Category Archive: Construction

A Lidl issue: VAT Invoices and Final Dates for Payment

In any construction contract, the payment mechanism is of fundamental importance and it is no surprise that many disputes stem from the provisions dealing with how and when payments are made.

It is also why the payment mechanism must comply with the requirements set out in the Housing, Grants, Construction and Regeneration Act 1996 (“the Act“) as amended.

An amendment or provision that we often come across in negotiating, reviewing or advising on contracts is one which ties the final date for payment to a period after the payee has provided an invoice (VAT or otherwise). Whether or not such a provision complied with the Act was uncertain after the 2020 decision in Rochford Construction Ltd v Kilhan Construction Ltd.

The TCC has now confirmed that such provisions are not compliant with the Act in the recent judgment in Lidl Great Britain Ltd v Closed Circuit Cooling Ltd (t/a 3CL) [2023] EWHC 2243 (TCC).

The case involved a dispute between the well-known retailer Lidl and 3CL, an industrial refrigeration and air conditioning contractor. The parties had entered into a framework agreement enabling the instruction of individual works orders. Under one works order, 3CL applied for payment of £781,986.22. Lidl failed to pay and a dispute arose over 3CL’s entitlement to the sums claimed.

One of the issues in dispute was the final date for payment. The contract provided that the final date for payment would be “either 21 days following the due date or receipt of the Contractor’s valid VAT invoice, whichever is the later”.

3CL argued that this clause failed to comply with Section 110(1)(b) of the Act:

(1)        Every construction contract shall—

(a)        provide an adequate mechanism for determining what payments become due under the contract, and when, and      

(b)        provide for a final date for payment in relation to any sum which becomes due.

The parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date for payment.

3CL’s submission was that a contractual term purporting to fix a final date for payment other than by reference to a period of time following the due date is void and ineffective as it would contravene s110(1)(b). Lidl contended that the Act did not impose such a constraint, and that the clause in the contract was valid.

The TCC was not persuaded by Lidl and held that the clause in the contract was not compliant with the Act. The Court found that the wording of s110(1)(b) is deliberately more limited in scope when compared to s110(1)(a), which allows the parties to decide on the mechanism for determining when payments become due. The Court decided “on a proper analysis, that is because the only discretion intended to be and actually given in the former case is for the parties to agree the length of the time period between the due date for payment and the final date for payment”.

The result is that s110(b)(1) prohibits parties from agreeing to a final date for payment that is contingent on the occurrence of an event (such as the issuing of an invoice). Instead, it must be pegged to the due date to ensure compliance with the Act.

In this and any other case where a construction contract does not comply with the Act, the Scheme for Construction Contracts will be implied insofar as is necessary to correct the non-compliance. Under the Scheme provisions, the final date for payment is 17 days from the due date and the contract between Lidl and 3CL would have been amended accordingly.

The incorporation of the Scheme could result in unforeseen consequences such as a failure to make payment on time or issue payment and pay less notices in accordance with the contract  which, amongst other issues, may result in a smash and grab adjudication. Either way, it is in both parties interests to ensure that they agree a compliant payment mechanism and adhere to it.

If you are aware of any similar provisions in contracts that you currently use, it would be worth reviewing and updating these forms. As for any contracts already in existence, you should ensure that the effect of the Scheme is accounted for when dealing with pay less notices and making payments.

Sintons once again wins praise from Legal 500 2024

Sintons has again confirmed its position as one of the leading law firms in the North of England with the release of Legal 500 2024, which highlights the expertise and client service excellence delivered by departments and key individuals across the business.

Newcastle-based Sintons has won praise across the firm for the high levels of legal advice and personal service it delivers, and it is highlighted in four key practice areas as being leaders in its field in the North of England, and being recommended in 15 others.

A total of 48 lawyers are recommended for their standout practice in their respective fields, with fifteen of its lawyers hailed as leading individuals, which comprises experts in their field from across the North. Head of licensing Sarah Smith maintains her place in the Legal 500 Hall of Fame, in recognition of being a leading individual consistently for more than a decade.

A further four are named as next generation partners, and four hailed as rising stars.

While Sintons has for many years continually been named by Legal 500 as one of the key law firms in the North, its rankings for 2024 show the firm’s ongoing growth and progress, with gains made in many key practice areas.

Newly released for 2024, Legal 500 is based on extensive research into law firms throughout the UK, with its independent findings based on examples of work, client and peer testimonials and interviews.

In Legal 500 2024, Sintons is named as a top tier firm in:

Its leading individuals have been named as:

Next generation partners have been hailed as:

Rising stars are:

Christopher Welch, managing partner of Sintons, says: “This is a phenomenal and very well deserved assessment of our performance as a firm. We are ranked as leaders in our field in several key practice areas, with Legal 500 rightly recognising the huge capability and expertise we have here, and the progress we continue to make.

“Sintons is all about our people, and to see so many recognised for the outstanding efforts they make on behalf of our clients is fantastic news. We have excellence running throughout the business, in all areas of our work, and our team are all absolutely committed to delivering the best possible service and outcomes to our clients.”

Sintons adds five new aspiring solicitors to its team

Law firm Sintons has continued its commitment to supporting the next generation of legal talent by recruiting its latest round of aspiring lawyers.

Sintons has added four new graduate trainees to its ranks, as well as a new solicitor apprentice who will embark on the North East Solicitor Apprenticeship (NESA) course towards qualification.

Corina Dias, Jessica Fields, William Chapman and Anthony May all join Sintons as trainee solicitors, selected from scores of applicants to undertake the two-year training programme, which will see them gain experience in a number of practice areas ahead of qualification.

In their first seats, which will last for six months, Corina will join the Employment team; Jessica will be in Neurotrauma; and William and Anthony will join the Real Estate department.

Faith Ramsay becomes Sintons’ latest solicitor apprentice, and will be supported for the next six years through the NESA programme – of which Sintons was a founder member – comprising legal experience and part-time academic study at Northumbria University.

She will begin her training at Sintons in the Dispute Resolution department.

Sintons’ existing trainees – who are in their second and final year of training – will also move seats from September as their development continues.

Lucy Milnthorp moves to Dispute Resolution; Charles Bell joins Construction & Engineering; and Edward Pattinson moves to Wills, Trusts and Probate.

Solicitor apprentices Saffron Sinclair will move to Corporate, Sabrina Jackland will join Residential Conveyancing and Sophie Lemon will remain in Wills, Trusts and Probate.

The addition of five new people – and ongoing development of its existing trainees – continues Sintons’ longstanding commitment to offering opportunities to the next generation of legal professionals, investing in their training and development and delivering supervision and support from lawyers who are leaders in their field regionally and nationally.

Christopher Welch, managing partner of Sintons, says: “At Sintons, we are committed to offering opportunities to outstanding legal talent throughout their time at Sintons. Investing in the progression and development of our team is absolutely fundamental to what we do here, and in how we value and recognise the people who make Sintons what it is.

“Our long track record in supporting lawyers through training contracts, and more recently apprenticeships, is something we are very proud of. Several of our senior lawyers in the firm began their careers at Sintons as trainees, which speaks volumes about the quality of our training and the ethos of the firm as a place to build a highly successful career.

“We welcome Corina, Jessica, William, Anthony and Faith to Sintons, and will support them with the highest quality of training and development from day one. Best of luck to Lucy, Charles, Edward, Saffron, Sabrina and Sophie as they continue to build their careers and advance the excellence progress they have already made during their time with us.”

Building Safety Act 2022 Update: secondary legislation for new building control framework

On 17 August 2023 the Department for Levelling Up, Housing and Communities published a suite of secondary legislation which fleshes out the technical details that underpin the new safety regime for the design and construction of higher-risk buildings (“HRB”). The new regulations will come into force on 1st October 2023. This article therefore seeks to provide a short summary of the key changes that are likely to impact those in the construction sector. The new regulations include:

  1. The Building Regulations etc. (Amendment) (England) Regulations 2023.

This regulation amends the Building Regulations 2010 and applies to all buildings as opposed to HRB’s only. Perhaps most importantly it introduces new dutyholder roles, duties and competence requirements which includes the client, principal designer and principal contractor. These roles and competencies are referred to at Regulation 6 and it is important that those within the construction industry familiarise themselves with this regulation to understand what is expected of them.

  1. The Building (Higher-Risk Buildings Procedures) (England) Regulations 2023.

This regulation provides procedural building regulation requirements for HRB’s and provides details in relation to:

  • the procedure for “Gateway 2” applications which requires the submission of a building control approval application to the Building Safety Regulator (“BSR”) before the commencement of building works. Approval from the BSR must be obtained before the works start;
  • details on what must be included within the building control approval application referred to in Regulation 4;
  • the requirement for the creation and maintenance of a change control log by the principal contractor and what is to be included and requirements in relation to “major changes” and “notifiable changes”;
  • the arrangements and procedure for golden thread information and mandatory occurrence reporting system of the principal dutyholders to the BSR; an
  • the procedure and requirements for applying for a completion certificate (Gateway 3 application).

In depth guidance on the new regime in relation to Gateway 2 and 3 has been issued by HSE and can be viewed here.

  1. The Building (Approved Inspectors etc. and Review of Decisions) (England) Regulations 2023

These regulations amend the Building (Approved Inspectors etc.) Regulations 2010 in a way that supports the HRB control regime. For example, the regulator for any HRB will be the building control authority and approved inspectors will be replaced by registered building control approvers.

Clearly there is a lot to consider prior to the regulations coming into effect on 1 October 2023 and we would strongly advise those involved with HRB developments to familiarise themselves with the new regime. Parties will also need to consider whether there are any contractual implications arising from the secondary legislation that need to be addressed. It is worth noting that there will be transitional arrangements that allow HRB works to continue under the current framework if certain conditions are met. For example, if an initial notice has been given to a local authority prior to the new regime coming into force and the works have “sufficiently” progressed before 6th April 2024 then it may be eligible to continue under the current framework.

For advice on this or any other construction and engineering related issues or support, please contact our team and we will be happy to help.

JCT 2024 is on the way

The Joint Contracts Tribunal (“JCT”) contracts is one of the most widely used standard form suite of construction contracts in the UK. With the current edition of the JCT contracts being published in 2016, the time has come for an updated suite to take account of recent legislation, case law and market practice. We are currently short on detail, but the JCT has outlined some key changes it hopes to make in the 2024 editions, as follows:

Modernising and streamlining

JCT users can expect to see provisions that allow for increased flexibility for notices to be sent electronically together with electronic signing, which we are sure will be a welcome change as the industry continues to take a progressive approach to digital working.

The JCT 2024 will also see the adoption of gender neutral language across the suite of contracts.  We are particularly pleased to see this announcement given our recent work alongside Constructing Excellence in the North East and other law firms in the region, and our commitment to adopting gender neutral language in the drafting of bespoke construction and engineering contracts and ancillary documentation.

Legislative change

Given the key recent changes to the law, namely the Building Safety Act, it has been reported that the new edition will include significant updates in this regard. Further, changes will be made to take into account the new insolvency grounds that were introduced under the Corporate Insolvency and Governance Act 2020.

Additionally, the new edition will include a due date for final payment after termination, which will remove the uncertainty on this point within the 2016 suite and will reflect the requirements of the Construction Act.

Liquidated Damages and Termination

We understand the new edition will make clear when liquidated damages apply upon termination to take account of the decision of the Supreme Court in Triple Point Technology Inc v PTT Public Company Ltd in which it was confirmed that a liquidated damages clause will generally only apply up to the termination of a contract, with general damages for delay applicable thereafter. A full discussion of this case can be found here.

Extensions of Time

It is anticipated that the period of time for an Employer to assess an extension of time claims will be reduced from 12 weeks to 8 weeks from receipt of the required particulars.

In addition, there will be updates as to how statutory powers are dealt with and ‘Statutory Undertakers’ will be redefined to ‘Statutory Providers’.

Finally, new Relevant Events will be included to deal with epidemics, unexploded ordnance, contaminated materials and asbestos.

Resolving Disputes

The JCT 2024 is reported to put further emphasis on senior executives to meet sooner in an attempt to negotiate a settlement to disputes. It is also envisaged that parties will be able to choose their own Adjudicator Nominating Body as opposed to a shortlist being provided.

Future Proofing

It is anticipated that the changes will reflect the Construction Playbook and will incorporate previously optional provisions that relate to collaborative working and other matters such as sustainability.

New Target Cost Contract

Finally, JCT will be introducing its own JCT Target Cost Contract which will comprise a main contract, sub-contract and guide.  This contract is likely to be seen as an alternative to NEC ECC Option C.

The foregoing provides only outline detail at this stage, and we will be providing further updates and training in due course.

Summer networking event for construction sector

An annual event which brings together professionals working in construction from across the North East is being held again this year.

The Summer Networking event, hosted by Sintons with Constructing Excellence North East (CENE), is a popular event which attracts those working in construction throughout the region to socialise in an informal environment.

The evening, held at Sintons’ headquarters – The Cube on Newcastle’s Barrack Road – provides an opportunity for people working in the built environment sector to come together and make new connections and renew existing relationships.

Sintons’ specialist team, led by Alex Rayner, continues to grow both its regional and national presence, acting for a number of leading names in the construction sector on both contentious and non-contentious issues.

“Our Summer Networking is always a popular event, and we once again look forward to welcoming the great and good of the industry this year,” says Alex.

“We are delighted so many people continue to attend this event, it’s a great opportunity to discuss industry trends and share experiences, but also just to take some time out to catch up with people in a relaxed environment.”

The Summer Networking will be held on Thursday, July 13, from 4.30pm to 7pm, at The Cube on Barrack Road in Newcastle.

To attend, contact dainee@cene.org.uk

Second edition of the CIC Low Value Disputes Model Adjudication Procedure has been published

The second edition of the Construction Industry Council (CIC) Low Value Disputes Model Adjudication Procedure (LVD MAP) has recently been published following a review of its use since the first edition was published 3 years ago.

As a reminder, adjudication is a statutory dispute resolution mechanism which applies to “construction contracts” as defined in the Housing, Grants Construction and Regeneration Act 1996. It is designed to promote cash flow within the industry and provide a quick and cost-effective method of obtaining an “interim-binding” decision within 28 days. The parties can then decide to refer the dispute on for final determination by the Courts or Arbitration, depending on the terms of the relevant contract.

Many Adjudicator Nominating Bodies, or ANBs, have developed or adopted streamlined adjudication models which the parties can use in order to further reduce the cost of disputes with lower values or simpler issues. These models are designed to sit within the provisions of the Scheme for Construction Contracts. The Scheme rules are implied where a construction contract does not provide a compliant adjudication mechanism or where the Scheme is expressly incorporated.

The LVD MAP is one such streamlined procedure, specifically design for low value disputes, and the second edition brings the following changes:

  1. Consent

The consent of both parties, either expressly noted in the contract or agreed after a dispute has arisen, is no longer required where the Scheme applies. Instead, the procedure can be requested by either party or applied at the adjudicator’s discretion.

  1. Increased Dispute Value

The upper value of disputes to which the LVD MAP can be used has increased from £50,000 to £100,000.

However, where the issues in dispute are so straightforward that they are capable of adjudication under the LVD MAP, the adjudicator has the discretion to apply the procedure. No advice is provided on the higher value disputes that could be adjudicated under the LVD MAP but guidance is given on factors that might make a dispute unsuitable, such as a non-financial remedy being sought or disputes where the Contract terms are not easily discernible.

  1. Adjudicator Fee Limits

The capped fees which can be charged by the adjudicator based on the dispute value have been amended to the following:

Up to £10,000:            £2,000

£10,001 to £25,000:    £2,500

£25,001 to £50,000:    £3,500

£50,001 to £75,000:    £4,500

£75,001 to £100,000:  £5,000

Any suitable disputes above £100,000 are subject to a negotiable fee cap. In addition, the hourly rate chargeable by an adjudicator has also been capped at £250.

  1. ANB Appointment Fee

ANBs charge a fee when an application is made to appoint an adjudicator. Previously, the LVD MAP  limited this fee to £250. However, ANBs are now free to set their own appointment fees.

At the time of this article, the CIC listed a charge £300 and the RICS listed £425 (both inclusive of VAT) for an appointment under the LVD MAP.

  1. Timetable Changes

The timetable for the adjudication for the adjudicator to direct. However, the LVD MAP provides a default position which applies unless the adjudicator directs otherwise.

This default timetable has been amended to increase the time available to the adjudicator to make their Decision by 1 week.

It does this by reducing the time which the Respondent has to serve the Response from 14 days to 7 days after the Referral Notice has been received by the adjudicator. A Reply is then due on day 14 with the Decision to follow by day 28.

