UK: The Society of Construction Law

Last Updated: 11 August 2006
Article by Nicholas Gould

Nicholas Gould recently became chairman of the Society of Construction Law. In the article below he reviews key legal developments over the past year and sets out his vision for the next year.

Introduction

In the past year, the Society of Construction Law ("SCL") has continued to grow and now currently has approximately 1650 members in the United Kingdom. In addition, the SCL has continued to grow internationally and has now been set up in a number of overseas countries including Hong Kong and the UAE.

These societies are autonomous to the UK SCL but maintain strong links and a close working relationship with the UK SCL. They continue to grow, and the Hong Kong SCL now has approximately 250 members. In addition to the overseas societies, the SCL has also a number of overseas members and has an international subcommittee that manages contacts and relationships with these members.

My Aims as Chairman

I have recently accepted the position of chairman of the SCL. In my term as chairman of the SCL I have decided to focus on three key areas: international connections, junior members and education.

Education is at the core of the SCL as the object of the SCL is to promote for the public benefit the education, study and research in the field of construction law. The SCL maintains strong ties with Kings College in order to continue its education focus, and regularly produces high quality papers on discrete legal areas affecting the construction industry.

I have also chosen to focus on the junior members of SCL. Before being elected as chairman of the SCL, I was a committee member for Young SCL and have retained this role since my election as chairman. I focus on the junior members, as these SCL members will develop the SCL into an established organisation serving the construction industry in the coming years.

Internationally, the SCL is now reaching further parts of the world than ever before and I anticipate that this will continue into the future as more projects involve joint ventures of companies of different nationalities. In addition, construction law in the UK is influenced by the developments in construction law in other common law countries and a heightened aware of this influence can only serve to assist our development as practitioners. One aspect of the international dimension is adjudication.

Adjudication in Singapore and Malaysia

My partners at Fenwick Elliott LLP and I recently hosted a contingent from Malaysia to discuss the adjudication provisions in the Housing, Grants Construction and Regeneration Act ("HGCRA"). Malaysia is in the process of introducing adjudication provisions, similar to the HGCRA, Singapore and New Zealand, into their legislation. The contingent was interested in discussing our experience with adjudication legislation in the UK, in order to consider those areas that might be improved.

Similarly Singapore has introduced the Building and Construction Industry Security of Payment Act into its legislation. This act incorporates adjudication provisions and commenced on 1 April 2005. The UK is already considering areas for improvement in the HGCRA, not just in respect of adjudication, but also payment.

DTI Consultation

The DTI in the process of a consultation to improve payment practices in the construction industry. The consultations are in respect of proposals to amend Part II of the HGCRA and the Scheme for Construction Contracts. DTI’s paper, Proposals for Better Payment Practices in the Construction Industry, was published on 16 January 2006.1

The bulk of the proposed changes relate to the payment provisions. For example, the DTI has considered whether to define the content of an adequate payment mechanism in Section 110(1) of the HGCRA, whether to restrict the use of pay-when-certified clauses and controversially whether to make "pay-when-paid" clauses ineffective in cases of "upstream" insolvency proceedings. In addition to the payment proposals, proposals regarding adjudication were also made, including preventing the use of "trustee stakeholder accounts" to suspend an adjudicator's award pending litigation other than when the recipient is involved in insolvency proceedings.

International Dispute Boards

Adjudication is not just provided for by statue, it is also increasingly provided for in contracts through the use of Dispute Boards. The collective term Dispute Board ("DB") covers the concept of Dispute Review Boards ("DRB") and Dispute Adjudication Boards ("DAB"). DRBs comprise three independent people who evaluate disputes during the course of the project and make settlement recommendations to the parties. The recommendations are not binding.

Each party selects a board member and the parties may then agree on the third, or if they cannot agree the two board members will select the third board member. The DRB then periodically visits the site to gain familiarity with the project and the individuals working on the project. This means that if a dispute arises the board members understand the project and have already built some rapport with the individuals working on the project. They can then deal with disputes by hearing presentations from the parties and suggest solutions. The term DRB can be misleading, as many contracts that include a DRB now provide for the DRB to make binding decisions. One should therefore carefully check the contracts in order to see what it is the DRB is actually doing.

More recently, a DAB process has been included in the 1999 FIDIC suite of standard form contracts. The key distinction between a DRB and a DAB is that a DAB considers submissions from the parties and then issues a written binding decision. The parties are obliged to comply with the decision, and unless they issue a notice of dissatisfaction within 28 days of the giving of the decision, the decision becomes final and binding.

On the domestic front, it is thought that Dispute Boards will be used by the ODA for the deliver of the Olympics Games facilities.

Domestic Case Law

In the UK, there have been developments in the areas of adjudication, arbitration, construction management, health and safety and costs this year. In the area of adjudication, in Connex South Eastern Ltd v MJ Building Services2 it was decided that, subject to circumstances where the right to refer a dispute to adjudication might have been waived, there was nothing to prevent a party from referring a dispute to adjudication at any time.

The incorporation of adjudication provisions was considered in Bryen & Langley Limited v Boston3. In this case, despite the absence of a formal written contract, the adjudicator’s decision was enforced as the surveyor engaged by Mr Boston to prepare the tender, invited tenders on the basis that the contract would be incorporate the JCT form, which, of course includes adjudication provisions.

