Construction law in 2018—the year so far

We look back at some of the key developments that occurred in the world of construction law and practice in the first half of 2018, highlighting important cases, legislation and other industry developments.

 

First published on LexisPSL Construction. Click here for a free trial.

Key Cases

Grove v S&T

Grove v S&T represented a significant change to the law around payment-related notices under the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996). In that case, the Technology and Construction Court (TCC) held that an employer was able to challenge, by way of further adjudication, the amount due to a contractor in respect of an interim application, by reference to the true value of the works—even if the employer had not given a valid payment or pay less notice.

In the court’s view, this conclusion was supported by first principles and Court of Appeal authorities, and the court described the earlier decisions of ISG v Seevic and Galliford Try v Estura as ‘erroneous and/or incomplete’. See News Analyses: Failure to give a payment or pay less notice—a change of approach (Grove Developments v S&T) and Uncertainties after Grove v S&T.

 

Grove v S&T has since been cited by the Chancery Division in Re A Company (No 008654 of 2017), and most recently by the TCC in ICI v Merit Merrell (see News Analyses: Court strikes out winding-up petition, in light of true value of the works (Re A Company (No 008654 of 2017)) and Court assesses quantum following repudiatory breach of contract (ICI v Merit Merrell)). Note that an appeal of Grove v S&T is currently due to be heard in the Court of Appeal on 9 or 10 October 2018.

Rock Advertising v MWB

The Supreme Court’s decision in Rock Advertising v MWB concerning no oral modification clauses (sometimes referred to as no oral variation clauses) is worth construction practitioners taking note of. In that case, the court held that payments under a licence agreement containing such a clause could not be varied by oral agreement between representatives of the licensor and the licensee. See News Analysis: Contract law in the Supreme Court—a sensible break with the common law? (Rock Advertising Ltd v MWB Business Exchange Centres Ltd).

No oral modification clauses are often found in construction contracts (see, for example, clause 12.3 of the NEC4 Engineering and Construction Contract). The Supreme Court’s decision resolves some of the uncertainty that had arisen around their effectiveness following the Court of Appeal’s ruling in 2016 in Globe Motors v TRW.

Equitix v Bester Generacion

In Equitix v Bester Generacion, the TCC had to grapple with the exclusions to the HGCRA 1996 set out in s 105. Its decision indicates that, when considering whether a dispute arising under a contract can be referred to adjudication under the HGCRA 1996, it is necessary to look at what the dispute itself relates to, rather than the contract as a whole.

On the facts of the case, although the contract in question was for the construction of a biomass-fired power plant, which is excluded by the power generation exclusion (HGCRA 1996, s 105(2)(c)(ii)), the court held that preparatory arrangements, such as the preparation of the bonds or a business plan, fell outside the exclusion. Accordingly, the adjudicator had jurisdiction to hear a dispute concerning the preparatory works. See News Analysis: Exclusions to the HGCRA 1996—the impact of Equitix v Bester Generacion.

Haberdashers v Lakehouse

Haberdashers v Lakehouse is the first case in which the court had to consider the legal basis under which a sub-contractor becomes party to a project-wide insurance policy. It is generally assumed that sub-contractors can be covered by such policies, even if the sub-contract is entered into after the policy is in place, but the legal basis for this has never been entirely certain. This judgment gives support to the basis that there is a standing offer by the project insurers to insure persons who are subsequently identified as part of a defined group.

In that case, the TCC held that the sub-contractor was not entitled to rely on project insurance due to the fact that the sub-contract required it to take out its own cover. Accordingly, the main contractor (on behalf of the project insurers) could recover from the sub-contractor sums paid out under the project policy. See News Analysis: Sub-contractor not entitled to benefit of project insurance (Haberdashers v Lakehouse).

Redbourn v Fairgate

Redbourn v Fairgate highlights the need to consider, in a wrongful termination claim, whether the defendant might have been able to lawfully terminate the contract in any event at a later stage. If so, this may defeat, or partially defeat, a claim for fees which the claimant expected to earn. The TCC held in this case that a project manager was not entitled to recover damages following the wrongful termination of its appointment, as the employer would have been entitled to terminate the appointment lawfully in any event before any further fees were earned. See News Analysis: No damages due following wrongful termination of appointment (Redbourn v Fairgate).