The above amendments are the result of efforts by a working group reviewing the issues and hurdles experienced by users of the LVD MAP with the aim of making the second edition easier to use and applicable to a wider range of suitable disputes.

In our experience low value adjudication schemes can be a cost-effective way to resolve lower value disputes.  Expanding the LVD MAP to include disputes up to £100,000 is a welcome increase to the scope of the procedure and may assist in making adjudication more accessible for lower value disputes, where parties might otherwise view the potential costs of the process to be a bar to adjudicating.

For advice on this or any other construction and engineering related issues or support, please contact our team and we will be happy to help.

Latest Updates to NEC4 Contracts – third set of amendments published

The Institution of Civil Engineers has recently published the third set of updates to its NEC4 suite of contracts (January 2023), following the previous updates in January 2019 and October 2020. These updates track changes in best practice, developments within the industry and feedback from users and stakeholders across the sector.

As a reminder, the NEC suite of contracts is designed to promote collaboration and proactive risk management between its users. The Cabinet Office has endorsed the NEC4 suite for use in public sector projects, so understanding each update is important for those procuring and tendering construction works in that area.

Nearly all of the contracts within the NEC4 suite have been amended in the January 2023 update. This article focuses on the most commonly used contracts, being the Engineering and Construction Contract (ECC), the Engineering and Construction Sub-Contract (ECS). These are accompanied by “short” versions, being the Engineering and Construction Short Contract (ECSC) and Short Sub-Contract (ECSS).

Adjudication – All contracts including the Y(UK)2 Option

Under the previous drafting, clause W2.3(2) provided that all adjudication submissions (“any further information from a Party to be considered by the Adjudicator”)  were required to be made within 14 days of the referral unless extended by agreement between the parties and the Adjudicator.

The new amendment replaces the default position by providing that the Adjudicator decides the procedure and timetable to be followed in the adjudication, which brings the provision in line with the Housing Grants, Construction and Regeneration Act 1996.

For those interested, the amendments achieve this by:

  • deleting the last two sentences of W2.3(2); and
  • replacing W2.3(5).

Working from home and other locations outside the Working Area now part of Defined Cost

Both the ECC and the ECS have several main “Options” for pricing the contract works. Options A and B are priced contracts, Options C and D are target cost contracts and Option E is a cost reimbursable contract.

All Options refer to a definition of “Defined Cost” in the valuation of a Compensation Event (or the calculation of the Price itself under Option E). The Short Schedule of Cost Components sets out the components which are included in the assessment of Defined Cost for Options A and B, the Schedule of Cost Components applies to Options C, D and E.

Previously, there were specific components within those Schedules which accounted for the cost of people who were working within the “Working Areas”. As hybrid and remote ways of working are increasingly becoming the “new norm”, the new amendments have addressed this issue by expanding the components to include costs for people working on the contract outside the Working Areas.

Specifically, component 1 in the Schedule of Cost Components has been replaced and there is now an option for the Contract Data to identify people working outside of the Working Areas whose costs are included in the Defined Cost, even if they are not normally based within the Working Areas.

Component 11 in the Short Schedule has been amended to replace the reference to time spent within the Working Areas to the time spent on work in the contract, allowing the cost of people who would normally be based in the Working Areas to be recovered if working on the contract from elsewhere.

Option X29 – Climate Change

First published in July 2022, option X29 was a standalone secondary optional clause aimed at achieving net-zero emissions and more sustainable building practices by supporting and incentivising carbon reduction. It will now be included within all of the major NEC4 contracts and sub-contracts.

Climate change requirements can be included within the Scope and users can set financial incentives for achieving certain targets set out within a performance table.

Option X22 – Early Contractor Involvement

Available in Options C (target contract with activity schedule) and Option E (cost reimbursable contract), optional clause X22 creates a two-stage contract with the details of each stage set out in the Scope. Stage one is the pre-construction phase, with development of the scope, detailed design and agreement on price. Stage two is the construction phase, which includes the completion of any remaining detailed design.

The amendments to Option X22 aim to introduce more flexibility during the first phase as the project is developed and greater certainty where the Contractor is not engaged for the construction phase. This is achieved by:

  1. Allowing the Project Manager and Contractor to agree changes to the Site Information during Stage One. As a reminder, the Contractor is assumed to have taken into account the Site Information when judging the physical conditions of the Site when assessing a Compensation Event.
  2. Providing that Compensation Events originally judged against the Contract Date are now judged against the date of the notice to proceed to Stage Two. This allows the information gathered in Stage One, including any agreed changes to the Site Information, to be taken into account in assessing the Stage Two Compensation Events.
  3. Including any Compensation Events before the date of a notice to proceed within the changes to Prices and Completion Dates in the notice to proceed. All outstanding Compensation Events can therefore be dealt with as part of the transition to Stage Two instead of requiring a separate resolution.

Design Liability in Short Contracts (ECSC and ECSS)

The default design provision in the short versions of the Engineering and Construction contracts previously imposed a “fitness for purpose” obligation in relation to design carried out by the Contractor. This is a strict legal obligation which, unlike a requirement to exercise reasonable skill and care, does not necessarily require the Contractor to have acted negligently to be in breach.

A professional indemnity insurance policy will exclude cover (or void the policy altogether) where the insured has agreed to a fitness for purpose obligation. For that reason, such obligations are usually negotiated out as a void PII policy does not benefit either party.

The amendments have introduced an Option within the ECSC Contract Data to limit the Contractor’s design liability to the exercise of reasonable skill and care to reflect the current reluctance within the industry to accept a fitness for purpose obligation. A similar amendment made in relation to Sub-Contractors in the ECSS.

For context, both the ECC and ECS have Option X15 relating to design which provides that the standard of care is “the skill and care normally used by professionals designing works similar to the works“.

Limitation on Liability in Short Contracts (ECSC and ECSS)

As a final note, the (Sub)Contract Data has been updated in the short contracts to include an optional limitation on liability. This reflects the main contracts which can include a limitation on liability in Option X18.

Publication of the new JCT 2023 suite of contracts had been expected prior to 2023. However, this is now expected to be published in late 2023 or early 2024, so we have slightly longer to wait until then.

For advice on this or any other construction and engineering related issues or support, please contact our team and we will be happy to help.

Non Payment in Construction Contracts – what are my options?

Cash is king, so the old saying goes.  This is certainly true in the construction industry, where margins are low and the cost and availability of material and labour is unpredictable.  Indeed, often the success or failure of a construction business hinges on getting paid the right amount at the right time.

Non-payment come in different guises, including late payment, underpayment and no payment at all and there is no “one size fits all” approach; the correct course of action will depend on a number of factors, not least the relevant contractual and factual position in each case, but also the usual commercial considerations.  It is likely that one or more of the following options can be used in conjunction and we recommend you take legal advice on which option is appropriate before taking any action.

1. Get your drafting right

As a preliminary point, the starting point must be to ensure that your expectations as to when you will be paid align with the contract you enter into!  This may seem obvious, but clients we advise in relation to payment disputes are often surprised when we explain the payment terms on which they have actually contracted.  We regularly hear phrases such as “we are supposed to get paid 14 days from month end” only to find that the contract says something entirely different.

As a refresher, the Construction Act provides that a party to a construction contract is entitled to stage payments unless the contract specifies that the duration of the works are to be less than 45 days or the parties agree that they are estimated to be less than 45 days.  Further, the contract must contain an ‘adequate mechanism for payment’ which must include the following:

  • a due date for each payment and a final date for payment – the parties are free to agree the period between these dates.
  • a “payment notice” to be given within 5 days of the due date setting out the amount to be paid and how it is calculated.
  • in the event that payer fails to serve a payment notice, the payee can serve a default payment notice or, if it was permitted to serve a payment application, that application becomes the default payment notice.
  • a pay less notice if the payer wishes to pay less than the amount stated in a payment or default payment notice, to be served a certain number of days before the final date for payment (the parties may agree this time period).
  • payment cannot be made conditional upon the payer being paid (pay when paid) or upon a notice being issue under a separate contract (pay when certified).

If you are uncertain as to whether the contract you are being asked to sign complies with the Construction Act and/or that it may not reflect the payment terms you have agreed, we recommend you seek advice.

2. Comply with the Contract

Once you have ensured that your contract matches your expectations, make sure you comply with it.  A payee’s prospects of succeeding with the steps set out below may hinge on whether or not it has complied with its side of the bargain.

A payee should ensure it issues applications for payment on time and in the form prescribed in the contract and should also be aware of when the payer must issue the relevant notices and the final date for payment.

3. Suspension

Section 112 of the Construction Act provides that where a notified sum is not paid by the final date for payment, the payee may suspend performance of any or all of its obligations under the contract.  Some important points to note:

  • you must be certain that the right to suspend has arisen to avoid the risk of being in breach of contract and making a bad situation worse;
  • If the right has arisen, seven days’ notice must be given before suspending, setting out the grounds on which the payee intends to suspend;
  • the payee may choose to suspend part of its obligations but not all;
  • an exercise of the right to suspend entitles the payee to an extension of time for completing the works;
  • the payee is entitled to recover a reasonable amount in respect of costs and expenses reasonably incurred as a result; and
  • the right to suspend ceases once payment is made in full of the notified sum.

The foregoing is a statutory right and cannot be ‘contracted out’, however the parties should check the relevant contractual provisions for additional obligations which may need to be complied with.

A word of warning, the right to suspend may be affected by the provisions of the Corporate Insolvency and Governance Act 2020 in circumstances where the payer has not paid and has entered insolvency.  The applicability of CIGA is outside the scope of this note and advice should be sought when an insolvency situation arises.

4. Adjudication

Section 108 of the Construction Act gives parties to a construction contract the right to refer disputes to adjudication at any time.  Adjudication is a relatively quick and relatively inexpensive method of obtaining a interim binding decision and may be useful in the event of non-payment in several ways, including:

  1. Where the payee has issued the correct notices but has undervalued the works, the payee may wish to refer a dispute for a decision as to the proper valuation of the works, often referred to as a “true value” adjudication.
  2. Where the payee has failed to issue the correct notices on time, in the correct form or at all, the payee may wish to refer a dispute seeking a decision that it is entitled to be paid the notified sum. This is often referred to as a “smash and grab” adjudication as, if referred correctly, the Adjudicator will not be required to open up the value of the payment and in some circumstances the payee will be entitled to the amount contained within its application for payment.  More information on smash and grab adjudications can be found in our previous blogs, here.

A payee will need to bear in mind that each party’s costs of adjudication (including legal fees) are generally speaking not recoverable from the other.  Further, whilst the adjudicator has the power to award his or her fees and expenses as he so chooses, the parties remain jointly and severally liable for those fees until they are discharged.  Several Adjudicator Nominating Bodies (ANB’s) now offer a capped fee structure for low value disputes, such as the RICS Low Value Dispute Adjudication.  These schemes can be very useful where the amount in dispute is relatively low.

Parties must also be aware that Adjudication is an interim binding process of dispute resolution, meaning that a Decision can be enforced (subject to matters such as jurisdiction and natural justice) in the Courts, but is only binding on the parties until such time as the dispute is resolved by way of litigation or arbitration.  That is not to say that the parties must take this extra step, and often adjudication is used by the parties as the final roll of the dice to resolve their dispute.

5. Termination

Some contracts may provide a payee with the obligation to terminate the contract in the event of non-payment.  This would clearly be a drastic step and a party considering termination must tread incredibly carefully in order to avoid a claim for delays, damages and/or wrongful termination.  The contract must be follows to the letter, including checking the grounds for termination reflect that contained within the contract and issuing the required notices.

Again, the Corporate Insolvency and Governance Act 2020 may prevent termination where the payer has entered insolvency and advice should be sought in this situation.

6. Interest

A payee who is wrongly kept from its money may be able to claim interest on those unpaid sums, either:

  1. As an express term of the contract – most construction contracts will contain an express right to interest, including the circumstances, rate and basis upon which it may be claimed.
  2. As an implied term under the Late Payment of Commercial Debts (Interest) Act 1998, which includes the right to claim simple interest on overdue sums at a rate of at least 8% per annum

7. Payment Security

Should you be concerned about the ability or willingness of the party with whom you are contracting to make payments to you in accordance with its contractual obligations, there are various ways in which you can add protection at the outset of the transaction.  We regularly advice clients in relation to payment security including Parent Company Guarantees, Performance Bonds, Escrow Accounts, advanced payments, standby letters of credit and bank account charges.

8. Insolvency

Statutory demands may be used in some circumstances where a payee has not been paid, with the effect that if payment is not made within 3 weeks of a statutory demand (the debt must be over £750) the creditor becomes automatically entitled to issue a winding up petition.

However, this avenue will only be available where the debt is undisputed and the courts have been clear that a winding-up petition is inappropriate to enforce interim payment obligations where the payer challenges the value of the works or has some other genuine cross-claim to raise.

9. Negotiation

Advising construction clients that they ought to negotiate can often feel like teaching grandmother to suck eggs, such is the nature of the industry in which people negotiate on a daily basis.  Having said that, even if previous negotiations have collapsed, we invariably advise clients to consider trying again either before or during any of the steps listed above.

It is sometimes the case that parties are more receptive once they realise that the payee does not intend to do nothing, and the mere threat of suspension or adjudication can sometimes force a different perspective on the dispute.

Our team of expert Construction & Engineering solicitors are experienced in advising on payment disputes. If we can be of assistance please contact us at any time.

‘Expertise’ in Construction & Engineering wins praise

The Construction & Engineering team at Sintons has won praise for its “expertise” in both contentious and non-contentious matters from Chambers and Partners 2023, as well as its ability to handle the most complex cases.

Again confirming it as a key name in the region, Chambers points to its support of clients with the design and negotiation of construction contracts, development work and adjudications.

Its client base is wide ranging, says Chambers, and includes contractors, utility companies and care homes.

Sintons is highlighted for its capability in highly complex matters, with Chambers stating the firm has an “impressive ability to comprehend the significance of technical matters….their ability to progress complex matters is excellent”.

Head of practice Alex Rayner is also singled out for his “hands on and forward thinking” approach, which has seen him become the advisor of choice to businesses across the North East and increasingly nationally.

“Without a doubt, he is the most pragmatic, commercially aware and legally knowledgeable construction lawyer we have used,” quotes Chambers.

The praise from Chambers comes only weeks after the release of Legal 500 2023, which also reported Sintons to be a leading name in the marketplace with deep expertise across the board.

Christopher Welch, managing partner of Sintons, says: “Our work and presence in the construction sector is growing strongly, with Chambers rightly highlighting our expertise in the field and ability to handle matters of the greatest complexity. We are the trusted advisor to many clients across the North, with our national reach increasing all the time.

“For Chambers to deliver such positive findings only weeks after Legal 500 reported similar positive ratings is great news, and further independent endorsement of the legal and client service excellence we are delivering.”

Construction & engineering team wins praise from Legal 500 2023

The construction & engineering team at Sintons has been hailed by Legal 500 2023 for its capability in their specialism and for the wide range of matters it is able to handle with expertise.

The team acts for a wide range of clients – spanning employers, developers, contractors and sub-contractors – on the full range of construction and engineering contracts.

Its sector expertise spans care, education, data, residential development and food production facilities.

Legal 500 notes the increase the team has seen in its contentious workload, including damages claims and adjudication proceedings.

Sintons has a “very knowledgeable team with dedicated departments for differing areas of work, which I found communicate very well between each other and appear seamless in conversation with them,” Legal 500 says.

“(The team is) experienced and driven whilst also providing value for money”

Head of department Alex Rayner is hailed as having a “great understanding of the complex contractual and legal issues associated with construction and civil engineering…(he is) very good at providing advice in a clear, uncomplicated manner”.

Solicitor Jay Balmer is also named as being a key member of the team.

Christopher Welch, managing partner of Sintons, says: “Legal 500 rightly highlights the deep capability and wide-ranging specialisms we have in our construction & engineering team, an area of the business in which we continue to attract new instructions on the strength of our hard-earned reputation.

“Through our unrivalled combination of legal excellence and outstanding client service, we are building strong and longstanding relationships with clients, while welcoming new clients from the sector continually. Under Alex’s leadership, the team is making strong progress and I am very pleased Legal 500 has independently recognised the key and growing position we play in this market.”

Climbing Prices – How the Industry Responds?

Constructing Excellence in association with Sintons are holding a panel discussion ‘entitled ‘Climbing Prices – how the industry responds’. The discussion will aim to address the impact on the sector of rising costs and ways in which the construction industry might be able to respond to and deal with the issue facing us.

The session will be chaired by Alex Rayner, Partner of Head of Construction & Engineering at Sintons and the panel will include:

Thursday 30th June 2022.

