Professional Documents
Culture Documents
2016
Diales
uncompromised expertise
33. Proving extension of time claims 63. Concurrent delay: Time does not
Cover: Goja1 Manoj Bahl, FTI Consulting always equal money
Andrew Bayne, Centra Consult
36. Fixed payment schedules:
Grove v Balfour Beatty 66. With great risk comes...?
Chartered Institution of Civil Engineering Surveyors Alan Williamson, Schoeld Lothian Gordon Lees, JGL Consulting
Dominion House, Sibson Road, Sale,
Cheshire M33 7PP, United Kingdom
39. Knocked out on penalties 69. Contract administration for claims and
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Claims Practitioners
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A celebratory issue
20 years of the Construction Law Review
D
papers that can be accessed and searched
OES construction law matter? by the societys members.
Anyone who reads the articles Perhaps the unique and most
in this Construction Law important feature of SCL is that it is open
Review would unhesitatingly answer yes. to all comers who have an interest in
Construction and engineering projects, construction law. So, our members are
whether they be small or large in scale, not just lawyers, but include architects,
are important enterprises in all countries. engineers, surveyors, property developers,
They are important because they are claims consultants, adjudicators, expert
fundamental to a countrys needs and witnesses and many others. The
ultimately to its prosperity. environment of SCL is therefore an
Concomitantly, the law provides an interdisciplinary one.
essential framework for the delivery of Happily, the environment of SCL is also
projects. Construction and engineering a very sociable one, and the society holds a
contracts dene what work is to be done, great number of regular and ad hoc events
how much is to be paid for it, and what is which allow our members to network
to happen if the project does not proceed and to meet up with friends and contacts.
according to plan. Completing the picture SCL has much to offer and, if you are not
is a vast body of statute and case law already a member, I warmly encourage you
which determines, in varying degrees of to join the society.
detail, the rights and obligations of parties
to construction and engineering contracts. Our world
Construction law is therefore important. Construction law matters, and if you are
It is also vast and highly nuanced. There is interested in construction law then the
much to learn about it, and therefore much Society of Construction Law is for you.
to discuss. With that introduction, may I encourage
you to start turning the pages of this
SCL Construction Law Review, and to explore
The Society of Construction Law was the richness of issues that exist in our
founded in 1983 in the kitchen of John construction law world.
Tackaberry QC. The germ of Johns idea, to
create a forum for promoting the education Julian Bailey, Partner, White & Case, and
and discussion of construction law issues, Chair, Society of Construction Law (UK)
quickly took hold. More than three decades julian.bailey@whitecase.com
later the UK SCL now has more than 2,500 www.whitecase.com
members, and worldwide there are SCLs on www.scl.org.uk
every continent. @SCL_UK
Specialist Advocates
to the Industry
A look at two decades pioneered in the Technology and Construction Court, construction
litigation has not been immune to change. The court now has a
of construction law much greater role in the management of litigation, with the aim of
enabling the court to deal with cases justly and at proportionate
cost. 2 The CPR is supplemented by the TCC guide, which is
currently in its second edition with a new edition expected shortly.
One of the most signicant new measures introduced by
the Woolf Reforms was the use of pre-action protocols. These
require the parties to a dispute to engage in reasonably extensive
correspondence, setting out the basis for the claim and the
rejection of it, before they are allowed to issue court proceedings.
The aim of this has been to crystallise the matters in dispute at
the earliest stage, so that parties can attempt to settle, or at least
understand, the case which they have to meet.
A unique feature of the TCC pre-action protocol was the
provision for at least one pre-action meeting between the parties.
1
Mr Justice Jackson, The Tower of Babel: What Happens when a Building Contract
Goes Wrong SCL Paper 136, March 2007
2
CPR, r1.1(1)
8 20 Years Construction Law Review
Adjudication
The eld of construction litigation has
Despite the passage of time, the TCC seems to be also been affected by the creation of the
in no immediate danger of losing its reputation adjudication regime recommended by Sir
Michael Lathams report Constructing the
as a pre-eminent venue for the resolution of Team. The resulting adjudication system
implemented by the Housing Grants,
construction disputes. Construction and Regeneration Act 1996
(as amended by the Local Democracy,
Economic Development and Construction
:OVY[LYHUKL_PISL[YPHSZZJhemes Act 2009) gives parties to a construction
The TCC, along with other courts in the Rolls Building, is piloting contract the option of referring disputes
two new schemes; the shorter trials scheme and the exible to adjudication, rather than waiting for
trials scheme. arbitration or litigation. This is a speedy
process, where the adjudicator is usually
Shorter trials scheme required to deliver a decision within 28
The shorter trials scheme is intended to allow speedy resolution days of being appointed. In most cases the
of cases that do not involve allegations of fraud or dishonesty,
dispute is resolved entirely on the papers,
multiple issues or parties, intellectual property claims or public
without any oral hearings.
procurement claims. Its goal is to have the trial within eight
The scheme has been an enormous
months of the case management conference.
success. While it has generated a eld of
The trial itself is restricted to four days, all applications are
litigation all of its own, it has reduced the
dealt with on the papers and the pre-action protocol does not
number of construction claims led in the
apply (though parties do have to send the equivalent of a letter of
TCC. Domestic construction arbitrations
claim). All of this is overseen by a docketed judge who is assigned
are virtually extinct. While the decision
at the case management conference and remains with the case
of an adjudicator is only temporarily
throughout the process. There are shortened timescales for the
binding with parties retaining the option
service of pleadings (which can be no longer than 20 pages).
of re-ghting the dispute in arbitration or
Parties only have to disclose documents upon which they are
litigation anecdotal evidence suggests
relying and/or those ordered after a request for specic disclosure.
that in 80% of adjudications, the parties
Evidence is by witness statements which can be no longer than
content themselves with the decision of
25 pages and expert evidence is by written report. After trial the
the adjudicator.11
judge will endeavour to give judgment within six weeks.
The other signicant feature, apart from the lack of a pre-action
protocol, is that the costs management provisions of the CPR do
Conclusion
A great deal has changed in the world of
not apply. Costs will usually be summarily assessed on the basis of
exchanged costs schedules. construction litigation since 1996. Many
It is too early to determine how this scheme will function, but of the reforms which have been applied
it has the potential to provide great reductions in both costs and to civil litigation generally have been
time for those with straightforward cases. pioneered in the TCC. This is part of a long
tradition of construction litigation being at
Flexible trials scheme the forefront of procedural reform.
The exible trials scheme is more focused on the manner in which It was in the old Ofcial Referees
evidence is gathered and presented. The scheme itself is largely Courts that the use of written witness
facilitative; it prescribes few rules, but allows parties to agree on a statements as evidence, the early exchange
variety of issues relating to the evidence. of expert reports, and the use of Scott
Parties must disclose evidence upon which they rely and which schedules were pioneered all of which
they know to meet the normal disclosure test; though there is no still form key parts of construction litigation
obligation to conduct searches for evidence which may meet the today. Despite the passage of time, the
test. Witness and expert evidence is given in written form and oral TCC seems to be in no immediate danger
evidence is limited to issues identied at the case management of losing its reputation as a pre-eminent
conference. Oral submissions and cross-examination are subject venue for the resolution of construction
to time limits, which are either agreed or directed. Where oral disputes. I look forward to writing about
evidence is necessary, it is limited to the principal parts of a developments in 2036!
partys case.
Alexander Nissen QC, Barrister,
The Briggs Review Keating Chambers
At the present time there is an additional review of the civil anissen@keatingchambers.com
courts structure being undertaken by Lord Justice Briggs. Matters www.keatingchambers.com
within his review include the creation of an online court, which @keatingchambers
is unlikely to affect users of the TCC; a possible weakening of the
division lines between the Queens Bench and Chancery Division; 11
Dr R Gaitskell QC, Trends in Construction Dispute
and the question of whether there ought to be a unied structure Resolution, SCL Paper 129, December 2005
Accelerated Membership for
RICS Fellows and Members
Belong here
(Y[PJPHSPU[LSSPNLUJLHUKSH^
Simon Tolson, Senior Partner, Fenwick Elliott LLP
AI today
Believe it or not law rms are really investing in articial
We had the big bang when the legal profession, and how it accessed
material, began to change forever. It changed law in a way nothing
else had for c.300 years.
Watson2 and Richard and Daniel Susskinds latest book, The Future of the Professions,
which predict an internet society with greater virtual interaction with professional services
such as doctors, teachers, accountants, architects and lawyers.
Linklaters and Pinsent Masons are the latest law rms to announce publicly their
investment in AI, as the legal profession tries to automate the most mundane tasks
that traditionally have been the preserve of more junior lawyers. Pinsent Masons has
developed a program that reads and analyses clauses in loan agreements. Its TermFrame
system also helps guide lawyers through transactions and point them towards the correct
precedents at each stage of a process.
Another law rm, Dentons, has set up NextLaw Labs,3 a virtual company which looks
at the application of technology within the law. It has invested in ROSS,4 an IBM Watson
powered legal adviser app, that streamlines legal research, saving lawyers time and
clients money. BLP and Linklaters have signed on with developer RAVN5 and developed
a computer program to sift through various UK and European regulatory registers to
check client names for banks. In transactional work, LONald can, for example, send
an enquiry to Companies House to check if the address in a document matches the
company number. If the address is out of date, the computer will ag it for review. The
team will then consider all agged documents in one go at the review stage. It thus
converts unstructured data (for example, contracts) into structured output (for example, a
spreadsheet) in a fraction of the time (a few seconds) it takes a human and with a higher
degree of accuracy! The lawyers then do the higher-level strategic review to make sure
nothing is missed.
Professor Richard Susskind, who is also IT adviser to the Lord Chief Justice, has
predicted radical change in the legal sector, pointing out that intelligent search systems
could now outperform junior lawyers and paralegals in reviewing large sets of documents
and selecting the most relevant. Prof Susskind said at a conference recently6 that he
believes the legal profession had ve years to reinvent itself from being legal advisers to
legal technologists and criticised law schools for churning out 20th-century lawyers.
Prof Susskind stated that over the course of the next decade, AI would move forward
so quickly that systems themselves would be able to assess, diagnose and respond to
the legal problems posed by clients. But instead of suggesting that this was a threat to
the profession, he instead claimed that it was an opportunity to become engineers of
knowledge, and to shape the future of the profession in a positive way. He stated:
For the next ve years, the legal profession will work on using better human-resource
models, delegate to paralegals, move to better locations and give lawyers far better
systems... It is not that there are no jobs in the future, but the 2020s will be a decade
of redeployment not unemployment. It is not an emergency but over the next ve years
we have to prepare. More and more legal services will be enabled by the support of new
technology. You can say that is for the technology industry to sort out, or you can be
part of the technology industry.
Where next?
