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• Construction Industry Related Questions & Answers

• How do I enforce an adjudicator's decision in my favour?

• Can I stop the court proceedings commenced against me as I wish to deal with the dispute by another means?
• Can I raise a further dispute in an adjudication, which I have commenced already?
• What is my liability for defects after the defects liability period?
• What do I have to do to comply with the Control of Asbestos at Work Regulations 2002?
• How does the new form of Sub-Contract differ from DOM/1?
• What is my design responsibility after receiving preliminary design details?
• Some of my male employees say that they will soon be able to take paid time off work if their partners have children. Is that true?
• When should I make an application for an extension of time?
• I have a counterclaim and want to deduct this from the next payment I make to the subcontractor. What shall I do?
• People keep talking about `Partnering` and `PPC 2000`. What is it?
• I am in dispute with a customer and he has suggested ADR. What does he mean?
• What is the Statutory Scheme for Adjudication?
• When should I make an application for an extension of time?
• Am I entitled to interest on late payments?
• When can I claim loss and expense?
• The Employer is interfering in the issue of Payment Certificates by the Architect. What should I do?
• Will the Disability Discrimination Act 1995 affect my business?
• I have been asked to sign a collateral warranty. What is it?
• When shall I submit my final account?

Answer

If a decision of an adjudicator has not been complied with then one option is to commence court proceedings against the defaulting party. After commencing proceedings an application to the court can be made at short notice for what is called summary judgment. This does away with the need for a full trial. Judgment is usually granted unless it can be shown that the adjudicator has acted outside his jurisdiction or powers. The legal costs of the proceedings are usually awarded to the successful applicant.

The courts have been fairly robust in enforcing adjudicators' decisions. The court will not generally look behind the decision for the reasoning used by the adjudicator, even if the decision appears to be wrong or there is an obvious error. Instances where the court have refused to enforce an adjudicator's decision include adjudications where there has been apparent bias on the adjudicator's part or where he has acted outside his jurisdiction.

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Question

Can I stop the court proceedings commenced against me as I wish to deal with the dispute by another means?

Answer

Yes, if there is a clause in the contract, which states that disputes or differences must be referred to arbitration Many building contracts contain an arbitration clause, although the parties can delete this if they so choose. If the arbitration clause is retained and a party commences court proceedings the other party can make an application to the court to stay (i.e. suspend) the court proceedings in order to refer the dispute to arbitration. The relevant statutory provision is section 9 of the Arbitration Act 1996.

For such an application to succeed it is important that the defending party does not take any step in the court proceedings (other than returning the "Acknowledgement of Service") such as serving a Defence.

A party making such an application should consider whether it wants to bring another party brought into the proceedings such as a sub-contractor. This is possible in court proceedings but generally not in arbitration proceedings.

It is also important to ensure that the arbitration clause being relied upon is properly incorporated into the contract as the court may reject the application to stay if there is not a clear and unequivocal reference to such a clause

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Answer

No. Not unless it forms part of the dispute, which you have already, set out in your Notice of Intention to Refer a Dispute to Adjudication or you have the consent of the other party to the adjudication. Only one dispute can be referred to adjudication at a time.

The definition of a "dispute" has been the subject of some judicial interpretation by the courts (sometimes conflicting). The courts have recently given a very wide interpretation as to what will amount to a 'dispute'. Several heads of claim can fall under the umbrella of one dispute.

Most adjudicators generally accept that the parties must bring a crystallised dispute to adjudication. In most cases that means that both parties have had an opportunity to give their different views on the matter prior to proceedings. However, if a party consistently fails to consider a matter put to them and requests for a response are met by silence then this is sufficient to amount to a 'dispute'.

This approach should prevent what is called ambushing. This is where one party launches a claim against another in adjudication proceedings, which has not been previously received or considered by the recipient. In such circumstances it should be argued by the receiving party that the adjudicator does not have jurisdiction to deal with this new claim, as a dispute has not yet crystallised.

