The infrastructure work is slow and at very low margins. This leads to a price war, with the eventual losers being the sub contractors, who in many instances are forced to reduce their margins to negative figures in some instances, to allow the main contractors to post profits. Familiar?

At present many sub contractors, but interestingly larger contractors, who do not feel they are being treated fairly by the project funders, are approaching me.

Speaking to architects and quantity surveyors, whilst their fees are at an all time low, (thereby reducing their service delivery), they have been more and more drawn in to the disputes world and are now in, what to many is unfamiliar territory. 

To all of the above there is help out there. A number of specialist surveyors, who understand contracts and their ramifications now find their clients seeking help for remedied.  

These are remedies which in previous years they would have overlooked, and when margins were good, often simply ignored.

Not so now they require new solutions.

So what’s in the game now? Longer payment times, with many expected payments being halved for the interim valuations. Contractors, simply put are daily cash managing mostly at the behest of their banks, who are reducing facilities and in many ways involved in the whole debacle, as they also reduce funding to the promoters. 

Final accounts to all the parties are being renegotiated, almost as if there are no rules or obligations, the worst being from companies who are ”on the brink”’ 

What’s the secret? = Contractual and fiscal awareness. This leads to a better- managed book, and the requirement for in house records to improve and credit control to take advantage of the legislation surrounding the works.

Yes in many cases there is help, and a remedy.

If you require help email me at: adrian@kearneyconsult.com to set up an appointment or text to 07771723453.

Your future must begin by taking steps now!

Ireland) 2012 comes in to being. It gives life to The Scheme for Construction
Contracts In Northern Ireland (Amendment) Regulations (Northern Ireland)
2012.

This has a number of key changes to our existing Construction Contracts order,
but most significantly to you, the payment provisions.

The Changes are summarized as follows:

1. Additional power to the Adjudicator to apportion how payment is
apportioned.
2. The Adjudicator now has the ability ( within 5 days of issuing his
decision) to correct any mistake.
3. The old withholding notice is now obsolete and the payer, must issue
a “pay less” notice, if the application amount is disputed.
4. The “pay Less” notice must be given not later than 7 days before the final
date for payment, either determined by the contract, or in its absence
the default position of the “Scheme”.

So what’s the penalty you say……… firstly if you dispute the money and do
nothing, the Courts and Adjudicators in the U.K,. have already indicated that they
will deem the payment applied for as due in full.

This will place you in the prejudicial position of having to pay more than that you
feel or know is due.

There is also a sanction. Ministers have said that where a party to a construction
contract , in government work fails to operate this process, properly, fairly or at
all, they after investigation, can be removed from the government tender lists for
up to one year.

I presume at this stage that this would also mean re-qualifying to get back on the
frameworks etc.

So the advice is ….get your house in order and quick…..

If you require help or advice, email me on adrian@kearneyconsult.com

“Notice of intention to pay less than the notified sum
10.  Where, in relation to a notice of intention to pay less than the notified sum mentioned in section 111(3) of the Act, the parties fail to agree the prescribed period mentioned in section 111(5), that notice must be given not later than seven days before the final date for payment determined either in accordance with the construction contract, or where no such provision is made in the contract, in accordance with paragraph 8 above.”

This is now an absolute and commentators including leading authorities are taking the view that if the Parties are silent in respect of paying less than that applied for, the sum claimed will stand as a debt due.

Indeed in a number of UK adjudications I have been involved with, leading Adjudicators have given decisions in the favour of the claiming party for the entire sum claimed, which follows on with the views expressed in the leading authority on Adjudication, “Coulson on Adjudication”.

The amendment to the Act also gives wider scope to the restrictions on the meaning of a contract expressed in writing, allowing part oral contracts, and the Adjudicator to consider costs.

Furthermore there is decided law on the restrictive provisions placed in some contracts making the sub contractor responsible for all costs whether they are successful or not.

More about that next time.

However the thrust of the legislative changes are simple……get your paperwork in order which is the thrust of the new construction and civil engineering contracts in any event.