So where is all this headed? Well, for sure, away from where we are now. Much the same
applies with how building information modelling can expedite design improvement and
2
It is amazing that Watson analyses unstructured data, understands complex questions, and presents answers and
solutions. www.ibm.com/smarterplanet/us/en/ibmwatson/
3
A global collaborative innovation platform set up in May 2015 focused on developing, deploying and investing in
new technologies and processes to transform the practice of law around the world. www.nextlawlabs.com/
4
ROSS is an articially intelligent attorney to help power through legal research. www.rossintelligence.com/lawyers/
5
RAVN helps you make sense of the explosion of big data in your organisation through state-of-the-art software
solutions. www.ravn.co.uk/
6
Law Societys Law Management Annual Conference: http://communities.lawsociety.org.uk/law-management/events/
law-management-section-events/law-management-section-annual-conference-27-april-2016-london/5052637.fullarticle
2016 AI 13
Robots are unlikely to replace lawyers in court, but they can prepare
papers for hearings and do other clever things with massive data.
aid the best selection of materials and/or provide the opportunity of testing and assessing
different design alternatives that may impact say on the energy performance of buildings.
I know for a fact computer modelling techniques and stochastic analysis7 in hydrogeology
are now helping developers address run-off and drainage issues in the UK8 and provide
real-time ood forecasting from catchment to national scales. In the law, text analytics and
machine learning can be incredibly helpful in enabling the data to tell its story, and what
we are nding is that computers are learning in large data cases they can be better
than human lawyers, particularly tired human lawyers.
Predictive coding enables users to sample data such as on a large project and identify
what is relevant. Through sampling, the program is able to learn which documents are
relevant. This process greatly reduces the time needed for e-discovery and document
review because the program is searching for concepts as opposed to simple keywords.
Indeed our own Law Society president, Jonathan Smithers, is bang on the money on
this issue. He acknowledges we live in complicated times. Complicated times require
the knowledge and advice of the global legal community, practical experts who can
develop long-lasting solutions to help us mitigate the crisis micro-economically, macro-
economically and geopolitically. The legal community, however, is often called too late.
We are involved when our clients have reached crisis. We are called to re ght, we are
the A&E department. At this point, the role of the legal professional may be rather limited.
Bright lawyers and astute law rms need to ask themselves, what are the common
developing legal issues coming over the skyline? The impact of technology on the law
is one such issue. We live in a globalised world. The exponential growth of technology
has created a new world order. It affects how we talk, how we learn, how we trade. The
world is, quite simply, more interconnected than ever and using big data is key.
The future is not desolate. The globalised world has also brought hope and
opportunity. Technology has already restructured the way we do business and
signicantly impacted the practice of law. We are already using technology to
communicate with our clients more quickly, to manage their data and to make our
businesses more efcient. Skype, instant messaging, WebEx online meetings and email are
part of our everyday working lives.
AI will become more embedded in our lives. In many ways, it is already part of the
way we interact with each other and with the world. When ebay suggests products you
may like, that is AI. Siri on your iPhone, thats also AI. Anti-lock braking systems on cars
and systems that wake you up as you nod off; AI. It is already everywhere. But, what
does this mean for lawyers?
Many of our business clients Google their legal problems before they come to see us.
Pro bono portals are available, helping people to access legal advice early. Of course,
self-diagnosis can never be a replacement for legal professionals any more than it can for
physicians. The functions we carry out as lawyers extend far beyond dispensing black-
letter legal advice. Lawyers will, however, need to consider the ethical and legal dilemmas
brought by AI in much the same way that architects and engineers are doing with
building information modelling and intellectual property.
Ethical duties
Lord Neuberger, president of the Supreme Court, only last week called for a debate on
the ethical implications of AI and for greater prominence for ethics in legal training.9
Law schools will therefore need to pull up a sock or two. Lord Neuberger made his plea
for greater prominence for ethics training both on university law courses and professional
legal training courses.
7
Having a random probability distribution or pattern that may be analysed statistically but may not be predicted
precisely
8
The Groundwater Foundation, a non-prot organisation that educates people and inspires action to ensure
sustainable, clean groundwater for future generations
9
Lord Slynn memorial lecture, 15 June 2016: www.supremecourt.uk/docs/speech-160615.pdf
14 AI Construction Law Review
Lord Neuberger said that the earlier and more effectively potential professional lawyers
and advocates could be trained to appreciate and understand the importance and nature
of their ethical duties, the stronger a legal profession we will have, and the stronger the rule
of law will be.
Back in 2013, the judge urged the legal profession not to lose sight of its fundamental
principles in the rush for modernisation, warning about the risks of pressure from
hard-nosed businessmen who may invest in law rms. The legal profession should be
preparing for the problems and opportunities that may arise from such an enormous
potential area of development, and one of the most difcult challenges will be to consider
the potential ethical implications and challenges.
Whilst Lord Neuberger does not fully embrace the Susskind view of future legal life, he
does say that the Susskinds point out that this potential development has ethical, as well
as employment, implications and they rightly call for a public debate on the issue. Lord
Neuberger likewise warned of increased potential for ethical conicts where alternative
business structures (ABS) were owned by non-lawyer investors who are ultimately
only concerned with the bottom line. The investors will often have no experience of, or
interest in, the lawyers ethical duties.
The world will always be complicated. But if lawyers take the time to put their
minds together, to learn from one another, they can x pervasive problems like new
technological solutions. If we are successful, we will make the legal profession worthy of
this millennium, all the more so with regard to the construction industry.
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CONSTRUCTION LAW REVIEW
GEOSPATIAL ENGINEERING
Expert errors
John Mullen FRICS FCInstCES FCIArb, Quantum Expert and Principal, Diales
Pitfalls in picking the their legislature or precedents, such a detailed framework for
experts to work in. However, this is not to say that experts will
wrong expert witness not be suitably chastised where appropriate. As with the England
and Wales judgments, some overseas judgments can be similarly
informative as to the potential pitfalls for experts and those
instructing them. They also might offer some light relief for those
suffering published criticism in the UK, or frustrated at the lack of
it in international arbitration.
The world took an understandable interest in last years South
African proceedings in the Oscar Pistorius trial. Whilst there is
disappointment in some quarters at his sentence, he appears to
have achieved that outcome notwithstanding the quality of the
expert evidence adduced by his team.
Oscar Pistorius chief witness was a former police ofcer, Roger
Dixon,2 who gave expert evidence on ballistics, gunshot wounds,
pathology and blood splatter. He was also involved in both audio
and visual tests. However, he admitted to not being an expert in
1
Access to Justice, Interim Report, June 1995; Access to Justice, Final Report, July 1996
2
Who unfortunately did not gain his early training in Londons Dock Green area
2016 Expert Witness 17
T HERE I was, sitting in my ofce, trying to get my head around a particularly difcult point in an
adjudication when Alan Lees from the Chartered Institution of Civil Engineering Surveyors phoned me. I
was grateful for the call, not only because it is always good to talk to Alan, but also it meant a break from
the mind warping adjudication. Alan reminded me that the rst publication of the Construction Law Review was
20 years ago and that I had featured in it. Kindly, if somewhat embarrassingly, Alan sent me a copy of the article.
It included a photograph. I have searched the attic in vain but sadly the original appears to have been lost.
On the topic of photographs, one of my colleagues mentioned the photograph I had shown her of my
endeavours to do some setting out at the beginning of my career and that in turn led to a discussion about my
rst overseas trip and a war story. It seems that as ones career matures, so war stories become more or less
mandatory. However, this one is relevant to the subject matter of this article so please bear with me.
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20 Ground Conditions Construction Law Review
recognise it as having some very close resemblance to the old The main areas of dispute
Institution of Civil Engineers (ICE) or the current Infrastructure Gibraltar entered into contract with Obrascon Huarte Lain SA
Conditions of Contract (ICC) forms. (OHL) under a FIDIC Yellow Book design and construct contract.
Most of the FIDIC forms have got provisions for unforeseeable It all went horribly wrong. Eventually Gibraltar terminated the
physical conditions, just like the old ICE clause 12. They also contract on the basis of poor progress, amongst other things.
have fairly draconian notice provisions where failure to comply OHL contended that progress had been impeded by unforeseen
with these provisions seems to result in a loss of entitlement. physical conditions (contaminated ground) and the termination
Because the standard dispute resolution procedure is the dispute was wrongful. Conversely Gibraltar contended the conditions were
adjudication board followed by arbitration, the FIDIC forms are entirely foreseeable, OHL had brought a lot of the difculties on
rarely considered by courts. Suddenly one appeared and it covers its own head by the way it dealt with the ground conditions, and
these rather difcult issues and also the matter of termination. in any event had not given notice in accordance with the contract
and so had forfeited its rights to make a claim. The contention that
Obrascon Huarte Lain SA v HM Attorney General for Gibraltar OHL had to redesign the tunnel because of the contamination and
I was particularly interested in the unforeseen physical conditions that the engineer had issued what OHL contended were variations
aspect of Obrascon Huarte Lain SA v HM Attorney General for were also contested by Gibraltar.
Gibraltar. It is a frequent problem in other civil engineering forms The dispute came before Mr Justice Akenhead in the
of contract, where there is relief available to the contractor should Technology and Construction Court in the rst instance1 and then
such circumstances arise. Obviously the facts and circumstances went on to the Court of Appeal.2 The main issue was termination
and the particular wording of the contract have paramount but that is not the issue that I address in this article but rather the
importance when considering if a particular judgment is relevant
underlying matters. The ground condition issue was subject to
to another dispute. We will get back to the matter of applicability
appeal and it is convenient to consider that matter before looking
of this judgment in a more general sense later. However, some
at the issue of notice.
background to the dispute is pretty important to understand what
happened not only in the rst instance case but also in the
Unforeseen adverse physical conditions
appeal court case.
The OHL proposition was that the amount of contaminated
The defendant party was the government of Gibraltar
matter excavated exceeded the quantity that could have been
represented by Her Majestys Attorney General for Gibraltar. The
expected. That meant not only greater expense but redesign and
works giving rise to the dispute unsurprisingly took place in
lengthy delays that explained the poor progress and made the
Gibraltar. The appeal case succinctly sets out some background.
termination unlawful.
Spain ceded Gibraltar to the United Kingdom by the Treaty of
The means of construction was to construct the walls of the
Utrecht in 1713 and the local population has occupied Gibraltar
under UK rule since that date. The territory has played an tunnel as diaphragm walls below original ground level using
important role in many wars, with the last of these being the rst bentonite, then cast the roof slab. The ground under the slab
and second world wars. The long military history of the territory would be excavated once the roof was strong enough to support
has an impact on the issues in dispute. itself and restrain the outer diaphragm walls. OHL considered
Gibraltar is connected to the south of Spain by a relatively that the amount of contaminated ground meant it was unsafe to
narrow isthmus that runs north/south. The airport is located on excavate in the conned space, work had to be suspended and
the isthmus close to the border with Spain and its runway crosses the works redesigned. The contract had the following provisions:
the isthmus running east/west and protruding into the sea. That
means that all the vehicle trafc going to and from Spain has to 1.1.6.8 Unforeseeable means not reasonably foreseeable by an
cross the runway. experienced contractor by the date for submission of the tender...
