Belong (Construction) Limited v Seddon Construction Limited

This is my judgment following the final hearing of the hearing of the Part 8 claim brought by the Claimant (“Belong”) against the Defendant (“Seddon”).

In short, Belong is dissatisfied with the determination of an adjudicator made on 2 May 2024 of a dispute in relation to Seddon’s application for an extension of time, which had previously been rejected by the Contract Administrator (“the CA”), as regards a delay to the works undertaken by Seddon for Belong pursuant to a construction contract dated 18 December 2020 in the form of the JCT Standard Building Contract (with Quantities), 2016 Edition, with a Schedule of Amendments (“the JCT Contract”).

The delay was caused by the undertaking of air sealing works (“theASW”) by Seddon pursuant to an instruction given by the CA under the JCT Contract.

The application for an extension of time was refused by the CA on the basis that the need for the ASW to be undertaken during the course of the contract works, rather than being identified and scheduled from the outset, was due to Seddon’s failure, in breach of an earlier contract, the Pre-Construction Services Agreement dated 27 May 2020 (“the PCSA”), to open up and test the existing ASW as had been done by a previous contractor, who Seddon had replaced following the previous contractor entering an insolvency procedure.

Seddon denied that it was under any contractual obligation to open up and test the existing ASW, on the basis that: (a) this obligation (“the open up and testing obligation”), contained in the PCSA which incorporated the then draft JCT Contract - referred to in the PCSA as the Proposed Contract Documents (“PCDs”) - did not appear in the final version of the JCT Contract as executed; and (b) under the PCSA “the parties’ respective rights and liabilities [in respect of the PCSA] shall be subsumed into and be subject to the [JCT Contract]”.

Seddon referred that dispute to adjudication. The adjudicator agreed with Seddon.

Belong disagrees with the adjudicator and brings this Part 8 claim to obtain a final determination of the dispute from the court.

In summary, having read the evidence, and having read and listened to the persuasive written and oral submissions of both counsel, I am satisfied that Belong is right and that insofar as Belong has a valid contractual right to complain about Seddon’s failure to comply with the open up and testing obligation as contained in the PCSA during the currency of the PCSA it has not lost that right as a result of its subsequent entry into the JCT Contract which did not contain that open up and testing obligation.

My reasons follow, as succinctly as is possible and without exhaustive reference to the detailed terms of the PCSA or the JCT Contract or detailed reference to authority.

These are well established and have been summarised on a number of occasions by the Court of Appeal and the Supreme Court. Mr Ward referred me to the most recent summary, in the context of a dispute as regards the interpretation of a JCT contract, in Providence Building Services Limited v Hexagon HousingAssociation Limited [2026] UKSC 1, as found in the judgment of Lord Burrows JSC, with which the other JJSC agreed, at pars. 21-31.

Clause 2, headed “Duration and Effect of this Agreement”, provided as follows.

“2.1.

The parties' obligations under this agreement start on the date of this agreement or, if earlier, the date on which the Contractor commenced performance of the Pre-Construction Services until the earlier of: 2.1.1 the execution and completion of the Contract; or 2.1.2 the Contractor or Employer issuing a notice of termination of this agreement under Clause 11.

2.2.

Before execution and completion of the Contract, the rights and obligations of the Employer and the Contractor in relation to the Works shall be governed by the provisions of this agreement supplemented by the Proposed Contract Documents. If there is any conflict or difference between this agreement and the Proposed Contract Documents, the Proposed Contract Documents will prevail.

2.3.

On the execution and completion of the Contract, the parties’ respective rights and liabilities in respect of all matters with which this agreement is concerned (including any design performed or any work carried out or order placed under Clause 4.3) shall be subsumed into and be subject to the Contract.”

It is immediately apparent that there are significant differences between the wording of each sub-clause in relation to “rights”, “obligations” and “liabilities”.

Thus, clause 2.1 refers expressly to the parties’ obligations under the PCSA, whereas clause 2.2 refers expressly to their rights and obligations in relation to the Works. Finally, clause 2.3 refers expressly to their respective “rights and liabilities in respect of all matters with which this agreement is concerned”.

From an initial reading, it appears reasonably clear that each sub-clause is intended to deal with a different topic. The difference in wording between obligations and liabilities would appear to be intentional. That is because once the JCT Contract has been entered into: (a) there are no continuing obligations under the PCSA or continuing rights or obligations under the PCSA in relation to the Works; whereas (b) there may be continuing rights and liabilities in respect of the subject matter of the PCSA, including work carried out under the PCSA, which are to be “subsumed into and be subject to the [JCT] contract”.