Who ever said it would get easier? However what the Government is about is fair play. Perhaps they should look closer at other industries and make the UK the place for fair trade and honesty, honesty with open books.

Experts should be just that. Unhindered, with their obligation to the court, tribunal or arbitration. When properly instructed and acting on the instruction of a solicitor (Registered as such with the Law Society) their correspondence via the solicitor is privileged.

In the case mentioned Knowles Ltd acted, in the first instance as giving “contractual and adjudication advice”.

The case went on to hearing and based on limited disclosure in the case it was discovered that a “strategy” was embarked upon by Mr Mackay and Knowles as stated, ”by which in effect the authority of the nominated architect was constantly monitored, if not undermined….”there has been no view as yet expressed on the outcome of that.

However the legal team sniffed out a defence and wished to see all inter party correspondence. The defence objected, and the hearing took place.

The Judge, Mr Justice Akenhead heard the matter. It states in the Judgement, “ Effectively, legal professional or legal advice privilege is claimed in relation to the balance of the Knowle’s documentation. The primary argument revolves around whether or not Knowles were engages as Solicitors or Barristers. There is no suggestion however that Knowles as a firm was qualified or certified to give legal advice….” The argument went on, citing a number of well-established authorities.

The conclusion reached was that the Claimants application for disclosure succeeds. The Judge pointed out that this decision only relates to legal profession or legal advice privilege. It does not deal with litigation privilege and there remains outstanding the possible issue as to whether or not advice and other communications given by claims consultants in connection with adjudication proceedings are privileged.”

In other words, claims consultants, quasi-legal advice and strategy will all be open for all to see…BEWARE!!!! You have been warned. Seek out the advice of construction solicitors and their independent Experts for the avoidance of an embarrassing day.

This also reaches into the other murkier worlds of advisors, being unqualified insolvency advisors, taxation and financial strategists…. It has long fingers.

Why is ownership so important?
If the Contractor owns the float, he may use it to absorb the delay effects of an event that does not entitle him to an Extension of Time under the Contract. If the Employer owns the float he may use it to reduce the Extension of Time that would otherwise be due to the Contractor. If the actual Project (let’s not forget we now ‘Partner’, or at least we did!) owns the float it belongs to either the Contractor or the Employer depending who claims it first in a factual sense. As a consequence float influences: Extension of Time, Liquidated and Ascertained Damages, as well as Loss and Expense.

Now I know a bit about the law so I put it to him – but the law at first returns i.e. ownership, is 9/10 of the Law?
That is correct, but there is no binding case law that specifies who owns the float and particular forms aside we may be guided by the Society of Construction Law Delay Protocol which generally suggests that the Project owns the float, meaning:
Pros:

• Events that simply use up float cannot cause critical delay.
• Such events should not be used against either the Contractor or the Employer.

Cons:

• The Contractor should normally make provisions for things to go wrong by including float in their programme.
• It may seem unfair that the Contractor should lose the benefit of float simply because the Employer causes a delay first but the commercial bargain should the Protocol be part of the agreement.

Another factor determining who owns the float may be the chosen form of contract. What about the various forms of Contract, do they influence your opinion?

Of Course, for instance, in the case of the Royal Brompton Hospital v Hammond (2002) a matter arising out of a JCT form, the Judge offered the opinion that the project owns the float. His view was that if at the time of a Relevant Event there was unused float for the benefit of the Contractor then the Architect was bound to take that into account in determining the extent to which an event is likely to delay completion beyond the Completion Date. He went on to say ‘the Architect should in such circumstances inform the Contractor that, if thereafter events occur for which an extension of time cannot be granted, and if, as a result, the Contractor would be liable for liquidated damages then an appropriate extension, not exceeding the float, would be given. In that way the purposes of the clause can be met: the date for completion is always known; the position on liquidated damages is clear; yet the Contractor is not deprived permanently of ‘its’ float.”

