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CONSTRUCTION CASE NOTES

By Kim Franklin

Her practice includes building, civil engineering and construction related work in the
Technology and Construction Courts, arbitration and adjudication. It includes contractors
claims and fees claims by construction professionals, professional negligence claims against
architects, engineers and surveyors, disputes arising from Her practice includes building, civil
engineering and construction related work in the Technology and Construction Courts,
arbitration and adjudication. It includes contractors claims and fees claims by construction
professionals, professional negligence claims against architects, engineers and surveyors,
disputes arising from the JCT, ICE and other standard forms of construction & contract,
insurance claims and claims relating to defective and damaged buildings.

Kim Franklin regularly writes the ‘Legal Matters’ column in The Architect’s Journal, which is published on a
weekly basis. The column seeks to explain a variety of topical construction law issues to the Journal’s non-
lawyer readership of about 16 thousand.

Below are three of her recent notes that have been or are to be published. They cover three areas, being:
Adjudication Review; the developments in Construction Law over the past twelve months and 26 Contractual
Nightmares.

Adjudication Review

The current Latham review of the adjudication provisions of the Construction Act, it transpires, nearly didn’t
happen. Despite what were either indications, or undertakings (depending upon your source) from the
previous construction minister, Nick Raynsford, that the Government had promised a review adjudication, the

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2004 Budget announcement majored on the fraught payment provisions of the Act and made no made no
mention of adjudication what so ever.

The perseverance of the Construction Umbrella Bodies Adjudication Task Group (‘CUB ATG’), which as the
name suggests, embraces numerous industry bodies such as the Construction Industry Council, the Property
Fedaration and the Federation of Master Builders, paid off when it was asked to act as the adjudication
working group for the current review under the chairmanship of CIC’s Graham Watts,. A separate working
group was set up to consider payment, chaired by Richard Haryott.

At construction solicitors, Fenwick Elliott’s recent presentation of their popular bi-annual Adjudication seminar,
Watts explained how the timetable for the review envisaged both groups reporting in July and the DTI
publishing a consultation paper at the end of October. The degree of agreement within CUB ATG was such
that they were able to report a number of issues upon which they were unanimous that the Act should be
amended. These so called ‘green issues’ included abolishing some of the present exclusions and extending
the scope of the legislation to include PFI contracts and residential occupiers. By contrast, the difficulties
experienced by the payment group were such that Sir Michael Latham was unable to report until September.

During the following weeks keen adjudication watchers anticipated the publication of the Consultation Paper.
Instead, on 21st October 2004, the present construction minister, Nigel Griffiths responded, identifying issues
he was clear should be excluded from consultation process and not considered further.

These government ‘no go’ topics all relate to the application of the legislation to contracts which are currently
excluded. Griffiths set them out:

- Residential occupiers. He stated that as adjudication was essentially a commercial dispute resolution
process, to extend it to what he called ‘domestic customers’ would ‘represent an unwanted shift in
balance away from the customer and towards the industry’.

- PFI contracts. These he considered to be far removed from the ‘traditional adversarial construction
contract’ and which incorporated detailed dispute resolution mechanisms in any event. He was
unaware of any ‘fundamental weaknesses’ in the operation of PFI contracts.

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- Process plant. He recognised that the intersection between process plant and construction contracts
had led to cases where a practical interpretation of the exclusion was required by the courts. This was
not, however, sufficient to justify a change in the law. Instead a better solution was to issue industry
guidance on the implications of the case law that has emerged.

This change of tack suggests that the publication of the consultation paper will be stalled, either temporarily
until the New Year or permanently until after the election.

In the meantime the industry will find the ministers’ preliminary stance something of a mixed bag. The
exclusion of residential occupiers is to be welcomed, at least by the ‘customers’ themselves and the
adjudicator fraternity. The residential community should still be alert to the fact that the statutory exclusion can
be overridden by the express terms of the contract and that some standard forms, frequently used for
domestic contracts, such as the JCT Minor Works, expressly provide for adjudication. The failure to embrace
all process plant contracts will however lead to more court cases. No amount of industry guidance will prevent
the referring party, keen to take advantage of adjudication, from conjuring ever more complex reasons why all
or part of their contract for pipework, boiler repairs or the installation of plant which burns a lot of rubbish and
generates a bit of electricity should be a construction contract and not a process plant contract.