Figure 1 is taken from the Rock of Gibraltar and is looking
north with the east end of the runway on the right. The road has 4.10 Site data: The employer shall have made available to
to be closed when the runway is in use by aircraft (always a good the contractor for his information, prior to the base date, all
idea) so the government of Gibraltar decided to build a tunnel relevant data in the employers possession on sub-surface and
under the runway. To avoid prolonged closure of the runway hydrological conditions at the site, including environmental
this was to be built at the eastern end of the runway. Doubtless aspects. The employer shall similarly make available to the
a certain amount of ducking was anticipated by the labour force 1
(2014) EWHC 1028 (TCC)
when aircraft were landing. 2
(2015) EWCA Civ 712
2016 Ground Conditions 21
Clause 8.4 deals with extensions of time in FIDIC contracts and the
NEC relevant part is the following terms:
The application of this case to NEC is, in
my humble opinion, difcult. The recovery The contractor shall be entitled subject to sub-clause 20.1...
of direct cost via a re-measured bill of to an extension of the time for completion if and to the extent
quantities depends on the main option that the completion for the purposes of sub-clause 10.1... is or
choice within the contract. will be delayed by any of the following causes...
In terms of relief from adverse physical
conditions the main option choice is My emphasis added.
irrelevant; the same procedure applies
to all options. What emerges from the In the rst instance judgment6 deals with the matter of notices.
Gibraltar case is a need for the tendering Two issues emerged; the form of the notice and its timing. In
contractor to make its own investigations as general terms, the judge took a fairly pragmatic view of these
well as taking into account the information provisions saying that they should be construed reasonably
supplied with the tender. broadly given the serious effect that they would have if strictly
In the NEC contracts there is relief for construed. There is no need for the notice to be any particular
unforeseen physical conditions and there form, but it must be identiable as notifying a claim and given
is also a need for the employer to provide in writing.
known information in the site information. The timing of notices was also dealt with on a non-prescriptive
However the compensation event for the basis. The provisions of clause 8.4 are said to allow two dates that
adverse physical conditions relief5 has to affect the notice. These are when completion (i) is being delayed
be read with the provisions of clauses or (ii) will be delayed. The rst is termed a retrospective delay
60.2 and 60.3. In particular clause 60.3 in because the delay has started, and the second a prospective future
the following terms seemingly causes a delay. Either date can trigger the claim and apparently can be the
problem to applying the Gibraltar case: start of the 28-day period within which the notice must be issued
as required by clause 20.1.
If there is an ambiguity or inconsistency I am reluctant to comment too much on this issue but I will say
within the site information (including that it is not an approach that I have seen in practice. Stretched
the information referred to in it), the to its limit, could it mean that a whole raft of extension of time
contractor is assumed to have taken into claims could be notied on the scheduled completion date, i.e.
account the physical conditions more when completion is absolutely known to be delayed?
favourable to doing the work. Does the same ethos apply to any additional payment because
clause 20.1 deals with both? This may not be so clean cut because
Had the Gibraltar case contract included clause 8.4 only refers to extensions of time and not additional
the desktop study concluding that payment. OHL was only awarded a one day extension on account
10,000m3 of excavation was likely to of encountering rock the extension of time claim for weather
be contaminated, and the wealth of delays was rejected for lack of notice.
information indicating a greater quantity, Would I advise a contractor not to notify the very instant
could OHL have relied on the more it became aware of a potential delay? The answer to that is a
optimistic 10,000m3? It certainly seems to resounding no! Would I advise a contractor that had not notied
be a reasonable potential argument. until it became aware of an actual delay to completion to use this
case? Yes.
Notices for extensions of time under FIDIC
Having possibly depressed contractors, an Just to close... Yes, the runway I recollected in my personal history
aspect of the rst instance judgment that was Gibraltar. But you probably guessed that anyway.
was not appealed showed a bit of leniency.
Clause 20.1 is a standard feature of FIDIC David Carrick FCInstCES FICE FCIArb MRICS MCIPS MBAE,
contracts and the relevant part is the Senior Vice President, Hill International
following terms: davidcarrick@hillintl.com
www.hillintl.com
20.1 If the contractor considers himself @hillintl
to be entitled to any extension of the
5 6
Clause 60.1 (12) Paragraphs 312 and 313 in particular
Managing with the MMHW
An examination of the use of the Method of Measurement for Highway Works
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The judicial committee of the Privy Council originated as the
highest court of appeal for the British Empire. It now fulls the
same purpose for many current and former Commonwealth
countries. It is binding in the jurisdiction to which it relates and
has persuasive authority in all other common law jurisdictions,
including England, Wales and Northern Ireland.
The contract in NIPDEC was based upon the FIDIC general
conditions of contract for construction, rst edition 1999,
also known as the Red Book. The terms of the Red Book, as
considered by the court in the NIPDEC case, are identical to
those found in the FIDIC Yellow and Silver Books.2 This decision
is therefore of widespread application for international projects
which use FIDIC Red, Yellow or Silver Book terms as the basis of
Two recent decisions the construction contract and which are subject to common law.
on the administration of Furthermore, given that one third of the worlds population live
in jurisdictions subject to common law and the geographically
employers claims widespread use of FIDIC forms, the NIPDEC decision has a
potentially far reaching signicance for projects globally.
employers claims. This might appear to suggest a In contrast, there is no long-stop date for notication of employers
less strict regime for the employer, but there is a claims. This might appear to suggest a less strict regime for the
employer in the provision of such notices, but there is a sting in
sting in the tail of sub-clause 2.5. the tail of sub-clause 2.5, as we shall see below. As to details of
the claim to be given, sub-clause 2.5 provides:
suspended works and purported to The particulars shall specify the clause or other basis of the
exercise its right to determine the contract. claim, and shall include substantiation of the amount and/or
The parties then referred a number of extension to which the employer considers himself to be entitled
differences to arbitration under the terms in connection with the contract.
of the contract. The arbitrator issued a
number of awards, two of which were Clearly, the intention here is that the contractor is given sufcient
then challenged. These two issues were details to be able to assess and respond to the employers claim.
connected. The rst was the arbitrators Immediately after the provision of such particulars, the linkage
decision that the contractor, NHIC, was with the determination process is found:
entitled to terminate the contract. This
arose from a question as to whether The engineer shall then proceed in accordance with sub-clause
the employer, NIPDEC, had met the 3.5 (determinations) to agree or determine (i) the amount (if
threshold for giving nancial security for any) which the employer is entitled to be paid...
performance of its payment obligations
under the contract (issue no. 1). The The determination machinery is a unique feature of the FIDIC
second aspect related to certain nancial forms. This involves the engineer (under the Red and Yellow
claims. This concerned the requirements Books) making a determination of whether and if so how much is
for NIPDEC to commence and maintain its due to the employer.3 It is necessary for the employer to provide
claims against the contractor (issue no. 2). details of its claims, not just to the contractor but also to the
This article considers issue no. 2 only. engineer, so that the engineer can perform the function required
of it under sub-clause 3.5.
Employers claims under FIDIC The Privy Council looked at the purpose of the provision and
In particular, issue no.2 concerns sub- identied that under FIDIC, the claims machinery applicable to
clause 2.5 of the FIDIC form and notices employers claims leads directly into the determination process
of claim by the employer. In common with under sub-clause 3.5. Thus, in NIPDEC, the court observed:
the drafting style of FIDIC, a number of
separate points are located within a single If an employers claim is allowed to be made late, there would
sub-clause. It may be helpful to break the not appear to be any method by which it could be determined
clause down into its constituent parts. Sub- as the engineers function is linked to the particulars, which in
clause 2.5 commences with the following: turn has to be served as soon as practicable. 4
If the employer considers himself to NIPDEC is therefore persuasive authority in common law
be entitled to any payment under any jurisdictions for the proposition that if there is no valid employers
clause of these conditions or otherwise claim under sub-clause 2.5, there can be no determination under
in connection with the contract... he sub-clause 3.5.
shall give notice and particulars to the
contractor. Notice requirements for employers claims as a condition
precedent to entitlement
This opening provision requires the The sting in the tail of sub-clause 2.5, as identied by the Privy
employer to take the initiative and give a Council in NIPDEC, states:
notice to the contractor. It is a mandatory
requirement, and if the employer fails to The employer shall only be entitled to set off against or
give notice, it will be in breach of contract. make any deduction from an amount certied in a payment
However, any such breach has other certicate, or to otherwise claim against the contractor, in
serious consequences, as we shall see. accordance with this sub-clause.
Another important provision within sub-
clause 2.5 deals with the time for giving This also provides a point of contrast with the regime for
notice, and provides: contractors claims under sub-clause 20.1, which includes express
3
The notice shall be given as soon as Under the Silver Book, where there is no independent engineer engaged to
administer the contract, the employer determines the validity and quantum of its own
practicable after the employer became claims, albeit the contractor may give notice of dissatisfaction within 14 days and
aware of the event or circumstances thereby avoid having to give effect to the determination
giving rise to the claim. 4
Paragraph 38 of Privy Council judgment
2016 FIDIC 27
Adverse weather
What are the differences?
Emily Monastiriotis, Partner, with Susanne Hose, Solicitor, and Simos Schizas, Paralegal, Bond Dickinson
JCT Yes (relevant event) Exceptionally adverse weather 1. The contractor has to notify the This is quite a broad (vague) denition.
Standard: 2.29.9 conditions. contract manager as soon as it realises Exceptionally adverse conditions are
Design & Build: 2.26.8 that completion will be delayed the considered to be greater than usual
Intermediate: 2.20.8 notice should incorporate all material adverse conditions. Exceptional means
Major Project Construction: N/A events (clause 2.27.1). having much more than average...
2. The contractor has to notify the (Collins English Dictionary, 1999).
contract manager of the result of the There is no accepted prescriptive
delay (clause 2.27.2). denition for adverse weather
3. The contractor should continue to give conditions.
notices with updates as matters progress JCT also contains a force majeure
(clause 2.27.3). clause but given the existence of a clause
regarding weather conditions, the force
majeure clause is unlikely to apply.
Whether or not the weather is as
adverse as it needs to be will be up to the
contract administrator to decide.
