ambiguous regarding their liability, and whether they intend to either carry out the work, arising from the event. They have verbally refused to accept that this additional work is entirely their responsibility though have never challenged in writing my letters confirming my view that they are liable. Implicit in their many statements given orally has been the threat to not proceed with the additional work unless an agreement is made giving them an additional consideration. However it was not until the last site meeting on the 27th April that they first explicitly stated (in an open and recorded forum) that if such an agreement was not confirmed in writing that day, then they would stop the additional work forthwith. In response to that explicit statement, I wrote to them advising them that if they did so then they would be committing a repudiatory breach which the Employer was entitled to accept, and they have not yet carried through their threat. As Jarvis have therefore neither formally disputed their liability in writing, and have, apparently not yet materially breached their obligations (with the exception of the failure to provide certain programming), so therefore no dispute has arisen which can be the subject of an adjudication. On my judgment, the programme to complete the works, for either of the two Completion Dates, is extremely tight. Jarvis are telling me that they will still complete on time, although they acknowledge the tightness. I have no criteria – apart from my instinct and experience – to make a proper assessment of whether they will be able to complete on time on the basis of their current programme, as Jarvis still have not provided me with the critical path information I need to properly assess it. I would guess that there is a very high risk that – even if they are not so far behind already that they are unable to complete on time – there will nonetheless be further slippages, resulting in a failure to meet either or both the Completion dates. 2.0 I now highlight certain aspects of potential losses and funding issued due to delay 2.1 You have calculated the relative “profit/loss” situation on the basis of 3 scenarios: Jarvis completing the buildings by the revised dates, one of those dates being missed, and both missed. In this context, (although I acknowledge Jayant’s point of the wider context of losses brought forward to Phase 11), I assess that the decision at this stage is on the basis of a judgment of which response would produce the maximum benefit to WDK. The results of your calculation was that: (i) Both sections completed to revised dates: profit £431K (ii) August completion on time but December late: profit £256K (iii) Both sections completed late: loss £40K You have not calculated the effect of the August completion being late but December on time. I would assess that losses would be almost as much as that for both sections being late, and for the purposes of this exercise, the loss should be taken to be in the same order. 2.2 I understand from Beverley Pike that if any part of the buildings are not completed by the 30th August 2000, then the investor is entitled to withhold a sum to the value of the element of the first year rent, to which the University was not committed to pay at that time, where this sum is not covered by the projected Balancing Payment. This sum would be withheld, from the funding the Investor provides to the Developer on the latter’s interim payment applications, the Developer would then be required to make up the shortfall on the interim payments from its own resources until practical completion of all the buildings. If no buildings were to be handed over by 30th August, then the investor will withhold £680K less its assessment of the sum which would be left in the Balancing Payment. If Buildings 1 + 2 were not handed over, then the sum withheld (equivalent to the first year rent for those two buildings) would be £350K, not £680K. As you have calculated that it would appear likely, at this stage, that the net sum of the Balancing Payment to be released to the Developer is a sum of between £350K and £680K, so Scenario 1 (all buildings completed to the revised timscales) would result in the project being funded to completion by the Investor. Scenario 2 or 3 would result in WD King having to inject further funds to allow the Developer to fulfil its payment obligations. Should WD King have to do that, then clearly it is further exposing itself to significant further risk of losses, particularly if the Developer consequently found itself trading at a loss. 3.0 I now address what would be achieved, at best, as a result of a reference to adjudication in the absence of any deal being struck with Jarvis. 3.1 Let us say that: Jarvis stopped the piling to stabilise the ground which is what they threatened to do, and which is the critical path activity necessary to progress Buildings 1 + 2; In response I issue an instruction; Jarvis refuse to comply with that; We make a reference to an adjudication; The adjudicator finds in the Employer’s favour that the Contractor is obliged to carry out this work at no additional cost to the Employer. 3.2 The “best” result does nothing to reduce the risk of the Contractor being late, and the risk of consequent losses to the Developer. Even if the Contractor then complied with the PM’s Instruction, and restarted the work under protest that the Employer was not entitled to require that at his cost, the damage in terms of slippage of programme would already have been done. On the contrary, I judge that as the Contractor would be forced to comply, (as opposed to have willingly signed up to a deal), so he will continue his work strictly in accordance with whatever he sees as his own commercial interest, after taking account of his relative costs in the differing amounts of LADs he will suffer. The best and worst case LADs for the Contractor are a cost to him of £190K and £300K respectively. If it will cost him more than £110K to maintain an accelerated method of working to meet the revised completion dates, then he won’t do it. It will be of no concern to him that the Employer may suffer £470K (the difference between Scenario 1 and 3). 