Buildlaw Newsletter - Summer 2009
Thursday 9th July 2009
Are you owed money and want to sue through the court?
New Practice Direction
In an attempt to streamline the Court process and reduce the number of disputes going to Court there have, for a number of years, been various Pre-Action Protocols applicable to specific types of dispute. These Pre-Action Protocols provide guidance as to what steps parties should take before commencing court proceedings. One such Pre-Action Protocol is the Pre-Action Protocol for Construction and Engineering Disputes which applies to all construction and engineering disputes other than those for £5,000 or less. If the subject matter of a dispute does not relate to construction or engineering then the Pre-Action Protocol does not apply.
Recently a Practice Direction on Pre-Action Conduct has been introduced which gives additional guidance for pre action conduct. This means that anyone considering commencing proceedings for more than £5,000 should look at the Practice Direction at www.justice.gov.uk/civil/procrulesfin/contents/practicedirections/pdpre-actionconduct.htm and ensure that the recommended steps are taken before proceedings are issued. If they are not then the court can impose costs sanctions against the defaulting party.
What steps does the Practice Direction require?
The Practice Direction suggests various steps which are aimed at enabling the parties to resolve their dispute without recourse to the Court system. The following steps should be taken:
- exchange information between the parties so that each side can understand the other's position and make an informed decision on how best to proceed;
-
make appropriate attempts to resolve the dispute before starting court proceedings, for example by attempting alternative dispute resolution("ADR") such as mediation or adjudication. Many contracts will have ADR provisions built in so always check the contract to see if a process is stipulated; and
- act in a reasonable and proportionate manner i.e. try to ensure that the dispute is resolved without incurring an unreasonable amount of costs.
How will the Court approach my case?
The Court rules include an overriding objective to enable the courts to deal with a case justly. The overriding objective says the court must:
- ensure the parties are on an equal footing;
- ensure the proceedings are dealt with so as to save expense;
- deal with cases proportionately;
- ensure cases are dealt with expeditiously and fairly; and
- allot an appropriate share of the court's resources to a case.
Net contribution clauses
Net contribution clauses are a useful way of reducing your firm's liability where more than one firm contributes to a loss. An example would be where a sub contractor carries out defective works under the supervision of a contractor and the contractor should have spotted the defect but does not. Both the contractor and sub contractor have caused the client loss. In the absence of a net contribution clause the client could choose to sue the contractor only and recover all of its loss from the contractor even though the sub contractor was primarily responsible. This is because the contractor has also caused the loss by its inadequate supervision. A net contribution clause states that the contractor shall only be responsible for that portion of the loss as would be just and equitable having regard to the extent of his responsibility for the loss on the basis that others involved in the project have paid to the client such proportion of the loss as would be just and equitable having regard to the extent of their responsibility. The effect of such a clause is to change the contractual responsibility owed by the contractor and to provide him with added protection against a claim.
Indemnities
Contracting parties should avoid clauses whereby they agree to indemnify a loss suffered by the other party. This is because an indemnity provides a greater liability on the party providing the indemnity than would otherwise be the case. The first point is that the party claiming the loss need not worry about its loss being reasonable since the effect of an indemnity is that the party giving the indemnity has agreed to pay the loss whether it is reasonable or not. The second point is that a party giving an indemnity will be at risk of a claim for longer than a party who has made a simple promise in a contract which is not an indemnity. Normally the claiming party has 6 years from a breach of contract to issue proceedings claiming the loss suffered whereas when there is an indemnity the equivalent 6 year period runs from the date the loss is incurred or actually spent rather than from the date of the breach of the contract. So where a contractor carries out defective work in 2000 and remedial costs are incurred or spent in 2006 the 6 year period in which to issue proceedings will normally start in 2000 for a simple contractual promise but will start in 2006 in the case of a promise to indemnify.
Defective Premises Act 1972
Be alive to your potential liability under the Defective Premises Act 1972 ("the Act")
Question:
Could I be held liable under the Act?
Answer:
The Act has a wide reach in that it imposes obligations on various people involved in the building and construction of residential properties.
The Act says that "A person taking on work for or in connection with the provision of a dwelling (whether a dwelling is provided by the erection or conversion or enlargement of a building) owes a duty...to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that, as regards that work, the dwelling will be fit for habitation when completed."