– McGovern & Co’s Andrew Pickersgill

– CA Group Andy Dickinson

Further speakers will be announced over the coming days! To register click here or if you have any questions, please contact Leanne leanne@cene.org.uk.

Smash and Grab Adjudication – Alive and Well

As most of you will already be aware, a “smash and grab” adjudication occurs where the paying party to a construction contract fails to issue the relevant payment or pay less notice in response to a valid application for payment, meaning that the ‘notified sum’ that must be paid is that contained within the relevant application for payment.

By contrast, a “true value” adjudication occurs where either party seeks a decision from the adjudicator as to the ‘true value’ of the works for the relevant payment period.  As opposed to a “smash and grab” adjudication, which is solely concerned with the technicalities of whether notices have been issued on time, a ‘true value’ adjudication seeks to establish the correct or true value of the works.

Without setting out the potted history of “smash and grab” versus “true value” adjudication in the Courts, the established legal position in relation to the interrelationship between the two is that:

  • having lost a “smash and grab” adjudication, a paying party may subsequently commence a “true value” adjudication to establish the correct value of the application for which it failed to issue the correct notices (S&T (UK) Limited v Grove Developments Limited [2018] EWCA Civ 2448); however
  • the paying party must comply with the “smash and grab” adjudication and make payment of the ‘notified sum’ before it may commence a “true value” adjudication (M Davenport Builders Limited v Greer [2019] EWHC 318 (TCC)).

To put this another way, the right to adjudicate “at any time” to obtain a true valuation of the sum due under section 108 of the Construction Act is subjugated or trumped by the immediate obligation to make payment of a ‘notified sum’ under section 111.

The recent case of Bexheat Limited v Essex Services Group Ltd [2022] EWHC 936 (TCC) has further reiterated the pre-eminence of the payment obligations under section 111.  The relevant facts of which are as follows:

Adjudication 1 – Bexheat secured a decision that on a “true value” basis it was entitled to payment in the sum of £141,646 in respect of its interim application 22.  ESG paid the sums due to Bexheat in full.

Adjudication 2 – ESG failed to serve a pay less notice in time in respect of the Bexheat’s interim application 23 (which had been issued one day before the commencement of Adjudication 1).  Bexheat was awarded £706,029.62 as a result of ESG’s failure to issue a timely pay less notice, on other words a classic “smash and grab” adjudication.

ESG failed to pay the sums awarded in Adjudication 2 and Bexheat sought to enforce the decision.  The following interesting points arise from Mrs Justice O’ Farrell’s judgment to enforce the decision in Adjudication 2:

  1. The Adjudicator in Adjudication 1 had jurisdiction as the disputes were not the same or substantially the same. Not only were they concerned with different payment periods but they were also different disputes in nature; Adjudication 1 expressly dealt with valuation whereas Adjudication 2 was solely concerned with whether ESG had served a valid pay less notice.
  2. In any event ESG had not raised any challenge to the adjudicator’s jurisdiction in Adjudication 2 and/or specifically reserved its rights, therefore it was taken to have waived any such challenge.
  3. ESG could not rely upon a clause in the contract seeking to permit it to set off or make deductions against an adjudicator’s award in respect of any amounts which may be due or have become due from Bexheat to ESG. Such a clause was contrary to section 108 of the Construction Act which provides that an adjudicator’s award is binding upon the parties until finally determined.
  4. ESG could not rely upon a clause in the contract providing it with the unilateral right to elect that the adjudicator shall be entitled to adjudicate on more than one dispute at the same time (the second adjudicator had refused to allow a ‘joinder’ of the true value of interim application 23 with the “smash and grab” Adjudication 2). This clause was contrary to paragraphs 8 and 20 of the Scheme for Construction Contracts which require the consent of both parties to a multiple dispute adjudication. Further, section 111 of the Construction Act precludes ESG from refer the ‘true value’ dispute in respect of interim application 23 prior to paying the “notified sum”.

ESG was also unsuccessful in its application to stay the enforcement, with the Court finding that Bexheat was a going concern and that its financial position was substantially the same as when it entered into the contract.

This judgment reiterates that a paying party must pay under a “smash and grab” adjudication before commencing or relying upon a “true value” adjudication.  Further, an earlier “true value” decision does not preclude the payee from commencing a “smash and grab” adjudication regarding a payer’s failure to issue the correct notices in a subsequent payment cycle, even where the true value of that claim has already been decided.

This is a timely reminder that paying parties and their representatives must ensure that the contractual payment notice provisions are complied with at all times, including following a “true value” adjudication.

For advice on these or any other construction and engineering related issues or support, please contact our team and we will be happy to help.

Sector body teams up with region’s law firms to promote inclusivity

In what is a rare industry move, a number of law firms in the region are collaborating alongside Constructing Excellence in the North East to promote a fairer and more diverse construction industry.

The sector body and law firms including Ward Hadaway, Muckle, DAC Beachcroft, Clyde & Co, Sintons, Weightmans and Womble Bond Dickinson, are working to ensure everyone, regardless of gender, feels valued in the region’s construction industry.

Whilst women account for approximately half of the UK’s workforce, ONS data compiled by the CITB suggest that the average number of women working in construction specific roles remains approximately 16%, of whom only 1% are employed in the trades.

Catriona Lingwood, chief executive at Constructing Excellence North East, said: “Officially launched in 2020, one of the stated aims of the region’s OneVoice construction strategy is to build a sustainable and inclusive construction sector and as part of this aim we have teamed up with and applaud those legal firms who are joining forces to discuss ways in which the legal sector can support gender inclusion in the construction sector, whether this be at entry level or senior management.

“Whilst we understand that plans are underway to adopt gender neutral language in the next suite of JCT contracts (The Joint Contracts Tribunal), a move which is welcomed, Constructing Excellence in the North East is delighted to be a co-signatory to this letter alongside law firms from the region, which signals a commitment to the use of gender-neutral language in the drafting of bespoke construction and engineering contracts and ancillary documents.”

Alex Rayner, Partner and Head of Construction & Engineering at Sintons, and Constructing Excellence North East board member, said: “It is not often that the legal sector get the opportunity to collaborate in this manner and I am very grateful to all the firms involved for their co-operation in this initiative.  The construction and engineering contracts we draft are used in projects of all shapes and sizes across our region and beyond and we believe that the use of gender neutral language within those contracts and ancillary documents is essential to promote and facilitate the diverse and inclusive construction industry that we all want to be a part of”.

‘Expertise’ and client service in Construction & Engineering team praised

The outstanding legal and client service delivered by the specialist Construction & Engineering team at Sintons has been highlighted by Chambers and Partners 2022.

The department, hailed for its “expertise” in both non-contentious and contentious construction matters, provides “great support informed by their diverse experience”, the independent legal publication states.

“Sintons are motivated to do their best for the client. Great individuals working as a team,” it quotes.

The team, which has grown its national presence and client base strongly over recent years, is known for supporting clients with the design and negotiation of construction contracts, redevelopment work and adjudications.

Among its many notable work highlights, Chambers points to its involvement in the £52m Ark Soane mixed-use development in Acton, West London, where it drafted the construction agreements on behalf of contractor Jerram Falkus Construction.

Alex Rayner, head of the department, is again hailed as a notable practitioner for his work across a range of matters, contentious and non-contentious.

“He gives great legal advice to people who aren’t lawyers by explaining things in a digestible way,” quotes Chambers.

The strong praise for the team comes only weeks after similar assessment was made by Legal 500, which also pointed to the quality of legal advice and client service from Sintons’ Construction & Engineering specialists.

“Our construction team has progressed strongly over recent years and we now rightly have a national reputation for the quality of our advice and client service,” says Christopher Welch, Sintons’ managing partner.

“We are involved in major construction projects on a national basis, acting for clients across an array of sectors, with more appointing Sintons all the time on the strength of the outstanding job we do on our clients’ behalf.

“We are delighted this has again been recognised by Chambers, which echoes the findings of Legal 500 in attesting the quality of the service we deliver. Construction & Engineering continues to be an area of strong progress for us and we are very pleased with this latest independent endorsement of what we are doing.”

Sintons again recognised for capability across the board by Chambers 2022

Sintons has again been hailed as one of the leading law firms in the North of England in newly-released rankings from Chambers and Partners UK.

The firm, consistently praised for its strength and capability throughout the business, again wins recognition for its legal expertise, deep experience and first-rate levels of client service.

Practice areas across the business win recognition as leaders in their field, with healthcare again being confirmed as one of the key advisors nationally for its work with growing numbers of NHS Trusts, organisations, professionals and healthcare businesses across the UK.

Chambers and Partners 2022, published today, also highlights 17 of Sintons’ lawyers as being stand-out names in their specialism, many of whom are recognised in the legal marketplace as being leading figures regionally and nationally.

The rankings come only weeks after Sintons won similar praise across the board from Legal 500, which also recognised the wide-ranging expertise, legal capability and service excellence the firm delivers to its clients.

Both Chambers and Legal 500 are independent publications which assess and rank law firms and lawyers throughout the UK, based on interviews, examples of work, and client and peer testimonials.

“For over 125 years, Sintons has built a well-deserved reputation as a first-rate legal advisor delivering outstanding levels of service to its clients, and those values have remained at the heart of the firm since our foundation in 1896,” says managing partner Christopher Welch.

“That these key features are consistently highlighted by independent legal publications like Chambers and Partners, and recently Legal 500 too, is a huge endorsement of what we do here at Sintons. Businesses, families and individuals put their trust in us to deliver an outstanding legal and personal service and that is what we deliver.

“Chambers again confirms our strength across the whole Sintons business, with capability and talent running throughout the firm, and a shared commitment by everyone here to continue to build Sintons so it can be the best it can be. We are all delighted to again have our efforts recognised in this way.”

Construction & Engineering team praised for breadth of expertise

The specialist Construction & Engineering team at Sintons has again been confirmed as a key player in its field by Legal 500 2022, with its specialism in a wide range of areas of work hailed as a stand-out feature of the practice.

The department has a longstanding reputation for its capability in both contentious and non-contentious work, but Legal 500 says it has more recently “carved out a particularly strong reputation” for its capability in sectors such as education, care homes, residential development and food production.

The team’s varied client portfolio consists of main contractors, sub-contractors, employers and developers.

Practice head Alex Rayner is named as a next generation partner by Legal 500, which praises his “excellent practical advice” and the unrivalled knowledge he is able to bring to the role through his previous career as a quantity surveyor.

Solicitor Jay Balmer is also named as a key figure within the team.

Testimonials from clients quoted by Legal 500 point to the team’s expertise and client service as being stand-out factors.

“The levels and speed of response have been impressive, as well as the invaluable guidance through the nuances of dispute, contract, and resolution processes to comply with legislation,” said one.

Christopher Welch, managing partner of Sintons, says: “Our Construction & Engineering team has seen strong growth over recent years, with appointments on increasing numbers of major projects nationally and becoming the trusted advisor of choice to clients from throughout the sector. This progress, which is underpinned by our core offer of legal and client service excellence, has been rightly recognised by Legal 500.

“Of course, this could not have been achieved without the ambition and determination of Alex and his team, who continue to grow the reputation and capability of our offering all the time. Alex has again been recognised as a stand-out name in this sector, which is very well-deserved recognition of his work, and we are pleased to see Jay highlighted for praise too.”

Sintons once again wins praise from Legal 500 2022

Law firm Sintons has again maintained its reputation as one of the leading law firms in the North of England in newly-released rankings from Legal 500, winning plaudits for its strength and expertise across the firm.

Legal 500 2022, released today, renews its praise of Sintons and confirms them as being a go-to legal provider in the region in many key practice areas.

The independent publication – which ranks law firms and lawyers across the North, compiled as a result of examples of work, interviews and client and peer testimonials – names eight of Sintons’ lawyers as leading individuals, three as next generation partners and a further six as rising stars. One of its lawyers also secures the highly coveted accolade of being named in the Legal 500 Hall of Fame, in recognition of consistent achievement throughout their career.

The latest Legal 500 rankings add further to the long-standing reputation of Sintons – winner of five awards at the most recent Northern Law Awards, including overall Law Firm of the Year – as a leading player in the North of England, with national reach and capability in many of its departments.

The leading individuals at Sintons, as identified by Legal 500, are:

The next generation partners, as identified by Legal 500, are:

The lawyer named as member of the Legal 500 Hall of Fame is:

The rising stars at the firm are:

Christopher Welch, managing partner of Sintons, said: “We are very proud of the reputation we have built during our 125 year history as being a law firm which consistently offers legal excellence and an outstanding service to our clients, and for these two factors to again be recognised by Legal 500 as being a staple of Sintons’ offering is very pleasing.

We are delighted to maintain our position as one of the leading law firms in the North of England, with strength, capability and experience running throughout our practice areas.”

Sintons appointed to £52m West London development

Construction & Engineering specialists at law firm Sintons have been appointed to support the creation of a £52million development in West London, which will bring vital new education and residential provision to the area.

Ark Soane is a mixed-use development in Ealing, which will comprise a new 1,200-pupil secondary school, Ark Soane Academy, alongside 116 new homes.

The development’s unique design will see the secondary school occupying the first three floors of the six to 12-storey buildings, with 113 apartments located above this, in addition to three separate townhouses on the site.

The project, which has secured full planning permission, is being delivered by developer Countryside and Jerram Falkus Construction. It is expected to be completed next year, with Ark Soane Academy due to open to pupils in September 2022.

Jerram Falkus, which has secured the design and build contract to deliver all construction works associated with the school and residential development, appointed construction experts at Sintons to handle the legal aspects of its involvement.

The specialist Construction & Engineering team at Newcastle-based Sintons has built and developed a relationship with Jerram Falkus over many years, with partner and head of department Alex Rayner acting for the business on a number of significant projects.

Alex said: “We are delighted to have advised Jerram Falkus on this exciting project.

“Given the scale of the project and the number of stakeholders involved the negotiations were extremely complex and it is really pleasing to see this over the line so that construction work could commence.

“We look forward to seeing the project progress and ultimately provide much needed school places and residential properties.”

William Jerram, managing director of Jerram Falkus Construction Limited, said: “Contract negotiations were fascinating with all the different stakeholders. Work had to progress at risk to change the faҫade from curtain walling to brickwork, while simultaneously amending planning and entering straight into contract at full speed.

“We would not have achieved this without the hard work, help and commitment of Alex and his team at Sintons.”

Domestic Building Projects – A Cautionary Tale

The recent case of Cartwright Pond Limited v Ms. Louise Wild [2021] EWHC 1600 (TCC) serves as a useful reminder of some of the things to do, and not to do, when it comes to embarking upon a domestic building project or any project for that matter. This case has a bit of everything, including disputes as to the terms of the contract, delays, repudiatory breach, termination, valuation of variations, defects and a loss of profit claim.

Given the number of issues and the fact that the parties argued their respective cases over the course of 4 days in the High Court, it would be reasonable to expect the project to be a high value, complex build. In fact the works amounted to modest alterations to an existing property with a tendered sum of approximately £85,000.

His Honour Judge Stephen Davies’ excellent judgment navigates the issues clearly and succinctly, but even then it runs to some 24 pages. Rather than explore each and every allegation and strand of the judgment, we would like to draw out some key tips which arise from the issues in this case.

1. Agree and sign a formal contract incorporating the key terms agreed

This may seem obvious, but it is surprising how many domestic building projects commence without a formal building contract in place, or at least something that records the fundamental agreed terms as to price, quality, payment, time, termination and insurance.

It seems that in this case the parties had originally intended to incorporate the RIBA Domestic Building Contract 2014 to regulate their rights and obligations, but failed to draw up or sign a formal contract. What they were left with was a simple contract incorporating the tender documents and correspondence including some terms such as the price and the programme, but missing others.

One of the missing elements was a mechanism for extending the date for completion for events beyond the control of the contractor, such as variations issued by the employer. The result of which being that the fixed date for completion of the works was no longer applicable, time became “at large” and the contractor’s obligation was then to complete within a “reasonable time”. Further, the employer lost its right to recover liquidated damages from the contractor for failing to complete on time. This is due to a common law doctrine known as the prevention principle, summarised in Keating on Construction Contracts (11th Edition at paragraph 8-033) as follows (emphasis added):

“If the employer prevents the completion of the works in any way the general rule is that, unless there is a contractual right to extend time for the employer’s act of prevention, it loses the right to claim liquidated damages for failing to complete on time, for it “cannot insist on a condition if it is his own fault that the condition has not been fulfilled”.

It is perhaps worth adding here that all is not lost for the employer, as it was still able to recover general damages for a failure to complete on time, although proving those damages is not always easy, particularly on a residential building project. In the event the employer was only entitled to the sum of £10 per day by way of general damages as opposed to the £50 per day that was referred to in the draft RIBA contract at tender stage.