On first impression, this would appear to indicate that there is intended to be a difference between the use of the word obligations and the use of the word liabilities, given that in my view the obvious meaning of liabilities, when contrasted with obligations, means continuing liabilities for pre-existing breaches of obligations committed during the period before entry into the JCT Contract.

It is these continuing liabilities for pre-existing breaches of obligations which are to be subsumed into and be subject to the JCT Contract.

The question then is as to what is meant by, and what is the effect of, these liabilities being subsumed into and being subject to the JCT Contract?

However, Seddon submits that this first impression and this analysis is wrong, and that on a proper interpretation there is no difference between obligations and liabilities, which may mean effectively the same thing and, in the context of this clause and this contract, do mean the same thing.

I do not accept this submission. Whilst I accept that some people in some circumstances might refer to an obligation and a liability interchangeably, nonetheless: (a) there is an intrinsic difference in contract law between primary and secondary obligations; and (b) in my judgment, it is conventional to equate being under a secondary obligation under a contract to being under a liability for breach of a primary obligation, whereas one would not usually equate being under a primary obligation to do something as being under a liability, even though it would not be a misuse of language to describe someone as being liable to perform a primary obligation.

As Mr Ward submits, this analysis is supported by the judgment of Lord Diplock in Photo Production Ltd v Securicor Transport Ltd [1980] A.C. 827, where he began by complaining in robust terms that “… the disarray into which the common law about breaches of contract has fallen, is due to the use in many of the leading judgments on this subject of ambiguous or imprecise expressions without defining the sense in which they are used…” (at p.847).

At p.848 he explained the distinction between primary and secondary obligations as follows:

“…breaches of primary obligations give rise to substituted or secondary obligations on the part of the party in default, and, in some cases, may entitle the other party to be relieved from further performance of his own primary obligations… The contract, however, is just as much the source of secondary obligations as it is of primary obligations; and like primary obligations that are implied by law, secondary obligations too can be modified by agreement between the parties, although, for reasons to be mentioned later, they cannot, in my view, be totally excluded.”

Since the PCSA was drafted by Belong’s lawyers, it is reasonable to conclude that the choice of wording was deliberate rather than sloppy. In my judgment the choice of wording makes perfect sense in the context of the difference between primary and secondary obligations. That is because once the JCT Contract has been entered into, since clauses 2.1 and 2.2 make clear that the parties’ obligations under the PCSA come to an end and their obligations are then governed by the JCT Contract, it is obvious that all that can be left under the PCSA are substituted or secondary obligations on the part of the party in default, which in my judgment are most obviously to be equated with the liabilities referred to in clause 2.3.

It is, however, necessary to consider this initial impression further in the light of the relevant terms of the PCSA and the PCDs, which also cast light on the meaning and effect of these liabilities being subsumed into and made subject to the JCT Contract.

The “Background” as stated at the beginning of the PCSA is a convenient summary of the relevant factual matrix, namely that:

“(A)

The Employer wishes to carry out the Project” (defined as the development of the property for the specified purpose of completing the works to provide a care home).

“(B)

The Employer wishes to engage the Contractor to carry out the Pre-Construction Services” (“PCSs”).

The PCSs are set out in some detail in Sch. 2, which makes clear that they are largely services to be provided with the intention of getting the project sufficiently developed to a position where the parties are able to enter into the JCT Contract. At par. 3, headed “Construction Advice”, is found “Visiting the Property and carrying out an appraisal of the Property and a survey and inspection of the partially completed works on the Property to satisfy the Contractor of all constraints for the Project”. It is this obligation, part of the PCSs, which the CA decided was breached by Seddon and which disentitled it from obtaining an extension of time.

The PCSs were also the subject of a separate payment, defined as the Pre-Construction Fee by reference to the provisions of Sch. 3.

The Background continued: “(C) The Employer may wish to appoint the Contractor to carry out the Works and wishes to secure agreement on the terms on which that appointment may be made”. The Works are defined as “the works and the services required for the construction, completion and commissioning of the Project”.

It thus appears that the Works are the works to be undertaken under the JCT Contract if and when agreement was reached and the JCT Contract was entered into. These works are different from the PCSs which form the subject matter of the PCSA, although under clause 4.2 provision was also made for Belong to instruct Seddon to carry out “Additional Services” (defined as “services performed by the Contractor under this agreement, in connection with the Project or the Works, that are additional to the Pre-Construction Services”) which, subject to agreeing additional payment, Seddon would undertake.

In my view this is important, because it makes clear that the PCSA was not the equivalent of a letter of intent, under which a contractor is required to undertake the very same works which are to be the subject of the eventual contract in anticipation of that contract being entered into, with the letter of intent being entered into in order to regulate the position of the parties in the interim or if the project did not proceed to an eventual contract. Instead, it was a contract for the undertaking of specific services which, in the particular circumstances of this case where the works had already been started and then abandoned by the former contractor due to its insolvency, were needed to get the project into a state where the parties could confidently enter into the JCT Contract under which the project works would be completed. Whilst there was the option for some of the project works to be accelerated and undertaken under the PCSA, that was not the primary purpose of the PCSA.

The definition of the Contract as “the final contract (if any) to be entered into between the Employer and the Contractor in relation to the Works and the Project in the form of (or based on) the Proposed Contract Documents” is also relevant because, when read with the rest of the PCSA, it makes clear that the parties had already agreed in principle the form of the substantive JCT contract to be entered into, but also recognised that more work was needed before its terms could be fully specified and fully agreed, not least as regards final agreement on the Contract Sum, defined as “the sum to be agreed by the parties under this agreement and included as the contract sum in the Contract”.

The procedure for getting from the PCSA to the JCT Contract is found in clause 6, whereby Belong was entitled – but not obliged – to appoint Seddon to carry out the Works by giving a Notice to Proceed, and whereby Seddon was required to execute the PCDs and undertake the Works. Provision was also made for the PCDs to be the subject of agreed amendments during the course of the performance of the PCSA, so that both parties would have known that the terms of any eventual JCT contract would not necessarily be the same as the terms of the PCDs as agreed at the time of entry into the PCSA.

However, the PCDs were to have effect during the Pre-Construction Period (defined as the period of the Project up to the date of any Notice to Proceed) because, under clause 3.1.1, Seddon warranted that it would comply with the PCSA and the provisions of the PCDs relating to the undertaking of the PCSs. Indeed, this may well be why the CA considered that the open up and testing obligation, as found in the PCDs, was applicable to the visiting the property requirement referred to in par. 25 above. This also explains why clause 2.2 included reference to the PCDs as governing the rights and obligations of the parties in relation to the Works, why the PCDs were included in Sch. 5, and also why it was provided that they should prevail over the PCSA in the event of conflict.

It is convenient to mention at this stage that included within the PCDs was clause 2.28.6.5, which provided that “(save where the Relevant Event is as defined in clause 2.29.10…[Seddon] shall not be entitled to any extension of time on account of any circumstance arising by reason of any error, omission, negligence or default of [Seddon]…”. This is consistent with clause 4.20.3, which provided that no entitlement to loss and expense (“L&E”) arises “where any such [L&E] arises by reason of any error, omission, negligence or default of the Contractor (other than an amount that is recoverable….under a policy of insurance…)”.

These two provisions were retained unamended in the final JCT Contract, whereas the revised version of clause 2.3.8 was materially different, because it provided: “At all times during the carrying out and completion of the Works [Seddon] shall use all the reasonable skill, care and diligence to be expected of an experienced building contractor to identify any workmanship defects in the PCL Works as would be reasonably identifiable following a visual inspection. This obligation does not require [Seddon] to open up or survey any of the PCL Works over and above requirements as outlined within the Contract Documents to do so. [Seddon] shall immediately notify the [CA] if he becomes aware of any such defects and [Seddon] shall subject to receipt of an appropriate Instruction from the [CA] open up any work covered up or carry out any test of any materials or goods incorporated into the PCL Works so far as is necessary to identify or verify the existence of a Defect” (emphasis added). It is the absence of the open up and testing requirement in the final JCT Contract which Seddon relied upon in its defence before the adjudicator.

Clause 1.3 expressly provided that “nothing contained in the [PCSA] shall override or modify the Schedule of Amendments, the Agreement or these Conditions”. However, the PCSA and a document called ‘PCSA Current Schedule of Work’ formed part of the JCT Contract, albeit rather peculiarly through being included in the list of Contract Drawings. No specific provision was made in the JCT Contract about how or when or in what circumstances any claim made under the PCSA might be made and on what basis.

In my judgment, nothing in the broader terms of the PCSA, when read with the PCDs, causes me to depart from the provisional view which I had already reached in relation to clause 2 of the PCSA, i.e. that the reference to liabilities is a reference to liabilities arising under the PCSA, and should be read as meaning something different to the previous sub-clauses where they refer to obligations arising under the PCSA.

Indeed, if anything, I am fortified by these broader terms. In my view they make it even clearer that, because the subject matter of the PCSA was quite different to the subject matter of any eventual JCT Contract, there was every reason why there might be rights and liabilities in respect of the subject matter of the PCSA, which would not only remain in place but which might also need to be enforced even after the entry into the JCT Contract.

