Commercial Disputes Weekly – Issue 21610 September 2024

Construction – JCT – Termination
The Court of Appeal clarified when a contractor was able to terminate a construction contract after repeat defaults by the employer. The first instance court held that the contractor could only terminate for the second default under clause 8.9.4 of the JCT Standard Form of Design and Build Contract, if it had chosen not to serve the second notice as set out in clause 8.9.3. The contractor was unable to serve the second notice because the default had not continued for 28 days after the first notice. The Court of Appeal held that clause 8.9.4 was broad enough to cover any situation where the contractor had not given notice. The contractor had therefore been entitled to terminate following the second default.
Providence Building Services Ltd v Hexagon Housing Association Ltd [2024] EWCA Civ 962, 15 August 2024

Maritime – MOA cancellation – Damages
The Commercial Court has allowed an appeal under section 69 of the Arbitration Act 1996 in relation to an award of damages following the cancellation of a ship sale contract. The buyers cancelled the contract when the sellers did not serve notice of readiness by the cancelling date. Clause 14 of the contract permitted cancellation in those circumstances. The buyers also sought damages based on the difference between the market price and contract price as at the date of termination. The court overturned the decision of the tribunal awarding such damages. Where termination resulted from the exercise of a contractual right, rather than acceptance of a repudiatory breach of contract, the buyers were not entitled to loss of bargain damages. Clause 14 did not create a condition of which the sellers were in breach and so the parties were taken to have agreed that the right to cancel did not confer entitlement to loss of bargain damages.
Orion Shipping and Trading Ltd v Great Asia Maritime LTD, The “LILA LISBON” [2024] EWHC 2075 (Comm), 9 August 2024

Guarantees – Bribery
The Republic of Mozambique has successfully claimed losses of over US$800m from a businessman and his group of Privinvest companies that had caused Mozambique to enter into guarantees of state owned entities. The guarantees related to supply contracts with the Privinvest companies which had never been profitable. The state owned entities defaulted on the related loan facilities and the banks called on the guarantees. The businessman, acting through his companies, had caused the guarantees to be entered into through bribery of Mozambique’s Minister of Finance and others, when it was clear from the outset that the state owned entities would be unable to meet their liabilities under the projects. He had the requisite knowledge and intent and was liable for corruption under Mozambican law (and the tort of bribery if English law applied).
Mozambique v Credit Suisse International [2024] EWHC 1957 (Comm), 29 July 2024

Aviation – Leases – Relief from Forfeiture
Vietjet was the sub-lessee of four aircraft (under a leasing arrangement based on a Japanese Operating Lease with Call Option) that had been terminated following Vietjet’s failure to pay rent. FWA was assignee of the lessors’ interests in the leases. Vietjet disputed the termination on the basis that there had been no “enforcement event” as required by the termination provisions in the contract. The court held that the termination was under clause 19 of the lease that only required an event of default, which included non-payment of rent. Although in principle relief from forfeiture was available for this type of lease, where the lease conferred only pure possessory rights without a proprietary element, that was insufficient. Further Vietjet’s conduct meant that it would not be fair or equitable to grant relief.
FW Aviation (Holdings) 1 Limited v VietJet Aviation Joint Stock Company [2024] EWHC 1945 (Comm), 31 July 2024

Construction – Adjudication – Set off
The Technology and Construction Court has refused to allow set off of one adjudication against another. The claimant was a subcontractor on the project and obtained an adjudication award in its favour for payment for works from the defendant contractor. Rather than challenge that decision for lack of jurisdiction or breach of natural justice, the defendant obtained a second adjudication award following a true value adjudication and attempted to claim set off. The court held that set off was not possible because the court only has discretion to do this where there were two sets of enforcement proceedings. Only the claimant had commenced such proceedings. Further, it was not appropriate for the court to consider set off. The defendant had not followed the appropriate procedures for enforcement and challenge of adjudication decisions, and not requiring payment of the first decision would undermine the policy of swift enforcement of adjudication decisions.
CNO Plant Hire Ltd v Caldwell Construction Ltd [2024] EWHC 2188 (TCC), 21 August 2024

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