Another major development in arbitration law over the past year is the House of Lords decision in Lesotho Highland Development Authority v Impregilo Spa & Others4 On appeal, the majority of the House of Lords, concluded that the arbitrators might have made an error of law by selecting European currencies and awarding interest in their award. However, the House of Lords held that a "mere error of law" did not amount to an excess of jurisdiction under the Arbitration Act and the appeal was allowed.

Also during the year was the first reported case where a construction manager has been found liable to an employer: Great Eastern Hotel Co Ltd v John Laing Construction Ltd5 Another first this year was the highest recorded fine of £10M given to Balfour Beatty for the health and safety breaches associated with the Hatfield rail disaster. This was later reduced to £7.5M on appeal.

The issue of costs has arisen on numerous occasions in the reported decisions this year in respect of costs incurred during adjudication6, costs arising from the claimant’s refusal to mediate the claim7 and costs incurred by a defendant at the Pre-Action Protocol stage when dealing with and responding to issues which are subsequently dropped when proceedings are commenced8.

Technology and Construction Court

To assist with the case load in the court, the past year has seen the addition of the Honourable Justice Ramsey as a judge at the Technology and Construction Court ("TCC"). Justice Ramsey was appointed in January 2006. The Judge in charge of the court is the Honourable Justice Jackson.

The court has set up a working committee in relation to consider whether there should be any changes made to the Construction and Engineering Pre-Action Protocol. An interim report was released on 16 January 2006, which identified two areas of concern: time and the cost of complying with the protocol. A final report is expected during the course of this year.

TCC mediation Survey

In addition to the working committee outlined above, research is currently being carried out, firstly by questionnaire survey and then by follow-up interviews, to investigate the following three points:

  1. In what circumstances is mediation an efficacious alternative to litigation;
  2. To assist the court to determine whether, and at what stage, it should encourage mediation in future cases; and
  3. Identify which mediation techniques are particularly successful.

This research is being conducted with the TCC after the Honourable Mr Justice Jackson had previously expressed interest in trying to further develop criteria which judges could use when assessing the most effective time to direct parties to mediation. The question is when is the right time? The purpose of the research is to ascertain at what stage in the litigation cycle parties settle by way of mediation in order that judges can become better informed as to when they should direct parties to mediation.

TCC Judges as Mediators

In addition to the TCC mediation survey, the TCC has recently announced the launch of a new mediation service to both criticism and applause from members of the legal profession. This service is currently being piloted by the TCC judges. Judges who have received appropriate training will offer to resolve disputes using conventional mediation techniques. If settlement is not reached and the case proceeds to litigation, the judge who acted as mediator will have no further role in the proceedings. However, they will be able to set out their views on the dispute and the likely outcome of the case, if the parties request them to.

Project Mediation

Another mediation alternative has been launched by CEDR and Fenwick Elliott; the project mediation initiative. ‘Contracted Mediation’ or ‘Project Mediation’ attempts to fuse team building, dispute avoidance and dispute resolution in one procedure. Two mediators are appointed at the outset of a project or major business relationship, to act as the point of contact when communication problems are anticipated or arise. The scheme’s aim is to support the successful delivery of a project and the panel assists in organising and attends an initial meeting at the start of the project and may conduct one or more workshops at the outset of the project or during the course of the project as necessary.

The panel may also visit the project periodically during the life of the project. In this respect the panel therefore has a working knowledge of the project and more importantly the individuals working on that project. That knowledge allows the panel to resolve differences before they escalate, because the panel provides an immediate forum for the confidential discussion and potential mediation of differences or disputes. Experiences with project mediation in practice are limited. However, project mediation was apparently used on Jersey Airport.

The only publicly reported project where project mediation has been used was Jersey Airport taxiway. The contract sum was approximately £15M, and the project mediation panel cost approximately £15,000. According to the article in Construction Manager a variety of disputes were resolved and the project finished one day ahead of schedule and approximately £800,000 below budget. Much of the project’s success has been attributed to the use of the contracted mediation process.

Conclusion

Construction law continues to develop not just in the UK, but internationally. Innovations in dispute resolution continue to challenge those involved in the field, but also provide opportunities to resolve construction disputes more economically. Adjudication is now widely used in the UK. As is expands internationally, so the use of Dispute Boards for larger projects continues to increase. Perhaps project mediation will be used for the medium size projects, as a cheaper alternative to dispute boards and to avoid the adversarial approach of adjudication.

Footnotes

1 http://www.dti.gov.uk/files/file20826.pdf

2 [2005] EWCA Civ 193.

3 [2005] EWCA Civ 973.

4 For further information, see my article "Praise the Lords", Building magazine, 22 July 2005. Also see the article by Anthony Lavers & Ellis Baker "Arbitrators do make Mistakes", Building magazine, 23 August 2005.

5 [2005] CILL 2217.

6 John Roberts Architects Limited v Parkcare Homes (No. 2) Limited [2006] EWHC Civ 64.

7 The Wethered Estate Ltd v Davis & Other

8 McGlinn v (1) Waltham McGlinn Contractors Limited (2) Huw Thoms Associates (3) D J Hartigan & Associates Limited [2005] EWHC 1419.

For further articles by Nicholas Gould please visit www.fenwickelliott.co.uk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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