Interestingly, attempts to limit the scope of adjudication to exclude claims against construction professionals
foundered, not on the grounds that adjudication is unsuitable for deciding such disputes, but because it would
be unfair to exclude professionals from the benefits of the process, should they want, for example to claim
their fees.

More to 2004 than JCT Contracts?

At the December meeting of the Society of Construction Law (SCL), Paul Darling QC, the chairman of the
construction courts’ Bar Association, (TECBAR) presented a paper entitled, ‘Construction Law – the Outer
Limits’. Of course everyone went. They were intrigued by the title, which suggested an inter-galactic journey,
conducted at the speed of light, stopping off at some of the more far flung centres of justice, in order to be
introduced to some distinctly colourful, if not wholly alien, characters. They were not disappointed. Darling’s
theme was, essentially, that there is more to construction law than JCT contracts. In fact, the principles with
which construction lawyers are only too familiar are relevant to some fairly obscure areas of the law. Claims

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in nuisance, claims brought under statute, for mining subsidence, claims for tree roots damage, insurance
disputes, claims under bonds, the list of rich and varied cases, in many of which Darling had featured
prominently, went on, ad infinitum, if not beyond.

Musing on this galaxy of unlikely topics, I reflect on developments in construction law, over the past 12
months, as seen through the eyes of this column – well, it is that time of year after all. From a selective review
the year’s copy, it should come as no surprise to AJ readers that construction law does, indeed know no limits.

In January we reported how the unfortunate Mr Marcic had lost his battle against Thames Water for new
sewers to prevent his garden from flooding when his local outmoded and overstretched sewers overflowed.
After a roller coaster ride through the lower courts, the House of Lords finally concluded that public bodies do
not owe private individuals a common law duty, or Mr Marcic, a legal remedy.

February saw the common law theme developed further by the claim by Mr Green who was, literally drunk in
the gutter, when Ms Bannister one night, reversed her car down a badly lit cul-de-sac and ran him over. The
interplay between negligence and contributory negligence was demonstrated when liability was apportioned
40/60, with the inert pedestrian bearing the larger share.

During March, we learnt of Mr Goodacre who had persistently refused to comply with planning enforcement
notices and then sued Wealden District Council after they cleared his woodland site of assorted building
materials and scrap items including, famously, a derelict Massey Ferguson tractor. The court exonerated
Wealden DC and Goodacre’s claim for damages failed.

April heralded the boom in construction work in China and alerted readers to the pitfalls of the new money
laundering regulations. In May the industry was introduced to the notion that there should be a code for ethical
conduct in the industry.

In June the important Court of Appeal decision in Halsey hit the headlines, setting out the basis upon which
parties should, or should not, seek to mediate disputes, and the consequences, in terms of costs, if they
unreasonably did the wrong thing.

The ‘silly season’ of the summer months was parried by the legal column which featured the incomprehensible
twaddle written about domestic building contracts in populist magazines, such as ‘BBC Good Homes’. By

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contrast we paid homage to the sound words of wisdom to be found in the new improved loose leaf text,
Emden’s Construction Law. We spotlighted the lonely life of a construction arbitrator and introduced the
Society of Construction Arbitrators’ new 100 day Arbitration Procedure.

The courts returned to business for the autumn term and seemed to be preoccupied by expert evidence. We
had judicial authority for ‘experts reports can be circulated in draft before exchange’ together with ‘experts
should set out the detail of their instructions in their reports’.

In November we were able to report the good news that the new direct access rules meant that anyone could
now go direct to a barrister for advice. We also trumpeted the return of Mr Justice Jackson as the new judge
in charge of the Technology and Construction Courts.

