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Chartered Institution of Civil Engineering Surveyors

CONSTRUCTION LAW REVIEW 20th Anniversary Issue

2016

Diales uncompromised expertise

OUR TECHNICAL TEAM DIALES TECHNICAL EXPERTS: and evidenced advice on engineering and construction disputes, often characterised by a complex mix of interrelated design, construction and

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Winners of the AI Magazine 2016 Dispute Resolution Awards for ‘Best for Engineering & Construction Expert Witness Services’ For more information about our experts and services visit www.diales.com or email [email protected]. The DIALES App is also available to download from

BMW Goodwood Festival of Speed Sculpture Centrepiece 2016 Sculptor: Gerry Judah Structural Engineers: DIALES Technical

2016 Contents Features 04. Forewords

44. Performance bond calls

David Loosemore, Chartered Institution

Stephanie Barwise QC and Omar Eljadi,

of Civil Engineering Surveyors, and

Atkin Chambers

Julian Bailey, Society of Construction Law

07. Civil litigation: 20 years on

Simon F Fegen, Leach Consultancy

Alexander Nissen QC, Keating Chambers

11. Artificial intelligence and law Simon Tolson, Fenwick Elliott LLP

50. Could the payment provisions of the construction act displace capped payment sums set out in letters of intent? Edwina Acland, Sharpe Pritchard

16. Expert errors

52. An (e)stopped clock is right twice a day: Is your engineer’s conduct a ticking time bomb?

John Mullen, Diales

18. Foreseeing the unforeseeable David Carrick, Hill International

Sarah McCann, Hardwicke

25. Employer’s claims under FIDIC Jonathan Hosie, Mayer Brown International

55. Harding v Paice: Rhyming slang for hard cases do not make good law?

28. Adverse weather

David Sears QC, Crown Office Chambers

Emily Monastiriotis, Susanne Hose and

Cover: ©Goja1

47. FIDIC Red Book, sub-clause 2.4

Simos Schizas, Bond Dickinson

58. The making of IChemE’s new professional services agreement

30. Payment provisions under LDEDCA 2009

John Challenger,

Peter Barnes, Blue Sky ADR

Institution of Chemical Engineers

33. Proving extension of time claims

63. Concurrent delay: Time does not always equal money

Manoj Bahl, FTI Consulting

Andrew Bayne, Centra Consult

Chartered Institution of Civil Engineering Surveyors Dominion House, Sibson Road, Sale, Cheshire M33 7PP, United Kingdom +44 (0)161 972 3100 www.cices.org President: David Loosemore FCInstCES Honorary Secretary: AH Palmer MBE FCInstCES Chief Executive Officer: Bill Pryke HonFCInstCES

36. Fixed payment schedules: Grove v Balfour Beatty

66. With great risk comes...?

Alan Williamson, Schofield Lothian

Gordon Lees, JGL Consulting

39. Knocked out on penalties Kate Corby and William Jones,

69. Contract administration for claims and claims avoidance

Baker & McKenzie

Andy Hewitt, Institute of Construction Claims Practitioners

ICES Publishing Edited, designed and produced by ICES Publishing. ICES Publishing is operated by SURCO Limited, a subsidiary of the Chartered Institution of Civil Engineering Surveyors Operations Director and Editor in Chief: Darrell Smart BEng [email protected] • @darrellsmart Managing Editor: Abigail M Tomkins BA(Hons) [email protected] • @amtomkins Media Sales Manager: Alan Lees [email protected] • @alan_lees Administrator and Subscriptions Manager: Joanne Gray [email protected]

42. Collateral warranties 71. Index of Construction Law Professionals

Fenella Mason, Burness Paull

Construction Law Review 2017 copy date: 31 May 2017.

Chartered ICES

CharteredICES

CInstCES

CharteredICES

Published by the Chartered Institution of Civil Engineering Surveyors. Statements made and opinions expressed in this publication do not necessarily reflect the views of the institution, its Council of Management or other committees. No material may be reproduced in whole or in part without the written permission of the publisher. All rights reserved. Printed using PEFC-certified paper as part of the institution’s commitment to promote sustainable forest management. Printed by Buxton Press Limited, Palace Road, Buxton, Derbyshire SK17 6AE. ©2016 Chartered Institution of Civil Engineering Surveyors. ISSN 0266-139X

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Foreword

Construction Law Review

A celebratory issue 20 years of the Construction Law Review David Loosemore, President, Chartered Institution of Civil Engineering Surveyors

I

Then and now... The articles of David Carrick, Jonathan Hosie and Alexander Nissen.