Irrespective of the size, extent or duration of your project, we would always recommend entering into a written contract that includes a date or dates for completing the works, a mechanism for extensions of time and a liquidated damages mechanism should the contractor fail to complete on time. The greater certainty this brings to the relationship is beneficial for both parties and whilst it may not necessarily mean a dispute is avoided, it provides greater clarity as to the parties’ respective rights and obligations should one arise.

2. Finalise the scope of works before you start

Additional works, extras, variations, changes – whatever terminology you choose to use, these are often the source of disputes on domestic building projects. The client will often set out with a broad idea of what they want to achieve from the project, but either fails to communicate this adequately or accurately enough in the contract or tender documents, and/or subsequently changes their mind during the course of the project.

In this case there seem to have been some variations to the scope of works which whilst not particularly high value, did have an effect on both time and cost in relation to which the parties were in dispute and which the Court had to do its best to value. These included the replacement of a wider Velux rooflight and the addition of a balcony that had not been included in the original tender documents.

As already explained above, this will invariably lead to claims from the contractor for additional time and money, both in terms of the cost of carrying out the works and also the time related costs of being on site for longer as a result, commonly known as “loss and expense”. In order to minimise the level of variations that arise, our advice would be to ensure that the design or scope of works is as complete as possible before entering into contract, particularly where the contractor is not being asked to design the remainder of the works.

We often liken this to purchasing a car; you wouldn’t wait until you’ve purchased the car to select the extras you want, and if you did you wouldn’t be surprised that it takes longer to deliver and costs more than you had originally expected!

3. Appoint a professional to administer the contract

For reasons which are unclear from the judgment, the employer decided to manage this domestic project herself rather than appointing a professional contract administrator, a decision which the Judge indicated was a bad one:

“She made what with hindsight was the error of deciding not to appoint her architect as contract administrator and to deal with the claimant herself … the problems with the works, which could have been resolved without undue difficulty had the relationship been better or an experience contractor administrator been involved, were left unresolved and the project drifted for far longer than it ought to have done…”.

The Judge also commented that it was not an easy task to decide the delay claims where there was no contract administrator appointed to undertake a contemporaneous analysis of the causes of delay to the project.

Whilst not always the case, often the employer in a domestic building project has little or no experience of the issues that can arise once works commence, and tensions often build if the project does not progress how they had wanted or anticipated. Our advice would be that parties should appoint an experienced professional to administer their contract, whether it be a project manager, quantity surveyor or architect. Again, ensure that you have a contract in place with that professional clearly setting out the terms of that appointment, including the scope of the services to be provided, the fee and instalments in which it is to be paid and the requisite level of professional indemnity insurance to be held by the contract administrator.

4. Records, records, records

The Judge in this case comments a number of times within his judgment that he has had to reach conclusions on matters without the assistance of “contemporaneous” evidence, a lack of which undoubtedly made it harder for the parties to evidence their various claims and cross claims and for the judge to reach decisions. Ultimately much of the judgment is based upon the witness evidence given by the parties and by piecing together the e-mail and text message correspondence.

Put simply, and we cannot overstate this, a party’s prospects of achieving its full entitlement in a construction dispute will invariably turn on the strength of the contemporaneous evidence that it is able to rely upon. The type and level of records will depend on the project, but may include:

  • Progress meeting records.
  • General meeting records.
  • Programme progress updates.
  • Marked-up drawings.
  • Correspondance
  • Labour allocation sheets.
  • Daily work area records.
  • Daily site diaries.
  • Quality control inspection sheets.
  • Handover records.
  • Daily weather records of weather conditions.
  • Progress photographs.

It will always be easier to evidence a claim with, and greater weight will be given to, evidence from the time rather than seeking to recall events that may have happened months or even years previously.

5. If it goes wrong, seek early advice

The Judge in this case had to grapple with issues relation to termination of the contract between the parties, in particular who was in repudiatory breach of the contract and who accepted whose repudiatory breach, with each party making allegations against the other. Ultimately the Court found that the employer was in repudiatory breach of the contract by failing to permit the contractor to return to site to continue with the works or to confirm that she was willing to do so.

As a result the contractor ought to have been entitled to a claim for loss of profit on the works remaining to be completed however it appears from the judgment that the contractor failed to give any meaningful evidence to support his claim. The Judge was left to conclude that the contractor had failed to satisfy the burden of proof and was therefore not awarded anything by way of loss of profit on the works not completed, despite an acknowledgement that it may have been entitled to the same.

We would suggest that had the parties sought legal and/or commercial advice during the course of the dispute, they could have taken steps to significantly improve their respective positions. For example the employer may have given the contract more opportunity to return to site and to proceed with the works before terminating the contract (thus avoiding being in repudiatory breach) and the contractor certainly would have made a better attempt to collate information to support its loss of profit claim.

We regularly provide a ‘project support’ role to clients whilst projects are ongoing to ensure they are taking steps to protect their position and to assist with advising on or drafting contractual correspondence. We find that this has numerous benefits, whether it be to realise its entitlement sooner, seek to avoid a dispute that is on the horizon or ultimately to ensure that should the matter be referred to a tribunal (whether adjudication, litigation or arbitration) that it has taken the correct contractual and commercial steps and marshalled its evidence at an early stage, thus maximising its prospects of success.

Building projects are not straightforward, but parties should as a minimum ensure that their respective expectations, right and entitlements are clearly set out within the contract. Should matters then go awry, there are practical, commercial and legal steps that a well-advised client can take to ensure that it does not make costly mistakes, resolve a dispute early, protect its position and ultimately ensure that it is best placed should the dispute be incapable of resolution without reference to a tribunal.

For advice on these or any other construction and engineering related issues or support, please contact our team and we will be happy to help.

Adjudication – one contract or two?

Adjudicator’s awards are temporarily binding unless and until the dispute is finally resolved by litigation or arbitration, and the Technology and Construction Court (TCC) has developed a streamlined process for enforcing decisions that have not been complied with, by way of a summary judgment application. Essentially, this is where the case is decided without a full trial, because the Defendant cannot demonstrate that it would have a real prospect of successfully defending the claim at trial.

Challenges to an Adjudicator’s award are rarely successful, however those challenges which do succeed are often decided on the basis that the Adjudicator acted outside of his or her jurisdiction. Under the Scheme for Construction Contracts (the Scheme), it is well established that an Adjudicator cannot deal with multiple disputes without the consent of the parties, whether those disputes arise under the same contract (Paragraph 8(1) of the Scheme) or related disputes arising under multiple contracts (Paragraph 8(2) of the Scheme). In Delta Fabrication & Glazing Limited v Watkin Jones & Son Limited [2021] EWHC 1034 (TCC), the Court had to decide whether the dispute that had been referred to adjudication arose under two separate sub-contract orders, or alternatively that the parties had agreed to combine those orders into one single contract.

The Facts

Delta was engaged by Watkin Jones to provide cladding and roof works as part of the construction of student accommodation. The cladding and roof packages were let to Delta under separate sub-contract orders some months apart, each with a separate sub-contract reference number as per previous dealings between the two parties.

A few months into the sub-contract works, Watkin Jones issued a single payment notice showing a combined figure due to Delta under both of the sub-contracts. The payment notice was supported by a table which set out the separate calculations for the value of works performed under each sub-contract. This format continued from that payment notice onward and Delta followed a similar practice of combining its payment applications for the two sub-contracts with each one supported by separate calculations.

A dispute arose regarding an alleged repudiatory breach of the sub-contracts and Delta made a single referral to an Adjudicator. Watkin Jones was ordered to make payment to Delta and when the Adjudicator’s award was not complied with, Delta applied to the TCC to have it enforced by way of summary judgment.

Arguments and Court Analysis

Watkin Jones contested the application on the grounds that the Adjudicator did not have jurisdiction to deal with multiple disputes, referring to the existence of two separate sub-contracts which Delta were claiming for.

Delta made three distinct arguments:

  1. The Contractor made an offer to vary the contracts

By combining the payment notices for both sub-contracts into a single document, Watkin Jones had made an offer to vary the contracts by amalgamating them into one. Delta contended that it had accepted the offer by issuing its request for payment under both sub-contracts in one document.  As such, the Adjudicator was acting within his or her jurisdiction.

The Court was clear that combining the payment applications was not the same as combining the two contracts into one. Watson J pointed to the separate calculations for each sub-contract set out in the first combined payment notice and those notices and applications issued subsequently, finding that there was no confusion or amalgamation of the sub-contracts. Instead, Delta would need to show a more specific intention to combine the contracts themselves, rather than just the administration of those contracts. The Court was unable to find any such intention in the evidence that was presented.

  1. The sub-contracts had become one contract for the purposes of the Construction Act

Delta further argued that, where the sub-contracts have been administered as one, they would qualify as a single contract for the purposes of the Construction Act. That is to say, by treating the contract as one for the purpose of the payment mechanisms, the parties had elected to treat it as one contract for the purposes of the adjudication provisions.

The Court’s deconstruction of Delta’s argument found a proposition that the usual common contractual formalities of offer, acceptance and consideration needed to vary a contract at common law were not required for the contracts to be amalgamated for the purposes of the Construction Act. This was rejected and Watson J again found that the parties had not unequivocally administered the contracts as one due to the detailed breakdowns of sums due under each sub-contract.

  1. Delta had relied on the Contractor’s representation that the contracts should be treated as one and, as such, Delta has a claim in estoppel

Delta’s argument was that Watkin Jones had represented, by the combined payment notice, that the sub-contracts were to be treated as one contract, Delta had relied on that representation and that Delta has suffered a detriment as a result.

The Court had already determined that the combined payment notice did not show an intention to combine the contracts and that, by the same reasoning, there was no such representation. Watson J did not find any evidence that Delta had relied on such a representation and, in respect of the detriment, failed to see how Delta would have incurred any additional costs as a result of treating the contracts as one. Indeed, Watson J noted that Delta would have likely made a small saving.

Outcome

The central theme of Delta’s arguments was that the combination of the sub-contracts for the purpose of administering the payments thereunder amounted to an amalgamation of those contracts into one. The Court failed to agree with that analysis, instead finding the clear breakdown of the amounts due under each sub-contract suggested otherwise.

The Court concluded that the Contactor had a strong prospect of successfully defending the claim on jurisdictional grounds and refused to grant summary judgment.

Comment

This case provides a useful reminder of the difficulties that can arise when trying to administer two separate contracts for the same project, with the same parties.  Our advice would be:

  1. To ensure that there is only one contract for the project with the second package of works perhaps being agreed as a variation to the first; or if that is not possible
  2. To ensure that the separate contracts are dealt with entirely separately, with separate payment applications and notices, in an attempt to make it easier to deal with them independently in the context of a dispute.

Fundamentally and as with a lot of disputes we see, problems arise where the parties do not have a clear understanding of the precise nature of the contractual relationship between them.  In this instance greater clarity in this regard may have prevented the parties from an expensive and ultimately futile reference to adjudication.

For advice on this or any other construction and engineering related matters, please contact our team and we will be happy to help.

Court issues guidance on notice of dissatisfaction under NEC ECC

Adjudication in the context of construction and engineering disputes is a temporarily binding procedure, that is to say that it is binding on the parties until the dispute is finally determined by court proceedings, arbitration or indeed settlement.

However, if the parties use the NEC ECC contract they should be aware that Option W2.4 (in both the NEC3 and NEC4 contracts) provides that an Adjudicator’s decision is final and binding unless a notice of dissatisfaction is given within four weeks of the notification of the Adjudicator’s decision.  Indeed the guidance notes go on to confirm that the intention of the clause is to “time-bar”the parties if they fail to issue a notice of dissatisfaction within the four week period, but does not go on to expand upon what needs to be included in that notice.

This was one of the issues in front of Mrs Justice O’Farrell in the recent case of Transport for Greater Manchester v Kier Construction Ltd [2021] EWHC 804 (TCC) in which the parties were in dispute as to whether or not a valid notice of dissatisfaction had been served by TfGM following an Adjudicator’s decision in which Kier was awarded an extension of time together with payment of associated sums. TfGM had commenced Part 8 proceedings relating to the dispute to which Kier issued Part 11 proceedings challenging the jurisdiction of the court, seeking to invoke the time-bar within clause W2.4. Amongst other points, Kier argued that the purported notice was defective because:

  • The letter had been sent by TfGM’s solicitors to Kier’s solicitors and therefore was not in accordance with the notice provisions in the contract in which methods and addresses for service were specified; and
  • It did not identify the matters in the Adjudicator’s decision with which TfGM was dissatisfied.

In dismissing Kier’s Part 11 application Mrs Justice O’Farrell set out some useful guidance in connection with the use of Option W2.4(2) of the NEC ECC contract:

  1. The contractual notice provisions in W2.4 are mandatory as set out in the case of Anglian Water Services Ltd v Laing O’Rourke Utilities Ltd[2010] EWHC 1529 (TCC) and therefore strict compliance was necessary in order for the notice of dissatisfaction to be effective.
  2. Whilst the contract provided for the service of notices via a project extranet system, clause 13.2 of the NEC3 contract in question also referred to the “last address notified by the recipient for receiving communications”. Kier’s solicitors’ address had been given for the purposes of the adjudication and thereby became the last address notified by Kier for receiving communications in connection with it, for the purposes of clause 13.2.
  3. The contract did not stipulate the form of words or the level of detail that had to be used in the notice of dissatisfaction, and therefore the notice simply had to be “clear and unambiguous so as to put the other party on notice that the decision was disputed but did not have to condescend to detail to explain or set out the grounds on which it was disputed”. On that basis the words used in TfGM’s solicitors letter that “it is clear that he has erred in law and in his interpretation and application of the express terms of contract between the parties in a number of fundamental respects” were sufficient to make clear that TfGM did not accept, and was dissatisfied with, the Adjudicator’s decision and the words: “TfGM’s … intention to seek formal resolution to reverse the outcome of the Decision” were sufficient to inform Kier that it intended to refer the disputed adjudication decision to the Court.

Comment

Time bar provisions are not uncommon in construction and engineering contracts and we regularly advise clients to consider whether they are appropriate and workable in the circumstances in which they are proposed to be used. If drafted properly it is likely that such a time bar will be effective and therefore parties need to ensure they are strictly complied with so as to avoid unwittingly waiving an entitlement they might otherwise have had.

For advice on this or any other construction and engineering related matters, please contact our team and we will be happy to help.

‘We’re proud to have helped make Sintons the firm it is’

As Sintons celebrates its 125th anniversary, some of its team share their thoughts and experiences of being part of the firm and playing their role in its growth. From those who have been at Sintons for over 30 years to those who have joined more recently, here they discuss what makes the firm stand out in the competitive legal marketplace, while also being a great place to work.

Amanda Maskery, partner and head of NHS healthcare

“I have been at Sintons now for nearly 20 years and during that time I have progressed from trainee to partner level and more recently to head of our fast-growing NHS Healthcare team. Many of my clients have been with Sintons for years and grown with me and I think a large part of that is because we have built such strong and trusting relationships with them.

The firm has grown significantly since I first started working here – it has doubled in size.  However, the same culture, values and traditions are still imbedded which means whilst the firm changed in size, it still embraces the supportive nurturing culture you only find at Sintons which cascades from the top down.

As I began life as a trainee at Sintons, it’s fantastic to be able to support others in progressing and achieving their goals. We have a strong team and great dynamic and that is evident to our young lawyers who bring with them a refreshing approach to the Sintons culture.”

Leah Greenwell, solicitor apprentice

“Starting my career, it was important to find a firm with local roots and a reputation for providing high quality training. The first-class levels of service Sintons provide is testament to the standard of training they deliver, and there was no question which firm I wanted my career to start in.

Sintons have always focused on ensuring that my development is put first and have laid the foundations for a successful career as a solicitor. Being a full service firm has given me the opportunity to experience all areas of law and has exposed me to a variety of high value and complex work. I look forward to what the future holds for me at Sintons.

Although the marketplace is competitive, Sintons longstanding history and their presence, both locally and nationally, will always place them at the forefront.”

Anne Smith, secretary

“I started at Sintons in 1986 and this year in November will have been here for 35 years.

I still remember my first day like it was yesterday. Everyone was so friendly and welcoming, and it is still like that today – almost like a second family to me.

“I have mainly worked in private client and worked for lots of fee earners and partners. In 2000 I started working for Steve Freeman who then went on to become a Partner and Head of the Private Client Department. I have now worked for him for 21 years this year and I can honestly say it has been a pleasure and an honour to work for such a lovely man – we have a great working relationship. I also work with the rest of the Family Department and work for such lovely fee earners.

I am also very proud to say that my daughter Emma also works for Sintons in the Conveyancing Department and she also loves her job and the team she works with.

