Although the High Court may not yet be the domain of hashtags and the twitterati, two important reports have been published that allow us to see what is “trending” in the world of litigation:
- The Ministry of Justice’s Judicial and court statistics for 2009-10.
- The TCC’s Annual report for 2009-10.
We have also researched new claims started in the TCC in 2011 to see what this year’s activity tells us about the state of the construction industry and the extent to which it is involved in litigation.
TCC bucks the trend
In 2009-10, in the Royal Courts of Justice in London there was a 25% fall in litigation, and the biggest impact on the figure was the number of originating proceedings in the Bankruptcy and Companies Courts, although the trend was followed across the Queen’s Bench and Chancery Divisions.
The TCC has bucked that trend, however, with 502 new cases in the London TCC in 2009-10, compared to 516 actions in 2008-09. Both of these numbers are substantially higher than in the previous four years, where the average number of new cases was fewer than 385.
Sue or be sued?
In our research, we wanted to look a little deeper into the overall number of London TCC claims in order to find out the incidence of the various types of construction industry persons involved in active claims. In other words, who are the claimants and who are the defendants?
Again, these figures are revealing, with the overall picture being dominated by contractors and sub-contractors, both as defendants and claimants.
For the period 1 January to 31 December 2010, the figures broke down as follows:
- Contractor. As claimant – 111 cases: as defendant – 114 cases.
- Architect. As claimant – 8 cases: as defendant – 28 cases.
- Quantity surveyor. As claimant – 4 cases: as defendant – 4 cases.
- Consulting engineer. As claimant – 33 cases: as defendant – 32 cases.
There was a considerable amount of similarity between the above figures, and their counterparts for 1 January to 31 December 2009:
- Contractor. As claimant – 120 cases: as defendant – 118 cases.
- Architect. As claimant – 8 cases: as defendant – 18 cases.
- Quantity surveyor. As claimant – 1 case: as defendant – 1 case.
- Consulting engineer. As claimant – 17 cases: as defendant – 36 cases.
In order to bring those figures up to date, we then looked at cases started in the London TCC this year. Our figures took us up to 15 July 2011, so we have also included in brackets the projected number of claims for this year, based on the activity in 2011 so far:
- Contractor. As claimant – 63 (117) cases: as defendant – 56 (104) cases.
- Architect. As claimant 4 (7) – cases: as defendant – 18 (28) cases.
- Quantity surveyor. As claimant – 0 (0) case: as defendant – 3 (6) case.
- Consulting engineer. As claimant – 12 (22) cases: as defendant – 24 (45) cases.
Contractor (and sub-contractor) claims continue to dominate
As previously mentioned, claims brought by and against contractors continue to dominate the TCC’s business. A contractor (which, for the purposes of this research, includes sub-contractors) is up to four times more likely to be involved in litigation than any other type of person involved in the construction industry. However, the number of cases brought by or against contractors appears to be relatively static. Indeed, if anything, there appears to be a very slight downward trend in claims brought against contractors in 2011, with a fall of up to 9% on this year’s projected figures.
Professionals in the firing line
By contrast, the statistic that leaps out from this year’s figures is that claims against construction professionals appear to be markedly on the increase. For instance:
- Although there were only 18 cases against architects in 2009, that jumped by more than 50% last year, and that figure looks set to be maintained in 2011.
- Claims against consulting engineers also looks to have increased considerably, with only 32 claims last year, but with a projected growth of more than 40% to 45 claims this year.
- In pure percentage terms, the figures for quantity surveyors are the most alarming, with a 500% hike since 2009 and a 50% increase since last year. Of course, it is worth noting that the actual numbers of claims are low, with a projected total of only 6 claims against quantity surveyors this year. Also, prospective claimants appear to be undeterred by the fact that cases against quantity surveyors are traditionally thought to be difficult to bring, a view the TCC confirmed in Dhamija v Sunningdale Joineries, which I wrote about at the time.
A price to be paid
Whether the increase in claims against construction professionals will have an impact on insurance premiums within the industry remains to be seen. However, developers may wish to think twice before running a claim against a professional as a fall-back position, where (for instance) the sub-contractor that ought to have been pursued has become insolvent. In the long term, such a strategy is likely only to drive up the costs of consultants’ fees and thus the cost of construction projects.
It is also worth bearing in mind that the construction sector only grew 0.5% in the second quarter of 2011, when order books would have been fuller after the lack of productivity during the harsh winter. This was reflected in the figures for the first quarter, which saw the sector shrink by 3.1%. That being so, any litigation trend that risks driving up costs within the industry, when growth in UK construction as a whole is, at best, fragile and, at worst, negative, is not one that should be welcomed.
On a more positive note, the total number of claims against construction professionals that end up in formal litigation remains low, with only a projected 79 such claims this year. This suggests that the continued willingness of the construction industry to innovate and engage with ADR as a means of resolving its differences is an approach that is serving the industry well.
This article was prepared with additional research by Warren Stapley and Roisin McGrellis, litigation assistants at Barlow Lyde & Gilbert LLP.
