Belong (Construction) Limited v Seddon Construction Limited

Where a pre-construction agreement precedes a later building contract, wording that contractual rights and liabilities are “subsumed into and subject to” the later contract does not necessarily extinguish liabilities for pre-existing breaches of primary obligations. The court must distinguish continuing primary obligations from secondary liabilities arising from earlier breaches.

Such liabilities may survive the later contract, while becoming subject to its procedural, limitation and liability provisions. Contractual references to error, omission, negligence or default are not confined to breaches of the later contract unless the wording requires that result. They may encompass non-compliance with legal obligations owed under the earlier agreement, provided the conduct falls within the specified categories.

Belong engaged Seddon under a pre-construction services agreement concerning a construction project later governed by a JCT building contract. The earlier agreement required specified pre-construction services, including inspection and appraisal of partially completed works. Seddon did not open up and test existing air-sealing works. Those works later caused delay and Seddon claimed an extension of time under the JCT Contract.

The contract administrator rejected the claim, but an adjudicator accepted Seddon’s position that its obligations under the earlier agreement had been superseded by the JCT Contract. Belong brought a Part 8 claim seeking final declarations concerning the interpretation of the agreements, Seddon’s entitlement to an extension of time and associated consequences.

1. Declarations granted. Belong succeeded in its Part 8 claim. The court held that the adjudicator’s interpretation was wrong and that Belong was entitled to the declarations sought, subject to consequential clarification.
2. Clause 2.3 of the PCSA had to be read alongside clauses 2.1 and 2.2. The deliberate distinction between “obligations” and “liabilities” indicated that primary obligations under the PCSA ended when the JCT Contract was executed, but liabilities arising from pre-existing breaches survived.
3. The distinction reflected the difference between primary and secondary contractual obligations, as explained in Photo Production Ltd v Securicor Transport Ltd [1980] A.C. 827. A later contract may modify secondary obligations, but it does not follow that it extinguishes liabilities for earlier breaches.
4. The phrase “subsumed into and subject to” the JCT Contract preserved liabilities for pre-existing breaches while making their enforcement subject to the later contract. Clause 16 of the PCSA, which contemplated claims after practical completion of the JCT works, reinforced that interpretation.
5. The clauses excluding extensions of time or loss and expense for error, omission, negligence or default were not limited to matters arising under the JCT Contract. They could apply to non-compliance with legal obligations owed under the PCSA, provided the conduct properly fell within those descriptions. On the unchallenged factual findings, Seddon’s conduct did so.
6. Belong was entitled to the first three declarations and, with the qualification that they operated by reference to those declarations, declarations that Seddon was not entitled to the relevant extension of time and that Belong could levy liquidated damages. The precise order was to be addressed at a consequentials hearing.

This was a first-instance Part 8 claim in the High Court. The court finally determined the dispute arising from the adjudicator’s decision dated 2 May 2024.