NEC3 Yes (compensation event) A weather measurement is recorded: 1. Notice must be given to the project The contract data includes very clear
60.1 (13) Within a calendar month manager within eight weeks of the and objective measurement details,
Before the completion date for the contractor becoming aware of the event which are often negotiated between the
whole of the works and (clause 61.3). parties to the contract. It provides a more
At the place stated in the contract data. 2. If notice is not given, the contractor prescriptive denition, one that parties
The value of which, by comparison with loses its right to any additional money often rely on for its clarity.
the weather data, is shown to occur on or time. Only deals with cold, snow, and rain
average less frequently than once in nothing relating to extreme heat, wind
ten years. Only the difference between (think of cranes) or worse.
the physical conditions encountered If the weather in question occurs less
and those for which it would have been frequently than once in ten years then it
reasonable to have allowed is taken into can qualify as a compensation event.
account in assessing a compensation There are four ways of measuring the
event. weather cumulative rainfall (mm);
number of days with rainfall more than
5mm; number of days with minimum air
temperature less than 0C (32F); number
of days with snow lying at a stated time
GMT.
The intention of weather measurements
is to report the weather over one month
not hourly/daily.
Weather measurements and data
should be taken on site or as close as
possible to the site in question.
ICE Yes (relevant event) Exceptionally adverse weather. 1. Notice must be given by the contractor A similar explanation to that of JCT
44 (1) to the engineer within 28 days after the very broad and vague. The engineer will
cause of the delay. usually assess whether the weather is
2. The engineer must then make sufciently adverse.
an assessment upon receipt of the Having historical records would be
particulars of the delay and notify the very helpful in determining whether the
contractor (clause 44 (2)). weather conditions were exceptionally
3. The engineer must then make an adverse not clear how far back these
interim extension of time award if found records should go (some say 10 years,
that the contractor needs more time others more).
towards completion (clause 44 (3)).
4. The engineer must, within 14 days of
the completion date decide whether an
extension of time is appropriate or not
(clause 44 (4)).
5. The engineer must review and make
a nal determination as to the extension
of time within 28 days of the issue of
the certicate of substantial completion
(clause 44 (5)).
Yes (relevant event) Exceptionally adverse climatic 1. Notice must be given to the contract Again, similar wording to that of JCT
FIDIC Red Book: 8.4 (c) conditions. administrator with a full description of and ICE vague and no guidance and
Silver Book: N/A the events as soon as practicable, and more subjective than NEC3.
not later than 28 days after the contractor Claimants must not confuse
became aware or should have been exceptional with unforeseeable
aware of the delay (clause 20.1). (employers risks clause 17.3/17.4).
2. Provide all particulars of the claim
within 42 days of becoming aware of
the claim or within 42 days of when the
contractor should have become aware, of
the event or circumstance.
3. On receipt of the notice, the
administrator must respond within 42
days of receipt of the claim approving or
disapproving the claim.
30 Payment Construction Law Review
*SVZPUN[OLVVKNH[LZ
The effect of the payment provisions under LDEDCA 2009
Peter Barnes FCIArb FCIOB MCInstCES MICE MRICS, Director, Blue Sky ADR
12 months on, another In reality the above factors (amongst several other exceptional
circumstances particular to the case) were part of the reason
look at default payment why Mr Justice Edwards-Stuart came to the judgment he did
in the Galliford Try case to defer part of the enforcement of
notice claims the adjudicators decision. (Although it must be noted that the
principles owing from the ISG case were still followed.)
right time, with an amount due being shown (without being overly concerned with its
content), and one that could be construed as being a default payment notice. If no pay
less notice was issued, the amount requested in the default payment notice would be the
amount that would need to be paid. However, the courts had other ideas.
Leeds v Waco
The rst matter that the courts dealt with was in the Leeds City Council v Waco UK Ltd
(2015) EWHC 1400 (TCC) case. It was in respect of what default payment notices needed to
be submitted at the right time to be valid.
After practical completion, Waco submitted its September 2014 payment application six
days before the contractual date specied. The employers agent refused to recognise the
payment application as it had been served prematurely. The contractor referred the matter
to adjudication and obtained a decision in its favour.
However, in subsequent part 8 proceedings, the court found that the contractors
September 2014 post-practical completion payment application was not valid. It had been
served too early, even though a previous post-practical completion payment application
was issued early and was accepted by the employers agent. Therefore, the contractor
could not rely on the September 2014 payment application as being a default payment
notice as it had not been served at the correct time.
Henia v Beck
Following on from this, the case of Henia Investments Inc v Beck Interiors Ltd (2015) EWHC
2433 (TCC)came along. In this case, Beck submitted an application for payment on 28 April
2015, six days later than it should have been submitted.
The contract administrator issued its own payment certicate in respect of the April
2015 valuation period, on 6 May 2015, but the payment certicate was one day late. Beck
did not submit a payment application for the end of May 2015 valuation period, but the
contract administrator issued a payment certicate in any event, although that certicate
was again issued one day late. The employer issued a pay less notice against this latter
payment certicate, reducing the amount due to the contractor to nil.
At this point, Beck said that if its application for payment dated 28 April 2015 had been
served too late for the end of the April 2015 valuation date, it should be carried over as
the payment application for the end of May 2015 valuation. Also because the contract
administrators payment certicate at the beginning of June 2015 had been issued one
day late and was therefore in-valid (and as the pay less notice related to that said in-valid
payment certicate was also by default in-valid), Becks application for payment dated
28 April 2015 became the default payment notice which set out the notied sum that
needed to be paid. The adjudicator agreed with this position, but the court did not.
The court found that there was nothing in the 28 April 2015 payment application that
indicated that it was a payment application for 29 May 2015 (in fact the document said
that the works had been valued up to 30 April 2015). Also, the said document was not
in the substance or form of all previous payment applications. Therefore, Becks
payment application dated 28 April 2015 could not be relied upon as being a default
payment notice.
32 Payment Construction Law Review
And others...
Following on from the above, the Severeld (UK) Ltd v Duro Felguera UK Ltd (2015)
EWHC 3352 (TCC) case made it clear that a default payment notice needed to clearly set
out the basis on which the sum claimed had been calculated. The Grove Developments
Ltd v Balfour Beatty Regional Construction Ltd (2016) EWHC 168 (TCC) case found that
the payment provisions of the scheme were not imported to provide for further interim
payments after the last date on an agreed schedule of dates had expired.
Other similar cases followed in respect of the need to comply precisely with the
required timing of applications and/or the need for there to be complete transparency
of submissions. These include Manor Asset Ltd v Demolition Services Ltd (2016) EWHC
222 (TCC); RMC Building & Civil Engineering Ltd v UK Construction Ltd (2016) EWHC 241
(TCC); and Jawaby Property Investment Limited v The Interiors Group Limited (2016) EWHC
557(TCC).
Peter Barnes FCIArb FCIOB MCInstCES MICE MRICS, Director, Blue Sky ADR
www.blueskyadr.com pbarnes@blueskyadr.com
2016 Extensions of Time 33
E XTENSIONS of time are again hitting the headlines following the recent
Technology and Construction Court decision in Carillion Construction Ltd v Woods
Bagot Europe Ltd and others (2016) EWHC 905 (TCC). It was a dispute in relation
to the proper interpretation of a standard form of construction subcontract provision.
Carillion contended that the nature of the particular subcontract clause warranted a
departure from the method by which extensions of time are usually applied. However,
the court rejected this argument, and found in Emcors favour that an extension of time
was to be treated in the usual manner. With this in mind, what are the key parameters for
determining extensions of time and what is the level of proof required?
Background
Uncertainty is endemic within the construction industry and, through a combination of
many factors, construction projects do not proceed as planned with the risk that the
contractual completion date will not be met. For contractors, this results in a delay to the
completion of the works, with a corresponding liability to the employer for liquidated
damages and the potential of cost overruns due to the increased costs of performance
arising from prolongation. For employers, delays result in a loss of prot, loss of revenue
and potential liability to the design team and other members of the professional team.
The construction team at FTI Consulting is regularly engaged
of proof required?
the preparation and award of extensions of time are often
misinterpreted or over simplied.
Consents & Engagement | Environment & Sustainability | Estimating | Project Management | Quantity Surveying | Contract Services
Schofield Lothian Limited, 3-7 Temple Avenue, London EC4Y 0DT 020 7842 0920 www.schofieldlothian.com
days duration, but the parties are free to agree the amounts and 15 September 2015 was on time. Thus
intervals of the said stage payments. If no such provisions are the payment mechanism of the scheme
included, then those of the scheme are to apply. Furthermore, did not need to be imported, as the
the contract should provide an adequate mechanism to determine contract already had compliant payment
when payments become due and a nal date for payment provisions. Furthermore, the contractor
again, the parties are free to agree the period between the due was estopped from changing its argument
date and the nal date for payment, with the provisions of the to the schemes payment mechanism in
scheme to apply if no such provisions are included within the any event, due to earlier representations
construction contract. made in correspondence as to its view
However, Mr Justice Edwards-Stuart was not swayed by either upon the applicable nal dates for payment
of these propositions, stating that the court should not strain based upon the original contract payment
to nd ambiguity where none exists. He considered that the schedule.
requirements of the act and scheme had been met and that it was
not automatic for instalment payments to continue to be made for Summing up
all work under a construction contract. As already commented in the introduction,
Indeed, he went so far as to say that the employers ability to the ndings in this case initially appear
refuse further interim payments could be used to exert commercial to be somewhat surprising. It is a very
pressure upon the contractor to complete on time. If further common occurrence for projects to overrun
periodic payments owed, in addition to those already agreed, and the employer to continue to make
this would restrict the parties commercial freedom to agree to any interim payments to the contractor, even if
amounts being paid at any intervals, for example the front loading the dates upon an incorporated payment
or end loading of payments. schedule have in fact expired. Although
The court further recorded that just because interim payments the ndings here will not be of general
did not cover all of the works duration, this did not mean that the application, due to certain case specic
whole of the schemes payment mechanism should be imported circumstances, contractors will nonetheless
into the contract. The contract already provided due dates and need to be wary when xed payment
nal dates for payment which, when read together with the schedules are incorporated into their
applications schedule, demonstrated that the parties had agreed conditions of contract.
the intervals and circumstances in which payments became due. Whilst most conditions provide for a
The parties had entered into an agreement for stage payments for further nal account payment at the end
23 interim payments upon the agreed dates within the schedule of the project, this could be many months
and no more. away in the event of signicant programme
Mr Justice Edwards-Stuart went on to assert that it was not overruns often at the end of the defects
possible to construe implied terms into the contract in such correction period that would be of at least
circumstances, as the contractor would have been aware of the 12 months duration, with consequential
consequences of not nishing on time and running out of interim adverse effects upon the contractors
payments. It had the opportunity to negotiate protective measures cashow with subcontractors, suppliers
at the outset but did not, so terms could not be implied due to and the like still requiring payment in
commercial common sense. this period of overrun. Contractors would
Although it was admitted that further interim payments after therefore be well advised, if in doubt,
application 23 were discussed between the parties, the terms to seek the incorporation of an express
under which they were to be made were not agreed. This would provision, at the contract negotiation stage,
be a pre-condition to a legally binding agreement. setting out what would happen should
Drawing all of these threads together, clearly the courts the applications provided for within any
decision was that Balfour Beatty was not entitled to any further incorporated payment schedule expire
interim payments after application 23. prior to the works being complete.