I have seen many changes over the years but one thing remains constant – Sintons is a great place to work. I have made lifelong friends here and they will remain so.”

Emelie Vardon, solicitor

“Sintons’ heritage was very important to me when choosing to join Sintons. I came here as a trainee solicitor in 2017 and making the right choice for my future career was crucial. Knowing Sintons’ reputation and history, I couldn’t have made a better decision.

This is such a great place to work with a warm and welcoming environment. Following the completion of my training contract in 2019, I joined our developing Wills, Trusts and Estate Disputes team. Under Emma Saunders’ excellent leadership and support, my first year as a qualified solicitor has been excellent groundwork for my future career in this specialist area of law.

As a full-service law firm, I consider that Sintons is well-placed in the competitive market.”

Mark Dobbin, partner and head of real estate

“I joined Sintons as a trainee in September 1997. At the time the firm consisted of about 80-90 people. We were operating from an office in Portland Terrace in Jesmond, it was like a rabbit warren for a new starter as it was multiple old terraced houses converted and joined on different floors.

The main changes have been the massive growth in size and expertise, plus multiple office moves until finally landing at the Cube. When I qualified in 1999 myself and the partner at the time (Andrew Walker) were the Sintons commercial property department. Since then we have grown significantly.

Sintons has always been and remains a great place to work, we have an excellent team in Real Estate and will continue to succeed because of the efforts of our staff.”

Pippa Aitken, senior associate

“Sintons was much smaller when I joined in 1998. It was a friendly, family firm renowned for its reputation in private client and personal injury work. There was no dedicated corporate and commercial department.

“I was the only trainee and was sent on all sorts of weird and wonderful jobs – witnessing wills, attending infant settlements and the odd trip to the bank for the accounts department!

Sintons has become a lot more sophisticated in its working procedures and there is a much faster pace of life with emails being the most popular form of communication. I have seen some great lawyers leave and some great lawyers arrive but everyone soon seems to inherit the ‘old’ Sintons sense of fun, respect and teamwork.

Sintons is in a great place going forward. Virtual working has opened up some great opportunities to spread our wings and engage with clients even better than before.”

Sarah Smith, partner and head of licensing

“The firm has almost doubled in size since I started in  2005. The range of services offered by the firm has expanded quite significantly since then too, making the firm much more attractive to commercial clients.

When I first came to Sintons, I headed up the department with Lucy Winskell (now chair of NELEP and Pro Vice-Chancellor of Northumbria University). Since her departure I have headed it up myself. In spite of that, the department has grown in its client base and the amount of work we deal with on an annual basis.

With the growth in size and services we continue to see, I think Sintons are very well placed in the market to take advantage of opportunities going forward.”

Astrid Stevenson, secretary

“I joined Sintons on 21 October, 1997, and will have been here for 25 years this year.

I think when I started there were only about 80 people working at Sintons. We were based in Portland Terrace then moved to Osborne Terrace. We didn’t have open plan working like we have now, we had little rooms with approximately 3 secretaries in each room. I shared a room with Anne Smith from the first day I arrived and we have been firm friends ever since. Fee earners all had their own office. Basically, it was like a rabbit warren.

The staffing levels were very much smaller then, as I say about 80 staff then and now we have more than double that number. The computer system (Word Perfect 5.1) and equipment were top of the range for the time, and I think that has carried on until this day, our IT department have the latest of everything and are basically top notch.

Since I started 25 years ago, the firm has changed and has always moved forward with the times.  When I started there were no female partners. Hilary Parker and Karen Simms became the first, which was a very welcome breakthrough for Sintons.

We were like one big happy family with lots of social events, which thankfully still happen to this day, keeping the ethos of Sintons going.

I think if I didn’t enjoy working here I wouldn’t be celebrating my 25th years this year at Sintons. I’ve worked for the head of dispute resolution Angus Ashman for 24 of those years, and I think we work well together because we work as a team.

This is a very nice place to work, the people are all friendly and If anyone needs help with anything there is always someone there to help. I always think we are only as good as the tools we work with and I must say Sintons do provide all the best equipment and people and it makes the job so much easier if you have things like that in place.”

Sintons’ development – reflections from the Chairman

Sintons’ chairman, Alan Dawson, is one of the firm’s longest-serving people, having joined in 1980. Here, he shares his thoughts on some of the biggest changes and advances he has seen in the past 41 years.

Technology

When I joined in 1980, we used manual typewriters, although thankfully electric typewriters had recently become available. There were no screens at that time, but over the years we added one-line screens to the typewriters, then that went up to three or four lines. It was the early 1990s before we introduced computers.

There were no colour photocopiers so all of the plans we copied were in black and white. We would have to go over them with coloured pens to make them the same as the original.

The introduction of fax in the 80s was a game changer, everything before then was done by Telex or telegram if we needed ‘instant’ communication. The only problem was that due to the paper fax machines used at that time, the print would fade – we’d go back to the file six months later and the sheet would be completely blank! We had to remember to photocopy the fax when they came in for use in our records.

With property completions, all bank-to-bank transfers involved getting an actual cheque from the bank, and then going to the office of the other solicitor in the transaction to inspect the deeds and then complete the deal. Fridays, the traditional completion day, were often spent going between solicitors’ offices in Newcastle.

When mobile phones were introduced, we had one mobile for the firm to use, we didn’t have one each. It was one of the brick-like phones with a huge battery, but it was a huge novelty.

Thankfully things have moved on hugely, and Sintons now has a first-rate technology and IT infrastructure, which enables us to offer a very efficient service to our clients while keeping their data fully secure.

Size of the firm

Back in 1980, we had about 36 people – now we have around 170.

We really started to grow from the mid to late 90s, and in 1998 we moved our offices from Portland Terrace in Jesmond to bigger premises in Osborne Terrace, which comprised three and a half houses next to each other with an overspill office further down the road. We imagined that would give us room to grow for the next 15 years – but within the next two or three years, it was already too small.

We came to The Cube in 2004 and at first didn’t use the top floor of our four-floor building, although within the next couple of years we had expanded into there.

Over the years, we have added many outstanding lawyers to our team, both through recruitment from other firms as well as training young people-in house. Our commitment to supporting aspiring lawyers through their training contract has been unfaltering – I joined as an articled clerk (or trainee, as it’s now known) and have progressed through the ranks.

As the firm has grown then so too has our back-office and support functions developed. We didn’t have the infrastructure we have now, so no HR, IT or marketing department.

Our accounts system was all manual, the cashier had to write everything by hand. There was one card per client, so if you had to borrow it, then they couldn’t make any more entries for that client until you returned it.

Our HR function was our office manager, who kept a record of who was off and the reasons for their absence – reading it now, some of the reasons are quite amusing!

Law firms weren’t allowed to advertise at all until the late 1980s, so the only kind of marketing we could do was through the Yellow Pages. Now, we operate at the very forefront of the sector, adopting digital way before many of our competitors, and that early investment is helping us to stay ahead in the marketplace.

Practice areas

In the 1980s when I joined, Sintons had a very significant insurance litigation practice which acted for four or five of the major national insurers. The revenue from that area of the business probably accounted for two thirds of our entire income. However, in the early 1990s, we recognised that reliance on a few large clients or a particular work stream was not the best way to develop the firm and could make us vulnerable. We therefore made concerted efforts to radically change our business model and to further grow the other practice areas we had operated in for many years, including private client, corporate and commercial and real estate, and they proved to be areas of strong development for us. They continue to be key areas of the business for us and will be central to our ongoing progress as a firm.

We also moved into claimant personal injury work, which really took off in the late 90s and early 2000s. More recently, we have developed our national reputation as specialists in catastrophic and serious personal injury work with a thriving specialist neurotrauma department which handles life-changing brain and spinal cord injury work.

National reach

In the early days, we were more of a regional firm with clients mainly across the North East, and some in the wider North. Occasionally, clients moved to elsewhere in England which helped us to reach out nationally on a small scale, but we didn’t have much of a national reach.

However, as we grew as a firm, we started to work on a more national basis and now on an international basis as well. The improvement of technology was also an important factor in enabling us to communicate with people wherever they were by phone or fax, but more recently by mobile phone, email or even video calling which has proved so important during the pandemic.

Through our efforts to grow individual areas of the business – which in many instances have demonstrated substantial growth over the course of a number of years, underpinned by the hard work of our people – we have been able to add outstanding new lawyers to the team, whether they have moved to Sintons from elsewhere or have been trained in-house.

Now, we have a number of areas of the business which are regarded in the highest terms nationally, including our healthcare team, which has grown its presence over the past 10 to 15 years to become a national leader in its field.

We continue to receive growing numbers of instructions from across the UK and wider afield in almost all areas of the business, as our capability and reputation as a firm builds further still.

Building on our heritage to create a strong future

1896 marked a year of historic new beginnings and breakthroughs.

The year that saw the first modern Olympic Games held in Athens;

The introduction of the X-ray;

The development of the first Ford vehicle, the Quadricycle.

And in such a landmark year as 1896, with events taking place which went on to change history, it is fitting that this was the year when Sintons was founded and the foundations laid for the firm that it would become.

Having been founded as Sutton Cheshire & Thompson on February 8, 1896, to serve the people of Newcastle, the firm then merged with John H. Sintons & Co in 1971 – later becoming Sintons – and has grown into one of the leading law firms in the North of England, acting for ever-increasing numbers of business and private clients both regionally and across the UK.

Over the past 125 years, Sintons has developed a reputation for the quality of its advice, and crucially, the deep and trusting relationships it builds with its clients borne out of the outstanding service it delivers to them.

There are so many momentous events and developments which have taken place over such a long period of time and the world has changed, and continues to change, beyond recognition.

However, throughout that period Sintons has been working alongside individuals, families, businesses and organisations for 125 years, adapting and changing to meet new challenges and will continue to do so for the years to come.

As a law firm for changing times, Sintons continues to evolve, as it has done since 1896, to ensure it stays at the forefront of the legal market and in the best possible position to deliver excellence to its clients.

“Over the past 125 years, we have continually shown we are innovators, we are leaders. We have never been afraid to take bold decisions,” says Christopher Welch, managing partner of Sintons.

“A great example of this is when we invested in our head office, The Cube, in 2004. We were moving to an area of the city which was largely undeveloped and were, largely, surrounded by the old Scottish and Newcastle plant. Looking around us now, this is a thriving, fast-growing and sought-after area, which is the site of huge investment from both business and academia. We had the foresight to buy into these brave future plans and the ambition to want to become part of it.

“In these changing times, we will continue to evolve and develop, as we have done throughout our history, to ensure that at all times we are delivering the very best service to all our clients while also building and investing in the firm from within.

“We have stood the test of time for 125 years and are committed to ensuring Sintons maintains the reputation and presence that has been built so carefully into the future.”

For Christopher, who joined Sintons in 2003, the main differentiator between Sintons and its competitors is its unfaltering commitment to clients.

While continuing to attract new clients nationally, the firm is rightly proud of its longstanding client base, which includes many who have been with Sintons through multiple generations of their family or business ownership.

“The firm’s absolute priority from day one has been our clients and ensuring they receive the highest standards of legal and personal service. Our reputation is built on those foundations, which were laid by our previous generations of Sintons’ lawyers, and is one we are proud to continue to develop further,” says Christopher.

“At Sintons, we care about what we do, how we do it and we never forget that the clients we are working with are depending on us for, often, some of the most momentous decisions of their lives. As a firm, we recognise both the privilege and the responsibility that goes with this, it is fundamental to how we work and to our values as a business.

“Our clients are the front, back and centre of everything we do. We’ve been there for them whenever they’ve needed us for 125 years and that will continue to be the case as we move forward.”

And building further on its reputation for leading the way in the legal marketplace, Sintons continues to innovate to stand out from the crowd.

Having carried out a full rebrand in early 2020, to give the firm a fresh yet timeless identity, Sintons continues to invest in its future.

“Our rebrand was a significant step for the firm,” says Christopher. “Our branding represents the firm that we are; bold, innovative and providing clear and confident advice to our clients – a firm that stands out from the crowd.

“The use of technology to better serve our clients has always been an essential part of our growth strategy. Our founding partners would be aghast at the thought that we were able to have virtually all our colleagues working remotely – with some as far away as the Cayman Islands and Texas – without any impact on client service.

“By investing heavily in our website and online presence, we have created a resource which is available to clients wherever they are in the UK or indeed the world, giving them immediate access to information and support in ways which weren’t available before.

“The legal sector isn’t always the first to embrace change, but we are rightfully proud of the reputation we have built for standing out in that respect. For 125 years, we have taken bold moves, we have never shied away from making investment to equip the business for the long-term, and we have shown foresight and innovation to make the firm what it is today.

“This is a landmark anniversary for us, and in uncertain times, the investment we have made for many years in our infrastructure, development of our people and strategic recruitment means we remain confident in our future and the service we can continue to provide to our clients and to the regional community of which we are a fundamental part.

“These truly are changing times – but with 125 years behind us then we must be doing something right!  We know that our business will continue to evolve, with further investments in technology and infrastructure changing how and where we work. However, as we move forward, what is clear is that Sintons will always be right there, by the side of our clients, as we have been since 1896.”

Law firm Sintons is marking its 125th anniversary

Since its foundation in 1896, Sintons has grown to become one of the leading law firms in the North of England with a client base which extends across the whole UK.

It has become known as a key advisor to businesses and individuals acting on major, complex matters, regionally, nationally and internationally.

In many of its practice areas, including business, healthcare, private client and neurotrauma, Sintons is regarded as one of the UK’s leading specialist advisors.

Sintons has built a well-deserved reputation for delivering expert legal advice and outstanding service to every client, which is at the heart of the trusting and long-lasting relationships it has built during the past 125 years.

Testament to the quality of service provided is the fact that many of the firm’s clients have been with Sintons for decades, with the firm routinely being trusted to advise multiple generations of families and business owners.

Now, in its 125th year, and despite the ongoing challenges being presented by the COVID-19 pandemic, Sintons remains confident in its future as the firm continues to develop and grow.

The firm can trace its roots back to the formation of Sutton Cheshire & Thompson on February 8, 1896, which merged with John H. Sinton & Co in 1971 to become Sinton & Co, and later Sintons.

The expansion of the amalgamated firm has seen it move offices a number of times in order to house its growing number of employees, moving from Portland Terrace in Jesmond to bigger premises in Osborne Terrace which were soon outgrown, resulting in the relocation in 2004 to its current purpose-built home, The Cube, opposite St James’ Park in Newcastle. A second site was added with the opening of a consulting office in York two years ago to help the firm service its increasing demand for work from around Yorkshire.

The move in 2004 acted as a springboard in the development of Sintons, with many people not having realised how big the firm had grown and heralded a period of strong growth across the firm as a whole, with legal talent continually added to build its expertise and capability further still.

This has been backed by continued investment in its IT infrastructure, digital offering and people, to ensure Sintons is well positioned for the future.

“We are very proud of the reputation we have built over the past 125 years, which has seen us become known on a national scale as a law firm of the highest capability which is absolutely dedicated to its clients,” says Christopher Welch, managing partner of Sintons.

“We have never been afraid to be leaders and to take bold decisions, which have frequently put us at the very forefront of the legal sector. We were, for example, building our online presence and digital business development platforms way ahead of our competitors and long before it was something that was embraced widely within the legal sector.

“Going forward, we are in a strong position, having built on the heritage and legacy of Sintons over the past 125 years to create a law firm with a national reach, regarded in the highest terms for the quality of both our legal and personal client service.

“This is a very significant milestone for us as a business, and while we reach it during some of the most challenging economic conditions in the country’s history, we remain confident in the future of Sintons.”

“Expertise” of construction team hailed by Chambers 2021

The specialist Construction & Engineering team at Sintons has won praise for its “expertise” in advising clients across the UK from the Chambers and Partners UK Guide 2021.

The team was hailed for its work in both non-contentious and contentious construction matters, and for its capability in a host of matters including the design and negotiation of construction contracts, redevelopment work and adjudications.

Chambers cites the team as being “very knowledgeable, pragmatic, commercial, approachable and reliable”.

Alex Rayner, head of Construction & Engineering, also wins individual praise for his work, particularly in drafting construction contracts and documentation for disputes.

“He is great to work with as he offers practical solutions and really understands our business,” one testimonial said.

The ability of the team to advise clients – who include contractors, utility companies and care businesses – in an accessible manner was also praised.

Another client said the team “explain things to me in a fashion I can understand, they always give me options on the advice we had. They were very punctual, very accurate in the advice they were giving us and personable.”

Christopher Welch, managing partner at Sintons, said: “Our construction team has built a reputation regionally and beyond for its capability and in delivering clear and direct advice, supporting clients throughout their project from the earliest stage to the conclusion and becoming a trusted part of their own team. We are very pleased with this latest independent recognition of our work in construction, which is testament to the efforts and expertise of Alex and his team.”

