REUTERS | Thomas Peter

The trouble with collateral warranties (CWs) is that they aren’t very interesting.  Construction lawyers typically overdose on them as trainees and have had enough of them by the time they qualify.  A brief foray into the world of third party rights and they are ready to move on to higher things, leaving the following cohort of trainees to pick up the next wave of CWs.

Some sections of the industry tend to pooh-pooh them as well.  A vocal corner of the insurance world, with no vested interest to declare (other than a desire to sell latent defects insurance), persists in declaring that CWs “aren’t worth the paper they are written on”. (Like oral agreements, as some wag once said.)  Decisions such as Parkwood, which I have previously blogged about,  don’t exactly help to enhance their reputation.  And the ritual pinhead dancing around net contribution and “no greater liability” clauses only reinforces the notion that CWs are little more than exercises in futility, designed to occupy the time of junior construction lawyers while their more glamourous corporate and finance colleagues get on with “real” work.  Continue reading

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Stuart-Smith J’s judgment in Lancashire Care NHS Foundation Trust & Blackpool Teaching Hospitals NHS Foundation Trust v Lancashire County Council provides helpful guidance on how not to conduct moderation meetings and highlights the defendant’s failure to provide adequate reasons for its decision making. What it does not provide is a finding on who deserved to win the contract.

The judgment follows an expedited trial on a procurement challenge brought under the Public Contracts Regulations 2015. The court found that the decision to award a £104 million contract for the provision of community services under the Healthy Child Programme to Virgin Care Services Ltd should be set aside.

This post looks at the lessons in process and record keeping, and considers why the court set aside the decision without carrying out a rescoring exercise. Continue reading

REUTERS | Thomas Peter

1 October 2019 will see a significant shake-up of the VAT rules in the construction sector. New rules will come into force on that date which will, in many cases, require the recipient of the supply of construction services, rather than the supplier, to account for VAT on the supply. Large and small businesses making standard-rated or reduced-rated supplies of construction services may be impacted. There may be cash flow implications, which could be positive or negative, for the businesses concerned.

HMRC is to issue guidance on the new rules. Continue reading

REUTERS | Alexander Kuznetsov

As full-time mediators, we often co-mediate. In this post, we discuss why and how parties are using co-mediation.

Mediation and multi-party disputes

For all the well-known reasons, parties to any dispute will want to consider mediation.

Where there are multiple parties, such as businesses who have contributed design, work or materials to the same project or homeowners all affected by the same event, the desire to settle is obvious. A greater number of parties will bring greater risk: each party’s legal costs are likely to be increased by the fact that they are fighting on multiple fronts. At trial one party may ultimately be ordered to pay everyone’s costs.

Often no-one dares attempt unilateral settlement for fear of being brought back into the party by way of contribution proceedings by the remaining parties. Drafting a watertight Calderbank offer is challenging. The parties therefore all go forward in the litigation together. Continue reading

REUTERS | Dominic Ebenbichler

One of the recurring themes on this blog is looking at what happens in arbitration and drawing parallels with what happens in adjudication. It is something that really interests me as I act as both adjudicator and arbitrator.

This week is no different and I am looking at the judgment in Fehn Schiffahrts GmbH & Co KG v Romani SPA, where the Commercial Court allowed an appeal on a point of law under section 69 of the Arbitration Act 1996 and remitted the award back to the three-person tribunal. Continue reading

REUTERS | Shutterstock

In the wake of the Carillion insolvency, many sub-contractors are likely to be investigating their rights to terminate their contracts with a now defunct main contractor. Looking for a clean break, they may be tempted by the explicit termination rights that standard form building contracts often contain, and that may be deployed in the event of main contractor insolvency.

On the surface, terminating appears as simple as writing to the liquidator citing the relevant provision, and declaring the contract to be at an end. However, a potential trap awaits the unwary. Unwitting sub-contractors may inadvertently forfeit any right to claim loss of bargain damages, that is, the loss of profits that would have been made had the contract carried through to completion. This is potentially a highly lucrative right, particularly if the sub-contractor is at the start of a multi-year project that was expected to generate significant future earnings.

This result arises from the case of Phones 4U Ltd (in administration) v EE Ltd Continue reading

REUTERS | Amir Cohen

Valuing a contractor’s work on a complex project is rarely an easy task. During the works, parties to a construction contract commonly devote significant resources to ensuring that the work is properly valued. These valuations are often carried out by people with close knowledge of the project, and under the NEC form of contract certified by an impartial project manager.

Given those efforts, can interim assessments and agreed valuations made during the course of the works be re-assessed and re-valued subsequently by the courts? If so, then what evidential weight should be given to these interim assessments and agreements when carrying out a subsequent valuation? Fraser J considered both of these questions in the quantum judgment in Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd. Continue reading

REUTERS | Tim Wimborne

Last summer I wrote about Fraser J’s “89-page opus” in Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd (or ICI v MMT). This week, my attention turns to his latest 95-page opus between the same parties. Last year the judgment was all about liability (which MMT won). This time, it was all about the numbers (which MMT won again). Jonathan also looked at the expert evidence points last time around, and may well do so again given some of the choice remarks, particularly about ICI’s quantum experts!

The judgment raises some interesting points, not least one of Fraser J’s final remarks (which you may notice I’ve borrowed for my title):

“This litigation also stands as something of an advertisement for adjudication.” Continue reading

REUTERS | Thomas White

Don’t wind me up

In Victory House General Partner Ltd, Re A company, Morgan J dismissed a petition to wind up Victory House, the employer under a building contract with RGB P&C Ltd, following its failure to pay a sum due to RGB pursuant to an adjudicator’s decision.

The case is the most recent of a number of authorities that make clear that it will only be in relatively rare circumstances that the presentation of a winding up petition will represent the most appropriate way to enforce an adjudicator’s decision. Continue reading

REUTERS | Toby Melville

Increasingly, the construction industry model that we know so well – based on layers of contractors and sub-contractors – is being called into question. In the last six months various failures (including Grenfell, Scottish PFI-built schools and Carillion’s collapse) have prompted questions about construction industry outsourcing and transfer of risk.

Queries have been raised about the potential for “passing the buck” and lack of accountability when things go wrong. On major construction projects, typically the large majority of the workforce are sub-contractors, sub-sub-contractors or workers employed on a daily or hourly basis, rather than being directly employed by the contractor. Does this model enhance the risk of non-payment, safety issues and reduced acceptance of responsibility for such issues? Continue reading