ICE Architects v EPIC

Finally, ICE Architects v EPIC acts as a reminder of the importance of considering carefully the point at which the limitation period commences in construction disputes. In the context of a claim against an employer for failing to pay for architectural services, the Queen’s Bench Division held that the cause of action arose (and therefore the limitation period commenced) when the services were carried out, rather than on the date by which the architect’s invoice should have been paid. This meant that, on the facts, the architect’s claim was time barred under the Limitation Act 1980. See News Analysis: Cause of action arose when services carried out, not when invoice payable (ICE Architects v EPIC).

Legislation

Construction (Retention Deposit Schemes) Bill

The Construction (Retention Deposit Schemes) Bill, which is aimed at the safeguarding of cash retentions withheld in connection with construction contracts, was introduced to the House of Commons as a Private Member’s Bill on 9 January by Peter Aldous MP (see News Analysis: Construction (Retention Deposit Schemes) Bill takes first steps). The text of the Bill was published in April (see News Analysis: Construction (Retention Deposit Schemes) Bill published).

If passed, the Bill would add new ss 111A and 111B to the HGCRA 1996, so as to provide for regulations for the introduction of retention deposit schemes, and to require cash retention clauses in construction contracts to ensure that retention monies are kept in such a scheme. The second reading of the Bill, which has been rescheduled twice, is currently expected to take place on 26 October 2018.

 

HGCRA 1996/retentions consultation

The following consultations, launched on 24 October 2017, closed on 19 January 2018:

We are still awaiting the outcome of these consultations, and it is not clear what impact the retentions consultation will have on the progress of the Construction (Retention Deposit Schemes) Bill. For more information on the two consultations, including the likelihood of changes being made as a result of them, see News Analysis: Exploring possible changes to construction retentions and the HGCRA 1996.

GDPR

The General Data Protection Regulation (Regulation (EU) 2016/679) became directly applicable and enforceable in all EU Members States on 25 May, representing the biggest overhaul in data protection law for two decades. See News Analysis: Slow progress—the GDPR and the construction industry and, more generally, Practice Note: The General Data Protection Regulation (GDPR).

Other developments

Hackitt report

On 17 May, Dame Judith Hackitt published her final report in the Independent Review of Building Regulations and Fire Safety, which was commissioned by the government following the Grenfell Tower fire. The report concluded that the current regulatory system for ensuring fire safety in high-rise and complex buildings was not fit for purpose, and that a radical rethink of the whole system was needed. It set out over 50 recommendations for the government, including a new regulator to oversee the construction and management of buildings, but (controversially) did not call for a ban on flammable cladding. See News Analysis: The Hackitt fire safety report—does it go far enough?

The same day as the report was published, the government announced that it would consult on a possible ban on flammable cladding (see: LNB News 17/05/2018 84), which commenced on 18 June and runs until 14 August 2018 (see: LNB News 19/06/2018 96). The government also ran a consultation on the use of desktop studies for fire safety purposes from 11 April to 25 May (see: LNB News 11/04/2018 95), following criticisms made of such studies in Dame Hackitt’s interim report. The outcome of this consultation is awaited.

 

The Independent Review and Building Regulations and Fire Safety is separate to the Grenfell Tower Inquiry, which commenced on 14 September 2017 and is currently hearing evidence.

Carillion insolvency

On 15 January, certain companies within the Carillion group declared insolvency. This caused alarm within the construction industry, and also had implications for public sector contracts more widely. See News Analyses: Carillion’s insolvency—infrastructure and construction and Carillion’s insolvency—how to protect yourself.

According to Peter Aldous MP, the sponsor of the Construction (Retention Deposit Schemes) Bill, Carillion’s insolvency highlighted the need for such legislation due to the possibility of parties lower down the supply chain losing retentions paid out to Carillion.

CIC BIM Protocol

Lastly, on 10 April, the Construction Industry Council (CIC) published the second edition of its Building Information Modelling (BIM) Protocol, to reflect significant progress with standards and practices in relation to BIM since the first edition was published in 2013. See News Analysis: The new CIC BIM Protocol—what’s changed?

Shortly after, the NEC published guidance on how to use the protocol with the NEC4 Engineering and Construction Contract (see: LNB News 16/04/2018 48).

The above links require a subscription to LexisPSL Construction. Click here for a free trial.

Filed Under: Construction

Relevant Articles
Area of Interest