3.3 If we go to adjudication before August 30th for any failure of the Contractor to comply with instructions, then the Employer at that stage will have suffered no consequential loss and so nothing could be claimed from an adjudicator, even if that is likely to be suffered later on. If the Employer was entitled to such consequential losses (which Mark Collingwood advised he probably would not be), then that would have to be withheld as a set-off from payments to the Contractor and then – when that is disputed – potentially subject to a further decision of an Adjudicator in a further reference. 3.4 However, Mark Collingwood has advised that the Employer would not be entitled to consequential loss, other than that provided for in the LADs, should the Contractor’s failure to comply with an instruction to do works meant that the Employer was entitled to redress under Clause 53 of the BC, which entitles him to bring in other labour to carry out those Works. 3.5 The Project Manager has the power, within the BC, of instructing the Contractor to accelerate the Works at the Contractor’s cost, if he assesses that the Contractor will otherwise complete late. The exercise of this power is fraught with risks to the Employer, and it is clear that the Contractor will fight any attempt to do so. He will allege that the specific works that the PM required him to do were either unreasonable or would have no effect on accelerating the programme. In the absence of detailed and continually updated information from the Contractor of his own sub-consulting arrangements and the specifics of what were the problems on site to be overcome (as appeared to what we alleged to be, or appear to be the problems), which will require the full co-operation of the Contractor, it will be hard to defend such a charge by the Contractor. Furthermore, even if the Employer successfully proves that the acceleration instruction was reasonable at an adjudication, so that the Adjudicator issues an Award requiring the Contractor to carry out the specific task which is the subject of the Instruction, there is nothing stopping Contractor then being late for some other reason. It will be a continual battle, day by day to the end of the job (similar to trying to stop the tide from coming in). 4.0 I now address the potential advantages of an agreement with the Contractor as previously set out. 4.1 I judge that the best way to look at such an agreement is like an insurance policy, where: (1) The risks of losses of up to £470K is very high. (2) The “premium” for the insurance is the consideration that the Developer would be pay in the deal. (3) This premium would only be paid to the Contractor is the “risk event” did not occur, i.e. the Contractor finished on time and the Employer suffered no further loss. 4.2 The Developer would be committing to paying the consideration in the Agreement, not WD King, if, at some future time, the Developer were to find that he is likely to be trading at a loss if it continued with the development, then if it ceased trading, no other party would be liable for that consideration. 5.0 I now address what could be achieved of a reference to adjudication, if the Employer and contractor had previously made a new agreement varying the terms of the BC which included a readjustment of the LAD regime against the Contractor which covered all the Employer’s losses upon late completion. 5.1 If the contractor failed to comply with Instruction and such failure meant that he was late in completing the project, then if an adjudicator found that the Contractor was in default and that such default delayed the contract, then the Employer would be able to recover the whole of this losses given the revised LAD regime. 6.0 Summary of my Opinion 6.1 No material breach of the BC has yet apparently occurred (save for providing certain programming information) which is being formally disputed and which may form the subject of an adjudication. 6.2 There is a very high risk that the Contractor will fail to meet the revised completion dates. 6.3 The further loss/ reduction in profit to the Developer if the contractor failed to meet the revised completion dates is £470K. 6.4 If the contractor completed on time to the revised dates, then the Investor would be obliged to continue to fund the interim applications, but if the August date was not met for Buildings 3 + 4, then the Developer would have to fund some of those interim payments out of their own resources. 6.5 If the Contractor breaches the BC and the Adjudicator in a reference prior to 28 August found in favour of the employer, nonetheless no loss could be claimed. 6.6. In the absence of an agreement with the contractor to vary the terms of the BC so that the LADs reflected the full losses to the Employer, an Adjudication award rendered when those losses had been suffered and claimed, would probably not compensate the Employer for anything above the level of LADs presently set in the BC. 6.7 Any instruction to accelerate carries great risks which potentially exposes the Employer to further costs, and would have only a limited effect in achieving the desired result of completing the buildings on time. 6.8 The proposed agreement could best be considered as if it were an insurance policy, the premium for which would only have to be paid if the risk event (delay to completion) did not occur. 6.9 Even if the Developer decided to sign up to an agreement, no other party would be liable for the consideration for that, and the Developer’s statutory rights and obligations if it subsequently finds itself trading at a loss still applies. 6.10 If the Contractor was in breach of his time obligations following the making of an agreement with the Employer on the terms discussed, then the Employer would be awarded the whole of his losses from an Adjudicator. 7.0 Conclusion I have set out my opinion, based on an understanding of the legal position as I see it. I am copying this letter to Beverley Pike (who has given advice relevant to 2.2) and to Mark Collignwood (who has given advice relevant to 3.2, 3.3, 3.5 and 5.1), and I request them to confirm or comment on the legal interpretation I have taken. As always, I shall do precisely was WD King and/or the Developer would like me to do. I trust that the foregoing opinion assists you in making that decision. I look forward to your instructions.”

