All posts by Practical Law Construction

REUTERS | Thomas Peter
July 11, 2018

The reverse charge: shaking up VAT on construction services

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
July 10, 2018

Multi-party disputes and co-mediation

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
July 10, 2018

Appeals on a point of law in arbitration and adjudication

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
July 4, 2018

Losing out on loss of bargain when terminating in reliance upon contractual rights

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
July 4, 2018

The costly business of ignoring interim assessments and agreed valuations: ICI v Merit Merrell Technology

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
June 26, 2018

When litigation “stands as something of an advertisement for adjudication”

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
June 20, 2018

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
June 20, 2018

Payment, retention and risk: shuffling the deck

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 →

REUTERS | Darren Staples
June 12, 2018

Security of payment legislation in Australia – a time for change?

You may recall that back in November I blogged about the UK government’s review of the 2011 amendments to the Construction Act 1996, and I revisited the topic after the consultation closed in January. The results of the consultation have not been published and the relevant page of the BEIS website does not give an indication of when they might be published; rather, it simply states that “We are analysing your feedback”.

However, I was interested to see that the UK is not the only country reviewing its security of payment legislation, and that John Murray has published his review of the Australian legislation, “Building Trust and Harmony”.

I should begin with a confession. I’ve not read the whole of the report but, in fairness, it is 350 pages long and includes 86 recommendations, so it is a mammoth piece of work. I thought that I would take a look at just a few of those recommendations in this week’s blog. Continue reading →

REUTERS | Pascal Rossignol
June 6, 2018

Prospective analysis of compensation events under NEC: shutting one’s eyes and groping in the dark?

The NEC contract is built on the spirit of mutual trust and co-operation. One area in which this plays out is in the context of applications for an extension of time or a change in the prices by a contractor. The project manager is required to assess these applications on a prospective or forecasted basis, at the time the relevant compensation event occurs.

However, one issue that the courts have not yet fully grappled with is how that assessment works when the contractual mechanism relating to quotations is not followed and the time and money effects of the compensation event fall to be considered after the impact of the event has played out. This post considers that scenario in the context of two recent cases: Northern Ireland Housing Executive v Healthy Buildings (Ireland) Ltd and Fluor v Shanghai Zhenhua Heavy Industry Ltd. Continue reading →

Share this post on: