The season of goodwill to all men is over, folks, so get ready for a year of wrangles, nit-picking, bust-ups over defects and early claims … like last year, only worse
Here are my predictions for what’s in store for construction law this year:
Ever more procedural defences
That is to say cases where the focus is not on the underlying rights and remedies but on whether one has clambered over procedural hurdles set down by the contract. Often these are technical points run as a last resort. Points such as, “the notice was not served on the chief executive of the company, as the contract requires, but on the director most closely involved in the project”, or “your notice was out of time – a provision in the contract stipulates failure to serve a proper notice means no entitlement to loss and expense or more time”. These requirements are often ignored in buoyant times, but they certainly come into play when times are tough.
Regulations and remedies galore
This looks set to be the Year of Regulations. The impact of regulations and schemes, such as those relating to the Carbon Reduction Commitment (see overleaf for more on this) and the Environmental Civil Sanctions order, to name but two, will start to be felt in contracts being tendered. Time and training will be needed for parties to understand the risk and cost consequences.
In addition, following the Public Procurement Remedies Regulations, which came into force on 20 December, expect to see more challenges to the award of public sector contracts by contractors. These regulations increase the rights and remedies of the tendering party, and as the prospects of losing a job now but winning another later are slim, a contractor may decide it has nothing to lose in claiming a foul. Any challenge, successful or not, could delay the procurement process as it prevents any contract award in the interim.
With the biggest casualties of the downturn in the property industry continuing to be developers rather than contractors, it is likely that further insolvencies this year will cause yet more uncertainty in the market.
Wrangles over practical completion
The wriggle room around when a property is practically complete and ready for handover will continue to be a source of dispute this year. For those developments being completed without a forward sale or tenant in place, arguments around when practical completion has been achieved are likely to continue. The stakes are high as deals, often negotiated before the recession, provide for practical completion to trigger large payments as well as the release of retention. If there is no tenant or purchaser for the development, the stakes are even higher.
Will the changes to the Construction Act ever come into force or will they fall off a cliff in the run up to the election? Will any new government really care? Do we care?
Bust-ups over snagging and defects
The attitude of employers to these issues has hardened. Any aspect of the works that might conceivably affect its marketability is likely to be under the microscope. This is not because buildings are being designed or built with less skill, but because the tolerance of defects is now zero.
Pressure on design teams’ professional indemnity insurance
Insurers are already busy fighting claims over defects as well as negligence during and after the tendering process. This is where the losses on a project are being attributed to a failure to provide sufficient allowances within the price. These give rise to some interesting arguments about the part the consultant plays in fixing the tender price.
Last year we saw a court decision about the net contribution clause – a provision in design team appointments to limit liability and avoid the implications of joint liability. This year the clause may be revisited. Although the Scottish case of Langstane Housing Association supported the concept, there is more to play for here both from the insurers’ and the employers’ viewpoint.
Although the recession has not yet dramatically increased the number of claims, it is likely this will change. Last year did see a rise in disputes about final accounts and liquidated damages. This year it will be the turn of loss and expense and extension of time claims. Given the fierce prices that are being tendered, it is inevitable that these claims will emerge not just towards the end of the job, but from the outset.
Construction Act apathy
Will the reforms to the act ever come into force, or will they be overtaken by the election? Will a new government really care? Do we care? Are we all not exhausted by a process of review that has taken years and has produced a mish-mash of provisions with few redeeming features? Perhaps this year should be the year we decide our energies would be better focused on the market than on the fringes.
Lindy Patterson is a partner in Dundas & Wilson