Legal Developments In Construction Law: May 2024

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An adjudicator is bound by previous decisions in adjudications between the same parties and cannot determine a dispute which has been the subject of a prior decision.
UK Real Estate and Construction
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IN THIS ISSUE

  1. Adjudication: same dispute? Court says new evidence does not make it different
  2. Adjudicator shuts out defence to payment claim (but should he have done?)
  3. Court says adjudicator had no power to correct award to reflect his second thoughts
  4. Did the adjudicator exercise a power he did not have or did he wrongly exercise a power that he did have?
  5. National Infrastructure Planning Guidance Portal and new guidance now in force
  6. May launch for JCT 2024 Minor Works contracts
  7. Guidance on BSR requirements for new HRB projects, and work to existing HRBs, that failed to meet the conditions for transitional arrangements
  8. Second staircases: Approved Document B updated guidance applies from 30 September 2026
  9. HRB guidance: how to apply for completion/partial completion certificates
  10. HRB guidance: how to make a change control application

1. ADJUDICATION: SAME DISPUTE? COURT SAYS NEW EVIDENCE DOES NOT MAKE IT DIFFERENT

An adjudicator is bound by previous decisions in adjudications between the same parties and cannot determine a dispute which has been the subject of a prior decision. But how can you tell if the same or a similar dispute has been determined in an earlier adjudication?

An adjudicator ruled that a contractor was liable for failure to complete its works by the completion date and that the employer was, in principle, entitled to recover a loss of revenue. He also said, however, that the employer had not proved any entitlement to such an award, and accordingly the employer's case failed.

In a subsequent adjudication, in which the employer served an expert's report, the adjudicator acknowledged that he was bound by his decision in the previous adjudication but ruled that the employer's defence in the later adjudication, that it was entitled to set off losses incurred as a result of the contractor's s failure to complete the works by the completion date, was a matter which had not previously been determined in an adjudication decision. The employer was advancing a different legal argument and had supported that argument, with this new expert's report.

The Scottish Court disagreed. Noting that, from the earliest case law, the English courts have been alert to the risk of an unsuccessful party seeking to make good a shortcoming in an earlier adjudication by re-raising the matter in a subsequent adjudication with the benefit of improved evidence, it said that the fact that different or additional evidence is deployed in the later claim will not normally alter what the earlier decision was about and whether the later adjudication gives rise to the same or a similar dispute. The Court of Appeal has underscored that the existence of further, more detailed, evidence is not a factor of any real significance in support of the notion that the new dispute differs from the previous decision.

In so far as the adjudicator viewed the existence of a new expert report as a factor in support of the proposition that a different issue was before him in the later adjudication, he was in error. New evidence does not, in itself, say anything about whether the subsequent dispute is different from the previous decision taken. In adjudications where a party seeks, but fails, to prove its loss due to a lack of evidence led before the adjudicator, the normal consequence will be that a further adjudication seeking to establish the loss will be barred. A failure to prove quantum in a contractual claim due to inadequate documentary substantiation will normally prevent the unsuccessful party seeking to re-adjudicate that issue.

Having sought but failed to prove its loss in the first adjudication, the contractor was consequently not entitled to re-raise that issue as a defence in a subsequent adjudication. Its remedy was to advance that claim in litigation or arbitration proceedings.

Engenda Group Ltd v Petroineos Manufacturing Scotland Ltd: https://www.bailii.org/scot/cases/ScotCS/2024/2024_CSOH_36.html

2. ADJUDICATOR SHUTS OUT DEFENCE TO PAYMENT CLAIM
(BUT SHOULD HE HAVE DONE?)

A subcontractor pursuing its claim for payment in adjudication attempted to achieve a tactical advantage by drafting, and relying on, its notice of adjudication so as to confine the scope of the adjudication and exclude potentially relevant defences to its claim. In its defence the main contractor raised cross-claims as a defence of set-off but the adjudicator decided that they could not be raised as they fell outside the scope of the adjudication. Was the adjudicator entitled to do that?

COULD THOSE CROSS CLAIMS BE EXCLUDED?

The court noted that a responding party is entitled to raise any defences it considers properly arguable to rebut the claim made by the referring party. In doing so, the responding party is not widening the scope of the adjudication; it is engaging with, and responding to, the issues within the scope of the adjudication, which is what the main contractor in this case had done. And where the referring party seeks payment in respect of specific elements of the works, the responding party is entitled to rely on all available defences, including the valuation of other elements of the works, to establish that the referring party is not entitled to the payment claimed. As noted by Lord Briggs JSC in Bresco v Lonsdale:

"However narrowly the referring party chooses to confine the reference, a claim submitted to adjudication will nonetheless confer jurisdiction to determine everything which may be advanced against it by way of defence, and this will necessarily include every cross-claim which amounts to (or is pleaded as) a set-off."

