Pitfalls of incorporating main contract terms under sub-contracts

Imtech Inviron Limited v Loppingdale Plant Limited [2014] EWHC 4006 (TCC)

Facts

Loppingdale (LPL) entered into a Framework Agreement with Stansted Airport in October 2014.  LPL then proceeded to sub-contract the majority of the work to Imtech Inviron (Inviron).  The sub-contract referred to the terms of LPL's Framework Agreement with Stansted Airport.

Inviron brought adjudication proceedings against LPL for failure to pay sums due under an interim payment application.  LPL were ordered to pay Inviron the sum of £643,283.04 and Inviron subsequently sought an order to enforce the Adjudicator's Decision.

LPL argued that the Framework Agreement had specified that one of 3 named adjudicators was to be appointed which did not include the adjudicator in this case.  As a result, the adjudicator did not have jurisdiction to hear the matter.  Inviron argued that the adjudication provisions of the Framework Agreement were not actually incorporated into the sub-contract and therefore LPL had not been obliged to use only one of the 3 named adjudicators.

Held

Mr Justice Edwards Stuart agreed with Inviron's argument that the sub-contract agreement only incorporated the 'primary provisions' of the Framework Agreement, such as the standard to which the works were to be performed.  The adjudication provisions however were secondary and therefore there was no clear evidence that the parties intended to incorporate the adjudication provisions into the sub-contract.  The Judge remarked that other "secondary provisions" would include the clauses relating to liability, insurance and indemnification, etc.  As a result, the Adjudication Decision was enforceable.

Comment

This case highlights the need to carefully consider what provisions of any Framework, Development or 'Main' agreement should be fed down into subsequent agreements with other parties, e.g. sub-contractors or suppliers.  If there is a specific provision which you want to pass down to a sub-contractor then this should be specified clearly in the sub-contract agreement to ensure it is enforceable.  This is particularly important in light of the fact that the Court regarded indemnification and liability clauses as secondary and not automatically incorporated into sub-agreements.  This could create a serious gap between the main contractor's obligations to his employer and his rights against the sub-contractor.

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