“Project Manager’s Instruction 003 …… Under the terms of the above Contract, I/we issue the following Instructions: Under the terms of the above Contract, I/we issue the following Instructions: 1. I am of the opinion that the contractor’s rate of progress in carrying out the works is likely to prejudice the completion of Section 2 by the date for completion given in the Building Contract, and it is my opinion that this is due to a cause which is not listed in condition 36(1)) of the Contract. I therefore instruct you under Clause 38(1) to increase your resources and/or to resequence your work in order to accelerate the progress of the works so that this rate of progress is not likely to prejudice the completion as described. 2. I am also of the opinion that that Contractor’s rate of progress in carrying out the works is likely to prejudice the completion of Sections 1 & 3 by 23rd December 2000and 7th January 2000 respectively. The effect of any such failure to complete the sections would place the Employer in breach of his obligations in the Agreement for Lease and Development Finance agreement which the contractor under clause 20(1) has covenanted not to do. I therefore instruct you under clause 40(2)(e), (f) and (s) to allocate adequate resources and to sequence your works in order to progress the works so that the employer is not placed in breach of his obligations in the aforesaid Agreements. 3. I also instruct you under clause 33(3) to issue amended programmes in relation to the completion of each section revised to take into account any delays to the works (whether actual or anticipated) and to take into account of this instruction which you the contractor warrants: b). that it is achievable c). that it permits the effective monitoring of progress d). that in relation to Section 2 that the Programme is based on a period for the execution of the Works to the Date for completion in the Contract. 81. Signed : ____________________________________________ 82. For Paul Whitley Architects This instruction has no cost effect in the Contract.”

