Legal developments in construction law: December 2024
1. Does a D & B contractor have to check the ER design?
A design and build contractor may agree to complete the design of a project but does that responsibility extend to checking the design in the Employer's Requirements? Under the JCT 2016 D & B standard form it is expressly stated that the contractor is not responsible for the contents of the ERs or for verifying the adequacy of the design they contain and any correction required due to any design inadequacy in them is treated as a contract change in the contractor's favour. In Workman Properties Ltd v Adi Building And Refurbishment Ltd, however, material amendments were made to the JCT provisions and the court had to decide which party was contractually responsible for completing the design of the works.
The claimant employer referred to the case of Co-operative Insurance Society Ltd v Henry Boot (Scotland) Ltd, where the court considered that the concept of "completion" of a design, of necessity involves a need to understand the principles underlying the work done thus far and to form a view as to its sufficiency. The employer also argued that an obligation to verify the existing design extended not only to verifying that no necessary design work had been omitted but also to verifying that the design work which had been done was not defective. It was unrealistic, they said, to attempt to draw a clear dividing line for these straightforward contractual purposes between omission and defective commission.
A paragraph in the ERs stated, however, that significant design had been developed, which had been taken to the end of certain stages but was that, the court asked, so clear as to amount to a contractual warranty that the existing design had been completed in all respects up to the relevant stage, so that there was no need for the contractor to satisfy itself that this was indeed the case?
The court ruled that the words used were nowhere near sufficient to require the other unequivocal contract provisions to be read as so heavily qualified. The contractor's argument not merely involved qualifying the unamended provisions of the JCT 2016 D & B contract, but also qualifying the bespoke conditions which imposed a far more wide-ranging design responsibility, including a responsibility for the whole of the ERs, and overriding other sections of the ERs.
The court was satisfied that the contractor did have the contractual responsibility to satisfy itself that what was in the existing design was sufficient in all respects.
Workman Properties Ltd v Adi Building And Refurbishment Ltd [2024] EWHC 2627
2. Impediment, prevention and default – spot the difference?
A design and build services contractor had a contractual right to terminate its employment if the works were suspended for two months by reason of any "…impediment, prevention or default, whether by act or omission, by the Employer or any Employer's Person…". But what, exactly, do those words impediment, prevention or default mean? Do they all mean the same thing and do they involve a breach of contract? And what does an act of prevention look like?
In BNP Paribas Depository Services Ltd & Anor v Briggs & Forrester Engineering Services Ltd the court, drawing on the case law, provided some helpful discussion. It noted that it was common ground that impediment, prevention and default are different things. An impediment or a prevention does not require a breach of contract and a default is simply a failure to fulfil a legal requirement or obligation. It was also common ground that, if a contractor wrongly purports to terminate pursuant to an alleged contractual right, and leaves site undertaking no further work, then that purported termination will normally be a repudiatory breach of contract.
The contractor alleged that certain suspension events constituted acts of prevention. The case law, to which the employer referred, says that an act of prevention may be:
- a breach of an express or implied contractual obligation; and also
- the exercise of an entitlement (such as the giving of an instruction).
It will not, however, be an event for which the parties have otherwise agreed a contractual allocation of risk. The concept of 'prevention' is consequently rooted in consideration of the parties' express or implied obligations.
The conduct which engages the prevention principle has to render it 'impossible or impracticable for the other party to do the work within the stipulated time' and must actually prevent the contractor from carrying out the works within the contract period, i.e. it must cause some actual delay.
3. Enforcing an adjudication award – does a claimant have to disclose its financial position (in case it justifies a stay)?
A defendant to enforcement proceedings applied for a stay of the proceedings because of its concerns about the claimant's solvency and its ability to repay the judgment following proceedings for a determination of the true value of the sums due between the parties. Once the claimant had filed evidence as to its ability to repay the award, the defendant indicated it would not pursue its application. In a subsequent dispute about the costs involved, however, the claimant said it was under no obligation to provide financial information to assist a defendant in its decision as to whether an application for a stay ought to be made. But did the court agree?
The court understood the case law to establish that there is no general obligation to provide financial information, particularly confidential financial information, but that is not the same as saying that a claimant can always refuse to answer a reasonable request for information without any risk to itself as to costs, no matter what the circumstances of the case.
The facts in the case were very different from the sort of 'fishing expeditions' (demanding access to confidential commercial information) with which case law suggests claimants are not obliged to cooperate. This was not a case of an apparently solvent claimant being asked to provide evidence to reassure a defendant that its financial position has not worsened since its statutory accounts were filed. This was a case where the claimant was obviously insolvent, according to its most recently filed statutory accounts, so that the defendant was clearly able to discharge its burden of proof.
Whilst there was no obligation requiring the claimant to disclose information, the court did not consider that it was never appropriate for a defendant to expect a claimant to disclose information that might explain that, despite its statutory accounts, it is not insolvent or that, for some other reason, it can be expected to meet a claim for repayment of the judgment debt when ordered to repay it.
The Court Procedure Rules' Overriding Objective, which the parties must help the court to further, includes saving expense and allotting an appropriate share of the court's resources. The court, and parties to litigation, expect parties to behave reasonably and avoid unnecessary costs and unnecessary hearings.
The claimant's conduct, however, in refusing to provide the information when requested but, instead, insisting that it need do so only after it had incurred the costs of its enforcement application and after the defendant had incurred the costs of its application for a stay and court time had been taken up in listing the applications for hearing, was contrary to the principles of the Overriding Objective and the way the TCC expects parties to conduct litigation.