The Judge’s view makes a lot of sense, but I have yet to see it followed on site.
So that is one view for JCT in general construction terms. What about civil engineering – what’s your view on that?

Under NEC3 (both a building and civil engineering form), the Contractor must show on his programme, amongst others, the contractual Completion Date, the planned Completion and any provision for float.

It is clear under NEC3 that the Contractor owns the float (referred to as ‘Terminal Float’). The Contractor may show planned Completion as being earlier than the Completion Date, thus including terminal float. A delay to the Completion Date is assessed as the length of time that, due to the Compensation Event, planned Completion is later than planned Completion as shown on the Accepted Programme. As stated in the guidance notes to the form of contract, any terminal float resulting from an early planned completion date is preserved.
Well that’s all well and good but what about the older form of contracts which are still around, say ICE?

It is not possible to deduce who owns the float and there is no case law to provide any assistance. Where such forms exist, as will the arguments; however reference to the Protocol may assist.
So what about delay analysis?

Delay analysis may be as much as an art as a science. Chosen techniques are influenced by the form of contract, the jurisdiction, extent of records and of course the facts!

An experienced analyst will be able to apply the right technique on consideration of the circumstances. The right technique is not necessarily that which gives the desired output. Rather, considering the above factors what is upmost is an independent, assessable output which assists all parties to the claim or dispute. Discussion on the detailed techniques is probably another day’s work…
What about the project that has gone into delay today, what do managers do?

The advice used to be “records, records, records!” Now I think it is better put “records, notices, records, records!” That liquidated damages can be a very punitive payment although in itself it is not a penalty, it is a genuine pre-estimate of loss. If you have significant liquidated damages rates, the figures soon rack up so you must protect yourself. On the flip side Extension of Time is the best part a ‘condition precedent’ to a Loss and Expense claim so time does mean money. If unsure, seek advice.

One concerns the obligations of the Architect/Engineer and Designer and I will deal with this shortly. However, I have had the opportunity to reflect, ok, so I was on a sunny island and I went diving, lucky me! When I was in the water in the reef and the clear clarity and peace of the water, I could see the building industry, yes, there it was – clearly the big fish and lots of small fish.

The big fish were happy in their world and they fed on the reef and little fish. Little fish were also happy, because there were many of them, and they didn’t miss the occasional one or two.

However, all that it takes is for that equilibrium to be broken down, the vision that came to me for peace in our building industry, with regard to financial and technical disputes, was that of the clarity, the water or a shark attack. I spoke at a conference recently, and I have said, if there were complete transparency from the top bidder right down to the person carrying out the work as the subcontractor, there would be little or no dispute. In other words everyone agreed the profit margin, everyone agreed the tenders and everything was open and visible to all, why should anyone be embarrassed about their profit or mark up, then there would be no dispute!

Perfect world isn’t it? It’s almost as perfect as down in the reef, the only problem is that you have to get back out and into your boat, and we all know that in reality wishes and expectations don’t always occur, we can only work towards them with a simple approach and good will, and we aim to strive towards that.

Now, back to the dilemma of the ever-changing role of the Architect’s obligations. I wrote some time ago about an Architect that had endured all sorts of difficulties due to fire, I think it was in a kitchen because he specified the wrong type of panels, this was called contributory negligence, and at the time thought he was totally liable in respect of the particular case.

However, the fire has once again raised its ugly head, and there were two reported cases, the first one we dealt with, Savage Foods Ltd –v- Paskin Kyriakides Sands, and went on to look at another case almost concurrent with this; called, 6 Continents Retail –v- Carford Catering in Bristol. My learned friend Simon Tolson has also mentioned these cases, as he is very aware of what is happening in the London Courts.

In the first, Paskin case, the Architect had been found liable for damage caused by fire and the particular damage because of the composite boards in the kitchen, finally resulting in a £17 million pound loss, which was settled by the Architects insurers, this set the world alight (pardon the pun)! Designers in general were running for cover, as this increased their liability manifold from the existing liability.