In my judgment neither the words of the PCSA nor the words of the JCT Contract (which I accept are relevant because, as Mr James submitted, it is perfectly open to two contracting parties to enter into a further contract which modifies the terms of the original contract, even with retrospective effect) produce the outcome for which Seddon contends.

It follows in my judgment that there is no basis for the submission made by Mr James that “the parties obviously intended the PCSA to govern their dealings up to the Contract, and then for the Contract to absorb the PCSA and to operate retrospectively to cover the works done under the PCSA. That is why the PCSA and the Contract used the express language (1) of subsumption, (2) of the PCSA being subject to the Contract, and (3) of the PCSA not overriding or modifying the Contract”.

“Subsumed into and subject to”.

In submissions, I noted that the Oxford English Dictionary includes what appears to me to be the most directly relevant definition of the word “subsumed” as being “to take up or absorb (a concept, thing, person, etc.) into another, esp. one which is larger or higher; to include in”.

In my judgment this indicates that the thing which is subsumed into the other larger thing does not necessarily entirely lose its independent existence, albeit it has become part of the larger thing into which it has been subsumed. It follows in my judgment that the use of the word “subsumed” does not necessarily mean that the PCSA no longer remains in existence for the purpose of enforcing any respective rights and liabilities following the entry into the JCT Contract. Indeed, in my judgment, such an outcome would be inconsistent with clause 16 of the PCSA, which provides that: “The Employer may not commence any legal action against the Contractor under this agreement [i.e. the PCSA] after 12 years from the date of practical completion of all of the Works under the Contract [i.e. the JCT Contract]”. If the PCSA had lost its existence as a separate contract in respect of which claims to enforce rights or liabilities could be made once the JCT Contract had been entered into, then I agree with Mr Ward that this clause 16 would be otiose. The same is true of the purpose of making the PCSA a contract document.

Further, in my judgment the way in which clause 16 is worded is consistent with what I regard as the true meaning of clause 2.3, which is that any primary obligations remaining under the PCSA have been subsumed into, by which it means superseded by, the JCT Contract, but that leaves unaffected rights and liabilities, in the sense of claims in relation to secondary obligations for pre-existing breaches of primary obligations, save only that such claims are “subject to” the terms of the JCT Contract.

Clause 16 of the PCSA illustrates that this provision would most obviously benefit Belong as the employer, insofar as the limitation period is extended by reference to the limitation period applicable to the JCT Contract, although it might also benefit Seddon in certain circumstances.

Further, as Mr Ward submitted, if there were terms in the JCT Contract which restricted the enforcement of any rights and liabilities such as, for example, a particular dispute resolution procedure, or some time-bar separate from the general limitation period applicable to deeds, or some exclusion or limitation of liability, then it would follow that the enforcement of any liability in respect of an obligation arising under the PCSA would be subject to such provisions. As he submitted, this is the most obvious meaning of the phrase “subject to”.

Again, this interpretation does not necessarily only favour Belong as the employer. It is also possible that the contractor may wish to enforce the employer’s liability for a historic breach of an obligation under the PCSA or, perhaps more likely, to use the terms of the PCSA as a defence to any claim based on breach of the JCT Contract but said to have been committed before the JCT Contract was completed. It is just as likely that any difference between the obligations under the PCSA and PCDs compared with the obligations under the JCT Contract may adversely affect the employer as much as the contractor.

In my judgment this is the real meaning of “subsumed into and subject to” the JCT Contract. These words do not have the effect that liabilities for pre-existing breaches of obligations are brought to an end by the JCT Contract, or that they survive only insofar as they would also have been liabilities for breaches of obligations under the JCT Contract had the JCT Contract been in existence at the time of the alleged breach. The liabilities remain in existence as liabilities, but from the date of the JCT Contract they are included in the JCT Contract and made subject to it.

I accept that it may be said that on this basis the words “subsumed into” add little or nothing to the words “subject to”. However, given that the words “subsumed into” do not have any particular established legal meaning, and given what in my view is the clear overall intention of clauses 2.3 and 16 that pre-existing rights and liabilities should survive and be capable of being enforced as such, even after the completion of the JCT Contract, I regard it as a more commercially realistic outcome to give those features more weight than attempting to place a weight on the words “subsumed into” which they cannot bear.

Finally, the adjudicator was plainly influenced by the amended version of clause 1.3 of the JCT Contract, which provided: “Following execution and completion of this agreement (incorporating the Schedule of Amendments) by the Parties, nothing contained in … the pre-construction agreement entered into by the Parties on (DATE) shall override or modify the Schedule of Amendments, the Agreement or these conditions”.