“We discussed today what may be the potential losses the Employer would be able to recover from the Contractor in the event that he fails to comply with the Project Manager’s Instruction No. 003. You advised that the Employer would be likely to be able to claim all consequential losses, not just those capped at the level of the LADs. You noted however that there could be argument from the Contractor taking an opposing view and you assess that the chances of success in your opinion is 60:40.” 84. This was followed, on 22 June, by a fuller letter from her: “Further to our recent conversation on the subject of a potential adjudication against Jarvis, I have finally had a chance to review the correspondence that you have sent me and to give some further thought to what might be achieved by an adjudication against Jarvis. For reasons I explained on the telephone, I am sorry that I have not been able to get this advice to you earlier. The letter would have come to you yesterday were it not that I felt I needed to discuss elements of it with Mark and unfortunately he has only been able to look at the questions this morning. Accordingly, Mark has seen this letter and agrees with the points I have made. It seems to me that there are two potential objectives of an adjudication at this stage. The first would be the object of securing confirmation from the adjudicator that Jarvis is in breach of contract for:- 1. Failing to comply with PM’s instructions (failure to accelerate, and possibly for failing to provide you with a programme); 2. Failing to mitigate any delays to the works, as is required by the Contract; and 3. Failing to provide Sub-Consultant warranties in accordance with Condition 63 of the Contract. The Adjudicator could simply be asked to confirm these breaches and direct Jarvis to comply with the Contract at this stage. The second objective would be to obtain from the Adjudicator a declaration as to the consequences the first of these breaches should it persist, namely whether in circumstances where Jarvis’ failure to comply with the acceleration instruction leads to late completion, Prospect Gardens, Bath Limited would be entitled to recover damages beyond the liquidated damages figure on the basis that late completion flowed from Jarvis’ failure to comply with the acceleration instruction. In order to determine the likelihood of success in an adjudication which dealt with 1 above and the second objective, we must look at the various matters that Prospect Gardens will need to demonstrate in order to satisfy an adjudicator first that there is a breach by Jarvis and secondly that an entitlement to general damages arises as a result. 1. For Jarvis to be in breach, it must have failed to comply with a valid acceleration instruction. For the instruction to be valid – see clause 38(1) – the PM must have: (a) acted reasonably in issuing it, taking account of Jarvis’ representations; and (b) been of the (reasonable) opinion that the rate of progress was likely to prejudice completion of the Works or any Section by its date for completion; and (c) been of the (reasonable) opinion – see clause 36(10 – that the prejudicial rate of progress is due to a cause other than: (i) a change in the Employer’s Requirements; (ii) any act/neglect/default of the Employer, the PM or other person for whom the Employer is responsible; (iii) an Accepted Risk; (iv) the exercise by Jarvis of its right of suspension for non-payment. The case and supporting evidence as to all these requirements will need to be given by you in a statement which will form part of the case put to the adjudicator. We must also anticipate, and know how we will meet, the points that Jarvis can be anticipated to raise by way of response. For example, will they not deny the works will not be completed by the relevant Completion Dates? Will they not say that any delay that has been caused to date has in fact been caused by matters that might be covered by (c)(i) and (ii) above? What there arguments can they be expected to raise? Bearing in mind that Jarvis currently says that it is able to meet the relevant Completion Dates notwithstanding any delay to date, you will need to demonstrate why this is not the case in order to justify the reasonableness of your opinion that the relevant Completion Dates are unlikely to be met because of Jarvis’ own failure to progress the Works. Their failure to provide you with a programme which demonstrates that they can make the relevant Completion Dates will be relevant here, but is not of itself conclusive evidence that they will not make the dates. 2. On the assumption that the above points are demonstrated by you by reference to correspondence and/or conversations with Jarvis, we will then need to demonstrate Jarvis’ failure to comply with what we will have shown to be a validly issued instruction to accelerate. You will again need to set out the basis on which Jarvis are failing to comply with the instruction. 3. Having done this, the issue of Prospect Gardens’ entitlement to recovery on breach is the next point to consider. Condition 55(6)(b) of the Contract says that “no challenge shall be made or sought to be made to the liquidated damages by the Employer or by the Contractor on the basis that they … do not represent a genuine pre-estimate of the Employer’s losses arising from delay”