As in all courts the next senior court overruled the previous judge in the TCC i.e. the Court of Appeal overruled the matter regarding the contributory negligence point and went to the basic question in respect of the matter, which was simply put as to whether Sahib has suffered any damage or loss, partly by reason of its own fault. In other words was there a duty of care by the employee not to cause the fire to its employers property. Also, in respect of answering the Architects questions, there was an exchange in respect of who should have told him what.

In the 6 Continents case, this was a further fire in relation to a stud walling problem, with a rotisserie in position in a restaurant, the fire in the rotisserie caused the whole lot to ignite causing, in turn, the Project Manager to be sued and ultimately the manufacturer of the rotisserie. It would appear that the Project Manager was first in line with a contractual duty to check the fire provisions of the stud walling and also the obligation to install and follow the manufacturers guidelines.

He, yet again, was as it were let off as he had forwarded to the client a letter from the manufacturers setting out the recommendations; the restaurant owner had ignored this. The Court of Appeal obviously disagreed with all of this hearsay, saying it was the scope of the Project Manager obligation to assess the fire risk and the letter in itself was not a sufficient warning or duty of warning.

All and all, the Court looked for simple tests, warning does not always remove blame, but it is a lesson to them or anyone, is that common sense questions are asked in Court and when you go back to the Sahib case, the employee owning the duty of care to its employer, meant that Sahib had to pay back approximately 2/3 of the claim, which was some £12 million pounds of the £17 million originally granted – not a bad return for the insurer.

This branch of law is still moving, it is still happening and it takes me back to the clear water, perhaps if everyone clarified the brief that they have to carry out to do, then indeed they could all go swimming in a beautiful reef with peace of mind.

Many people will refer back to older cases but recently the case called AMEC Civil Engineering Ltd v Secretary of State for Transport ( 2004) BWHC 2339 (TCC); (2005) EWCA; CIV.291 is a case which has tried to make sense of a coalesced dispute. This case steamed from Arbitration but applies equally to Adjudication and litigation.

Mr Justice Jackson has assisted us with 7 propositions as to what constitutes a “dispute” for the purposes of arbitration. It is simple and easy to read and also extremely practical. Primarily the facts of the case are that in 1996 AMEC completed works which involved renovation to the Thelwall via duct. They had contracted with the highways agency to carry out the work under an ICE Form of Contract.

Five and a half years approximately occurred and structural deficiencies became apparent in and around 2002. The Contractor, AMEC was dually notified, meetings took place and the letter of claim was sent by the Secretary of State on the 6th December 2002. AMEC responded saying it was not in a position to comment on liability. Bearing in mind also the six year rule was running, when Arbitration Proceedings should have been commenced as the expiry would have blocked the action. The dispute was referred to the Engineer for a decision on December 2002 but AMEC was not sent a copy of the referring letter of the dispute to the Engineer. The Secretary of State did not provide the Engineer with a copy of AMEC’s response.
The Engineer decided AMEC had not carried out the works in accordance to the contract and then an Arbitration notice was issued by the Secretary of State. The case went before the TTC, were AMEC was challenged on the jurisdiction of the Arbitrator by stating that there was no dispute on the 11th December 2002.

Mr Justice Jackson found in favour of the Secretary of State and made an appeal to the Court of Appeal that they dismiss the appeal. Here are the 7 propositions as to what constitutes a “dispute” for the purposes of Arbitration and adjudication:

1. The word “dispute” which occurs in many arbitration clauses and also in section 108 of the Housing Grants Act should be given its normal meaning. It does not have some special or unusual meaning conferred upon it by lawyers:
2. Despite the simple meaning of the word “dispute”, there has been much litigation over the years as to whether or not disputes existed in particular situations. This litigation has not generated any hard-edged legal rules as to what is or is not a dispute. However, the accumulating judicial decisions have produced helpful guidance.
3. The mere fact that one party (“the claimant”) notifies the other party (“the respondent”) of a claim does not automatically and immediately give rise to a dispute. It is clear, both as a matter of language and from judicial decisions, that a dispute does not arise unless and until it emerges that the claim is not admitted.
4. There are a number of circumstances from which it may emerge that a claim is not admitted. For example, there may be an express rejection of the claim. There may be discussions between the parties from which objectively it is to be inferred that the claim is not admitted. The respondent may prevaricate, thus giving rise to the inference that he does not admit the claim. The respondent may simply remain silent for a period of time, thus giving rise to the same inference.
5. The period of time for which a respondent may remain silent before a dispute is to be inferred depends heavily upon the facts of the case and the contractual structure. Where the gist of the claim is well known and it is obviously controversial, a very short period of silence may suffice to give rise to this inference. Where the claim is notified to some agent of the respondent who has a legal duty to consider the claim independently and then give a considered response, a longer period of time may be required before it can be inferred that mere silence gives rise to a dispute.
6. If the claimant imposes upon the respondent a deadline for responding to the claim, that deadline does not have the automatic effect of curtailing what would otherwise be a reasonable time for responding. On the other hand, a stated deadline and the reasons for its imposition may be relevant factors when the court comes to consider what is a reasonable time for responding.
7.  If the claim as presented by the claimant is so nebulous and ill-defined that the respondent cannot sensibly respond to it, neither silence by the respondent nor even an express non-admission is likely to give rise to a dispute for the purposes of arbitration or adjudication.

This is obviously couched in language, that allows a certain degree of latitude in understanding what a dispute is but it appears on the face of it, that it is down to common sense. Adequate time must be given to consider what is placed before the Court, Arbitrator or Adjudicator before a dispute can materialise.

Sometimes there are a number of matters which are pre-existed which means a very short time is necessary to cause a dispute. That is were the Law sits at present, it is not entirely prefect, there is no number of days given, there is no magical rule or formula however all things being equal, it is an acceptable compromise to guide us on the way ahead. It will be interesting to see what the next challenge will be to a dispute and with the thought of dispute materialising you should consider in the year ahead, alternative methods of resolving disputes – conciliation, mediation, and just good old fashion negotiation.

Remember at the end of the day disputes are costly and very time consuming.

I have further had the opportunity to look at other bespoke contracts on international work and it is amazing the prescriptive and almost unfair contract terms that are being touted, right through to the Contractor in civil work having responsibility for unforeseen conditions! It is just ‘not on’ in this day and age, that this is still happening and that supported by certain large international organisations that are funding works.

Leaving that aside, there is an interesting case in the Southern Ireland about Arbitration; it concerns an Arbitrators finding of fact in a matter between a local authority and a major contractor. Limerick City Council determined or terminated a contract with Uniform Construction Ltd, this related to works on a major drainage scheme and of course Uniform cried ‘foul.’

The background to the situation in the contract was that there was a tunnelling operation and it was the view of the Council that the termination of the contract was right and proper in that Uniform were not carrying out their work in a diligent or timely manner. It was Uniform’s view that they were totally professional and competent and that they suspended tunnelling works to carry out ground investigation and that for that investigation they should have been given an extension of time.

The Council terminated and brought in another contractor at considerable uplift, which cost a further amount of time in the contract substantially more than what Uniform had left for completion. The original contract was approximately €9.5 million and there were difficulties on site, these were not envisaged or even anticipated at tender time. Because of the difference of opinion the Council terminated on the delayed work, it was the view of Uniform that the delay was important and that proper ground investigation would lead to a suitable solution and safe solution and that within time.

It was viewed that had Uniform been allowed to complete, it would have happened approximately in April 2002 at a substantially lower price than that of a replacement contractor. There were further knock ons in respect of the terminated work, whilst Uniform was around since 1977 and had been involved in some of the bigger State Funded Infrastructure Works, it nevertheless had been unable to tender for any new work in the State since 2001. The Arbitrator found in favour of the construction company and that they would have been entitled to an extension of time.

