Monthly Archives: August 2021

REUTERS | REUTERS/Goran Tomasevic
August 31, 2021

How to avoid PFI contract expiry risks

Private finance initiative (PFI) projects tend to be long-term, usually lasting for a period of 25 years or more. There is an active secondary market for equity interests in PFI projects: original project developers exit and new longer term investors hold projects to maturity. Notwithstanding this longer-term investment horizon, as time goes on, it is only natural that parties tend to focus more on day-to-day operations and portfolio management and less around the ultimate backstop of expiry.

However, contract expiry is becoming an increasingly pressing issue. There are over 550 current PFI contracts. Of those, 78 projects are due to expire before December 2027 and a further 91 projects will expire in 2028-2030. The nature of PFI contracts means that significant claims can arise in relation to hand-over of assets. Typical PFI contract structures employ limited equity and special purchase vehicles (SPVs). In addition, construction contractors have long since exited from their typical 12 year defects liability period in a 25+ year concession. This means that long-term investors can be exposed to contractual liabilities on expiry.

On 16 August 2021, the Infrastructure and Projects Authority (IPA) released a support plan for contracting authorities, Managing the Risks of PFI Contract Expiry. The support plan aims to prepare public authorities for the expiry of PFI contracts and the handover of PFI assets. The IPA’s plan emphasises the importance of early engagement with the private sector and aims to smooth the transition process by undertaking a structured process of engagement with private sector counter-parties. Continue reading →

REUTERS | Peter Cziborra
August 24, 2021

Professional advisers beware – check the terms of your engagement

The scope of duty and the extent of liability of professional advisers are two hotly contested issues at the core of many a dispute between professional advisers and their clients in negligence claims.

For the last 24 years, the judgment in South Australia Asset Management Corp v York Montague Ltd, popularly referred to as SAAMCO, has been the leading authority setting out the principle of scope of responsibility that a court must consider when assessing a negligent adviser’s responsibility for a claimant’s losses. Briefly put, if the conduct complained of falls outside that scope, there may be no claim at all (the SAAMCO principle).

Over the years, multiple views have developed as practitioners struggled to apply the SAAMCO principle to differing facts. Claimants have often struggled to construct a “SAAMCO counterfactual” showing that the correct information/advice would have resulted in no loss.

Many will, therefore, welcome the recent clarification provided by the Supreme Court in Manchester Building Society v Grant Thornton UK LLP and Khan v Meadows. A majority approved a test comprising six questions formulated by Lord Hodge and Lord Sales (who gave the lead judgment). Continue reading →

REUTERS | Brendan Mc
August 23, 2021

Cranes on the horizon: construction arbitration abroad

This post is the latest in a series covering issues that frequently arise in international arbitration, each with a specific regional focus. It addresses issues in Brazil, where the use of dispute boards is common as part of a tiered dispute resolution mechanism. Continue reading →

REUTERS | Hannah Beier
August 17, 2021

What happens when the contract administrator resigns?

Beyond the Scottish courts’ adjudication enforcement procedure, I’m not particularly familiar with the processes they follow. Therefore, I was interested to see the judgment in Graeme W Cheyne (Builders) Ltd v Michael Duthie Wilson, which involved the Sheriff Appeal Court (SAC) reviewing a sheriff’s decision to enforce an adjudicator’s decision. I’m not sure I’d heard of the SAC but I suppose it is a bit like the English High Court reviewing a judgment handed down in a County Court. It just isn’t something we see very often. Continue reading →

REUTERS |
August 11, 2021

Try before you buy: the price of expert shopping

When it comes to replenishing my wardrobe, I have little patience for the careful selection of clothes for style and fit (this should come as no surprise). Instead, I am one of those who buys a job-lot of clothes once or twice a year to see me through the next couple of seasons. When I may not have been sufficiently realistic about size, I rely on the ability to change my mind and send things back or exchange for something more appropriate.

However, do the same with experts at your peril!

The case of Matthew Rogerson (t/a Cottesmore Hotel, Golf and Country Club) v Eco Top Heat & Power Ltd provides a very useful reminder of the court’s approach to expert shopping. As well as a recap on that approach, it invites reflection on how we go about selecting, instructing and managing experts when proceedings are anticipated. Continue reading →

REUTERS | Gonzalo Fuentes
August 9, 2021

Liquidated damages and London buses

Cases about liquidated damages are, it transpires, like London buses: you wait ages for one to turn up and then two come along together.

Hot on the heels of the Supreme Court’s decision in Triple Point, which has restored good sense to the law concerning the recoverability of liquidated damages after termination, O’Farrell J has handed down a judgment which deals with two of the other classic debates in the law relating to liquidated damages. Her decision in Eco World – Ballymore Embassy Gardens Co Ltd v Dobler UK Ltd deals first with the law concerning the application of the penalty doctrine to the liquidated damages clause where partial possession has been taken and, secondly, with the debate about whether such a clause operates to limit the contractor’s liability for losses resulting from delay even where it has found to be void and inoperable. Continue reading →

REUTERS | Bogdan Cristel
August 3, 2021

When is a collateral warranty a “construction contract”?

Or should that be, when is a collateral warranty not a construction contract?

July was a busy month for TCC judgments, which makes the job of writing these blogs considerably easier. In addition to the fascinating judicial review cases being brought by the Good Law Project, one case that caught my eye was Timberbrook Ltd v Grant Leisure Group Ltd because it concerned the construction of a new orangutan enclosure at Blackpool Zoo. However, it is quite a detailed, merits-based judgment and, in the end, I plumped for the only TCC judgment (at least of those on BAILII) that concerned adjudication, Toppan Holdings Ltd and Abbey Healthcare (Mill Hill) Ltd v Simply Construct (UK) LLP.

It is an interesting judgment by Martin Bowdery QC, sitting as a deputy High Court judge, not least because two decisions (from the same adjudicator) were dealt with in the same enforcement proceedings.

Continue reading →

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