“Dear Jeffrey PROSPECT GARDENS (BATH) LIMITED You will have seen the various letters that Paul has written to us in the week or so since his return from holiday, concerning the current position on taking disputes with Jarvis to adjudication. You will also know that he has instructed us to cease work for the moment on the claim in relation to the retaining wall because Jarvis has now provided some design information which is being reviewed by Buro Happold to determine whether it will deal with the concerns which Buro Happold have about the wall’s stability. What I would like to look at now is the benefit to Prospect Gardens of adjudicating the other areas of dispute with Jarvis, all of which are linked. I said in my letter of 1st September that these issues are complicated and will take longer to prepare for adjudication than the case on the wall, and in the light of Paul’s feeling that this somehow represents a change of heart on our part, I thought it might be helpful if I looked in more detail at: (a) what the remaining disputes are (b) what needs to be done to prove Prospect Garden’s case in each of the disputes. (c ) what Jarvis is likely to argue in defence of the case put by Prospect Gardens and, in the light of this, the merits of the case. (d) how long the preparation will take in the light of all this. (e) what the costs of preparation and running the adjudication might be (f) the consequences of losing. (g) what benefit there is to Prospect Gardens of adjudicating these issues. I apologise at the outset for the length of this advice but there is quite a lot of ground to cover and the issues are complicated. Paul has said that prospect Gardens currently faces losses in the region of £1million. I have not done any calculations but accept that there is a likelihood that the late completion of the works will mean that Prospect Gardens may not recover any element of the Balancing Payment, and that it will face a claim from the investor for finance costs and liquidated damages payable to the University to the extent that these take the investor beyond the Maximum Commitment. I do not know if this brings us to a total of £1million but for the moment will assume this figure to be correct. Clearly, it will be necessary to confirm the position and I return to this later. The claims against Jarvis. The claims against Jarvis essentially fall under 2 headings: Claim 1 – Failure to comply with the acceleration instruction in respect of Blocks 3 and 4. The case on this is that Paul, despite the lack of detailed programming information from Jarvis (as to which see below), took the view on the information available to him that completion of blocks 3 and 4 was unlikely to be achieved by the completion date and issued an acceleration instruction requiring Jarvis to increase its resources in order to achieve that date; and that they failed to comply with that instruction. Paul will have to evidence the basis on which he believed completion would be late, and how Jarvis have failed to comply with the instruction – for example, that they made no effort to increase their resources on site after the instruction was issued. Assuming that the evidence is such that we are satisfied that this claim is good on its merits, we then have to consider what defence Jarvis will raise to it. It seems clear these would include saying that the instruction was not reasonable; the Contract says that such instructions must be reasonable. They will say that it was not reasonable because there are a number of things that have happened which they believe entitle them to an extension of time under the contract. One of these is the zinc issue in respect of which Paul has already refused an extension, and Jarvis have challenged this refusal. We know that Jarvis intend to bring other claims but have yet to be told the detail of these. The merits of each and our ability to defend each on the facts would need to be considered carefully and it is possible that Jarvis will seek to bring into the arena delays that they allege arose from the dispute over liability for the retaining wall works and from he alleged agreement to pay them additional sums made at the meeting of 18th April. If Jarvis were to succeed in establishing an entitlement to an extension of time this would mean that for an acceleration instruction to be reasonable it would have to take account of the factor giving rise to that entitlement (in my view, that is true even if Jarvis had not actually claimed an extension of the time when the acceleration instruction was issued, as long as it was a favour of which Paul was aware). If the instruction was not reasonable then it would not be properly issued and Jarvis would therefore be under no obligation to comply with it. You will understand therefore that there are a large number of potential issues, all linked, that are likely to need to be addressed under this head of claim before we can say with some conviction that the case has sufficient merit for an adjudication on it to be commenced. More generally, I do not know what advantage, if any, Jarvis might seek from the fact that Paul is both Project Manager and has an interest in Prospect Gardens (Bath) Ltd. However, this would certainly be an area I would probe were I to be advising Jarvis. Claim 2 – Failure to provide adequate programme information, in breach of the requirements of the Contract. The case, in outline, is that the failure to provide proper detailed programme information meant that Paul was unable effectively to monitor the progress of the works. This meant, at least in relation to blocks 1 and 2, that he was unable to make a judgment about whether the completion date was in fact likely to be achieved by Jarvis until it was too late to do anything about it. The Contract permits Paul to issue acceleration instructions to require Jarvis to accelerate the works in order to achieve the completion date. He can only do this reasonably. By the time Paul became aware that blocks 1 and 2 were unlikely to be completed by the August completion date, he could not issue an acceleration instruction because by that stage the delay was so great that it would be impossible for Jarvis to comply with that instruction. He would have been able to make the judgment sooner had he been provided with the programming information that the Contract requires Jarvis to provide. Non-provision of that information has deprived him of the opportunity to instruct acceleration in respect of blocks 1 and 2. This means that he has been unable to intervene and prevent late completion of those blocks and consequently PGBL has suffered losses which it would not have suffered had the programme information been provided. Proving this case will require: (a) that there is a contractual entitlement to receive the programming information that permits monitoring of progress (and we are satisfied that the contract is clear on this point); (b) that Jarvis did not comply with this 9and on what we have seen so far we believe that this can be shown); (c ) that the lack of the information is the cause of Paul being unable to issue an acceleration instruction – this is a more difficult point to prove and is dependent upon Paul being able to come up with a detailed explanation of his reasoning on this point, which we would need to review. A hurdle that we will have to get over is explaining why he was able to issue an acceleration instruction in respect of blocks 3 and 4 in the absence of the programming information, but not blocks 1 and 2. We have to show the absence of programming information actually caused Paul to be unable to issue an instruction to accelerate. (d) that if Paul had had the programming information he would have issued an acceleration instruction, the point in time at which he would have issued it and that such an instruction would have been reasonable (i.e. that it would not, amongst other things, have been issued at a point so close to the completion date as to render it incapable of being complied with) – and against this Jarvis are again bound to argue that it would not have been reasonable because the cause of any delay to the works was In fact the acts or omissions of Paul as Project Manager – and the same points would then apply to this claim as I have made in respect of claim 1 above. We have not seen the detailed case on either of claims 1 and 2. In my letter of 22 June I outlined the matters that would need to be proved and on which we would need evidence from Paul. We have not had anything from him yet and in reality the best way to get the necessary information now would be for a senior solicitor, under Mark’s supervision, to sit down with Paul and spend time working through all these issues to put together a comprehensive “story” that explains the case in detail and the supporting evidence. So as to crystallise the disputes, we would probably also need Paul to write to Jarvis confirming the breach of the instruction to accelerate and breach of the obligation to provide programming information and to give them, say, a period of 7 days to respond to his letter accepting or rejecting what Paul says. (I believe that I advised Paul to do this at our meeting before his holiday but do not know if it has been done). Loss suffered Assuming that we are satisfied after carrying out the detailed exercise referred to above that the merits of the claims are good, we then have to look at the way in which we prove the loss suffered by PGBL. In the case of both claims 1 and 2, we would have to show that if Jarvis had complied with the acceleration instructions, one factual and the other hypothetical, they would have been able to complete by the August completion date. For both, the case would then be that the blocks would have been completed by the end of August and PGBL would have (a) recovered the full Balancing Payment and (b) not been liable to the investor for any additional amounts; accordingly the loss is any sum which puts them in a worse position than that. To the extent that anything has happened since the date on which acceleration was instructed/would have been instructed to cause delay to the works which would entitle Jarvis to an extension of time, this would reduce the amount of damages recoverable. This brings us back once again to the importance of being satisfied that we can defend any claim for additional time which Jarvis may raise. Assuming that all of the factual causation matters are proved, there is then the issue of entitlement to consequential loss (as against damages being limited to liquidated damages) I have advised previously that a decision on this point ought on balance to be favourable but is by no means certain and would be likely to need a robust adjudicator. It might be worthwhile taking a second opinion from construction counsel in this issue. Timescale for preparation and to obtain a decision Concurrently with the 7 day period that I say above Jarvis should be given to respond to the allegation of breaches of contract, we would need to sit down with Paul to work out the detailed case and evidence. In view of the issues to be covered, this will take at least 7 days; we will then need to spend a few days reviewing the case, “shaping” it and finally considering all the merits including the areas of weakness. It will take a further 7 days to appoint an adjudicator and a final period of say a week needs to be allowed for the collection of all the documents in support of the case (some of which will of course be done in the week that appointment of the adjudicator will take) and service of the “Statement of Case”

