EM Law Fluor v Shanghai Zhenhua Photo By Matt Artz

Fluor v Shanghai Zhenhua Heavy Industries Ltd [2018] EWHC 1 – a reminder of the importance of getting Settlement Agreements right

Fluor v Shanghai Zhenhua Heavy Industries Ltd [2018] EWHC 1 is a recent case heard in the High Court to determine the damages that a supplier (Shanghai Zhenhua Heavy Industries Ltd (SZHI) should be liable to a contractor (Fluor) for. The case is a reminder of the importance of getting a settlement agreement right.

Background

Fluor contracted with Greater Gabbard Offshore Winds Ltd (GGOW) to build the foundations and infrastructure for a 140 turbine wind farm in the North Sea off the Suffolk coast.

SZHI contracted with Fluor to make the turbine foundations.

When the integrity of the first few batches of SZHI’s steel piles was tested by Fluor, the tests revealed extensive cracking in the welding on the piles. Fluor issued certificates of non conformance in respect of the steel piles and transition pieces delivered with them following which an extensive progamme of testing and repair began. Litigation ensued which resulted (in 2016) in SZHI being found liable for breach of contract with Fluor.

On 11 January 2018 Sir Antony Edwards-Stuart (sitting as a High Court Judge) gave judgment on the amount of damages that SZHI should pay Fluor.

The Judgment

The judgment is complex. One of the issues that was considered was the correct approach to delay analysis with the court concluding that some form of retrospective analysis was required in this instance.

The main point that we want to flag up from this case is the judge’s comments on and approach to the settlement agreement that Fluor entered into with GGOW (as prime contractor, Fluor was responsible to GGOW for the faults in the foundations supplied by SZHI). The judge had to consider the extent to which the settlement agreement limited the damages that Fluor could recover from SZHI.

Paragraphs 465 and 466 of the judgment are set out below:

“465.   It is settled law that, in principle, C can recover from a contract breaker, B, sums that it has paid to A in settlement of a claim made by A against C in respect of loss cause by B’s breach of its contract with C.

466.   However, C’s settlement with A must be an objectively reasonable settlement and, if it is, that sum represents the measure of C’s damages in respect of B’s breach of contract (assuming there were no other heads of loss). Even if C can show that its settlement with A was at an undervalue, the settlement sum still represents a ceiling on the amount that it can recover from B.”

So, to put it another way, if your customer sues you for losses caused by your subcontractor then the amount that you agree to pay your customer under the settlement agreement that you make with him is the amount that the subcontractor must pay you provided that the settlement agreement is objectively reasonable.

If the settlement agreement is not objectively reasonable (perhaps because you agreed to pay your customer more than you should have done) then you may not be able to recover that amount from your subcontractor.

As ever, care and attention is needed when dealing with claims and settlement of claims.

In Fluor v Shanghai Zhenhua Heavy Industries Ltd the judge concluded that the settlement agreement between Fluor and GGOW was objectively reasonable.

For any questions you have concerning this case or if you are facing a breach of contract dispute please contact us.


EM Law CAP Codes Photo By Engin Akyurt

CAP Codes and BCAP Codes introduce new rules prohibiting sexual portrayal of under-18s in advertising

What are CAP Codes and BCAP Codes?

The UK Code of Broadcast Advertising (BCAP Code) applies to all advertisements and programme sponsorship credits on radio and television services licensed by Ofcom.

What are the changes to CAP Codes?

On 2 January 2018 Code rules 4.8 and 4.13 were added to the CAP Codes and BCAP Codes respectively. The new rules (CAP Codes rule 4.8 and BCAP Code 4.13) state that ads should not portray or represent anyone who is, or seems to be, under 18 years old in a sexual way. This does not apply to ads whose principal function is to promote the welfare of, or to prevent harm to, under 18s, provided any sexual portrayal or representation is not excessive.

The Advertising Standards Authority has stated that the Codes do not prevent marketers from using images of children but they should do so in a socially responsible manner.

When assessing ads the ASA will consider whether models seem to be younger than 18, as well as their real age. It is not acceptable to present models in a sexual way if they could appear to be under 18, even if they are over 18.

In March 2015, the ASA upheld a complaint about an image of a model in an ad for a thong bodysuit. The ASA considered that, whilst the model was 20 years old, she had a youthful appearance in the ad and some consumers were likely to regard her as being younger than 16. As the model’s expression and pose were considered sexual in nature, the ad could be seen to sexualise a child and was so was found irresponsible in relation to CAP Codes (ASA Case: American Apparel (UK) Ltd. 18 March 2015).