Corporate, commercial & banking praised for capability and client service

The corporate, commercial and banking teams at Sintons have again been confirmed as one of the leaders in their field by Legal 500, through their combination of outstanding legal advice and focus on “maintaining excellent relationships with clients”.

The teams were praised fortheir strength in the full spectrum of corporate transactions, winning particular plaudits for their capability in private equity transactions and investments.

Legal 500 2021 praises Sintons’ corporate and commercial specialists for being “open, approachable and extremely competent…providing the very best advice and guidance”.

The involvement of the team – winner of the corporate and commercial team of the year at the Northern Law Awards 2019 – in a number of key deals was highlighted, including acting for Co-Wheels Car Club in the sale of a majority stake to ExaMotive SA and Shanghai Automotive to create the Only UK car sharing network, and the sale of TDX (Europe) to a major player in the European packaging sector.

Sintons’ banking team won independent praise from Legal 500 for its strength in real estate finance and corporate refinancing matters. Its close collaboration with the corporate team on refinancing instructions following corporate restructurings, as well as on acquisition finance issues arising during management buyouts, won further praise.

Karen Simms, head of corporate and commercial, is again named as a leading individual in the North of England, who wins praise for developing “niche bespoke contracts expertise” in the energy, waste and natural resources sectors.

Senior associate Emma Pern maintains her position as one of Legal 500’s rising stars, who is hailed for her “clear and concise approach”.

Managing partner Christopher Welch was hailed as a key figure in the region’s legal marketplace, alongside Matt Collen and Adrian Dye, who were named as “go to” practitioners for investments and private equity work.

Head of banking Jane Meikle and partner David Ferguson won further praise for their work in the niche area of banking and finance.

“We have rightly built a reputation over many years for the capability we have here, coupled with the quality of service we provide, which has established us as one of the leading names in the corporate and commercial field in the North of England, supported by our fast-growing reputation as a leading banking specialist,” said managing partner Christopher.

“We are very pleased to be recognised again by Legal 500, and it is particularly pleasing for the quality of our client relationships to be highlighted. Our entire approach is built on delivering an outstanding service to our clients, who are the front, back and centre of everything we do.”

Construction specialists discuss collateral warranties

The topic of collateral warranties in construction projects is to be examined at an upcoming online event.

The webinar will cover various issues relating to collateral warranties including an explanation as to their purpose, a reminder of the key provisions and an update on the Court’s approach in dealing with claims that arise under them.

The event, hosted by Alex Rayner, Head of Construction & Engineering at Sintons, will provide an introduction to collateral warranties as well as being a useful refresher for anyone who deals with them in a construction or property context.

Organised by Sintons in conjunction with Constructing Excellence in the North East, the webinar will be held on Tuesday, October 6.

The webinar is the latest in a series of a highly successful online events organised by Sintons, enabling its lawyers and specialist guest speakers to share their expertise with attendees despite the ongoing restrictions posed by COVID-19.

Alex Rayner said: “We are delighted events such as these are able to proceed despite the ongoing challenges posed by COVID-19. Whereas ordinarily we would welcome attendees in person, over the past few months our webinars have been shown to be highly successful, attracting attendees from across the country.

“Through our events, we aim to tackle a range of topics pertinent to those working in construction and explain and update on these as necessary. Collateral warranties is a topic relevant to many working in construction and property and we look forward to sharing our knowledge and expertise in this field.”

* Collateral Warranties will be held on Tuesday, October 6, from 12.30 to 1.30. It will be an online event and registration is required. To sign up, please contact Peter Jennings on peter.jennings@sintons.co.uk or 0191 226 7907.

Newly-qualified solicitor takes role in Construction & Engineering team

The Construction & Engineering team at Sintons has added a new solicitor to its ranks with the qualification of one of the firm’s trainees.

Jay Balmer has become a solicitor after completing his two-year training contract with Sintons, during which he impressed with his work in Construction & Engineering and Real Estate.

He has now taken up a permanent role within the firm’s specialist Construction & Engineering team, which acts for an array of major clients both national and regionally and is known for its capability in both contentious and non-contentious work.

Jay becomes the latest of Sintons’ trainees to secure a role with the firm, with Sintons having a longstanding reputation for its commitment to young lawyers and the high quality of training and opportunities it offers.

“Completing my training contract with Sintons has been even better than I had hoped. I’ve had the opportunity to work with some of the best lawyers in their fields regionally and nationally and have been part of teams completing really significant transactions. The training I have had has been exceptional and sets me up well for my career ahead,” said Jay.

“I am delighted to be offered this role in the Construction & Engineering team, which is a really strong and growing area of the business.  I have been involved with some exciting projects during my time in the department as a trainee and I look forward to continuing to work with Alex and the rest of the team.”

Alex Rayner, partner and head of the Construction & Engineering department at Sintons, said: “Jay is a fantastic addition to the team and we are delighted to be able to reward the commitment and dedication he has shown with a permanent role with us. Construction & Engineer is a growing area of the business and will be a great environment for Jay to learn and develop in his career. We all wish him every success and look forward to working with him going forward.”

Bresco Electrical Services Ltd (in Liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25

 Key Point: Insolvent companies retain the ability to refer claims to adjudication.

As we slowly emerge from the COVID-19 pandemic, the resulting economic downturn may have the effect of increased insolvencies within the construction sector. The judgment of the Supreme Court in Bresco is important for companies that are involved in or anticipate claims where either party is liable to become insolvent as adjudication was found to be compatible with, and of practical use to, the process of insolvency.

Background

In 2014, Lonsdale enlisted Bresco to carry out electrical installation work on a construction site in central London. 2 years later, in 2016, Bresco entered insolvent liquidation.

By this point, Bresco argued that Lonsdale owed £219,000, whereas Lonsdale were cross-claiming £325,000 for payment of replacement contractors following Bresco’s alleged abandonment of the project. In 2018 Bresco’s liquidators sought to refer a dispute to adjudication and Lonsdale objected, seeking an injunction which marked the commencement of protracted litigation, culminating in the recent Supreme Court judgment.

Arguments

By the time that the case had reached the Court of Appeal, Lonsdale’s argument for an injunction against the adjudication rested on two points:

  • The jurisdiction point – this argument hinged on the application of the insolvency set-off rules. Lonsdale argued that the claim and cross-claim cancelled each other out, effectively extinguishing the claim and dispute under the contract. Instead, the net claim was a dispute under the insolvency rules. Without a claim under the contract, no adjudication could be sought.
  • The futility point – Lonsdale’s second argument was that it would be unlikely that the adjudicator’s decision would be enforceable until the liquidators had calculated a final net balance and concluded the insolvency. As such, it would be a futile endeavour that the courts should not allow.

The Court of Appeal rejected the jurisdiction point. However, the injunction was upheld on the basis of the futility argument. The judgment effectively barred an insolvent company from referring a claim to adjudication where there was the existence of a cross-claim.

Bresco appealed again to the Supreme Court and Lonsdale cross-appealed on the jurisdiction point.

Supreme Court Judgment

The Supreme Court unanimously dismissed both of Lonsdale’s arguments, with Lord Briggs delivering the lead judgment.

  • Jurisdiction –the claim and cross-claim do not simply melt away as a result of insolvency set-off. Each claim maintains its separate identity for various purposes. Bresco could therefore refer its claim to an adjudicator.
  • Futility – Lord Briggs recognised the contractual and statutory right of Bresco to adjudication and held that it would be inappropriate for the courts to interfere with that right. Adjudication had purposes beyond just maintaining cash flow, being a further method of alternative dispute resolution. The Court held that Bresco’s adjudication would be a simple and proportionate means of determining the net balance.

Implications

The judgment specifically commented on the usefulness and practical utility of adjudication, with Lord Briggs commenting that “adjudication does, in most cases, achieve a resolution of the underlying dispute which becomes final”. Going further than just improving industry cash flow, adjudication has become a mainstream dispute resolution mechanism with decisions rarely being successfully challenged, providing some certainty for the parties involved.

The judgment reiterates the strength of parties statutory right to refer a dispute to adjudication “at any time”, further strengthening it as a method of dispute resolution.

This is could have a substantial impact on the construction sector given the potential for insolvencies as we emerge from the COVID-19 pandemic. It is now clear that insolvency does not act as an absolute fetter from referring a dispute for adjudication and we anticipate the number of referrals from insolvent companies may rise as a result.

For advice or assistance with your construction disputes, please contact us at any time.

Ask the Experts weekly Q&A from Sintons’ Employment Team – episode 4

Ask the Experts weekly Q&A from Sintons’ Employment Team – episode 4 – with Keith Land and Ailsa Hobson.

These sessions have come about due to the employment team here at Sintons having been inundated with COVID-19 and furlough questions following the introduction of the Coronavirus Job Retention Scheme and the ever changing government guidance.

The team has also been giving some thought as to what work may look like following the relaxation of the current restrictions.

So, In order to give you an opportunity to share in some of that wisdom, the team have opened themselves up to these Q&A sessions which are going to last until the end of May. During these short, bite sized sessions, members of the employment team will answer three questions, although it will actually be four today, (either COVID-19 related or not) that you haven’t either quite got to the bottom of or that your employees persistently ask you.

Please click on the image below to watch the session.

Sintons’ Employment Seminar – Managing the End of Furlough

Sintons’ Employment team, in partnership with Reed HR, have recorded the following complimentary online employment law seminar.

This seminar focuses on how to manage the end of furlough & potential restructuring.

Please click on the play button in the bottom left corner of the below image to start viewing.

To follow the full size slides the team are using throughout the presentation, please click here prior to commencing watching.

 

Ask the Experts weekly Q&A with Sintons’ Employment Team – episode 2

Ask the Experts weekly Q&A from Sintons’ Employment Team – episode 2 – with Keith Land and Angela Carver

These sessions have come about due to the employment team here at Sintons having been inundated with COVID-19 and furlough questions following the introduction of the Coronavirus Job Retention Scheme and the ever changing government guidance.

The team has also been giving some thought as to what work may look like following the relaxation of the current restrictions.

So, In order to give you an opportunity to share in some of that wisdom, the team have opened themselves up to these Q&A sessions which are going to last until the end of May. During these short, bite sized sessions, members of the employment team will answer three questions, although it will actually be four today, (either COVID-19 related or not) that you haven’t either quite got to the bottom of or that your employees persistently ask you.

Please click the image below to listen.

COVID-19 and Construction Contracts

The current COVID-19 pandemic is placing significant strain on the construction industry and will continue to do so for some time to come.  At the time of writing the majority of the country is in lockdown, with people being advised to stay at home and work from home other than those who cannot do so.  The guidance for the construction industry is less clear and there is a feeling, perhaps justified, that yet again the construction industry has been left behind in the Government‘s approach.

After some initial confusion following the Prime Minister’s lockdown announcement, the Government confirmed that construction sites should continue to operate during the pandemic, providing this can be done whilst following Public Health England and industry guidance, most notably the Construction Leadership Council’s ‘Site Operating Procedures‘.  This led to some sites remaining open and others closing as contractors grappled with the guidance and the reality of a shortage of labour and materials.  It is perhaps telling that the CLC Guidance is now on its third version.  In contrast to this advice, many high-profile figures, including the Mayor of London Sadiq Khan, believe that construction sites should be closed.

The decision as to whether or not to close sites has therefore fallen to contractors, as the Principal Contractor under the CDM Regulations, and many have decided to do so until the lockdown is ended on the basis that they cannot work safely. We have given a great deal of advice to both Contractors and Employers as they look to the contractual consequences of suspending the works and we have set out below some of the key issues and potential contractual issues that arise. As ever, the factual scenario and the terms of the particular contract will affect any advice.

  1. Force Majeure

The most commonly asked question in the initial stage of the pandemic, was whether it could be categorized as a ‘force majeure’ event.

Force majeure, at its simplest, can be described as matters that are outside the control of the parties, which could not reasonably have been foreseen at the time of the contract being entered into and whose effects prevent performance of the contract.

Under the JCT Design & Build Contract, for example, force majeure is undefined, and is a ‘Relevant Event’ which may entitle a contractor to an extension of time.  It is not however a ‘Relevant Matter’ entitling the contractor to loss and/or expense.

By contrast the NEC 4 contracts do not expressly refer to force majeure, but contain similar provisions within its compensation events (i.e. potentially time and money), with Clause 60.1(19) describing events which stop the contractor completing the whole of the works, which neither party could prevent and which could not reasonably have been allowed for at the contract date.

It goes without saying that the contractual notice requirements and other mechanisms must be followed properly in the above instances, for example an early warning notice and risk reduction meeting under the NEC and a notification ‘forthwith’ under the JCT forms. Further, the duty to prevent and mitigate delays (in the case of the JCT contracts an obligation to use best endeavours) must be complied with.

It is our view that COVID-19 is likely to fall within the definition of force majeure for contracts already entered into prior to the outbreak, however, as ever, this is subject to the contractor demonstrating cause and effect and having an audit trail to justify its decision to close a site, referencing the current industry guidance.  Indeed, given the changing nature of the guidance contractors should review this decision periodically in order to determine whether in fact some parts of the works can proceed.

It may be a different story for contracts entered into after the outbreak, or after it became foreseeable that the outbreak could potentially reach the UK.  That is to say that in those circumstances the requirement for the event not to have been reasonably foreseen is unlikely to have been met; this will depend upon the circumstances and we can foresee disputes arising as to whether or not COVID-19 was foreseeable at a given time.

  1. The Exercise of Statutory Powers

The UK Government’s response to the pandemic is likely to be fluid and largely determined by the impact of the current restrictions.  It may be that under certain circumstances, particularly if statutory powers are used to close certain construction sites or to stop types of construction activity, the parties may look to Relevant Event 2.26.12 of the JCT DB 2016, although again this is a Relevant Event but not a Relevant Matter.

  1. Termination

Under clause 8.11 of the JCT DB 2016 contract in the event that the Works are suspended for the continuous period stated in the Contract Particulars (2 months unless the parties have expressly provided otherwise) as a result of a force majeure event then either party may give 7 days’ notice to terminate the employment of the Contractor (note that a further notice terminating is required).

Clause 91.7 of the NEC4 contracts gives the Client the ability to terminate the contract for a force majeure type compensation event, but not the Contractor.

Again, we can foresee disputes arising with regards to the exercise of termination rights under the current scenario.  By way of example, the JCT suite of contracts state that the parties should not exercise any such rights “unreasonably or vexatiously”.  There is limited guidance from the courts on how this would be interpreted, albeit the following six propositions were derived from the authorities in the case of Reinwood Limited v L Brown & Sons Limited[1]:

“1    It is for the employer to show on the balance of probabilities that the contractor has determined the contract unreasonably or vexatiously.

2     By vexatiously it is meant that the contractor determined the contract with the ulterior motive or purpose of oppressing, harassing or annoying the employer.

3     The test of what is an unreasonable determination is to be ascertained by reference how a reasonable contractor would have acted in all the circumstances.

4     It is not for the court to substitute its own view of what is reasonable for the view taken by the contractor if that is one which a reasonable contractor might have taken in the circumstances.

5     Although the motive or purpose which a contractor had in exercising the right of determination is a relevant consideration, the test of what is unreasonable conduct in this context is objective and the fact that the individual contractor may have thought that his conduct in determining the contract was reasonable is not conclusive.

6     The effect on the employer of determination by the contractor is a factor to be taken into account and a determination may be unreasonable if it disproportionately disadvantages the employer.”

  1. Frustration

Frustration of a contract may occur where a serious event occurs without default of either party after the formation of the contract which is unexpected, but which renders it physically or commercially impossible to fulfil the contract.  The parties are discharged from further performance as a result. It is important to note however that there are very few cases in this jurisdiction in which a party has successfully argued frustration and at this stage we see it as unlikely that COVID-19 would render a contract frustrated, but this will of course need to be monitored closely.

  1. Pragmatic, Commercial Solutions

The construction industry often talks about collaborative working and indeed an obligation on the parties to act in a spirit of mutual trust and co-operation underpins the ethos of the NEC suite of contracts.  In our experience competing stakeholder interests sometimes, if not often, act as a bar to the parties acting in this way.

What does seem certain is that no-one in the construction industry is likely to come out of the current restrictions unscathed.  We would encourage parties to work together to find a commercial solution, which may be outwith the terms of the contract, to deal with the inevitable disruption that this may cause and to document any such commercial agreements as clearly and timeously as possible.

  1. Adjudication

If parties to a construction contract find themselves in an adjudication during the pandemic they should be alive to the fact that adjudicators and courts are unlikely to accept COVID-19 as an excuse to delay or injunct the progress of the dispute.  This was shown in the very recent case of MillChris Developments Ltd v Waters[2], handed down on 2 April 2020.