The combination of a year’s worth of legal column and Darling’s address should leave AJ readers and SCL
members alike, in no doubt that construction law is indeed a cosmic subject and that Darling is a super nova of
a barrister

26 Contractual Nightmares

Summary

This is a slightly tongue in cheek piece which points out that there are no easy answers to most construction
law problems, and that you can no more look in one book or attend a seminar entitled ‘26 Contractual
Nightmares’ to find out all the answers than can a novice navigate across London with a small A-Z.

Text

As the book review editor of the Construction Law Journal, I receive a regular sample of the publishing output
which serves the long standing love affair between the construction industry and the law. Published texts
range from the indispensable, such as Keating on Building Contracts and Jackson & Powell’s Professional
Negligence, through the practical commentaries on arbitration, adjudication and the various standard forms of
contract, to the downright bizarre such as ‘Legal Frameworks for the Built Environment’ and ‘Total Information
Systems Management- A European Approach’.

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There is also a steady stream of reference books designed to solve all contractual problems with a flick of the
page. A prime example is Powell-Smith’s ‘Contract Documentation for Contractors’ which sets out, in
splendidly user-friendly style, a letter for all construction contract occasions. The hapless contractors have to
do no more than pick their way through the various multiple choice options of contractual provisions, and fill in
the blanks and, hey presto, they have successfully determined their contract (under JCT 98/WCD/ IFC98 -
delete as appropriate), largely oblivious to the contractual ramifications of what they have done.

Such an approach calls to mind trying to find your way across London with only a pocket sized A-Z to guide
you, or, knowing little of the workings of the internal combustion engine, single-handedly attempting to rebuild
a modern motorcycle with the assistance of only a Haynes manual: both of which I have attempted and would
not recommend. The notion that ‘Contract Documentation etc’ was something of a joke book was confirmed
beyond peradventure, when opening the review copy revealed that its contents had been bound in upside
down.

I was reminded of this irreconcilable tension between the complexities of construction law and the constant
need for easy answers when contemplating the programme for a ‘contractual awareness event’ being
promoted by well known construction consultants, which rejoiced under title of ‘26 Contractual Nightmares’.
The promoters are to be commended, not only for settling upon so intriguing a number, but also because the
seminar programme and fee suggest that all 26 can be solved within six and half minutes, at the rate of £3.25
(plus VAT), each.

The ‘nightmares’ reward closer scrutiny. Here are some examples:

- A contractor commences work on receiving a letter of intent. Can he recover payment if the project is
abandoned before a contract is entered into?

- Can an Employer deduct liquidated damages if he suffers little or no loss?

- If payment is not made when due, is a Contractor entitled to walk off site?

- Is a Contractor obliged to correct defects which come to light after the official defects list has been
issued at the end of the defects period?

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- Can an Architect refuse to grant a certificate of completion on the grounds of defective work even if
the facility can be used by the Employer?

What we have, in fact, is a long list of exam questions, taken in isolation from any factual, commercial and
most importantly, contractual situation. They may as well have asked ‘My partner has pranged the car. Can I
recover on my insurance policy?’

The answer to these and all the other contractual conundrums thrown up by constructions projects across the
globe is, in fact, simple. First of all, you must establish the terms of the contract between the parties. The
contractual provisions then have to be married up to the particular facts of the given problem and considered
against the background of general principles of contract law, in the light of decided cases on the point. The
likely legal outcome has to be weighed against the commercial position and interests of the relevant parties.
The achievability of the desired objective is then assessed, given the personalities of the decision makers
involved, and a strategy devised which takes into account all of the above, either with, or without, (depending
entirely upon the motives of the questioner) the application of general common sense.

As you can see, those searching books such ‘Contractors Documentation etc’ and attending contractual
awareness seminars, for easy answers, will not be disappointed: in every case the answer is ‘it depends’.

26 Contractual Nightmares

Knowles Training Division

e-mail: seminars@jrknowles.com

Kim Franklin

Construction Commercial Insurance & Reinsurance Contract Professional Negligence Personal Injury Health & Safety Product Liability Clinical Negligence

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