In my judgment, however, it is difficult to see what impact this could have on the interpretation of clause 2.3 of the PCSA. On the interpretation of clause 2.3 as set out above, it does not in any way either override or modify the JCT Contract. It simply preserves any liability for pre-existing breaches of obligations imposed by the PCSA, but also requires that any liability should be subject to and in accordance with the JCT Contract.

This deals with the principal issue the subject of this Part 8 claim, which is the challenge to the adjudicator’s decision on what he identified as Issue 2. He decided that Seddon’s obligations under the JCT Contract have superseded, replaced and discharged Seddon’s obligations under the PCSA (to the extent that the latter are different). He referred to “obligations” because of the way in which Seddon had identified the dispute, even though it was clear that what Seddon was referring to was “liabilities” under clause 2.3. It may be that it was this forensic tactic by Seddon which led the adjudicator not to focus his attention sufficiently on the actual words used in clause 2.3.

If what the adjudicator was doing was simply summarising the effect of clauses 2.1 and 2.2, then his answer to issue 2 is unobjectionable. However, if he was saying, as the parties have treated him as saying, that Seddon’s liabilities under the JCT Contract have superseded, replaced and discharged Seddon's liabilities under the PCSA (to the extent that the latter are different), then I would respectfully disagree.

In relation to issue 4 the adjudicator decided that “references to error, omission, negligence or default in Clauses 2.28.6.5 and 4.20.3 of the Contract etc. refer to Seddon’s obligations only under the Contract and not to obligations under the PCSA”.

He identified the question as being “do errors etc which may have arisen under the PCSA bar Seddon’s rights of recovery under Clause 2.28.6.5 and or 4.20.3?”. He concluded that “the clear meaning of these clauses is that they apply only to matters arising under the Contract in which they are present. For them to include for matters which had arisen under the PCSA on the basis of different wording, as for example in respect of Clause 2.3.8, specific express words would be needed. There are no such words in the Contract”.

Before me the debate seemed to be whether or not the any error, omission, negligence or default had to refer to a failure to do what should be done or doing what should not have been done, i.e. a failure to fulfil an obligation, such that it would give rise to some kind of liability, as Mr James submitted, or whether it could be read more widely as referring to any matters within the contractor’s reasonable control, as Mr Ward submitted.

However, in my judgment that is not really the point here. As I have indicated, there was no difference in the wording of clauses 2.28.6.5 and or 4.20.3 from the PCDs to the JCT Contract. The difference was in the wording of clause 2.3.8. However, it was apparent from the CA’s decision that he was referring to the earlier version in the PCDs, because he was referring to the breach of an obligation which was in force at the time of the PCSA. He was not seeking to apply the earlier version to Seddon’s later performance of its duties under the JCT Contract.

Insofar as the question is whether or not any error, omission, negligence or default can apply only to matters arising under the JCT Contract, in my judgment, the adjudicator applied too narrow an interpretation. That is because the clauses do not use the words “breach of the terms of this Contract”. They refer widely to errors, omissions, negligence or defaults. I accept, as I said in argument, that these words cannot be read as if they were entirely unrelated to the legal obligations undertaken by Seddon. However, it must still be proper for the CA, the adjudicator or the court to conclude that what is complained of is a non-compliance with legal obligations owed to the employer, whether in contract, tort or under statute or statutory obligation. Beyond that, there is no logical reason why it should have to be a breach of a legal obligation owed under the JCT Contract. That is particularly so in this case, given the close connection between the PCSA and the JCT Contract, and especially based on my interpretation of clause 2.3 and of the terms of clause 16. There is no reason why a state of affairs which amounts to a breach of an obligation owed by Seddon to Belong under the PCSA should not fall within these clauses, provided that it can properly be described as an error, omission, negligence or default. Based on the factual conclusions of the CA, which Seddon did not challenge before the adjudicator, it cannot be said that the conduct complained of did not fall into these categories of conduct.

The relief claimed by Belong was for five declarations, as follows:

Mr James accepted that if Belong succeeded on this Part 8 claim, as it has, then it is entitled to the first three declarations. He indicated that he reserved his position in relation to (d) and (e).

In my judgment it would appear to follow from the CA’s decision, from what was referred to the adjudicator and from what he decided, and also from the scope of this Part 8 claim, that Belong is also entitled to declarations (d) and (e) provided that the words “by reference to the matters the subject of (a) to (c) above” are added, so as to ensure that the declarations do not have any unintended wider effect.

I will, however, hear further submissions on this point as appropriate as part of any consequentials hearing to deal with the terms of the order to give effect to this judgment.