Although it was not necessary for the judge to decide upon
the issue of whether Grove had served a valid pay less notice Alan Williamson FCInstCES,
in respect of application 24, due to the above conclusions, Mr Principal Consultant,
Justice Edwards-Stuart did pass comment upon this second Schoeld Lothian
point. He concluded that whatever way the contract payment alanwilliamson@schoeldlothian.com
mechanism was looked at, Groves pay less notice given on www.schoeldlothian.com
2016 Penalties 39
He continued:
provision dealing with the consequences
Where the test [for a penalty] is to be applied to a clause xing of breach are honoured by the lower
the level of damages to be paid on breach, an extravagant courts. For those in the process of drafting,
disproportion between the stipulated sum and the highest level or analysing the enforceability of, a
of damages that could possibly arise from the breach would liquidated damages clause, our guidance
amount to a penalty and thus be unenforceable. would be to refer rst to the three-stage
test set out above.
This element of the Supreme Court judgment seems somewhat If the clause can also be shown to pass
self-contradictory, and may ultimately lead to some confusion the genuine pre-estimate of loss test,
when considering the enforceability of a liquidated damages this should provide additional comfort
clause. Nonetheless, our view is that their Lordships were that it will be enforceable. This approach
unequivocal that the genuine legal test for assessing whether a should allow players to enforce liquidated
clause is penal is the three-step test we set out earlier. damages clauses in the course of a project,
without wasting extra time debating
Comment whether or not something falls foul of the
At the time of writing, there have not yet been any reported penalty rule.
cases that apply the El Makdessi decision to a liquidated damages
scenario. As such, it remains to be seen how the courts will Kate Corby, Partner, and William Jones,
interpret the Supreme Courts reframing of the penalty rule, and Associate, Baker & McKenzie
whether they will allow contracting parties more leeway to agree Kate.Corby@bakermckenzie.com
in advance the amounts of damages to be paid on breach. William.Jones@bakermckenzie.com
Since liquidated damages provisions are a useful and practical www.bakermckenzie.com
tool for parties to avoid disputes arising from construction @bakermckenzie
projects, it is hoped that the Supreme Courts comments about
parties being themselves the best judges of what is legitimate in a Kate Corby is the ICES advisory solicitor.
42 Collateral Warranties Construction Law Review
Collateral warranties:
I know I said I would give you them, but...
Fenella Mason, Head of Construction and Projects, Burness Paull
The Scottish courts sink consultant had undertaken, but failed, to produce.
a consultants armada 2015: The contractor asks for the collateral warranty
In 2015 the contractor sent a collateral warranty to the consultant
of arguments about and asked them to sign and return it. The style warrantys blank
Being demanding
Recent cases on performance bond calls
Where are we now when it almost the same, or will do just as well.
In IE Contractors v Lloyds Bank (1990) 2 Lloyds Rep 496, the
comes to making demands Court of Appeal expressed the view that there was less need
for that doctrine in the case of performance bonds because they
on bonds? were used less frequently, and attracted attention at a higher
level in banks, than letters of credit (which formed part of the
ordinary day-to-day mechanism of trade). That distinction
between letters of credit and performance bonds has not met
with universal approval.1 Indeed, 26 years on, it may not have
quite the same force.
Nevertheless, the position2 is that: The degree of compliance
required by a performance bond may be strict, or not so strict. It
is a question of construction of the bond. 3 This ostensibly more
exible stance should not give too much comfort to beneciaries.
Any cursory examination of the decisions on this subject reveals
the need to ensure that the terms of the bond governing notice
1
Sea-Cargo Skips v State Bank of India (2013) EWHC 177 (Comm) at [27]
2
Established in IE Contractors at p.501
3
See also Sea-Cargo Skips at [29] - [30]
2016 Bonds 45
are scrutinised extremely carefully, and to determine whether the delay alleged Although nothing new, the prospect of
that demands are drafted with the utmost was of the type referred to in article IV1(E), invoking requirements not explicitly stated
caution. The slightest non-conformity may and therefore whether its obligation to pay in the bond, coupled with the apparently
justify a refusal to pay. was triggered. fairly strict approach to requiring
In Frans Maas v Habib Bank (2001) Determining the stipulations which compliance, seems recently to have proven
Lloyds Rep. Bank. 14, the bond required the must be included in a demand is a matter grist to the mill of issuers. Two instances of
party making a claim thereunder to state of interpretation. The requirements are rejected calls have been reported already
that its counter-party in the underlying often stated clearly and expressly, causing this year. The decisions illustrate well the
contract had failed to pay you under little difculty for the prudent beneciary. courts present approach to interpretation
their contractual obligation. The demand Occasionally, however, the precise in this context, and explore the limits of
stated we claim the sum of 500,000, statements to be contained in a demand issuers ability to rely on alleged non-
[the other party] having failed to meet their are less obvious. On its true construction conformities within the demand in an effort
contractual obligation to us. The bank a bond may require a particular statement to resist payment.
or assertion to be made in a demand, even
refused to pay and the court held that its
though that requirement is not expressly
refusal was justied. The key statement Lukoil v Barclays Bank
stipulated, on the basis that the statement
was a failure to pay. A failure to meet Often a failed call will be no grave matter.
was necessary to enable the bank to
obligations did not necessarily equate to The beneciary will usually be able to
determine on the face of the document
a failure to pay. It was ambiguous and the make a revised demand that complies with
whether its obligation is engaged.
bank was not obliged to accept it. the bonds requirements. That was not so
In Esal (Commodities) Ltd v Oriental
In Sea-Cargo Skips, a bond procured in Credit (1985) 2 Lloyds Rep. 546, for example, in Lukoil Mid-East Ltd v Barclays Bank plc
relation to a shipbuilding contract required the Court of Appeal decided that an (2016) EWHC 166 (TCC), (2016) BLR 162, where,
a demand thereunder to state: undertaking to pay on your written by the time Lukoil received Barclays +
demand in the event that the supplier letter rejecting its US$7m demand, the
That the vessel or the construction fails to execute the contract in perfect bond had expired, preventing a further call.
thereof is delayed with more than 270 performance required the demand to state Whether Barclays was right to reject the
days as set out in the contract article that it was made because the supplier had call therefore bore enormous importance.
IV1(E) which entitles the buyer to cancel failed to execute the contract. Similarly, The bond served as security for
the contract and to receive repayment of in IE Contractors, an undertaking to pay the contractors performance of oil
the advance payments. you the said amount on demand, being drilling works that Lukoil had engaged
your claim in damages brought about by it to execute in southeast Iraq. Barclays
The buyers demand under the bond the above named principal required the contended that Lukoils demand was
failed to refer to the relevant article of the demand to state that it was a claim for defective because it failed to state that
contract, such that the bank was not able damages brought about by the principal. no amendment had been made to the
An impressive array
of silks and juniors
Legal 500
underlying drilling contract which impacted specic sum because once Coface knew
upon the timely performance of those the councils costs, the sum to be paid was
works. It relied on the following words determined by a relatively straightforward
from the fourth paragraph of the bond: process of calculation, applying the
schedule and index linking provisions in
[Barclays] shall be responsible for the the bond. Coface was able to carry this out
payment of the total above mentioned just as easily as the council.
amount in full at [Lukoils] rst written Cofaces second argument fared no
request submitted to [Barclays] before better. The bond required notice in
the expiry date if [Barclayss client] fails following cessation of mining at an writing of any breach. The councils
to full the contract provisions, on the opencast coal mine near Douglas. The demand had stated that the contractor was
condition that no amendment has been amount recoverable from Coface varied in breach of its obligation to carry out
made to the contract concluded between over time in accordance with a schedule to the restoration works. Coface argued that
[Lukoil] and [Barclayss client] impacting the bond and certain indexing provisions, greater specication of the precise breach
the timely performance of the works but was subject to a maximum liability of that had occurred was required. However,
under the contract. 4,499,411. in circumstances where the contractor had
Before completing the restoration entered insolvency and could not carry
Stuart-Smith J held that the demand was works, the contractor became insolvent. out the works, the court noted that it was
valid. He acknowledged that, in light It ceased work and was wound up. The impossible to specify the breach beyond
of IE Contractors and Esal, stipulations council made a call on the bond by a stating that the restoration works would not
as to the required content of a demand single notice, which stated both that the be carried out.
might, on a proper interpretation of the contractor was insolvent and in breach of
bond, be implied rather than express, its requirement to carry out the restoration Where are we now?
but held that the principal justication works, and that the cost of completing Although requirements as to the content or
underpinning the interpretation of the the restoration works was some 9m. Not form of a demand may be expressly
bonds in those cases was that the bank long after the councils call, the amount framed as such, further requirements may
needed to know, based on the contents of recoverable under the bond decreased not be explicit, and only apparent from a
the demand alone, whether its obligation substantially. Accordingly, as in Lukoil, the careful interpretation of the words of the
to pay was triggered.4 That justication did validity or otherwise of the councils call bond. This is most frequently so where a
not avail Barclays. The statement alleged was important. certain fact (usually a breach by the issuers
to be necessary could have no bearing Coface rejected the councils call, client) is framed as a prerequisite to the
on the obligation to pay because the arguing that the bond required a two- issuers obligation to pay.9 It also occurs
fth paragraph of the bond very clearly stage notice procedure to be followed; where the nature of the sums to which
acknowledged that no amendments or a written notice of breach and the cost the beneciary of the bond is entitled is
addenda to the underlying contract would of the restoration works, followed by a described in the bond.10
relieve Barclays of its obligations and that separate demand for payment of a specic Parties making calls under bonds which
Barclays waived the right to be notied sum. It also contended, as a secondary describe or condition the issuers liability
of the same. Although that provision ground, that the council had failed to state to pay, should be astute to make clear
conicted with the closing words of the the contractors breach with adequate in their demand that those conditions
fourth paragraph, Barclays accepted specicity. Neither ground for rejection or descriptions are met. Moreover, it is
(correctly, the judge said) that the bond found favour at rst instance, or on appeal a counsel of prudence that the demand
was not invalidated by amendment.5 to the Court of Session, which held that should provide a reasonable level of
This acceptance effectively brought only one notice was required and that detail on those matters such that there
an end to the matter. Barclays was the breach was sufciently stated. The can be no challenge to the demand on
unable to point to any justication for councils demand was valid; Coface was this front either. The objective is always to
the statement which satised the judge. obliged to pay. The existence of a two make it clear to the issuer on the face of
Barclays suggestion that it had an interest stage procedure was not expressly stated the demand that its obligation to pay has
in knowing of any amendment, because it in the bond. Cofaces contention was been triggered.
increased the risk of a call, was dismissed instead based on a detailed and, it must These recent cases make clear, however,
be said, fairly strained interpretation of that there is a limit to the scope for
as ignoring contractual realities.6 The judge
the language used in the bond, predicated interpreting the bond as imposing demand
also found that it was commercially absurd
upon minor differences in expression. requirements that are not expressly stated.
to expect Lukoil to be able to make the
The court disagreed with this approach. Where the content of the statements
required statement. Given the size of the
It stated that the provisions of the bond allegedly required can have no bearing on
project, extensive changes were inevitable.7
had to be construed in a practical manner, the issuers obligation to pay, and serve
in accordance with commercial common no real commercial purpose (other than
South Lanarkshire Council v Coface
sense and having regard to the essential posing a further technical hurdle to the
A similarly purposive approach to
purpose of a performance bond. An unduly issuers liability), issuers are likely to face
interpretation was applied by the Scottish
technical construction was to be avoided.8 an uphill struggle in persuading the courts
Court of Session (Inner House) in South
Paramount in the courts reasoning of the merits of that interpretation.