Complete Ceiling and Partitioning Systems Ltd v DE1 Ltd [2024] EWHC 2800
4. Government sets out its remediation acceleration plan
The government has published its remediation acceleration plan.
The plan has three key objectives, to:
- remediate HRBs faster;
- identify all buildings with unsafe cladding
- better support residents and leaseholders through the remediation process.
The government aim is that, through this plan, by the end of 2029:
- all 18m+ (high-rise) buildings with unsafe cladding in a government funded scheme will have been remediated;
- every 11m+ building with unsafe cladding will either have been remediated, have a date for completion, or the landlords will be liable for severe penalties.
The government intends, among other aims, to create a legal obligation on landlords to remediate unsafe cladding and to give regulators (local authorities, fire and rescue authorities, and the Building Safety Regulator) robust new powers to enforce remediation.
The Deputy Prime Minister has set out the government's expectations for remediation work to start in 2025 (see Letter to Building Safety Fund and Cladding Safety Scheme buildings - GOV.UK) with buildings with the most unsafe cladding to start by the end of March 2025.
The Deputy PM appreciates that approval by the Building Safety Regulator is taking longer than expected but says that the government is working with the Regulator to resolve this.
The government also proposes to legislate to create a clear and legal duty on those responsible for buildings 11m and over to take the necessary steps to fix their buildings within clear timescales. This would be supported by significant financial consequences for inaction and a new criminal offence for those who ultimately fail to remove unsafe cladding. This will be supplemented by further powers for regulators to enforce.
The government additionally proposes to legislate to require the registration of 11-18m residential buildings. Once this process is complete it will provide a complete register of relevant buildings (i.e. residential buildings above 11m).
Legislation for these reforms is to be brought forward as soon as parliamentary time allows and an update, assessing progress and outlining further necessary steps, will be provided in summer 2025.
5. Government targets autumn 2025 start for new Building Safety Levy
The government remediation acceleration plan also states its intention to introduce the new Building Safety Levy, which will be charged on all new residential buildings in England (subject to exemptions) which require building control approval. The levy is intended to come into effect in autumn 2025 and applications for building control after the date the regulations come into force will be liable for the levy charge.
Local authorities will act as the collecting authority on behalf of central government and the target is to raise around £3.4 billion over at least 10 years.
6. BSI issues new fire safety code of practice
The BSI has issued BS 9991:2024 Fire safety in the design, management and use of residential buildings - Code of practice, which supersedes BS 9991:2015.
The standard provides recommendations and guidance on the provision of measures to control or mitigate the effects of fire and aims to achieve an adequate standard of life safety in the event of fire in a building. The standard has also been designed to provide a level of protection for property and businesses against the impact of a fire in close proximity, either in residential buildings or those within the same building or building complex.
It is expected to be suitable for use across the whole of the UK and has been designed to provide a consensus-based “mid-point” between the different regulations, and supporting statutory guidance, in the UK. This includes Approved Document B in England and Wales, Technical Handbook 2 in Scotland, and Technical Booklet E in Northern Ireland). Some of the updates include the expansion of the scope to include residential care homes, as well as the expansion of guidance relating to evacuation lifts, and revised height limits for sprinkler installation and single-stair buildings.
7. Third King's construction adjudication report published
The King's College London Centre of Construction Law & Dispute Resolution, in collaboration with The Adjudication Society, has published its third and final report on construction adjudication in the UK.
Among the report's findings are:
- referrals received by participating ANBs reached the highest number on record, in the year from May 2023 to April 2024) at 2,264;
- the most common value of an adjudication claim in that year was between £125,000 and £500,000;
- the two leading causes of disputes were inadequate contract administration (50%) and lack of competence of contract participants (42%).These were followed by exaggerated claims and changes by client (30% each) and adversarial industry culture (25%);
- ‘smash-and-grab’ adjudications were the most common category of claim (identified by 63% of individual respondents), followed by ‘true value’ (final account) adjudications (38%), ‘true value’ (interim payments) (35%) and loss and expense and/or damages for delay and/or disruption (35%);
- Since October 2011, the Technology and Construction Court rendered 219 reported judgments relating to enforcement of adjudicators’ decisions, fully enforcing 77% of adjudication decisions if the case resulted in a reported judgment. Jurisdictional objections were successful in defeating 15% of adjudication decisions, followed by natural justice at 10%, and other grounds (such as fraud) at 7%.
8. BSR to carry out "fundamental review" of Approved Documents
The Deputy Prime Minister has asked the Building Safety Regulator to undertake a fundamental review of how building regulations guidance (Approved Documents) is produced, updated, and communicated to the construction industry.
The BSR, which is leading the review, is to establish a review panel and further details will be announced in due course.
See: Fundamental Review of Building Regulations Guidance
9. BSR highlights key Gateway 2 requirements
The Building Safety Regulator and the Construction Leadership Council meet regularly to discuss the new building control approval process for HRB work.
A CLC update records that:
- initial feedback from the BSR about Gateway 2 applications indicates that a number were incomplete or unclear, making them unsuitable for approval. This is particularly the case for smaller refurbishment projects and work on existing buildings;
- Gateway 2 applications should provide quality, detailed information that clearly and comprehensively demonstrate compliance with building regulations. The update has a summary of the key issues and requirements highlighted by the BSR:
10. New Olympic style rating system in Fair Payment Code
The new ‘Fair Payment Code’, replacing the Prompt Payment Code, and overseen by the Small Business Commissioner, introduces a gold, silver, and bronze system to reward best payment practices.