“6.48.4 JCUK [Jarvis] knew what the effect of the instruction was, and they claim that they did in fact accelerate, although not with the result required (paragraph 19 of the Response). 6.49 As it was instructed under PMI 003, the nature of the accelerative measures to be adopted was left in the hands of JCUK save that whatever measures were adopted were to be sufficient to ensure that: (a) the rate of progress was sufficient not to be likely to prejudice completion of Section 2 by the Date for Completion given in the Contract (28 August 2000). (b) PGBL was not placed in breach of its obligations in the Development Finance Agreement (DFA) and the Agreement for Lease (AFL) to complete Sections 1 by 23 December 2000 and Section 3 by 7 January 2001. (The instruction incorrectly refers to 7 January 2000, but it is not contended that anything hangs upon that). 6.50 The evidence offered by JCUK in its Response to the Referral to demonstrate that some acceleration was achieved relies on data illustrating that at some times there was more labour on the site than at others together with copies of their sub-contractors’ financial claims. I do not accept that any of that is persuasive evidence of acceleration. In a project such as this, where the majority of the work is subcontracted, it would not be possible to accelerate the progress of very much without the active co-operation of JCUK’s sub-contractors. If they were to achieve such acceleration I would expect to find short term programmes for discussion, notes of meetings held with the sub-contractors indicating what they were going to do, how the interfaces were going to change and some correspondence confirming their Sub-contractors’ agreement to bring forward sections of the Works. I drew this to the attention of Mr Ward of Eversheds [representing Jarvis] during our telephone conference of 16 July and asked for such information and evidence to be disclosed. Nothing persuasive has been provided by JCUK in response to that request. 6.51 By the same token, I find nothing persuasive of PGBL’s allegation that JCUK reduced their resources, but nothing turns on that. 6.52 I accept the Referring Party’s evidence on this element of the case and I determine that JCUK did not make any bona fide effort to comply with PMI003 by accelerating progress in order to achieve the completion dates specified, they did not comply with PMI003, which was properly issued, and hence were in breach of contract.”