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Answer

Most contracts provide for a defects liability period of six months following practical completion. At the end of the period a schedule of defects is usually drawn up, the defects remedied and final payment made.

What is the position where there is no schedule of defects issued at the end of the defects liability period? In the case of Pearce and High Ltd v Baxter, it was held that in those circumstances where no schedule of defects was issued at the end of the defects liability period the employer still retained the common law right to employ another contractor and to recover damages for breach of contract on the part of the contractor.

However, if the employer refused to allow the contractor to return to repair the defects, the damages would be restricted to the amount it would have cost the contractor to carry out the repairs.

In any event, a contractor remains liable for any latent defects appearing after the defects liability period for a period of six years from the date of practical completion or twelve years where the contract is executed as a deed.

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Answer

The Control of Asbestos at Work Regulations 2002 came into force in November 2002 and introduce a duty on employers and others to identify, record and deal with asbestos at workplace premises. There is a possibility that premises constructed, extended or refurbished between 1950 and 1980 contain asbestos.

Under the regulations any person who has, by virtue of a contract or an obligation of any extent in relation to the maintenance or repair of non-domestic premises has a duty to manage the risk from asbestos.

The duty to manage comes into force on 21 May 2004. However, those with such a duty are advised to start addressing the task now by:

Employers also need to consider training for staff and the provision of information, how they are going to manage contractors working in their premises and what to do when asbestos is discovered unexpectedly.

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Answer

The JCT Standard Form of Domestic Sub-Contract (DSC) was published in 2002 and is to be used where the Main Contract is the JCT 1998. It has not changed dramatically from the DOM/1, but there are some alterations to the payment provisions. Under the DSC, the payments are due on the date when the Interim Certificate under the Main Contract is issued. Under the DOM/1 the first payment becomes due not later than one month after the date of commencement of the Sub-Contract Works on-site.

This should help to ease the burden on the Main Contractor in that payments to the Sub-Contractor will be falling due at the same time as payments under the Main Contract.

The DSC also gives the contractor an additional four days for payment, the final date for payment being 21 days after the due date. This gives some breathing space between payments under the main contract and the sub-contract.

There are changes, involving the alteration of retention and practical completion provisions as well as various new provisions which seek to encourage a more open and co-operative environment.

There does not seem to be anything radically different about the DSC when compared with DOM/1 but it is presented in a more user-friendly way.

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Question

What is my design responsibility after receiving preliminary design details?

Answer

This issue recently arose in the case of Co-operative Insurance Society Ltd v. Henry Boot Scotland Ltd and others 2002 where the Co-op engaged Henry Boot to carry out demolition and building works on a large project.

The Co-op employed structural engineers to provide assistance with some of the design. The engineers designed only part of the works and Henry Boot took over completion of the design and execution of the works, during which, water and soil flooded into sub-basement excavations. The Co-op sued both Henry Boot and the engineer for the damage they suffered.

The Court held that Henry Boot had a duty to complete the design and execution of the works to the level of proficiency required by the contract that involved developing the concept design into one capable of being constructed. This required examining the design at the point at which it was taken over and concluding whether it was suitable.

This decision serves as a warning to all contractors because the result confers upon them the responsibility to complete designs and execute works irrespective of any fault in the concept design. Therefore, be very careful when taking over preliminary designs completed by others. You should investigate thoroughly whether the designs are appropriate for the works.

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Question

Some of my male employees say that they will soon be able to take paid time off work if their partners have children. Is that true?

Answer

Yes, working fathers will have the right to take paid time off work to care for their new-born. The new Paternity Leave rights are contained in the 'Employment Act 2002' and will be available to employees whose children are due on or after 6th April 2003.

To be eligible for Paternity Leave, an employee must have responsibility for the child's upbringing as well as being the biological father or the mother's husband or partner. Furthermore the employee should have worked for 26 weeks for his employer by the 15th week before the baby is due.

Employees will be entitled to two weeks' paid leave, which will be paid at the rate of £100 per week, or 90% of the employee's average weekly earnings if he earns less than £100 per week.