If a model could appear to be under 18, marketers should consider the way the model is presented to ensure that they are not done so in a sexual way. The CAP codes will take the clothing, make up, pose and gaze of models may be taken into consideration, alongside any text.

Sharon Playford is our lead lawyer for advertising and other media law matters. If you have any questions concerning CAP Codes or BCAP Codes or on your next advertising campaign please get in touch.


EM Law Crawford v Network Rail

Crawford v Network Rail Infrastructure Ltd UKEAT/0316/16 (8 November 2017) Compensatory Rest Breaks

The Employment Appeals Tribunal in the case of Crawford v Network Rail Infrastructure Ltd UKEAT/0316/16 has held that a worker’s right to compensatory rest for a 20-minute rest break under the Working Time Regulations 1998 (SI 1998/1833) (Working Time Regulations) must be given as an uninterrupted rest break of 20 minutes. Allowing a railway signalman to take a number of shorter breaks throughout his eight-hour shift, which in aggregate amounted to substantially more than 20 minutes, was not compliant.

Background

Under the Working Time Regulations, a worker is entitled to a rest break if their daily working time exceeds six hours (regulation 12(1)). A rest break is a period of at least 20 minutes which the worker is entitled to spend away from their workstation, if they have one (regulation 12(3)).

Workers falling within a number of “special cases” under regulation 21 of the WTR, including those working in rail transport whose “activities are linked to transport timetables and to ensuring the continuity and regularity of traffic” (regulation 21(f)), are excluded from entitlement to a rest break under regulation 12(1). However, in such cases, regulation 24 provides that:

  • His employer shall wherever possible allow him to take an equivalent period of compensatory rest (regulation 24(a)).
  • In exceptional circumstances in which it is not possible, for objective reasons, to grant such a period of rest, his employer shall afford him such protection as may be appropriate in order to safeguard the worker’s health and safety (regulation 24(b)).

In Crawford v Network Rail Infrastructure Ltd UKEAT/0316/16, the Employment Appeals Tribunal considered whether a railway signalman had been given adequate compensatory rest when he was permitted to take a series of short breaks while remaining “on call”.

Facts

The Claimant – Mr Crawford - was a railway signalman working on single manned boxes on eight- hour shifts. He had no rostered breaks but was expected to take breaks when there were naturally occurring breaks in work whilst remaining “on call”. Although none of the individual breaks lasted 20 minutes, in aggregate they lasted substantially more than 20 minutes.

Mr Crawford claimed that he was entitled to a 20 minute “rest break” under regulation 12 of the Working Time Regulations or “compensatory rest” under regulation 24(a). The Employment Tribunal found that regulation 12 did not apply and that the arrangements were compliant with regulation 24(a).

Mr Crawford appealed on the basis that “an equivalent period of compensatory rest” must comprise one period lasting at least 20 minutes.

Decision

Judge Shanks in the Employment Appeal Tribunal found in favour of Mr Crawford – agreeing with him that adequate compensatory rest had not been provided.

Judge Shanks picked up on the Employment Tribunal’s finding that Mr Crawford had not requested (and had therefore not been refused) any different arrangements to the ones he was obliged by Network Rail to follow and noted that, in fact, Mr Crawford had more than three months before the starting of the tribunal proceedings brought a substantial grievance and then an appeal which raised the very complaint that he took to the tribunal, namely that he did not have a continuous 20-minute break. Judge Shanks noted that Mr Crawford’s complaint and the appeal were dismissed and no steps were taken to change the system. Accordingly, the only question to be determined was whether the tribunal had been entitled to find that what was provided on such occasions amounted to an equivalent period of compensatory rest.

Judge Shanks examined the case of Hughes v The Corps of Commissionaires Management Ltd [2011] EWCA Civ 1061 (8 September 2011) noting that the mere fact of being “on call” during a break would not mean that the break couldn’t amount to a compensatory rest break in accordance with the Working Time Regulations. However, he concluded from the judge’s reasoning in that case, that the compensatory rest must comprise a break from work which must last at least 20 (continuous) minutes.

Comment

Crawford v Network Rail Infrastructure Ltd makes it clear that if a worker’s daily working time exceeds 6 hours, the worker must have an uninterrupted single period of at least 20 minutes’ rest.

Also of note: Network Rail ran an argument that their system worked better from a health and safety perspective than a system involving a continuous 20 minute break. This argument was rejected as irrelevant.

For any questions that you have concerning the Working Time Regulations please do not hesitate to contact us.