T’S been 20 years since the Chartered Institution of Civil Engineering Surveyors first published the Construction Law Review. That was in 1996 — a year forever associated with another construction law development, the Housing Grants, Construction and Regeneration Act. And what an act it was, one that continues to create debate amongst the brightest legal and construction professional minds. 20 years on, I am delighted to see three of those minds still writing for us. David Carrick, Alexander Nissen and Jonathan Hosie wrote for us back in the very first Construction Law Review and join us again here today. They, and all the authors who have written for us over the last two decades, understand the need to bring legal developments to the attention of commercial managers, quantity surveyors, cost consultants, estimators, project managers — the people on the ground that these very cases affect. I am also pleased to see our colleagues at the Society of Construction Law once again opening this publication. We learn much operating in our own specialist fields, but it is so important to look up and share that knowledge, and friendship, with those around us. For those of us involved in civils projects, 20 years is not such a long time. You only have to look at the newly opened Gotthard Base Tunnel to see what takes 20 years to create. Yet throughout these major projects — the HS2s, the Crossrails, the Millau Viaducts, the Hong Kong– Zhuhai–Macau Bridges — are professionals enthused and impassioned by how they are crafted and intrigued by the mechanisms of interaction that go on between the myriad bodies that are involved. Construction, and the law that governs it, is a marvellous arena to work in. Here’s to the next 20... David Loosemore FCInstCES President, Chartered Institution of Civil Engineering Surveyors [email protected] www.cices.org @CharteredICES

2016

Foreword

5

Does construction law matter? Julian Bailey, Partner, White & Case, and Chair, Society of Construction Law

D

OES construction law matter? Anyone who reads the articles in this Construction Law Review would unhesitatingly answer yes. Construction and engineering projects, whether they be small or large in scale, are important enterprises in all countries. They are important because they are fundamental to a country’s needs and ultimately to its prosperity. Concomitantly, the law provides an essential framework for the delivery of projects. Construction and engineering contracts define what work is to be done, how much is to be paid for it, and what is to happen if the project does not proceed according to plan. Completing the picture is a vast body of statute and case law which determines, in varying degrees of detail, the rights and obligations of parties to construction and engineering contracts. Construction law is therefore important. It is also vast and highly nuanced. There is much to learn about it, and therefore much to discuss.

SCL The Society of Construction Law was founded in 1983 in the kitchen of John Tackaberry QC. The germ of John’s idea, to create a forum for promoting the education and discussion of construction law issues, quickly took hold. More than three decades later the UK SCL now has more than 2,500 members, and worldwide there are SCLs on every continent.

There are two matters at the core of SCL’s activities. First, SCL holds lectures around the UK (and even abroad) on current construction law issues. Since its foundation, SCL has provided a continuous programme of seminars and conferences where leaders in the field lecture on and debate the latest issues. Secondly, to complement these lectures and conferences SCL publishes papers that are distributed to all members. The society’s papers offer the latest thinking on the most important construction law issues of the day. Additionally, SCL’s website provides a vast repository of published papers that can be accessed and searched by the society’s members. Perhaps the unique and most important feature of SCL is that it is open to all comers who have an interest in construction law. So, our members are not just lawyers, but include architects, engineers, surveyors, property developers, claims consultants, adjudicators, expert witnesses and many others. The environment of SCL is therefore an interdisciplinary one. Happily, the environment of SCL is also a very sociable one, and the society holds a great number of regular and ad hoc events which allow our members to network and to meet up with friends and contacts. SCL has much to offer and, if you are not already a member, I warmly encourage you to join the society.

Our world Construction law matters, and if you are interested in construction law then the Society of Construction Law is for you. With that introduction, may I encourage you to start turning the pages of this Construction Law Review, and to explore the richness of issues that exist in our construction law world. Julian Bailey, Partner, White & Case, and Chair, Society of Construction Law (UK) [email protected] www.whitecase.com www.scl.org.uk @SCL_UK

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2016

20 Years

Civil litigation: 20 years on Alexander Nissen QC, Barrister, Keating Chambers

W

RITING in the very first volume of this journal, published in autumn 1996, I addressed the final report on the civil justice system produced by Lord Woolf and its likely impact on litigation generally and official referees business specifically. The intervening 20 years have seen significant changes to the landscape of construction litigation, much of which related to the introduction of the Civil Procedure Rules 1998 as a result of Lord Woolf’s report. Delivering a paper to the Society of Construction Law in March 2007, Mr Justice Jackson (now Lord Justice Jackson) commented on the impact of the 1998 Woolf reforms: “Although it is fashionable to carp about detailed glitches and infelicities in the Civil Procedure Rules 1998, it is worth pausing for a moment to note the huge benefits which they have brought to court users. The scandal of civil litigation dragging on inefficiently for many years and then being struck out for want of prosecution has come to an end. An increasing number of disputes are now resolved without any formal legal process at all. Pre-action protocols (one of Lord Woolf’s innovations) lead to many cases settling before they start. Mediation is now encouraged by the courts and often leads to earlier settlements.” 1 While the impact of the reforms was undeniably dramatic, whether they have all benefited the process of litigation is a matter of perennial debate amongst practitioners and court users. This article will review some of the key changes to construction litigation that have occurred in the last 20 years and looks to its future prospects.