The leave must be taken within 56 days after the child's birth, or the expected week of childbirth. Employees will be able to take Paternity Leave in addition to their existing (unpaid) rights to Parental Leave

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Question

When should I make an application for an extension of time?

Answer

In most standard forms of building contracts there is normally a contract completion date and a sum stated for liquidated damages in the event of the contractor failing to complete on time. The standard forms also contain provisions for the contractor to obtain an extension of time in circumstances, which are outside its control. For example, a contractor may be entitled to an extension of time where it can be shown there has been inclement weather or where variations issued by the Employer have delayed the works.

The moment the contractor becomes aware of a possible delay in completing the works by the contract completion date it should make an immediate application for an extension of time.

Clause 25 of the JCT Forms of Agreement requires the contractor to make an application for an extension of time as soon as it becomes reasonably apparent that the works will be delayed.

An employer can only deduct liquidated damages when the works have not been completed by the contract completion date. It is therefore important that the contractor gets an extension of time prior to contract completion in order to cut the risk of liquidated damages being deducted.

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Question

I have a counterclaim and want to deduct this from the next payment I make to the subcontractor. What shall I do?

Answer

If you want to deduct a counterclaim this from the next payment to the subcontractor, then it is important that you comply with the provisions of the Housing Grants Construction and Regeneration Act 1996 better known as the `Construction Act`. The Act provides that where a paying party wishes to make deductions from payments due to the payee, then an appropriate Notice should be served prior to the payment date. The Notice is commonly known as a Withholding Notice and it should specify any amount proposed to be withheld and/or deducted from the due amount. The grounds for such withholding and/or deducting and the amount of withholding and/or deduction attributable to each ground.

The general rule is that the paying party is required to give notice no later than 5 days prior to the final date for payment of its intention to withhold and/or deduct from the due amount.

In the event of the paying party failing to serve the Withholding Notice upon the payee then the payee may have a sound argument for claiming in an Adjudication that its application for payment should be paid in full without deduction.

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Question

People keep talking about `Partnering` and `PPC 2000`. What is it?

Answer

Partnering is becoming the new method of procurement, in the construction industry. The general idea is for the Employer, Contractor, Consultants, Subcontractors, to form a team at a very early stage prior to works commencing on site with a view to working together in the successful completion of the contract on time and within budget.

The new form of building contract for Partnering Contracts is known as `PPC 2000`. This contract is already being used by housing associations and the Government. The ethos is one of teamwork and an end to conflict and disputes.

The PPC 2000 contract has a number of novel provisions. For example, it introduces the Partnering Advisor, Core Group and Problem Solving Hierarchy. There are also performance incentive payment mechanisms, such as key performance indicators. If they are achieved then the contractor will be paid more. However, if the contractor fails to meet the key performance indicators then he may be paid less.

Is Partnering the way forward? What distinguishes Partnering from other procurement methods is more a state of mind than a new form of contract. Construction is a complicated business and where there is complexity there is room for disagreement. It remains to be seen whether Partnering is the panacea some would make it out to be. Time will tell.

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Question

I am in dispute with a customer and he has suggested ADR. What does he mean?

Answer

ADR means Alternative Dispute Resolution and parties in dispute are now being encouraged by the Courts to attempt to take every step possible to resolve their differences and thus avoid litigation. The Courts have recently introduced what is known as a `Pre-Action Protocol`. The Protocol requires the parties in dispute to go through a process that will helpfully resolve matters and avoid proceedings. Part of the Protocol requires the parties to sit round a table and explore the possibility of a settlement.

If this does not work then there is Mediation.

Mediation is becoming very popular and involves the appointment of an independent third party who acts as a go-between. A Mediation meeting will start with the Mediator sitting the parties around a table and allowing them a short period of time to set out their position. The parties will then be asked to go to their own rooms and the Mediator will shuffle between both parties rooms with a view to brokering a deal.

The Mediation does not have any power to force an agreement on the parties. He is there is facilitate an agreement.

From my own personal experience Mediation works and is to be encouraged.