These findings of fact cannot be appealed and it would be interesting to see what the outturn of this is and what the effect of the measured loss would be to Uniform. I will report at a later date as to the outcome, if any, but it does show that an Arbitrators finding of fact can have far reaching effects, but bear in mind that this is 2005 and the occurrences were circa 2001. It is a long time to get a result, but nevertheless I am sure for the contractor a pleasing result at that, “alls well that ends well.”

You should remember that whilst we have Adjudication and Conciliation that Arbitration is usually final and ensure that the Arbitrator that you choose is competent, is a Chartered Arbitrator and is familiar with the facts and the law both of Civil Engineering and Construction depending upon the field in which you are engaging the Arbitrator. Ensure that there is an Arbitration Clause or agree one, and that the Arbitrator can competently move the matter forward without delay.

This is yet again a salient reminder on the terminating of the contract, it should be done as a last resort and with very good considered opinion, and in fact I would suggest Senior Counsel’s opinion prior to any conclusive final decisions! – They could be costly!

There is a matter of Master Tashan Gabriel ~v~ Kirklees Metropolitan Council in the Court of Appeal. It deals mainly with the construction side and the duty of care to passers by, particularly the danger from children throwing stones from site and was there any “foreseeable” risk of injury.

The story relates to a young six year old in July of 1997 sustaining injuries to his left eye. In every day parlance, he was strolling past a building site. During this walk, he was hit in the eye by an object, which it has been alleged as being thrown by children playing on the site. This site was owned by the Metropolitan Council, damages were claimed and the young man being a minor used the vehicle of his father as his litigation friend and an action ensued.

The history of the site relates to the fact that the Council was knocking down buildings and construction work had begun on site. It is common ground that, in essence, the area was still covered in rubble, general demolition rubble and some remaining in a partly excavated condition. It was an assertion that there was no perimeter fence erected, but the Council had stated that the Police advised not to erect a fence because children climbing the fence could risk hurting themselves (the site was actually located in a residential area)! I wonder which was the less of two evils?!

Foreseeability was the prevailing action and the negligence related to failure to fence or enclose the site. The Council did not call any evidence in the matter, but made a submission to Court of no duty of care to one who was neither visitor nor trespasser on the site, (such case would arise from separate actions from those who were on site either as visitors or trespassers), it is a matter of law called, “No Vicarious Liability,” I won’t go into that here.

The first instance Judge dismissed the claim, saying the Council had no duty of care, so therefore it went to appeal. The appeal was allowed and the case was given to a different judge for its consideration. The views on the first instance Judge was that she made very view findings of fact and rejected the submission the Council owed a duty of care. The Court of Appeal criticised this finding on two issues; [1] the Judge did not make sufficient findings of fact to justify conclusions made and [2] that the wrong questions were asked. This is a bit like what we receive in Adjudications from time to time, when we study Adjudication cases being tried by Judges.

The Appeal Court Judge gave direction to questions that should have been asked by the original Judge, that is, where duty of care was owed; [a] was it reasonably foreseeable that minors could enter the construction site [b] while on that site, was it reasonably foreseeable that children would play there [c] was it reasonably foreseeable that during this playing on site, they would throw objects [d] where throwing objects on site, was it reasonably foreseeable that they might cause injury to those passing by outside the site.

He goes on to say that if it was foreseeable, to the above questions as asked, you then had to consider was there duty owed by the Council to [a] remove that risk and [b] take steps to remove the risk, (i.e. was there a breach in its duty of care)?

In all of this, the matter has been sent back to a different Judge for trial, obviously we cannot comment further until that decision is made. But what this shows, is that even at Law there is a review process by the Court of Appeal, the Court of Appeal Judges are positive in their analysis, where they feel injustice has occurred or wrong questions have been asked by the first instance Judge, this is similar to Adjudication and Arbitration. It also means that the law is developing and being analysed on a continual basis, benefiting our industry considerably.

I was watching a programme on television where the public decides what the decision is in respect of a dispute between parties, I wonder what the public would have decided in the first instance had the case been put to them?