“1. Please note that I was not involved in drafting the contract and therefore was not privy to the details of why various clauses were included in the contract. 2. Secondly, my advice now on the acceleration clause is based on my recollection of looking at the clause approximately 12 months ago and advising on its effect. 3. In my experience, it is unusual to have an express acceleration clause in a UK construction contract, and most particularly unusual to have a mandatory clause, i.e. where the contractor is obliged to accelerate if instructed. 4. The client specifically required the clause, because if completion were not achieved at the beginning of the academic year, they would lose an entire year’s revenue by failing to achieve one date. Liquidated damages, which apply at a set rate over time, could not have compensated for such a loss. A possible alternative might have been to apply liquidated damages at the full rate of the loss if completion was not achieved by the “drop dead” date (with liquidated damages at a nil rate thereafter as the client’s loss would not increase), but such a clause would have been totally unacceptable to any contractor on a commercial basis. 5. In those circumstances, both parties agreed to a contract containing the compulsory acceleration clause, since clearly the costs of accelerating were a more attractive option to the contractor than bearing the full loss of the rate which would be incurred if they failed to meet simply one date. 6. The effect of the acceleration clause in the contract, is that, if the contractor is in delay, the client can elect: (a) to allow the work to continue at its original progress and recover liquidated and ascertained damages, or at his option. (b) require the contractor to accelerate to avoid the delay. The reason for choosing option (b) would be to cover the circumstances outlined above where liquidated damages could not compensate for the loss. 7. If the contractor refuses to obey an instruction to accelerate, he would be in breach of contact. If the result of that breach were to be damages the equivalent of liquidated damages, this would make the acceleration clause in the contract totally superfluous. This clearly was not the intention of the parties. 8. The requirement to accelerate is a different (and unusual) obligation in the contract, and is not the same as the obligation to complete on time. There is therefore no legal reason why damages for a different obligation, i.e. to accelerate when instructed, should be the same as the damages which arise from the obligation to complete on time. In fact, as explained above, the very fact that there are two different results of breach. Given that the intention of the acceleration clause was specifically to avoid the client having to accept liquidated damages for delay, it would be entirely inappropriate if they were the damages to be applied. In fact, the normal rule for damages applies, as in any other breach of contract, i.e. it is the damages directly and foreseeably flowing from the breach. As the contractor knew that the acceleration clause was to avoid delay and liquidated damages, he would also have known that his failure to accelerate would have resulted in different damages than the liquidated damages for delay.”