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Question

What is the Statutory Scheme for Adjudication?

Answer

The Housing Grants Construction and Regeneration Act 1996 commonly known as the `Construction Act` introduced Adjudication as a statutory form of dispute resolution. The Act provides that in those cases where the construction contract does not include a proper provision for Adjudication then the Statutory Scheme shall apply. It is known as the Scheme for Construction Contracts (England and Wales) Regulations 1998.

If you have a `Construction Contract` evidenced in writing and formed after 1st May 1998 then a dispute arising out of the contract may be referred to Adjudication and the Statutory Scheme will apply where there are not adequate provisions in the contract.

The Adjudication is started by the Referring Party serving a Notice of Intention to Refer and at the same time making arrangements for an Adjudicator to be appointed by making an application to one of the nominating bodies within 7 days of service of the Notice of Intention the Referring Party is required to serve its Notice of Referral which is effectively its claim document. The Adjudicator will then give directions which will in all probability give the Other Party an opportunity to respond. The Adjudicator may also call a meeting of the parties to obtain further information.

The Adjudicator is required to issue his decision within 28 days of the service of the Referral Notice and his decision is enforceable through the Courts.

The Statutory Scheme does not apply to Construction Contracts where the works are in connection with a residential property, where one of the parties will have his or her principle place of residence.

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Question

When should I make an application for an extension of time?

Answer

In most Standard Forms of Building Contracts there is normally a contract completion date and a sum stated for liquidated and ascertained damages in the event of the contractor failing to complete on time. The Standard Form of Building Contracts also contain provisions for the contractor to obtain an extension of time generally in circumstances which are outside of his or her control. For example, contractor may be entitled to an extension of time where it can be shown there has been inclement weather where there have been variations issued by the Employer that have delayed the progress of the works.

The moment the contractor becomes aware of a possible delay in completing the works by the contract completion date he or she should make an immediate application for an extension of time, even if at that stage there has been no delay.

Clause 25 of the JCT Forms of Agreement require the contractor to make an application for an extension of time as soon as it becomes reasonably apparent that the works will be delayed. In my experience two many contractors leave it far to late to make applications for an extension of time and this can cause all kinds of problems.

The biggest problem is the deduction of liquidated and ascertained damages. The Employer can only deduct liquidated damages when the works have not been completed by the contract completion date. This is why it is important for the contractor to get an extension to the completion date at the earliest possible opportunity in order to cut the risk of liquidated damages being deducted.

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Question

Am I entitled to interest on late payments?

Answer

From 7th August 2002 almost all businesses which have entered into commercial contracts after that date may charge interest on late payment at the Bank of England dealing rate plus 8% under the Late Payment of Commercial Debts (Interest) Act 1998.

The rate to be used for interest which starts to run between 1st July and 31st December of any year is the Bank of England dealing rate in force on 30th June which has just passed.

The rate to be used for interest which starts to run between 1st January and 30th June of any year is the Bank of England dealing rate on 31st December which has just passed.

Further fixed sums penalties are payable in addition to interest. For a debt of less than £1,000 the penalty is £40. For a debt of £1,000 or more, but less than £10,000 the penalty is £70 and for a debt of £10,000 or more the penalty is £100.

Prior to 7th August 2002 there were statutory provisions that provided for the payment of interest but its implementation was limited to small businesses who had 50 or few employees.

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Question

When can I claim loss and expense?

Answer

Most of the Standard Forms of Building Contracts contain a provision for the payment of loss and expense caused by matters materially affecting the regular progress of the work. These matters include such events as the issue of Variation Orders or the late issue of instruction of drawings.

Where loss and expense has been incurred a written application should be sent to the Architect giving notice that direct loss and/or expense has been incurred. The application should be made as soon as it has become or should reasonably have become apparent that the regular progress of the works has been affected.

In the application the Contractor should submit such information and details as should reasonably enable the Architect to form an opinion as to whether or not the Contractor is entitled to loss and expense.