Lanarkshire Council v Coface SA (2016)
was that the second notice in the alleged
CSIH 15, [2016] BLR 237, where the council
two-stage notice procedure (one making Stephanie Barwise QC and
was the beneciary of a bond issued
a demand for a specic sum) served no Omar Eljadi, Barrister, Atkin Chambers
by Coface to secure the contractors
commercial purpose. That the council was sbarwise@atkinchambers.com
completion of certain restoration works
demanding payment would be clear from oeljadi@atkinchambers.com
4
See [19] the rst notice they served. There was no http://www.atkinchambers.com
5
See [26] need for a second notice demanding a
6 9
See [28] See Esal
7 8 10
See [30] See [22] See IE Contractors
2016 FIDIC 47
sub-clause 2.4?
arbitrator and it was not open to the courts to interfere.
So, although the devil is as always in the detail, the arbitrators
award might offer a clearer view of what may be acceptable as
reasonable evidence under sub-clause 2.4.
The facts
Chronologically, the brief facts of the case are:
The employer shall submit, within 28 days after receiving any request from the
contractor, reasonable evidence that nancial arrangements have been made and
are being maintained which will enable the employer to pay the contract price (as
estimated at that time) in accordance with clause 14 (contract price and payment). If
the employer intends to make any material change to his nancial arrangements, the
employer shall give notice to the contractor with detailed particulars.
The contract does not dene reasonable evidence. The arbitrator considered that the
letters sent on behalf of NIPDEC, in reply to NHICs requests for reasonable evidence,
were insufcient to satisfy the requirements of sub-clause 2.4; this was founded on there
being no evidence of cabinet approval for the funding.
On 3 September 2004, NHIC issued a request for reasonable evidence of the
employers nancial arrangements under sub-clause 2.4. NIPDECs response, on
29 December 2004, referred to there being cabinet approval for the additional funding.
On 28 April 2005, NHIC made its second request for reasonable evidence of the
employers nancial arrangements. On 23 June 2005, having not received a response,
NHIC gave notice under sub-clause 16.1 to reduce the rate of work.
T HERE has been much written about (and cautioned against) the use of letters
of intent over the years. It is perhaps a testament to the attention letters of intent
have been given that the courts have seen very few cases recently where the
parties are governed, or said to be governed, by them.
It is not my intention to repeat what are perhaps now trite warnings over the use of
letters of intent in place of entering into formal contractual arrangements although,
there is no harm in repeating it, if just once. There is, however, one aspect in respect of
them which has had less practitioner attention than perhaps it ought; the impact of the
payment provisions of the amended construction act on the payment arrangements under
letters of intent.
Edwina Acland on an
Given the recent prolicacy of payment-
related construction cases reaching the
aspect of letters of intent courts, it may be only a matter of time
before the applicability or otherwise of the
that isnt widely debated payment provisions of the act, intertwined
with the complications of letters of intent,
comes before the courts.1 It is not my intention to repeat
It is not uncommon for letters of intent
to include a cap on the amount payable what are perhaps now trite
to the contractor for the duration of time
the letter is intended to cover. This should warnings over the use of letters
be relatively straightforward, particularly of intent in place of entering into
where there is an agreed schedule of
rates or priced activities list, along with a formal contractual arrangements
clear scope of works and programme for
the contractor to adhere to. In an ideal
although, there is no harm in
world (where the use of letters of intent repeating it, if just once.
is unavoidable), the scope of works, time
period and cap are reasonably well aligned
and the fully executed contract is entered into before either party
has the opportunity to start raising concerns.
However, as is too often the case, the parties do not agree on
the terms of the nal contract and letters of intent continue to be
issued and re-issued, or worse elapse, leaving a void as to how
the relationship is governed. As time goes on, the likelihood of
disagreements increases. And the chances are they will relate in
some way or form to payment.
Assuming that the work authorised under a binding letter of
intent is for a period of at least 45 days, it seems to me that the
letter of intent could be construed as a construction contract for the
purpose of the act, entitling the contractor to periodic payments.
The implications of this could be quite signicant for both
parties. If and to the extent the payment terms of the letters of
intent do not comply with the amended act, then the relevant
provisions of the act (and scheme) would apply. As such, a
contractor under a lump sum/capped letter of intent could be
1
In Allen Wilson Shoptters v Mr Anthony Buckingham (2005) EWHC 1165, HHJ
Peter Coulson QC (as he was then) commented upon this issue, but this was before
the amendments made to the 1996 act by part 8 of the Local Democracy, Economic
Development and Construction Act 2009 and was an adjudication enforcement case
and so the judge declined to review the correctness or otherwise of the adjudicators
decision on the matter
2016 Letters of Intent 51
entitled to periodic payments for the work undue comfort from any capped gure
done, even if the letter of intent did not in the letter and be alert to any interim/
anticipate this and the total payable periodic payment applications made by the
in respect of such payments would not contractor. Failure to respond timely and
necessarily equate to the cap. comprehensively with payment and/or pay
This not only places an administrative less notices runs the risk of the letters of
burden on the parties by needing to intent cap being dislodged by the sum total
be alert to the importance of preparing of the notied sums.
compliant and timely payment (and pay
less) notices at regular intervals, but it also Edwina Acland, Solicitor,
opens up the question as to how much the Sharpe Pritchard
contractor is entitled to. As it is unlikely the eacland@sharpepritchard.co.uk
parties would have agreed the amounts of www.sharpepritchard.co.uk
the periodic payments (as these were not @SharpePritchard
anticipated), such amounts are implied by
the provisions of the act and scheme. The
key phrase in the scheme in analysing this
is the contract price, as it is this which sets
the upper limit of the amount payable. It is
dened as:
KE^dZhd/KE/^Whd
The entire sum payable under the
construction contract in respect of
the work.
some force in arguing that these become process for: to understanding the
referring a
responding
dispute to
to an adjud
adjudicatio
n
adjudicatio
n
ication notice
7RGLVFXVVKRZ6KDUSH3ULWFKDUG
The obvious way to avoid this risk is to FDQKHOSFRQWDFW
This is an important limit placed on any estoppel, but one There will be no estoppel without a sufcient number of
might question why it would bar BBs claim when the point occurrences to form a course of conduct.
was apparently never raised in Leeds. In both cases, hadnt the The engineer or contract administrator must have the
contractor sought to rely on the estoppel as the basis for its claim authority to alter the contractual valuation dates, or else the
for interim payment? However, although the estoppel might have estoppel will fail.
appeared to act as a sword in Leeds, the difference was that in The estoppel cannot be used to create any new rights beyond
Grove, BB was attempting to use the estoppel to create a right those conferred under the contract.
to obtain further interim payments, rather than just varying the
route through which an already existing contractual right could Sarah McCann, Barrister, Hardwicke
be exercised. Waco was therefore able to rely on the estoppel and sarah.mccann@hardwicke.co.uk
there was no question of it being used as a sword. www.hardwicke.co.uk @hardwickelaw
Harding v Paice
Rhyming slang for hard cases do not make good law?
The failure to serve a pay less notice should either have a deeming
effect in relation to all payment applications or in relation to none.
The appeal
Both the contractor in Harding and the employer in ISG launched appeals, but the ISG
appeal settled before it was due to be heard. However, amongst the points raised by the
contractor in the Harding appeal1 was an argument that the fourth adjudicator did not
have jurisdiction to decide the dispute as to the proper value of the termination account
because the third adjudicator had already decided the amount properly due in respect of
the account. In making that argument, the contractor relied upon the decision in ISG,
contending that, by failing to serve a pay less notice, the employer must be deemed to
have agreed the value of the account and the adjudicator had to be taken to have decided
the value of the work carried out.
The contractor also argued in the alternative that, even if the third adjudicator had not
decided the amount properly due (i.e. because it had decided the dispute only on the
basis of the lack of a pay less notice), it had nevertheless been asked to decide that issue
and had made a decision in that adjudication, thereby engaging paragraph 9(2) of the
scheme which provides that:
An adjudicator must resign when the dispute is the same or substantially the same as
one which has previously been referred to adjudication, and a decision has been taken
in that adjudication.
In giving the leading judgment, Jackson LJ took the latter point rst. He held that the
word decision in paragraph 9(2) means decision in relation to that dispute and that
ultimately it is what the rst adjudicator actually decided which determines how much
or how little remains available for the second adjudicator. He said that Parliament could
not have intended that if a claimant refers 20 disputes to adjudication but the adjudicator
decided only one, future adjudications about the other 19 were to be prohibited. In the
present case, the third adjudicator had made no decision in relation to the value of the
account and the judge was therefore correct to interpret paragraph 9(2) in the way he did.
So far as the other ground of appeal was concerned, Jackson LJ disagreed with the
contractor that the fourth adjudicator did not have jurisdiction to decide the dispute
because it was the same, or substantially the same, as the dispute already decided by
the third adjudicator, namely the amount properly due in respect of the account. He said
that, on a proper analysis, the contractor had referred a dispute involving two alternative
issues to the third adjudicator, one relating to the failure to serve the pay less notice
(the contractual issue) and one relating to the amount properly due on the account (the
valuation issue). It was clear that the third adjudicator had only dealt with the former.