WAS THE ADJUDICATOR'S DECISION STILL ENFORCEABLE?

Case law says that if an adjudicator fails to address the question referred to them because they have taken an erroneously restrictive view of their jurisdiction (and have, for example, failed even to consider the defence to the claim or some fundamental element of it), then that may make their decision unenforceable, either on grounds of jurisdiction or natural justice. The failure must, however, be deliberate, not inadvertent, and material, that has had a potentially significant effect on the overall result of the adjudication. A potentially relevant factor is whether the claimant has brought about the adjudicator's error by a misguided attempt to seek a tactical advantage.

In the present case, the adjudicator's failure was deliberate, as he decided that the cross-claims could not be raised because they fell outside the scope of the adjudication. The error was material, because the cross-claims would, if upheld, have had a very significant effect on the overall result of the adjudication and the error was brought about by the subcontractor's deliberate attempt to achieve a tactical advantage by confining the scope of the adjudication so as to exclude potentially relevant defences to the claim for payment. The decision was consequently unenforceable because made on the basis of an error as to the adjudicator's jurisdiction and in breach of the principles of natural justice.

Morganstone Ltd v Birkemp Ltd [2024] EWHC 933

3. COURT SAYS ADJUDICATOR HAD NO POWER TO CORRECT AWARD TO REFLECT HIS SECOND THOUGHTS

An adjudicator decided that there was a matter of substance which he had not adequately addressed in his decision and he changed it. The Scheme for Construction Contracts says that an adjudicator can correct their decision to remove a clerical error or typographical error arising by accident or omission, but was the adjudicator's error "clerical or typographical" so that this slip rule applied?

The parties agreed that the error was not typographical and the court ruled that it was not clerical. It referred to previous English and Scottish case law which noted that:

  • the slip rule is not directed to pure omissions, i.e. something that an adjudicator meant to do but by some oversight they forgot to do;
  • a "clerical or typographical" error means an error in expression or calculation of something contained within the decision, not an error going to the reason or intention forming the basis of that decision, for instance an arithmetical error, mis-transposing parties' names, a slip in carrying over a calculation from one part of the decision to another or the mistaken insertion of a rogue number;
  • a clerical or typographical error is as a result of "accident or omission".This also points to correction of slips or mistakes in expression, rather than changes to the reasoned or intended basis of the decision.

All these features are consistent with the slip rule essentially being confined to corrections of the adjudicator's "first thoughts and intention". If the slip rule was broader, i.e. to include corrections of pure omissions or to give effect to second thoughts or intentions, it could seriously undermine the interim finality of adjudications under the Scheme. The slip rule is confined to correcting a typographical or clerical error of something expressed within the four corners of the decision that is apparent on the face of the decision. It is not a warrant to correct more substantive errors, in the sense of a mistake of fact or law. Nor does it warrant correcting a pure omission, something that the adjudicator intended to include or take account of, but which they wholly omitted in reaching their decision.

In this case the court considered that a "clerical error" occurs where the (probably metaphorical nowadays) clerk or similar person is given instructions by the author of a decision and writes them down wrongly.

McLaughlin & Harvey Ltd v LJJ Ltd [2024] EWHC 1032

4. DID THE ADJUDICATOR EXERCISE A POWER HE DID NOT HAVE OR DID HE WRONGLY EXERCISE A POWER THAT HE DID HAVE?

In McLaughlin & Harvey Ltd v LJJ Ltd the court decided that the adjudicator's amendment of his decision to deal with a matter of substance that he had not adequately addressed was not a clerical error or typographical error, arising by accident or omission, that he could correct under the slip rule in the Scheme. Was it, however, simply an error of fact or law in applying the slip rule that did not invalidate the amendment?

Noting that the dividing line between exercising a wrong jurisdiction which does not exist and exercising a jurisdiction which does exist, wrongly, is difficult and that each case must always be fact sensitive, the court concluded that the adjudicator in this case was not exercising a power which he had, namely to correct clerical or typographical errors. Instead, in the light of further submissions on the facts, he was qualifying or clarifying his decision. That was not a power which the adjudicator enjoys. This was not merely a case of erroneous exercise of power vesting in the tribunal but the purported exercise of a power which the adjudicator did not have, namely giving effect to second thoughts or intentions.

Even if the adjudicator did have such powers, then in every adjudication the issue of a decision would not represent the end of the process, but merely herald further rounds of submissions from the losing party or, perhaps, both parties. That is certainly not the intention of the Housing Grants Act or the Scheme.