“9. The client, to whom Masons shall be contracted is: W D King Ltd 120 High Street Edgware Middx. HA8 7EL Tel: 0181 9511 1616 Fax: 0181 951 1427 Attn: Mr Jayant Sanghvi A company I control, Urban Dialectics Ltd, is a joint venture partner on this project. This practice of architects has a separate engagement with W D King. City & County Ltd is one of the other joint venture partners, and is to be copied on all correspondence.”

“The first thing Paul [Whitley]did was to ask for confirmation of acceptability of his letter of 14 January which confirmation MAC gave although he could not help wondering whether we are going to be doing rather more work for £8,500 than might at the outset have been imagined!”

“The (Claimant) …will be entitled to sue for unliquidated damages in the ordinary way, in addition to suing for liquidated damages, if other breaches have occurred outside those that fall within the ambit of the liquidated damages provision.”

“The Employer and the Contractor shall deal fairly, in good faith and in mutual co-operation, with one another, and the Contractor shall deal fairly, in good faith and in mutual co-operation, with all his subcontractors and suppliers.”

“The Contractor shall execute the Works in accordance with the Contract and – (a) with diligence; (b) in accordance with the Design; (c) in accordance with the Programme; (d) with all reasonable skill and care; (e) in a workmanlike manner; and (f) in accordance with any quality control or assurance system, standards, and/or procedures specified in the Employer’s Requirements.”

“56 (1) Without prejudice to any other power of determination, the Employer may determine the Contract by notice to the Contractor if: (a) any ground mentioned in subparagraphs (6) (a), (b) or (c) has arisen: the Employer has given notice to the Contractor specifying the relevant ground and facts; and such ground was in existence 14 Days after such notice was given; or has arisen again at any subsequent time; or (b) any ground mentioned in paragraph (6) has arisen, other than those mentioned in sub-paragraphs (6) (a), (b) and (e). (2) The Employer shall specify in a notice of determination under paragraph (1) which of the grounds mentioned in paragraph (6) apply. (3) The Employer shall specify in a notice of determination under paragraph (1) which of the grounds mentioned in paragraph (6) apply; (4) The Employer may, after giving notice of determination under paragraphs (1) or (8), give directions in relation to the performance or completion of any work and any other matters connected with the Works, the Site and any other contract or subcontract.” …. (6) The grounds referred in paragraph (1) are – (a) the failure of the Contractor to comply with an Instruction within a reasonable period of its issue; (b) the failure of the Contractor to execute work in a proper and workmanlike manner, or to proceed regularly and diligently …. so that in the opinion of the PM the Contractor has not completed or will be unable to secure the completion of the Works or any relevant Section by the Dates for Completion. …… ….” (a) the failure of the Contractor to comply with an Instruction within a reasonable period of its issue; (b) the failure of the Contractor to execute work in a proper and workmanlike manner, or to proceed regularly and diligently …. so that in the opinion of the PM the Contractor has not completed or will be unable to secure the completion of the Works or any relevant Section by the Dates for Completion. …… ….”

“...in the Employer’s interests the choice of the wording, including the use of the word “shall” is lamentable, since it is self evident that no sanction has been provided for the enforcement against the Contractor of clause 46, which therefore is mere verbiage from this point of view and adds nothing…”

“I had advised Masons in the first place that there was a shortfall, therefore it was not something that they needed to advise us about.”

“Nor do I believe we have yet achieved a position where the employers potential liability to the University in respect of delay is covered under the Construction Contract. (I may be wrong about this, in any event, I do not know how damages for delay were ultimately dealt with in the invitation documents)”

“Accordingly, we reiterate that it was our understanding of the commercial deal between the parties that delay losses were to be compensated by liquidated damages. It was only well after execution of the building contract that Mr Whitley, in the circumstances in which the project then found itself, began to search around for arguments that might be adopted to recover the shortfall. Reliance on condition 19 was one avenue explored, the bond another. Later, a claim for breach of condition 38 was canvassed. The advice we gave as to the prospects of such arguments was provisional and by no means unequivocally favourable. We refer you to the documents attached [i.e. Masons attendance notes of 22 February and 10 March 2000, the latter with attachment with Ms Howells’ manuscript notes; Mr Whitley’s faxes of 16 and 17 May 2000; Masons letters to Mr Whitley of 22 June 200 and to Mr Rosenbaum of 20 September 2000.]”