Jackson LJ said it was unnecessary to embark on an analysis of ISG. He therefore did
not think it necessary to consider what the judge had said about deemed agreement was
correct. The important point so far as he was concerned was that the passage in the ISG
1
(2015) EWCA Civ 1231; (2016) BLR 85; 163 ConLR 299
2016 Payment 57
judgment upon which the contractor relied not there is an opportunity for subsequent adjustment should
did not apply to nal accounts. make no difference. The failure to serve a pay less notice should
Jackson LJ therefore held that although either have a deeming effect in relation to all payment applications
the employers failure to serve a pay or in relation to none.
less notice meant that the employer had The Court of Appeal could (and probably should) have said
to pay the full amount shown on the that, whilst the judge was right to decide that, as a matter of
contractors account, it did not mean that contract, interim applications had to be paid in full in the absence
the employer was precluded from starting a of a pay less notice, he was wrong to say that an employer was
new adjudication in order to determine the to be deemed to have agreed the value of the interim valuation
correct value of the contractors account. put forward by the contractor. There was no need for any deemed
agreement, still less for the adjudicator to have been deemed to
Comment have decided the question of the proper value of the account.
It is regrettable that the Court of Appeal did However, as things stand, there must remain some uncertainty as
not take the opportunity to decide whether to whether what the judge said about that was right.
the judge was right in both ISG and Another aspect of the decision which may give rise to more
Galliford Try to say that an employer, by questions than it answers is the nding that this was one dispute
failing to serve a pay less notice, was to be with two alternative issues, only one of which was decided by the
deemed to have agreed the amount stated third adjudicator. Not only was that true of the dispute in Harding
by the contractor to be due. Instead, the but it was also true of the disputes in ISG and Galliford Try. Were
Court of Appeal seems to have accepted it not for their deemed agreement, the employers in both those
as the judge himself had tried to explain other cases would have wished to argue the same, namely that
in Galliford Try that a different regime the adjudicator had only decided the contractual issue and not the
should apply in relation to nal accounts. valuation issue.
In contrast with interim payments where an More generally, it seems likely that the decision will spawn any
adjustment for overpayment could always number of cases where the scope of a dispute and its constituent
be made on the next interim valuation, an issues will give rise to argument as to what has already been
employer would otherwise have no means decided and what therefore remains for subsequent adjudication.
of challenging and adjusting the amount Harding v Paice was a hard case. The result was almost certainly
subsequently. right but, for all the above reasons, it is doubtful whether it makes
There is no logical basis for the good law.
distinction. There is no reason why any
deeming effect should depend upon the David Sears QC, Crown Ofce Chambers
type of payment application. Whether or www.crownofcechambers.com sears@crownofcechambers.com
*VUZ[Y\J[PVU
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Adjudication
Arbitration
Construction
Energy
Engineering
Infrastructure
Insurance
Professional Negligence
SPECIALIST BARRISTERS Property Damage
Whats new?
Previous users of IChemE contracts will nd many aspects of this
new short form familiar. However, it varies from previous contracts
in that it is for the provision of services only and does not include
John Challenger on the within its scope the procurement of materials or the installation
or construction of plant. The obligations and liabilities of the
latest form from IChemE parties are thus quite different. Nevertheless, the general sequence
of clauses and schedules and their titles follow the previously
published forms of contract.
This short form is suitable for pure consultancy services, such
as feasibility and concept studies, the development of business
cases or research and development activities, which are likely to
have a relatively low contract price and are generally of a short
duration. It is equally suitable for other industries and types of
work unconnected with the process sector, where professional
services for concept/feasibility studies, business or product
development, or cost estimating and management are required.
This short form has not been developed to act as an
employment contract for agency staff, secondments or sole traders
working essentially as employees of the purchasing company. It
contains a typical form of agreement, a set of general conditions of
contract and recommended schedules.
Guidance is provided on how to compile the agreement
and the schedules to which reference is made in the general
conditions. The guide notes have been included that will aid
interpretation of some of the general conditions and to explain the
need for certain special conditions. As with all previous IChemE
published forms, users are strongly encouraged to read the
relevant guide notes before completing the agreement, preparing
any special conditions (if required) and completing the schedules
IChemE Forms of Contract
For over 45 years IChemE have partnered with experienced
industry professionals to publish their acclaimed UK and
international Forms of Contract.
(some of which are optional), all of which to refer the dispute to the relevant court.
will have to be written individually. Clearly in some locations this may not be
a cost effective approach and therefore the
Location parties are encouraged to include a special
Since 2007, IChemE has published contracts condition that will dene the preferred
specically for use either in the UK or method of dispute resolution.
for international application; however,
this short form is structured so that it General conditions
may be used in any location. As with the The general conditions in particular have
previously published international forms been formulated to reect best practice
of contract, the short form will require the and relationships within the process plant
general conditions to be supplemented by sector, which is generally recognised as
the drafting of special conditions to deal being far less adversarial than other parts
with those matters arising out of specic of the construction industry. IChemE has
governing law/jurisdiction and/or location always adopted the basic philosophy that
of any intended project. the parties should co-operate to achieve
The general conditions have been the mutual objective of a successful project.
drafted on the basis that the contract is It is in the best interests of the parties to
in compliance with the laws of England. deal fairly with each other and with their
In view of the wide variations in law sub-consultants, specialists and advisors
and practices in different countries, in an atmosphere of co-operation in order
advice should always be sought as to the to achieve successful solutions to the
appropriateness of any terms, or the need problems that will inevitably arise during
for additional matters, having regard to the course of any project.
the law of the contract and the law of the Given the relatively low cost and limited
country where the services are performed liabilities associated with the application
or the project is situated. of the short form, it is anticipated that the
contract can be used without change to the
Dispute resolution general conditions. As with all contracts
We took the view that disputes are likely published by IChemE, the institution
to be a rare occurrence under the short advises against modications to the general
form. As a result, the approach to dispute conditions in order to avoid introducing
resolution has been deliberately simplied provisions that may conict with these
and does not include clauses in the general well-established practices and relationships.
conditions for arbitration, adjudication or Users should particularly be aware of the
expert determination. risk of introducing inconsistencies within
The primary approach to resolving the contract conditions, or provisions that
disputes is to escalate the matter to more may be unenforceable. The consultants
senior management of the contracted liabilities are also considerably different to
parties rather than to an external body. those of a contractor and the short form
If this fails then the default approach is reects this by deliberately limiting the
Agreement
It is strongly recommended that the agreement be used in the
form provided. The agreement denes those documents which
comprise the contract. This will include incorporating into the
special conditions or the schedules all those documents in the
The consultants liabilities are considerably consultants tender which have been agreed by the parties to form
part of the contract.
different to those of a contractor and the short When there have been changes in concept during pre-contract
form reects this. negotiations, any relevant special conditions or schedules should
be amended before the agreement is signed. The contract can be
modied by agreement between the parties at any time after it
nancial obligations of the consultant in has been signed, but it is important that any modication should
the event that it fails to satisfactorily carry be expressed in unambiguous terms in a document signed by
out the services. both parties.
The short form is available in digital format, which is
Pricing and payment consistent with forms of consultancy contract available from other
As the range and variety of professional institutions. A printed version will be made available as part of the
or consultancy services covered by this long form of professional services contract when it is published in
contract could differ widely, then the the near future.
payment mechanisms to be applied may
be equally wide. If, for example, the John Challenger CEng FIChemE FIMechE, Chair, Contracts Committee,
services are for a dened project with a Institution of Chemical Engineers
predetermined timescale, the contract price john.challenger@wh-partnership.com
is likely to be based on a xed lump sum. www.icheme.org/foc @icheme
Conversely, pure consultancy services, for
which the outcome is unknown and the
terms of reference and timescales are not
capable of being fully dened, are likely
to be undertaken on a reimbursable rates
basis. The parties must carefully select and
agree the pricing mechanisms adopted if
disputes are to be avoided.
No purchaser will wish to commit
to an unlimited expenditure so it is
imperative, even where it is not possible Claims Advice
to fully dene the scope of work initially, Dispute Resolution Consultancy Services
that some means of nancial and/or
time control should be applied to avoid Adeooersacomprehensive,independent
misunderstandings emerging in the latter contractual and commercial service designed
toguideclientsthroughthecomplexitiesof
stages of the services. Based on this
construction and engineering projects
approach to pricing and payment, the from inception to completion.
contract price is not to be stated in the
agreement at the time of making the
contract, but rather is dened as the total
amount payable to the consultant.
Competence
As with all other IChemE forms of contract,
it is emphasised that the purchaser should
satisfy itself of the qualication and
competence of any potential consultants
or other service providers under
consideration. In this regard it is also wise
to seek references from clients for which Commercial and Contractual Negotiation Claims Appraisal,
the consultant has undertaken relevant Preparation and Defence ADR Contract Advice and Problem
services in the recent past. Solving Delay and Disruption Analysis Claims Negotiation and
Settlement Preparation of Documentation for Adjudication,
The purchaser should also devote
Mediation and Arbitration Negotiation and Settlement of Final
sufcient time to compiling information Accounts Expert Determination Claims Avoidance
that will help to minimise variations in
the consultants tenders. In this regard,
the tender invitation should incorporate ContactHeadOceon01403821770
a draft contract document including, enquiries@adeo.uk.com www.adeo.uk.com
as a minimum, drafts of the schedules
Accredited Courses
Concurrent delay:
Time does not always equal money
Andrew Bayne, Partner, Centra Consult
In contrast to City Inn, Walter Lilly & Co Ltd v Mackay (2012) EWHC
1773 (TCC) reafrmed what had been the established position. At
paragraph 370 of the judgment, Mr Justice Akenhead states:
where are we up to? A period of project overrun which is caused by two or more
effective causes of delay which are of approximately equal
causative potency.
additional works but it may still result concurrent delay was operative and where
in critical path delay. The contractor may costs were being incurred pursuant to the
be experiencing delay which is its own failings of the contractor. However, where
responsibility (shortage of labour is an two concurrent issues exist, it should be
example used in the above judgments) but possible for the chain of causation to be
where does this result with regards to an established whereby costs arising from the
extension of time being due? Perhaps to effect of relevant events can be recovered
an employer or contract administrator, the by the contractor. An example would be
shortage of labour may be the effective where the relevant event has prolonged
cause of critical delay. However, if the the period that a tower crane was needed
impact of the relevant event results in on site. Site staff costs are perhaps less
a chain of causation upon the critical easily disentangled for the purpose of
path which delays completion, then a attributing to a relevant event so a
contractor would feel somewhat aggrieved degree of apportionment would perhaps
if the employer is still entitled to deduct be understandable. If an extension of time
liquidated and ascertained damages. is granted, it does not necessarily result
in a situation whereby the contractor can
Time v money recover all of its time-related costs. But
It is important to emphasise the distinction in relation to time, if a chain of causation
between time and money. It is entirely can be established where a relevant event
possible that an extension of time may has delayed completion, albeit during a
be due, but that no loss and expense period of concurrent delay, should the
is payable and vice-versa. The chain employer be entitled to deduct damages
of causation should apply to loss and for contractor delay during this period?
expense as well. However, perhaps the Under a traditional standard form
apportionment approach described in the contract, where assessment of extension of
City Inn case is more appropriate with time is undertaken retrospectively, the full
regards to loss and expense? effect of a relevant event may already be
In general, time related costs such as known at the point in time an extension
preliminaries would not be payable to the of time is granted. It may be that, in
contractor during a period of concurrent retrospect, the contract administrator takes
delay. The contractor would still need the view that the effective cause of critical
to be on site for the period where its delay during the period the relevant event
2016 Delay 65
This different denition introduces the concept that risk can be perceived as having a
positive effect as well as a negative effect.