In that case a homeowner commenced an adjudication against a contractor.  The contractor applied to the court for an injunction prohibiting the home owner from proceeding with the adjudication because it claimed that it could not comply with the timescales required to respond to the referral notice (note, the adjudicator had already offered the contractor a two week extension) due to the COVID-19 pandemic.  But the contractor’s application was refused because it had failed to demonstrate that the COVID-19 health crisis (and also the fact that it was no longer trading) had prevented it from preparing for the adjudication so that if the adjudication proceeded it would have been resulted in a breach of the rules of natural justice.

Of course, a party’s ability to delay or injunct proceedings due to the current pandemic will depend upon the factual scenario but the case of MillChris demonstrates that parties will need to be able to overcome the high bar imposed by the courts in order to injunct any proceedings and, overall, the approach of the Courts (and adjudicators will no doubt follow suit) is to facilitate the continuation of proceedings wherever possible providing they can do so within the bounds of natural justice.

MillChris also provides a timely reminder of the benefits of acting reasonably (and the pitfalls of acting unreasonably) in a dispute scenario.  Parties should try and find reasonable solutions, such as extensions of timetables and relaxations of the method of delivery of documents, or else risk adjudicators resigning or unsuccessful attempts to injunct proceedings together with the associated time, cost and hassle involved.

[1] [2007] BLR 10

[2] [2020] 4 WLUK 45

Coronavirus and Construction Contracts

During the course of a construction project time and money are often at the top of the stakeholders’ list of concerns and with the outbreak of COVID-19 parties are turning their attention to the consequences of having to stop work for a period of time.  We have been contacted by several clients for advice in this regard and this brief note outlines the potential contractual options.  As ever, the factual scenario and the terms of the particular contract will affect any advice.

  1. Force Majeure

Force majeure, at its simplest, can be described as matters that are outside the control of the parties, which could not reasonably have been foreseen at the time of the contract being entered into and whose effects prevent performance of the contract.

Under the JCT Design & Build Contract, for example, force majeure is a ‘Relevant Event’ which may entitle a contractor to an extension of time.  It is not however a ‘Relevant Matter’ entitling the contractor to loss and/or expense.

By contrast the NEC 4 contracts do not expressly refer to force majeure, but contain similar provisions within its compensation events, with Clause 60.1(19) describing events which stop the contractor completing the whole of the works, which neither party could prevent and which could not reasonably have been allowed for at the contract date.

It goes without saying that the contractual notice requirements and other mechanisms must be followed properly in the above instances, for example an early warning notice and risk reduction meeting under the NEC and a notification ‘forthwith’ under the JCT forms. Further, the duty to mitigate delays (best endeavours under the JCT forms) must be complied with.

It is likely that the foregoing will cover COVID-19 for contracts already entered into prior to the outbreak, however if you are not yet under contract the requirement for the event not to have been reasonably foreseen may not be met and therefore you might not be able to rely upon force majeure provisions.  Our advice is therefore that for contracts currently under negotiation the parties discuss and agree how this risk is to be dealt with under the contract and ensure that the drafting is clear.  At its simplest this may include expressly referring to COVID-19 in the force majeure definition, however more complex drafting could be required depending on the agreed allocation of risk as to time and money.

  1. The Exercise of Statutory Powers

In the event that the UK Government’s response to COVID-19 escalates and enhanced steps are taken to reduce the spread of the virus, it is conceivable that statutory powers are used to prevent projects from proceeding.  If that does happen then the parties would look to Relevant Event 2.26.12 of the JCT DB 2016 (again not a Relevant Matter).

  1. Termination

Under clause 8.11 of the JCT DB 2016 contract in the event that the Works are suspended for the continuous period stated in the Contract Particulars (2 months unless the parties have expressly provided otherwise) as a result of a force majeure event then either party may give 7 days’ notice to terminate the employment of the Contractor (note that a further notice terminating is required).

Clause 91.7 of the NEC4 contracts gives the Client the ability to terminate the contract for a force majeure type compensation event, but not the Contractor.

  1. Frustration

Frustration of a contract may occur where a serious event occurs without default or either party after the formation of the contract which is unexpected but which renders it physically or commercially impossible to fulfil the contract.  The parties are discharged from further performance as a result. It is important to note however that there are very few cases in this jurisdiction in which a party has successfully argued frustration and at this stage we see it as unlikely that COVID-19 would render a contract frustrated, but this will of course need to be monitored closely.

  1. Pragmatic, Commercial Solutions

The construction industry often talks about collaborative working and indeed an obligation on the parties to act in a spirit of mutual trust and co-operation underpins the ethos of the NEC suite of contracts.  In our experience competing stakeholder interests sometimes, if not often, act as a bar to the parties acting in this way.

If the outbreak of COVID-19 escalates and has an adverse affect on the construction industry then it is unlikely that any stakeholder will emerge entirely unscathed, and we would encourage parties to work together to find a commercial solution, which may be outwith the terms of the contract, to deal with the inevitable disruption that this may cause. As ever we are available to assist with documenting such arrangements.

Christian care company builds 11th home as part of ongoing expansion

A Christian care company is adding another care home to its national portfolio with the construction of a 48-bed home in Wiltshire.

Pilgrims’ Friend Society, a charity founded in 1807, is opening its 11th UK care home with the creation of a purpose-built facility in Chippenham.

Middlefields House is due to open in spring 2021, with construction work now underway on the project. The project is part of the organisation’s Renewal Programme, which will see six new homes opened in the next ten years, alongside investment in its current facilities to ensure their long-term usability.

The Chippenham home will cater for people aged 65 or older, including those living with dementia, and will have its rooms arranged in four ‘households’ of 12 rooms, to create a more sociable environment – the first of Pilgrims’ Friend Society’s homes to adopt such a design.

Alongside sizeable grounds, Middlefields will also have a café, hair salon and communal rooms for use by the community. The home will have strong links with local churches as part of its commitment to the Christian faith.

Building work is being carried out by Midas Construction, and law firm Sintons completed the legal work to allow the scheme to proceed. The development was designed by Northstar, a specialist in the design and development of elderly care facilities, who will also undertake the project management role.

Stephen Hammersley, Chief Executive of Pilgrims’ Friend Society said, “There is an increasing need to provide care for the growing number of older people in the UK. Middlefields House is the first phase of our long-term commitment to provide excellent care in a Christian context for older people in Chippenham.”

Alex Rayner, Partner and Head of Construction & Engineering at Sintons, acted for Pilgrims’ Friend Society in advising upon, negotiating and drafting the suite of construction documents for the development of Middlefields.

“Pilgrims’ Friend Society has a stellar reputation for the high quality of its care and we are delighted to act for them in enabling the creation of this state of the art facility. This marks another very significant investment by the charity in helping older people to live fulfilled lives,” he said.

Ian Holmes, project director at Northstar, said: “We have enjoyed working closely with PFS on the design and delivery of this new scheme which promotes the ‘Household Model of Care’ principle. The scheme gives significant space to private, domestic scale living areas whilst also providing some fantastic communal areas for visiting relatives and residents to enjoy together.”

Sintons’ construction team supports development of The Auckland Project

Construction specialists at Sintons are supporting the development of The Auckland Project, one of the most historic new visitor destinations in the UK.

The Auckland Project is a regeneration charity which is using art, faith and heritage to fuel long term change in the Bishop Auckland area. To do this, it is creating a visitor destination of the same name, which brings together seven sites in one setting.

The development includes 900-year-old Auckland Castle, which forms the centrepiece of the visitor destination and reopened earlier this month following three years of conservation work.

Three other sites are also already up and running in the town – the Mining Art Gallery, Deer Park and Auckland Tower visitor centre.

Further sites, due to open in the coming years, include a Spanish Gallery, which will house artworks from the medieval period onwards, with particular emphasis on the 17th century Spanish Golden Age, a Faith Museum, and a Walled Garden and restaurant, one of the oldest gardens in the country which pioneered the introduction of pineapples in the 18th century.

The specialist Construction & Engineering team at Sintons continues to advise The Auckland Project in its development programme, including drafting and negotiating various construction contracts and associated documents to enable the work to proceed.

Alex Rayner, Partner and Head of Construction & Engineering at Sintons, has led a team, including Associate Matthew Pexton, which has worked closely with The Auckland Project during the three-year conservation of Auckland Castle.

“The Auckland Project is creating a truly unique destination, the impact of which will be huge for the North East. It brings together 1,000 years of heritage with modern construction and design, resulting in a project which will showcase Bishop Auckland as a must-visit destination,” said Alex.

“We are delighted to be the construction lawyers of choice for this fantastic initiative, and have worked closely with the project team to develop the contracts and documentation to allow it to become reality. It is fantastic to see what has been created so far and we are excited to see what is yet to come.”

Helen Redman, Head of Projects at The Auckland Project, said: “Reopening Auckland Castle to the public on 2 November was a landmark moment, both for The Auckland Project and Bishop Auckland.

“We are grateful to all of the partners who supported us throughout the Castle’s conservation project. Our contacts at Sintons have been a pleasure to work with and we look forward to continuing this partnership as The Auckland Project develops.”

Capability of Sintons’ Construction team hailed by Legal 500 2019

The specialist Construction & Engineering team at Sintons has been hailed by Legal 500 2019 for the quality of its legal advice coupled with its involvement in an impressive array of major projects.

The team is regularly instructed on a national basis in contentious and non-contentious matters and its client base comprises a mixture of developers, contractors, funders and consultants.

Legal 500 points to its involvement in major projects on behalf of nationally-known clients as being significant in Sintons’ offering, including its work for NWG Commercial Solutions Ltd in connection with the design, build and operation of a new wastewater treatment plant in Gibraltar for Her Majesty’s Government of Gibraltar; acting for The Auckland Project on the transformation of Auckland Castle; and acting for Tolent Construction in their appointment to the Vaux Brewery Site in Sunderland.

Alex Rayner, head of Construction & Engineering and a former quantity surveyor – which is regularly hailed as giving him unrivalled specialist knowledge of the sector – and associate Matthew Pexton are both named individually as being key advisors in this sector.

Mark Quigley, managing partner of Sintons, said: “Our Construction & Engineering team has grown significantly in the recent past and is now a leading advisor to many major names in this sector, with strong capability in both contentious and non-contentious matters. To have this recognised by Legal 500 2019 is very pleasing, and our involvement in an array of highly significant projects is rightly highlighted and is a true reflection of the capability we have here at Sintons. This is another area of great potential within Sintons and we look forward to our construction & engineering offering continuing to develop.”

Provisional sums – An introduction

What are provisional sums?

Provisional sums are generally an allowance or estimate (often described as a “best guess”) included within the contract price of a construction contract for works that are:

  1. not sufficiently defined, designed or detailed to allow an accurate determination of its cost at the time the contract is entered; and/or
  2. work that the Employer may or may not wish to be carried out.

Lord Justice May, in Midland Expressway Limited v Carillion Construction Limited and Others [2006] EWCA Civ. 936 (“Midland Expressway v Carillion”), described provisional sums as being:

“[…] generally well understood in the construction industry [and] used in pricing construction contracts to refer either to work which is truly provisional, in the sense that it may or may not be carried out at all, or to work whose content is undefined, so that the parties decide not to try to price it accurately when they enter into their contract.”

What are “Defined” and “Undefined” provisional sums?

The Royal Institute of Chartered Surveyors’ (RICS) New Measurement Rules (NRM) categorises provisional sums as being either “defined” or “undefined”.

Defined provisional sums are those that are sufficiently well defined and/or detailed to allow the contractor to make allowances for them in their programming, planning and pricing preliminaries.

The NRM provides guidelines on details to be included within a contract for provisional sums to be categorised as “defined”. In order for provisional sums to be considered “defined” it suggests that the following should be included:

  1. a description of the nature and construction of the work;
  2. a statement of how and where the work is to be fixed to the building and what other work is to be fixed thereto;
  3. a quantity or quantities that indicate the scope and extent of the work; and
  4. any specific limitations and the like.

Undefined provisional sums are those that fall outside of the above parameters. For example, work required below an existing structure (i.e. piling works) where the grounds conditions, and therefore the extent of the works, cannot be determined until the existing structure is demolished and the ground opened.

So, how are provisional sums dealt with in construction contracts?

In Midland Expressway v Carillion, Lord Justice May summarised how provisional sums are most commonly dealt with in construction contracts stating:

“A provisional sum is usually included as a round figure guess, it is included mathematically in the original contract price but the parties do not expect the initial round figure to be paid without adjustment. The contract usually provides for the provisional sum to be omitted and an appropriate valuation of the work actually carried out to be substituted for it.”

However, different contracts deal with provisional sums in different ways. For example, the Joint Contracts Tribunal (“JCT”) contracts compel the “Employer” to issue instructions to carry out work detailed in the provisional sums schedule regardless of whether they are “defined” or “undefined” and the price of the works detailed are provisional in the true sense of the word (i.e. can and will be adjusted as the works progress).

Under the JCT contracts, provisional sums form part of the scope of the works regardless of whether they are defined or not. As such, an Employer who decides not to expend a provisional sum under the contract but then later employs another contractor to carry out those works may in theory be in breach of contract and could face a claim by the original contractor for loss of profit. (Note: the Employer can remove this risk by amending the contract).

Other standard forms of contract deal with provisional sums in differing ways and in fact some, like the NEC suite of contracts, do not deal with them at all.

Matters to be aware of when including provisional sums in a construction contract:

For Contractors:

  1. Employers will often try to categorise all provisional sums as “defined” when including them in a contract – the effect of this is that the risk is passed to the Contractor who will be deemed to have sufficient allowances for them in their planning, programming and pricing preliminaries thus removing the possibility of claiming an extension of time or for additional costs for any provisional sums that are not sufficiently defined.
  2. Delays – in order to avoid the risk of delay and falling victim to the consequences of the same, Contractors must allow sufficient time in the programme to account for lead times, etc., for works instructed under a provisional sum.
  3. Cost certainty – Contractors should be aware that the Contract Sum may go up or down if provisional sums are included in a contract. Therefore, they should be aware that the job may not be as lucrative as first thought if many provisional sums are provided for in the contract.

For Employers/Developers/Funders:

  1. Cost certainty – the inclusion of provisional sums often creates uncertainty as to time and costs. Many Employers/Developers/Funders require a high degree of cost certainty and as such favour lump sum contracts. However, if the lump sum contract contains a significant number of provisional sums there will be a risk that the ultimate cost may be (significantly) in excess of the original contract sum.
  2. Claims brought by the Contractor for works omitted and awarded to a third party. Employers should be aware that, under many contracts including the JCT, provisional sum work forms part of the overall scope of works whether it is defined or undefined. As such, if the provisional sum works are not carried out by the Contractor (under the original building contract) but instead carried out by another, unless the contract provides otherwise, the Contractor may bring a claim for breach of contract and for loss of profits against the Employer.

For Both (Employers and Contractors):

  1. Tension between both parties – agreeing the actual costs of or deciding on extensions of time required in expending provisional sums can often result in disagreements and tensions being created between the parties. Therefore, where they can be avoided, it is better to do so.

For more advice please contact our construction and engineering team.

Further growth forecast for Sintons’ construction team

The specialist Construction & Engineering team at law firm Sintons is forecasting further growth after a successful past year, underpinned by new key client wins and strategic appointments to the team.

From its Newcastle base, the specialist team handles matters nationally and internationally, and has built a reputation as one of the leaders in its field in the North of England.

The team counts an array of major names as clients, including Greggs, The Auckland Project, Meldrum Construction, Tolent Construction, Thompsons of Prudhoe and Northumbrian Water, for whom Sintons is advising upon the design, build and operate contract of a new wastewater treatment plant in Gibraltar.

It has also been appointed to regionally-significant projects, including acting for main contractor Tolent in the redevelopment of the Vaux site in Sunderland, and advising The Auckland Project in its transformation of Bishop Auckland, including the restoration and refurbishment of the Auckland Castle and the construction of a Spanish Gallery and Auckland Tower.

The team – which also has a strong relationship with Jerram Falkus Construction, a long-established construction company based in central London, with whom it works on an array of projects in the South East – has kept pace with its growing workload through new appointments, with further hires planned for the near future.

Associate Matthew Pexton has moved to Sintons from a London law firm, in what has been hailed as a “highly significant” move for the team. Newly-qualified solicitor Andrew Noble, who studied Civil Engineering prior to converting to law, has spent many months developing his career under the guidance of department head Alex Rayner and has now become a permanent member of the team.