It is clear from this section of the Act that people in a wide range of roles could potentially be liable i.e. builders, architects and plumbers. If you're involved in the building industry it is likely that you could at some point be exposed to liability under the Act should your work not be considered 'workmanlike' or 'professional'.
Question:
How bad do defects need to be to bring the Act into play?
Answer:
For years it has been a 'grey area' as to what defects would give rise to liability under the Act. The decision of the High Court in the case of Bole and Van den Haak on 13 March 2009 has given useful guidance on this point and the key factors mentioned by that case are:
- the defects need not be so serious as to render the building in imminent danger of collapse;
- whether or not the premises are unfit for habitation is a question which should be answered on the specific facts of each case;
- it may be that 'defects of quality' i.e. in the workmanship and/or materials used are sufficient to render a building unsuitable for its purpose in which case it will be unfit for habitation;
- minor defects will not give rise to liability under the Act unless they render the property dangerous or unsuitable for habitation;
-
the effects of the defect need not be evident on completion of the works; and
- when considering whether the property is fit for habitation the court should look at the effect of the defects as a whole and not at each defect on its own.
In this case His Honour Judge Toulmin found the property in question was unfit for habitation as it was unsuitable for its purpose as there was cracking and the house was built on unstable foundations.
Challenge to Devon County Council procurement process
On 1 May 2009 the High Court dismissed an action brought by one of the bidders for the Devon County Council four year construction framework agreement seeking a declaration that it had been wrongly excluded from the procurement process.
The Invitation to Tender issued had stipulated compliance with various requirements including:
- a strict deadline;
- submissions to be made electronically to a secure portal;
- the submissions were required to include at least 4 completed case study templates;
- tenderers were to be responsible for ensuring the complete set of tender documents was correctly uploaded; and
- all main elements of the submission (including the case studies) were to be submitted at the same time, failing which the tender would be invalid.
The aggrieved bidder submitted their tender within the revised deadline but then realised that they had omitted the case studies. The case studies were later submitted by e-mail some 26 minutes after the deadline. The Council rejected the tender on the basis that the complete tender had not been submitted by the deadline.
As a public body the Council had various obligations in relation to the tender under the Public Contracts Regulations and the aggrieved bidder claimed that the Council had not complied with certain of these obligations, namely:
- it had not treated the tenderers equally and in a non-discriminatory way;
- it had not complied with its duty to select the most economically advantageous tender; and
- it had not acted proportionately.
In relation to the first ground the Court held that the extension of the original deadline following a power failure suffered by one of the tenderers was a vey different circumstance as it was outside the control of that tenderer.
The High Court held that the Council had been entitled to enforce the tender requirements strictly and so their decision to reject the bidder's tender was well within the margin of discretion allowed to contracting authorities. Even though the omission of the case studies was a genuine mistake by the bidder, and their submission was only slightly outside the deadline the Court chose to side with the Council.
This case illustrates how local authorities can be strict in interpreting tender requirements and so how it is vital for tenderers to ensure they comply or risk their tender being rejected.
If anyone has any queries arising from this article I can be contacted at s.homer@ashfords.co.uk
Promotion news
The team is delighted to announce the promotion of Patrick Blake who has been with the firm since September 2000. Patrick has been promoted to Partner bringing the number of Partners in the Construction Department to four.
The Department has seen increased work levels during the last financial year.
Highlights have included the following:
- acting for a European contractor regarding the construction of a power station in Bulgaria. This is Bulgaria's largest inward investment project to date;
- advising a contractor on the mechanical and electrical works contract for the 2012 London Olympic Athletes Village;
- advising on a number of renewable energy projects involving new energy creating technologies;
-
a 100% success record during the year at contested Court hearings resulting from adjudicators decisions; and
- advising a UK Project Management Company on the procurement by an Iranian developer of the appointment of a consultant to a new scheme in Tehran.
In addition we continue to act for owner run businesses and private individuals.
Autumn Seminars
Ashfords' Construction team will be hosting their annual Autumn seminars.
Time:
5:30pm start
Location:
Ashfords Exeter Office
24th September 2009
Time:
5:30pm start
Location:
Ashfords Bristol Office
15th October 2009
Time:
5:30pm start
Location:
Alverton Manor, Truro
12th November 2009
For further information on all Ashfords events, please refer to our website
http://www.ashfords.co.uk/Events
or contact Emma Clark on +44 (0)1392 33 3615