The management of risk during the course Knowing what we are doing
of the project is an iterative process The implementation of an effective risk management system for
to monitor the identied risks and the both tendering and project execution, whether in accordance with
implementation of the mitigation measures ISO:31000 or not, will allow a party to a construction project to
and identify, assess and evaluate any better understand the potential problems that are likely to arise
new risks that may arise and were not and how best to mitigate or eliminate them.
considered in the tender process. The The management and mitigation of risk is therefore an
introduction of the early warning system important aspect of the construction process for any size of
into contracts, most notably in the New project. An effective risk management system will reduce the risk
Engineering Contract (NEC) suite, has that comes from not knowing what we are doing and provide
pointed out the requirement for a project greater certainty to the parties to the project.
to identify and deal with risks that could
impact the time, quality and cost of a Gordon Lees FCInstCES
project in a collaborative manner, and JGL Consulting
to allocate risks to the party best able to gordon@jglconsulting.co.uk
mitigate them for the good of the project. www.jglconsulting.co.uk
2016 Contract Administration 69
C
documents to take into account any changes that have been
ONTRACT administration is a far- negotiated and agreed between the parties within the appropriate
reaching topic and much of it falls section of the contract. This also applies to tender queries and
outside the purpose of this article, their responses, which will arise in the rst instance from lack of
but there are many ways in which good clarity, ambiguity or conict within the documents. Rather than
contract administration will help when a just including the tender queries and responses as an addendum to
claim situation occurs. Additionally, many the contract as is often the practice, the relevant documents should
claims arise from conicts or ambiguities in be amended to reect the instructions given in the responses to
contract documents or the failure of one of such queries.
the parties to comply with its obligations The best time to complete and sign the contract is as soon as
under the contract. Good contract possible after the agreement has been made. If this is not done,
administration can also therefore play an personnel responsible for the construction and administration of
important part in avoiding claims. the project will often replace the people involved in the tender
and subsequent negotiations or memories will grow dim. Whilst
The contract documents there should be pressure to produce the contract documents for
The contract documents will usually completion and signature as soon as possible, it should always be
form the basis of any claim. If something remembered that rushing this very important task and producing a
has changed, the extent of the change poor set of contract documents could have serious consequences
may only be measured and evaluated by later on.
reference to the drawings and specication
upon which the contract is based. The Programmes and planning
claimants entitlement to make a claim will Most forms of contract require the contractor to submit a
usually be spelled out in the conditions programme of the works to the engineer for acceptance or
of contract, as will the procedure to be approval. This usually has to be done within a specied time
followed in the case of a claim. If there frame. The contractor should do its utmost to produce the most
is a disagreement between the parties as detailed and accurate programme possible within the time
to design, quality, responsibility, scope of stipulated. As a minimum, the programme should include:
works or procedures, the contract is the
place to look for guidance and resolution. A clear intention of the time and sequence of how the work is
There is a great temptation for those intended to progress.
whose job it is to prepare and compile the A clear critical path to completion.
contract, to dump all sorts of documents Dates when the employers input is required, with links to the
into it. Typically these may consist of critical path.
correspondence between the parties
between the time of tender and the If delays occur and the contractor wishes to pursue an extension
letter of acceptance, tender queries and of time claim, then the programme will be the yardstick against
clarications, tender bulletins, minutes of which to measure the effect of delays, so it is essential to have this
meetings during the negotiation process in place as soon as possible. It is usual for contracts to allow for
and the like. The potential for conict revised programmes to be prepared should the previous version
between such documents and other no longer reect the intended sequencing of the project, current
contract documents becomes high in such progress or extensions of time awards. A revised programme is
a situation and may, according to the the one in which to make amendments and not in the original
order of precedence stated in the contract, baseline programme.
not reect pre-contract negotiations and Contract administration procedures should allow for an updated
subsequent agreements between the programme to be maintained, recorded, submitted, agreed and
parties. The possibility for error is also kept as a record on a regular basis. The updates should include
increased if important points are hidden for changes such as additional work, omitted work and extensions
away in the main contract documents. of time awards. If logic errors have been discovered within the
70 Contract Administration Construction Law Review
Notices
Many forms of contract include requirements for the contractor Available on an international basis to
individuals and companies that possess
to provide notices or early warning of events or circumstances
skills, qualications and expertise in the
that it considers may provide entitlement to additional time or specialist eld of construction claims.
payment within a specied time frame of the event occurring.
The reasoning behind such requirements is that the employer and Become a member. Get the recognition
that you deserve. Apply today at
its agents need to be made aware of the circumstances as soon
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as possible, in order that they may consider corrective action or
mitigation measures which may be implemented to minimise
the effects of the circumstances. Additionally, if no mitigation
CONSTRUCTION LAW PROFESSIONALS
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Howard Close working for contractors involved in professionals working in the specialist
Waltham Abbey building and civil engineering works eld of construction claims based on
Essex and has produced expert reports for qualications, expertise and experience.
EN9 1XE the purposes of court action. Andrew Corporate membership is also available
UK Bayne also has a masters degree in to companies providing services within
+44 (0)845 371 2575 construction law. this eld. The ICCP is an international
admin@blueskyadr.com Alexander Dickson BSc MBA LLB MCIOB FCIArb organisation and is accessible to claims
www.blueskyadr.com sandydickson@centra-consult.com practitioners on a worldwide basis.
Peter Barnes MSc FCIArb FCIOB MRICS MICE MCInstCES Chairman. Sandy Dickson is a quantity
Arbitrator, adjudicator, mediator and surveyor with chartered status within the
expert witness in respect of both liability construction industry. He is experienced in John Papworth Limited
and quantum issues. Represents parties in commercial management; the preparation White Shutters, 47 High Lane
arbitration, adjudication and mediation. and defence of claims; and preparation and Shapwick
Provides seminars and training and author/ adoption of commercial control systems Bridgwater
co-author of several books including Delay for commercial organisations. He has Somerset
and Disruption Claims in Construction. prepared expert witness reports and also TA7 9NB
Matthew Davies BSc(Hons) LLB(Hons) LPC MRICS has extensive experience in representing UK
Specialises in providing legal, commercial parties within adjudication and more +44 (0)7747 778 517
and contractual management, construction recently in mediation. www.johnpapworth.com
claims and dispute resolution services Peter McKernan HNC Building MCIOB ACIArb John Papworth
to the construction industry. Drafts and petermckernan@centra-consult.com johnrobertpapworth@gmail.com
reviews contracts, subcontracts and Partner. Peter McKernan is a highly
Consultant in international dispute
collateral warranties and advises on a experienced project manager and planner
resolution engineering and construction.
variety of contentious and non-contentious who has worked in both the contracting
Chartered arbitrator; FIDIC listed dispute
construction matters. Matthew Davies and consulting sides of the industry. His
board member; adjudicator, mediator,
is on the Royal Institution of Chartered experience spans more than 30 years and
conciliator, expert determiner. 46 years
Surveyors panel of adjudicators. he is experienced in the preparation of
experience in different continents and
delay analysis and production of reports
jurisdictions on oil and gas, power
for adjudication, litigation and mediation
generation and transmission, building, civil,
Centra Consult submissions.
process, electrical, mechanical and nuclear
17a Spylaw Street
engineering projects. Gives training and
Edinburgh
Corbett & Co International Construction talks to rms and professional groups.
EH13 0JS
UK Lawyers
+44 (0)131 441 0800 George House
www.centra-consult.com 2 Claremont Road Keating Chambers
Teddington London
Ana Almeida MCE Civil Engineering PMP
anaalmeida@centra-consult.com TW11 8DG WC2R 3AA
Consultant. Ana Almeida is a chartered UK UK
engineer with experience in project +44 (0)20 8614 6200 +44 (0)20 7544 2600
management in the UK and overseas. Prior info@corbett.co.uk clerks@keatingchambers.com
to joining Centra Consult, her experience www.corbett.co.uk Alexander Nissen QC
was gained working for contractors on Edward Corbett anissen@keatingchambers.com
multimillion pound construction projects. Recognised as a principal construction Alexander Nissen QC is a highly acclaimed
Ana Almeida is currently completing her law practice dealing with international silk who acts for and against major
studies to achieve an MBA. arbitration, litigation and the FIDIC forms players across the construction industry
Chris Atkinson BSc(Hons) LLM(Construction Law) of contract. The company works both in a range of domestic and international
MCInstCES MCIArb internationally and in the UK advising claims (via litigation, arbitration,
chrisatkinson@centra-consult.com on procurement, drafting and negotiating adjudication and mediation). Alexander
Partner. Chris Atkinson is a quantity contracts, dispute avoidance and dispute is a member of leading commercial set
surveyor with over 20 years experience resolution. Edward Corbett heads the Keating Chambers, which has unparalleled
within the construction industry and a company which has one of the most expertise and experience in construction
masters degree in construction law. He is experienced construction law teams in law. Its outstanding silks and juniors
experienced in commercial management; the UK. are specialist advocates, committed
the preparation and defence of claims; to providing the best legal advice, in
the preparation and adoption of conjunction with a practical strategic
commercial control systems for contracting Institute of Construction Claims understanding of the commercial pressures
organisations; and a variety of dispute Practitioners specic to the construction industry.
resolution processes, notably adjudication. Kissack Court, 29 Parliament Street
Chris Atkinson is on the Chartered Institute Ramsey
of Building and Construction Industry IM8 1AT
Council lists of adjudicators. Isle of Man
Andrew Bayne BSc MSc LLM(Construction Law) MCIOB hello@instituteccp.com
MCIArb ARICS http://instituteccp.com
andrewbayne@centra-consult.com Andy Hewitt FCInstCES FICCP FCIOB FQSi ACIArb
Partner. Andrew Bayne is a delay analyst Andy Hewitt is executive ofcer of
specialising in the preparation of extension the Institute of Construction Claims
74 Construction Law Professionals Construction Law Review
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