While 2016 has been an eventful year in many respects, we look back at some of the key developments that occurred in the world of construction law and practice.
New legislation and protocols
This year, we finally saw the coming into force of the long-awaited Third Parties (Rights Against Insurers) Act 2010 in August, which makes it easier for a third party to issue proceedings directly against the insurer of an insolvent company, and modernises and simplifies previous legislation. See Practice Note: Construction insolvency—the Third Parties (Rights Against Insurers) Acts.
The Insurance Act 2015 also came into force in August, making radical changes to insurance law, for example by updating and replacing the existing duty to disclose every material circumstance known to the insurer with a new ‘duty of fair presentation’. See News Analysis: Insurance Act 2015—what does it mean for the construction sector?
In public procurement, the Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016 came into force in April.
The much-awaited second edition of the Pre-Action Protocol for Construction and Engineering Disputes was launched, and came into force, in November. Alexander Nissen QC, who led the drafting, explored the new protocol (see News Analysis: Exploring the new Pre-Action Protocol for Construction and Engineering Disputes) and also told us about the new referee procedure (see News Analysis: Introducing the new construction protocol referee).
Finally, the Society of Construction Law published the draft second edition of the its Delay and Disruption Protocol for comment. The consultation period lasted 8 weeks, and we now await publication of the second edition in final form.
New standard form contracts
The headline news in relation to standard forms was the publication of the majority of the 2016 editions of the Joint Contracts Tribunal (JCT) suite of contracts. The first family (Minor Works) appeared in June, and this was followed by further contracts throughout the year, including the Design and Build Contract and Standard Building Contract families. See our new JCT contracts 2016 sub-topic to find out more.
We also learnt more about the changes expected in the upcoming new FIDIC forms of contracts, when we attended the annual FIDIC London users’ conference a few weeks ago. See News Analysis: FIDIC—an update on the new contracts and other developments.
This year everyone was talking about the result of the UK’s referendum on EU membership. Check out our Brexit sub-topic, which includes an analysis by Adrian Bell of CMS on what Brexit could mean for construction and engineering (News Analysis: The future of the construction industry post-Brexit). The latest Office for National Statistics figures show that construction output increased by 0.7% in October 2016 as compared to October 2015, with new housing providing the biggest upwards contribution.
Also in 2016, building information modelling (BIM) level 2 became mandatory on all government projects in April, and an official BIM level 2 website was launched. We also saw the launch of a new National Infrastructure Delivery Plan (see Practice Note: The National Infrastructure Delivery Plan 2016–2021) and a new Government Construction Strategy (see Practice Note: Government Construction Strategy 2016–2020).
And let’s not forget that the National Infrastructure Commission (NIC) was busy throughout the year, publishing reports on smart energy, London transport, northern connectivity and 5G technology. For more information, see our new Practice Note: National Infrastructure Commission.
In this section we look back at key decisions from the last 12 months. As always, for a complete list of cases relevant to construction lawyers, see our Construction case tracker. There is also a 2016 review specifically for adjudication: Adjudication cases—2016 in review.
There were several cases this years concerning interim and final payment under construction contracts:
- there was no implied term entitling a contractor to interim payment where works were delayed beyond the final date for payment in an agreed schedule (see News Analysis: No entitlement to make interim application after latest date in payment schedule (Grove Developments v Balfour Beatty)). This was subsequently confirmed by the Court of Appeal (see News Analysis: Court of Appeal confirms no interim payments after schedule expired (Balfour Beatty v Grove))
- a term was implied into a contract to make its payment provisions comply with the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996) (see News Analysis: Adjudication—construction and implication in light of the Scheme (Manor Asset v Demolition Services))
- the court corrected a payment schedule to make it consistent with the parties’ other payment processes and compliant with the HGCRA 1996 (see News Analysis: Amendment of ‘obvious error’ in a payment schedule (Bouygues v Febrey))
- a contractor’s ‘initial assessment’ was not a valid interim payment application under a JCT contract (see News Analysis: Initial assessment’ not a valid interim payment application (Jawaby v Interiors Group))
- the court confirmed that the principles in ISG v Seevic, concerning what happens where a paying party fails to give the required notices, did not apply to final payments (see News Analysis: Adjudication and final payment valuations (Kilker Projects Ltd v Purton), and, for more on ISG v Seevic, see Practice Note: Interim payments in construction contracts)
- the court refused to grant an injunction to restrain a winding up petition where the employer had failed to give a pay less notice in respect of its final account (see News Analysis: Statutory demands and interim applications (COD Hyde v Space Change) and, more generally, News Analysis: Statutory demands for construction project debts)
In construction arbitration/alternative dispute resolution:
- the court found that, by actively participating in an expert determination process, a party had conferred jurisdiction on the expert to determine the dispute, either by implied agreement, waiver or estoppel by convention (see News Analysis: Jurisdiction issues in expert determination (ZVI Construction v University of Notre Dame)). Note too that, following the cases of Globe Motors v TRW and MWB v Rock (also decided in 2016), the court confirmed that a clause which purports to prohibit variations or waivers in the absence of written consent may be defeated
- in a rare decision, the court held that there was apparent bias on the part of an arbitrator (see News Analysis: Case of apparent bias against arbitrator made out (Cofely v Bingham & Anor))
There were a couple of important cases concerning exclusion clauses:
- the court considered the correct construction of an exclusion of liability for ‘consequential or special losses, damages or expenses’ and concluded (on the specific facts of the case) that the exclusion had a broader meaning than indirect loss under the second limb of Hadley v Baxendale (see News Analysis: ‘Consequential loss and special damages’ in exclusion clauses (Star Polaris LLC v HHIC-Phil Inc))
- the Court of Appeal confirmed that the starting point for interpretation of exclusion clauses between parties of equal bargaining power is the natural and ordinary meaning of the language chosen by the parties, and where the wording is clear it is not appropriate for the court to apply interpretive principles such as the ‘contra proferentem’ rule (see News Analysis: Clarifying consequential loss clauses in contracts)
2016 also saw the court:
- faced with various issues under a shipbuilding contract, including questions of concurrent delay (see News Analysis: Causation, contributory negligence, third party losses, LADs and concurrent delay (Saga v Fincantieri)). The case reminds us that a contractor can only claim the benefit of a concurrent delay where it actually affects the completion date as then scheduled. See also the blog piece on concurrent delay by Mischa Balen of Atkin Chambers
- consider the interplay between express termination provisions and termination at common law, holding that, in light of the particular wording of the termination provision, it did not apply to common law termination (see News Analysis: How did express provisions impact common law termination? (Vinergy v Richmond))
- look at fitness for purpose in respect of components for an offshore wind farm project, which it held (on the facts) required the goods to be in a condition that any reasonable purchaser could, without further investigation, install them (see News Analysis: Steel components not fit for purpose on wind farm project (Fluor v Shanghai Zhenhua Heavy Industries))
- find that an architect owed a duty of care towards her friend and neighbour in carrying out architectural and project management services, even though there was no contract and she was not paid (see News Analysis: Gratuitous professional services gave rise to duty of care (Burgess v Lejonvarn))
Watch our for our separate piece in January on what 2017 holds in store, from a panel of industry experts. And remember, you can always check out our Construction future developments tracker throughout the year to see what’s in the pipeline.