Upon receiving the application, together with the supporting information and details the Architect is required to ascertain the amount of loss and expense due to the Contractor. The sum ascertained should be added to the Contract Sum.

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Question

The Employer is interfering in the issue of Payment Certificates by the Architect. What should I do?

Answer

An Architect in issuing certificates due under the Standard JCT Contract should not allow the Employer to interfere with or obstruct the issue of any certificates due under the Contract. In the event of the Employer interfering with or obstructing the issue of a certificate then the Contractor should consider serving a Notice of Determination.

To start the process the Contractor is required to serve a written Notice on the Employer stating that he or she is interfering with or obstructing the issue of a certificate and that in the event of the Employer continuing this default for 14 days from receipt of the Notice then the Contractor will serve a Notice of Determination of Employment.

The Notice should be served by actual delivery or by registered post or by recorded delivery. In the event of the Employer ignoring the Notice and not remedying the default then after a period of 14 days from service of the Notice the Contractor can serve a Notice of Determination.

This will enable the Contractor to leave site, remove all its plant and equipment and then submit an account for all of the works carried out and materials supplied, including any claim for loss and expense.

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Question

Will the Disability Discrimination Act 1995 affect my business?

Answer

The Act will certainly impact on what is called service providers and their builders and architects.

From 1st October 2004, the Act requires service providers to make reasonable adjustments to the physical features of their premises, whether existing buildings or planned developments, where it is unreasonably difficult for disabled people to make use of the services provided. A service provider is someone who provides services to the public.

The effects of the Act will be wide-ranging. It will be important to ensure that all works carried out to the premises of service providers comply with the requirements of the Act. The penalty for non-compliance is an action against the service provider for discrimination which could result in knock-on negligence actions against the builders or architects for inadequate building works or designs.

If a court action is commenced, then the service provider will need to demonstrate that reasonable steps have been taken or that the failure to take what would otherwise be reasonable steps was justified.

Existing premises must be to required standard by the October 2004 deadline and, therefore, service providers should start making preparations to comply with the requirements of the Act.

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Answer

A collateral warranty is an agreement between a party to a contract and a third party whose interest lies in the performance of that contract. Its purpose is to provide security for persons who are not party to the construction agreements such as tenants who have leased premises developed by others.

A basic rule of contract is the 'privity' doctrine which provides only those party to a contract may enforce it. Therefore, a person who subsequently acquires an interest in a particular development, such as a tenant, has little protection if he discovers that one of the original parties was negligent or acted in breach of contract. For example, a tenant having a full repairing lease may find a major design defect in the property and yet have no redress against the architect. This problem is overcome by the tenant insisting on collateral warranties from all those parties involved in the design and construction of the building he or she is leasing.

If you are asked to enter into a collateral warranty, just remember you may be taking on additional liabilities which may be imposed by a stranger that you have not had any previous dealings with.

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Question

When shall I submit my final account?

Answer

The obvious answer to this question is following practical completion of the works. Believe it or not the words `final account` are not mentioned in the majority of the JCT Standard Forms of Building Contract. The words `final account` must be one of the most commonly used expressions in the construction industry, and yet it does not have a mention in the majority of the JCT Standard Forms.

These contracts require the Contractor to provide the Architect or Quantity Surveyor `with all documents necessary for the purposes of the adjustment of the Contract Sum`. The contract provides a specified period for complying with this provision.

Following receipt the Architect or Quantity Surveyor is required to prepare a statement of all adjustments to be made to the Contract Sum and following the preparation of the statement it is sent to the Contractor.

The Architect/Quantity Surveyor has a limited period for preparing the statement.

The statement produced by the Architect or Quantity Surveyor should show the total value of the works executed, together with any sums ascertained in respect of loss and expense.

If the Contractor is not satisfied with the sum stated on the statement then he or she should challenge the content of the statement.

It is important that any disagreement be made known at an early stage, as there is a possibility an Architect may include the final figure in the final certificate, and if the final certificate is not challenged within 28 days following issue then your right to challenge the figure may be lost.

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