TCC guide and pre-action protocol

A look at two decades of construction law

Since the introduction of the Civil Procedure Rules in 1998, litigation in England and Wales has been radically transformed. While many of the measures implemented by the CPR had been pioneered in the Technology and Construction Court, construction litigation has not been immune to change. The court now has a 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 significant 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)

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20 Years

One consequence of the protocol has been the front-loading of costs. This has been particularly acute in construction litigation, where a great deal of time and costs can be spent in attempting to set out the nature of the dispute. Parties have often got bogged down in protocol requirements and it has sometimes felt as though the process wastes time and cost rather than saves it. As a result, the two organisations which represent construction lawyers – Technology and Construction Bar Association (TECBAR) and Technology and Construction Solicitors Association (TeCSA) – are working with the TCC to develop a new, streamlined and more cost effective version. This is likely to be published before the end of the year. Whilst it is expected to retain the meeting, the process will be shorter and more focused. Parties will be able to opt out of it by agreement. The effect of the pre-action protocol can be seen in the number of claims issued in the TCC. In 1996, 1,778 writs were issued.3 In 2014-2015 there were a total of 948 claim forms issued in London and the various regional TCCs.4 In all likelihood, a substantial proportion of the claims issued back in 1996 would have never made it to trial, and it may be that the same amount of cases are making it to trial now. The difference could be accounted for by the fact that, prior to the requirements of the pre-action protocol, parties would often issue a writ simply as part of the negotiation process. Now, because of the increased costs which must be incurred before issue, parties are incentivised to negotiate before resorting to issuing proceedings.

Expert evidence Another area where substantial change has been felt is the use of expert evidence; a regular feature of construction litigation. Both the CPR and the TCC guide give the court far more control over the use and presentation of expert evidence. For instance, the court has the power to order the instruction of a single joint expert on any given issue. Where there are separate experts, the court will usually require them to meet prior to the trial to discuss their respective evidence and produce a joint statement setting out the areas in which they agree, the issues upon which they disagree and the reasons for this disagreement. This is intended to clarify the matters actually in dispute and narrow the issues before the court. The court also has control over the manner in which expert evidence is presented. It is possible for experts to give concurrent evidence (colloquially known as ‘hot-tubbing’) so that in disputes involving multiple technical issues, the court can more easily identify what the opposing expert evidence is on a given issue. The use of hot-tubbing varies widely across the various TCC courts, with some judges expressing enthusiasm,5 and others rarely using it. The judiciary is now undertaking an enquiry into the varied uptake of hot-tubbing to see if it could be more frequently used to further the efficient conduct of litigation.

Costs management The other significant procedural reform which has been introduced since 1998 is costs management. After completing a review of costs in civil litigation in 2013, Lord Justice Jackson introduced reforms to the manner in which costs are dealt with in civil litigation. There has been a complete change in emphasis, away from retrospective review of costs, towards prospective costs budgeting. The mainstay of these reforms is the obligation to file costs budgets in almost all cases which are worth less than £10m. The parties are bound to attempt to agree their budgets between themselves and if this is not possible the court will approve the budgets. The court is given a hands-on role in the management 3

Dr R Gaitskell QC, ‘Trends in Construction Dispute Resolution,’ SCL Paper 129, December 2005, p3 4 TCC Annual Report 2014-2015, p8 5 Her Honour Judge Frances Kirkham CBE, ‘Reflections on Life as A Judge of the Technology and Construction Court,’ SCL Paper D134, April 2012

Construction Law Review

Failure to file a costs budget on time results in the rather draconian position whereby the party is deemed to have filed a budget which claims court fees only. of costs budgets and, when assessing costs at the conclusion of the litigation, it will not depart from the budgeted figures unless there is good reason to do so. Failure to file a costs budget on time results in the rather draconian position whereby the party is deemed to have filed a budget which claims court fees only.6 This regime does not automatically apply to claims which are valued at more than £10m. However, the court has the power to make costs management orders which can require the filing and exchange of costs budgets. In at least one recent decision, the TCC has emphasised that the courts’ power to make such orders is unfettered, that there is no presumption that costs management will not be ordered and that it should be considered in all cases.7 The obligation to prepare accurate costs budgets has undoubtedly added to the administrative burden of litigation and has received a mixed response from the legal professions. Lord Justice Jackson’s conclusion at the time of the introduction of his reforms was that there was little appetite amongst lawyers for engaging with costs in a detailed way; many regarding such matters as the exclusive preserve of specialist costs lawyers and accountants. That said, the pilot schemes for costs management which were run in the Birmingham and London TCCs, were considered a success. Despite initial scepticism about the value of budgets and the provision of unrealistic estimates, many solicitors acknowledged that budgets made them focus on the future conduct of the litigation, the tactics which they adopted and whether settlement should be considered.8 The next development in this area may be fixed recoverable costs. In a recent speech dramatically entitled ‘Fixed costs – the time has come,’9 Lord Justice Jackson called for the introduction of a fixed costs regime which would apply to all civil claims worth less than £250,000. Prescribed total fees – rather than hourly rates – would be set for each stage of litigation, increasing i...