McLaughlin & Harvey Ltd v LJJ Ltd [2024] EWHC 1032

5. NATIONAL INFRASTRUCTURE PLANNING GUIDANCE PORTAL AND NEW GUIDANCE NOW IN FORCE

The National Infrastructure Planning Guidance Portal, for all those involved in Nationally Significant Infrastructure Projects in the fields of energy, transport, water, wastewater, and waste, now has guidance on all aspects of the NSIP system, from pre-application through to post-consent changes, and a range of related matters.

See: https://www.gov.uk/government/collections/national-infrastructure-planning-guidance-portal

6. MAY LAUNCH FOR JCT 2024 MINOR WORKS CONTRACTS

Following the April launch of the JCT 2024 Design and Build contracts, the 2024 Minor Works Building Contract family has been published, consisting of:

  • Minor Works Building Contract 2024 (MW 2024)
  • Minor Works Building Contract with contractor's design 2024 (MWD 2024)
  • Minor Works Sub-Contract with sub-contractor's design 2024 (MWSub/D 2024)
  • Minor Works Building Contract 2024 Tracked Change Document (MW 2024 Tracked) (available in hardcopy only)
  • Minor Works Building Contract with contractor's design 2024 Tracked Change Document (MWD 2024 Tracked) (available in hardcopy only)
  • Short Form of Sub-Contract 2024 (ShortSub 2024)
  • Sub-subcontract 2024 (SubSub 2024)

JCT is also releasing updates to these Model Administration Forms:

  • MW and MWD 2024 Admin – Contract Administration Model Forms (digital only);
  • DB 2024 Admin – Contract Administration Model Forms (digital only).

See: JCT Announces Release Schedule for Minor Works 2024 – The Joint Contracts Tribunal (jctltd.co.uk)

7. GUIDANCE ON BSR REQUIREMENTS FOR NEW HRB PROJECTS, AND WORK TO EXISTING HRBS, THAT FAILED TO MEET THE CONDITIONS FOR TRANSITIONAL ARRANGEMENTS

Transitional arrangements under the Building Safety Act secondary legislation (see Schedule 3: https://www.legislation.gov.uk/uksi/2023/909/schedule/3/made) determine which higher-risk building work could continue under the old rules, and which work must transfer to the Building Safety Regulator.

HSE guidance sets out the information and documents to be submitted for any work for which the BSR becomes the building control authority, where the conditions for continuing the work under local authority or private sector building control have not been met.

See: Transitional building control approval for new higher-risk buildings - GOV.UK (www.gov.uk)

and Transitional building control approval for work on existing higher-risk buildings - GOV.UK (www.gov.uk)

8. SECOND STAIRCASES: APPROVED DOCUMENT B UPDATED GUIDANCE APPLIES FROM 30 SEPTEMBER 2026

Changes in the updated guidance in the Building Regulations 2010 Approved Document B: Fire safety, focus on:

  • a new recommendation for more than one common stair to be provided in blocks of flats with a storey 18m or more in height;
  • building design provisions to support the use of evacuation lifts in blocks of flats.

The changes take effect on 30 September 2026 for use in England but the 2019 edition, incorporating the 2020 and 2022 amendments, will continue to apply where a building notice or an initial notice has been given to, or a building control approval application with full plans made to, the relevant authority before 30 September 2026 and either the building work to which it relates:

  • has started and is sufficiently progressed before that day; or
  • is started and is sufficiently progressed within the period of 18 months beginning on that day.

For the purpose of these transitional arrangements, building work is to be regarded as 'sufficiently progressed':

  • where the building work consists of the construction of a building, when the pouring of concrete for the permanent placement of the trench, pad or raft foundations has started, or the permanent placement of piling has started; or
  • where the building work consists of work to an existing building, when that work has started; or
  • where the building work consists of a material change of use of a building, when work to effect that change of use has started.

See: Calls for second staircases in all new tall residential buildings - GOV.UK (www.gov.uk)

9. HRB GUIDANCE: HOW TO APPLY FOR COMPLETION/PARTIAL COMPLETION CERTIFICATES

Guidance on how to apply for a completion or partial completion certificate for higher-risk building work or building work to an existing higher-risk building can be found at: https://www.gov.uk/guidance/building-completion-certificates

10. HRB GUIDANCE: HOW TO MAKE A CHANGE CONTROL APPLICATION

Guidance on how to make a change control application for higher-risk building work or building work to an existing higher-risk building can be found at:

https://www.gov.uk/guidance/change-control-and-notifiable-changes-manage-building-control-approval

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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