Lawyers had plenty to keep them busy this year, with duties of good faith in commercial contracts, lawsuits over blacklisting and confusion over changes to court rules

Rupert Choat

This year was always going to be the hangover after the Olympics, but it started well for the man I awarded the gold medal in legal gymnastics in my 2012 review. The Court of Appeal approved Mr Justice Akenhead’s summary, in Walter Lilly vs Mackay, of the law on delay and disruption claims that do not fully show cause and effect. Given its wide impact, Mr Justice Akenhead’s judgment was probably the most important of 2012.

There was less good news for last year’s silver medallist. In Compass vs Mid Essex, Mr Justice Cranston’s broad application of an express duty of good faith was reversed on appeal. The Court of Appeal reaffirmed what one professor calls “traditional English hostility” towards a general duty of good faith in contracts.

The Court of Appeal completed its hat-trick in John Grimes Partnership vs Gubbins. It awarded a developer its loss from a project’s 14% fall in market value during a 15-month delay caused by his engineer’s negligence. Final damages may be 25 times the engineer’s £15,000 fee.

The grimy business of blacklisting continued to occupy the courts during 2013, as allegedly blacklisted workers sued major contractors. But the threat of public authorities blacklisting blacklisters seemed to pass. While a contractors’ compensation scheme is potentially important, so too is the Welsh government’s new proposal to ask bidders if blacklisting complaints have been made against them. It also envisages adding clauses to contracts to permit termination if blacklisting is later proven.

April brought major changes to court rules. Missed deadlines will now be punished far more than previously. Thus, the filing six days late by Andrew Mitchell MP’s solicitors of a costs budget in his “Plebgate” defamation case means that, if Mitchell wins, The Sun will not be liable for more than nominal costs.

Costs budgeting was in the news for other reasons too. The process requires courts to approve or amend each party’s detailed costs estimate early on, timetable the case accordingly and hold parties to their budgets when they recover costs from their opponents. For 18 months, the Technology and Construction Court (TCC) piloted it for all cases. However, from 1 April, as most courts were adopting the process, the TCC dropped the mandatory requirement for it in cases worth over £2m because the Commercial Court wholly rejected it. The cost-benefit of the process was debated during a consultation on resolving this impasse. The outcome is awaited.

Blacklisting continued to occupy the courts during 2013, as allegedly blacklisted workers sued major contractors. But the threat of public authorities blacklisting blacklisters seemed to pass

An interesting development was the issue of the Late Payment of Commercial Debts Regulations (LPDCR) 2013. These can entitle suppliers to their “reasonable costs” of pursuing debts. Some suggest this may entitle suppliers to their costs of adjudicating. However, it is hard to see how such costs are “reasonable” given parliament’s banning of pre-adjudication agreements that give such costs to parties.

No annual review is complete without an obituary. If the trustee stakeholder account was not a dead duck before, it is now, after Pioneer Cladding vs John Graham Construction confirmed it contravenes the Construction Act. The device deters payees from adjudicating by requiring the sum awarded to be paid into a bank account, rather than to the payee.

This bird that is no more and has ceased to be is survived by three close relatives: first, long payment periods (which seem ever lengthening, suggesting cash flow hasn’t been improved by the Construction Act or LPCDR 2013); second, nominal instalments, with most of the payment deferred; third, “final and conclusive” interim payment decisions and certificates. As these devices are expressly permitted by the legislation, only parliament can stop them.

This year ends, as it began, with a distruption case (albeit of another kind). The Supreme Court’s judgment on the challenge to HS2 should be out by the time you read this.

Happily, next year promises simplified public procurement rules to reduce the scope for challenges and, if it’s not contradictory, help SMEs. Large contracts may have to be broken down into smaller lots. Also pre-qualification questionnaires may, in general, be prevented from stipulating that bidders turn over more than three times the contract value.

So a potential reason for some to celebrate - hopefully without hangovers.

Rupert Choat is head of construction disputes at CMS Cameron McKenna