Alex Rayner, Partner and Head of Construction & Engineering at Sintons, said: “Sintons has always had a strong reputation for its depth and breadth of expertise in Real Estate work but we have seen increasingly strong levels of growth in the firm’s Construction & Engineering offering over the past few years, and particularly in the last 12 months. We now act for an array of major clients on projects nationally and internationally and are proud to have become trusted advisors to some of the biggest names in North East business.

“Our new client wins and continuing instructions on major projects has meant we have had to add to our team, and we plan to recruit further in the coming months as our workload continues to grow.

“The appointment of Matt has been a highly significant move for us – construction lawyers of his experience and level of expertise are hard to find, and we are delighted he has relocated from London to join us. Having trained in our department, Andrew is already well known and highly regarded by many of our clients and his Civil Engineering knowledge gives the team a further dimension.

“This is an exciting time for the Construction & Engineering team as we continue to look for new opportunities, as well as continuing to provide our existing clients with the expert advice they have come to expect from us.”

Mark Quigley, Managing Partner of Sintons, added: “Alex and the team have done a fantastic job of growing the Construction & Engineering department into one of the most highly-rated in the North. The progress they have made has been outstanding, and supports the wider development of Sintons as a firm.”

Specialist Construction lawyer joins Sintons

The ongoing recruitment of senior lawyers at law firm Sintons has continued with the addition of a specialist construction lawyer who has relocated from London to take up his new role.

Matthew Pexton moves from renowned London law firm Wedlake Bell to join Sintons, and has become an Associate in the firm’s Construction & Engineering team.

He has significant experience in both contentious and non-contentious work, and has acted in major transactions in sectors including leisure, healthcare and care.

A highly-esteemed construction specialist and a founder member of TeCSA 10s – a sub-division of the Technology and Construction Solicitors Association for next generation construction lawyers – Matthew joins Newcastle-based Sintons at a time of strong growth for both the Construction & Engineering team and the wider firm.

The specialist Construction & Engineering team, led by Partner Alex Rayner, acts for many of the biggest names in North East business, and works nationally and internationally for a number of major clients.

Matthew said: “I am delighted to move to Sintons and to the North East, which is a fantastic region in which to live and work. The Construction & Engineering department has an excellent reputation with an enviable client base and is regularly instructed on major projects. This is a very exciting new challenge for me and I look forward to working with Alex and the team as we continue to grow the department further.”

Mark Quigley, managing partner of Sintons, said: “As an ambitious and growing law firm, we see recruitment of excellent lawyers as being central to our ongoing success, and this is at the very heart of our Strategy for Growth. Matthew is the latest in a series of senior lawyers who share our vision of excellence and have relocated from elsewhere in the UK to build their careers further with us.

“We are delighted to welcome Matthew to Sintons and wish him the very best of luck in his new role within our Construction & Engineering team, which has developed so strongly in the recent past and is rightly regarded as one of the best of its kind in the region. We are confident that can only continue with the hard work and capability of Alex, Matthew and the team.”

Retention Reform Bill – Fifth attempt at second reading scheduled for 25 January

The long awaited Construction (Retention Deposit Schemes) Bill 2017-19 is due to have its second reading before the House of Commons on 25 January.  Do not be surprised though if the timetable slips yet again as this will be the fifth attempt at a second reading since April 2018 with the first four attempts having been postponed four times due to pressures on parliamentary time caused by Brexit.  And with the House of Commons’ running order set to be dominated by Brexit-related issues on 24th January, the day before the second reading of the Bill, further slippage could occur.

The first reading of the Private Members’ Bill met with approval from more than 1 in 4 MPs and provided a glimmer of hope in the industry that the Government was starting to wake up to the industry-wide concerns with cash retentions.  The Bill’s primary purpose is to amend Section 111 of the Construction Act 1996 to impose a mandatory retention deposit scheme on parties in order to address the practice of retentions being kept unlawfully.  Details remain vague and it is envisaged that the scheme itself will be set out in a separate Statutory Instrument. And further progress could be slow because once the second reading is complete the Bill will then proceed to committee stage – where each clause and any amendments to the Bill may be debated before being returned to the Commons for final debate.  And that is before the Bill even gets to the House of Lords.

Reverse Charge VAT: Bulletin

January is often a quiet time when thoughts turn to the year ahead. And so what better way to spend your January down-time than by planning for the arrival of reverse charge VAT on 1 October 2019. To many suppliers and recipients of construction services in the industry reverse charge VAT will represent a major change to their accounting and administrative processes and one which will be underestimated or ignored at their peril.

What is Reverse Charge VAT?

The reverse charge mechanism has been implemented under Section 55A of the Value Added Tax Act 1994 (“VATA”) by way of the Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019 (draft order). N.B. Even though it is stated to be in draft, HMRC has confirmed that the order is in fact in final form.

Under normal VAT rules, it is the supplier of goods or services who is required to account for VAT on those supplies. However, the reverse charge system requires the recipient, not the supplier, to account for and pay tax on the supply of any construction services (“construction services” is broadly defined under the draft order and will cover most traditional construction works and services with a few exceptions).

Why is it being introduced?

HMRC is attempting to reduce the amount of avoidance of VAT occurring at the lower end of the construction chain where suppliers charge and collect VAT but fail to account for that VAT to HMRC (such as “missing trader fraud”). The logic being that those parties further up the chain are easier to trace and often have better administrative processes to deal with the accounting and due diligence requirements of the VAT system. Such parties are also likely to have more to lose if found guilty of VAT fraud.

How it works

Each party who is supplying construction services to a VAT registered recipient who intends to use those services for making further supplies of such construction services, must reverse charge VAT due to be applied on those services. Conversely, suppliers must not apply the reverse charge if either:

  • its customer is not VAT registered; or
  • its customer is VAT registered but the customer is not going to use the supplied services for making further supplies (i.e. is not going to operate the CIS scheme on the payment).

Effectively, this means that only contractors who supply to:

  • end users (who are not VAT registered); and/or
  • contractors who are not required to report payment under CIS

will need to charge VAT to its customers and account to HMRC for that VAT. Whereas those suppliers further down the chain that are caught by the reverse charge will still need to show the nominal VAT on their invoices but will not need to pay any VAT to HMRC because it will be reversed charged to the recipient of its services.

What happens if you or your suppliers/recipients get it wrong?

HMRC has reassured that it will operate a light-touch approach to penalties for genuine mistakes for a six-month period.  Despite that, the following key principles apply:

  • Under Section 55A(7) VATA 1994 the recipient of a reverse charge supply is responsible for accounting for VAT on the supply to HMRC, therefore any debt will be enforced against the recipient rather than the supplier and any failure by such recipient to account for the reverse charge could result in the recipient being assessed for the supplier’s output tax, losing the right to deduct input tax and also liable for penalties and interest.
  • If a supplier incorrectly charges VAT when the reverse charge applies the recipient will be assessed for that output tax and then the supplier will have to return the money collected as VAT and make the appropriate amendments to VAT records and returns. This could also give rise to penalties.
  • Recipients who fail to account for VAT where the reverse charge has been correctly applied or who knowingly claim “end user” status when the reverse charge should have applied will still be liable for the output tax that should have been paid and may be liable for penalties. HMRC will not seek to recover the output tax from the supplier as long as the supply undertook reasonable checks of the VAT registration status of the recipient.

Practical Steps

  • Cash flow: businesses should consider the effect on their cash flow of not receiving VAT from customers and if there are other ways to mitigate this.
  • Existing contracts: consideration should be given to both draft and existing contracts which may be in place after 1 October 2019 to ensure that the terms relating to charging VAT comply with Section 55A VATA. The HMRC guidance note states that end users should provide written confirmation of end user status.
  • Invoicing and due diligence: ensure that VAT is not being incorrectly charged by performing due diligence on the VAT/CIS status of each customer and supplier. Invoices need to be marked clearly to include the amount of VAT due (although this should not be shown as VAT charged) and a reference to Section 55A VATA (reverse charge) should be added.
  • HMRC Guidance Note: HMRC has also published a guidance note, click here to access it.

Disclaimer

Sintons LLP do not provide tax or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax and accounting advisors for further advice and information.

Moving Forward with Mediation

Nicola Crowther, of Crowther Mediation, and Alex Rayner, partner and head of construction and engineering at law firm Sintons, talk to North East Times about the growing demand for mediation services across the region, and how they are helping businesses in dispute to move forward.

Established five years ago in Sunderland, Crowther Mediation has steadily evolved into one of the largest mediation practices in the North of England, with a dedicated team of staff and eight offices across the region.

The business specialises in acting as mediator to assist parties to resolve civil, commercial, family and workplace disputes, as well as offering a range of training services.

Sintons is one of the largest law firms in the North East with a team of more than 200, including 33 partners and in excess of 100 lawyers. As a firm, it is committed to securing the best outcomes for its clients and regularly advises them to attempt to resolve matters through the use of mediation and other forms of alternative dispute resolution.

Nicola comments: “Mediation is nothing new, it’s been around for hundreds of years, but it is fast gaining recognition by both lawyers and clients alike as a more effective way of resolving disputes than going through a court process.”

Both Nicola and Alex Rayner, partner and head of construction and engineering at Sintons, believe this is largely because clients enjoy the benefits of solving their disputes quickly and cost effectively.

Alex adds: “Mediation is something we would consider in every case; we have a duty to advise our clients about methods of alternative dispute resolution and mediation is one of them. In my experience, it can be a very useful tool in resolving disputes. Having worked with a number of experienced mediators, I’ve witnessed some very good results. As Nicola says, mediation is not new, but it is fair to say that judicial encouragement of mediation has certainly meant that legal representatives are more tuned into it as a method of resolving disputes – hopefully at an early stage and without the parties incurring the costs of full- blown litigation.

“Our role is to support our clients to achieve the best possible outcome and mediation often provides a more flexible framework for exploring outcomes that both parties can live with, but that they might not have previously considered.”

Nicola and Alex have each helped a number of commercial clients over the years find resolution through the mediation process – from commercial, complex construction and engineering disputes to partnership dissolutions and more.

Nicola says: “Being involved in a dispute can be a very draining process for clients, not just affecting their work life, but their home life too. Most of the individuals we support simply want to feel unburdened and reach a resolution so that they can move forward confidently. While this process can take all day, and sometimes into the evening, it’s certainly much quicker than conducting those negotiations via solicitors’ correspondence.

“The sense of relief I see from clients at the end of a long, successful day is very rewarding for me as a mediator and makes this a very worthwhile career.”

The mediation process usually involves clients and their legal representatives attending a meeting with their opponent and their representatives
in the same building. The mediator essentially acts as an impartial ‘go-between’ for the parties, facilitating a conversation that will ultimately lead to resolution.

Nicola continues: “In mediation, the legal representatives form an integral part of the process, providing advice and ultimately preparing legally- binding agreements. It’s always a real pleasure to work with lawyers who are actively encouraging their clients to find solutions via mediation and valuing the role it plays in achieving excellent results.”

Alex adds: “From a client and lawyer perspective, a good mediator will manage the process to maintain a clear impartial role and not allow either party to monopolise negotiations.

“My view is that the clients should be given their opportunity to speak and air their grievances, and this process in itself can break down barriers. If a client feels unheard, they can very quickly become disillusioned with the process.

“A mediator also needs to be intuitive, to think outside the box and offer a flexible approach to problem solving. Quite often, clients are keen to maintain their working relationship, so as well as settling a dispute, the mediator can help to build bridges for the future.”

Mediation isn’t just limited to disputes in the UK and Nicola has also been involved in several cases on an international basis. To be able to use her globally-recognised expertise in the North East is a real credit for the region.

Nicola says: “While travelling can be exhausting, mediations in international cases are always challenging and present an opportunity to put all my skills to the test. I do love working abroad and taking advantage of experiences and opportunities I get, but I grew up in the North East and I am justly proud of our region.

“I really want North East businesses to be at the forefront of mediation, thinking outside the box to resolve their disputes.”

Both Nicola and Alex agree that, with the right professional support, clients can benefit hugely from mediation as a form of dispute resolution.

Vaux site development supported by Sintons

The revival of the project to transform the former Vaux Brewery site in Sunderland through the appointment of a new construction partner has been enabled with support from law firm Sintons.

The redevelopment scheme for the 5.5 hectare site – Sunderland city centre’s most significant regeneration project – was forced to come to a halt earlier this year through the collapse of Carillion, which had been leading the construction work.

However, through the recent appointment of Tolent as construction partner, work has now recommenced, with contractors delivering the first development on site, The Beam. The venue will offer more than 59,000sq ft of office and leisure space, and is expected to welcome its first tenants in early 2019.

Team Valley-based Tolent – appointed to the scheme after a competitive tender by developer, Siglion – has recently worked on a number of other significant Sunderland construction projects, including the Beacon of Light, Hilton Garden Inn and the Echo Building, which also houses Siglion’s headquarters.

The business has been supported in securing the Vaux site contract by law firm Sintons, with leading construction specialist Alex Rayner acting for Tolent and advising on the building contract for phase one of the redevelopment.

Paul Walker, Regional Commercial Director at Tolent, said: “We are delighted to have been appointed to this project, which will build on the history of this site to create a fantastic mixed-use development which will be used by many generations to come. Our work on The Beam is already progressing strongly and we look forward to completing this significant building, which is already changing the face of Sunderland’s city centre.

“We are grateful to Alex and Sintons for their advice and assistance on this project.”

Alex Rayner, Partner and Head of Construction & Engineering at Sintons, said: “The Vaux site redevelopment is a landmark project for the region, particularly in terms of the impact it will have on Sunderland City Centre by way of investment and job creation.

“The appointment of our client, Tolent, a highly-respected name in North East business, is a further boost to the region and our economy, with jobs being created as a result of securing this major contract. We are delighted to have been able to advise them on the agreement of the construction contract, which then allowed work on the site to recommence, and the creation of The Beam to get back on track.”

Construction team hailed by Chambers 2019 for its progress

The Construction & Engineering team at law firm Sintons has won further praise for its capability, with endorsement from Chambers 2019.

Chambers has hailed department head Alex Rayner as an up-and-coming lawyer in the Construction sector, in recognition of his work with his impressive client base across the UK and efforts in leading the development of the specialist team.

The Construction & Engineering team at Newcastle-based Sintons has grown significantly in recent times, winning work across the UK and acting in major projects regionally and nationally.

Its endorsement by Chambers follows the recent high ranking from Legal 500 2018 , which praised Sintons’ capability in both contentious and non-contentious construction matters.

Mark Quigley, managing partner of Sintons, said: “Our Construction & Engineering team is rightly regarded as one of the key advisors in this field regionally and beyond. It has enjoyed strong growth and has won instructions on a number of major projects regionally and nationally, which is due in no small part to the excellent work and efforts of Alex and his team.

“We are very pleased to again receive recognition from Chambers, particularly coming so soon after the excellent rating of Legal 500.”

RIBA Building Contracts 2014 & 2018 – What’s the Difference?

In November 2014 the RIBA Building Contracts 2014 were launched, consisting of:

  1. The Domestic Building Contract (“DBC”); and
  2. The Concise Building Contract (“CBC”).

Both contracts were specifically designed and drafted for use in small to medium scale construction projects with the DBC’s intended use being for domestic projects (i.e. works to a home including extensions, maintenance, renovations or new buildings) for consumers and the CBC being for use on all types of simple commercial building work for use in a “business to business” relationship.

The overarching intention of the RIBA Building Contracts 2014 was to provide an accessible, easy to use contract that was written in “plain English” that balanced the risk fairly between the parties to the contract.

Following industry feedback and changes in the law, the RIBA has revised and updated the contracts and released the RIBA Building Contracts 2018.

So what’s different and/or new?

  1. The contracts have been updated to comply with the Consumer Rights Act 2015 (DBC only) and the Construction (Design and Management) Regulations 2015;
  2. The strict deadlines for the Contractor’s right to claim relief under the Contracts have been removed presumably because they were unacceptable to most building contractors particularly those who are professionally advised;
  3. The RIBA have improved their guidance notes on insurance and dispute resolution to help make the contracts easier to understand and use;
  4. The “Contract Price and Payments” clause (clause 7) has been amended with the effect that the provisions comply with the Housing Grants, Construction and Regeneration Act 1996 (as amended) in the DBC and CBC even though the Act excludes “residential occupiers” (as most users of the DBC will be). This brings consistency to the contracts.
  5. The provisions surrounding regulatory and statutory consents, fees and charges now give the parties the option to set out who is to be responsible for obtaining and paying for them;
  6. The Contract Details – the front end of the Contracts where the parties details, etc. are inserted – have been simplified so that there is greater consistency across the contracts;
  7. The optional provisions relating to the Programme have been simplified;
  8. The Contractor Design option has been amended to allow a level of professional indemnity to be specified; and
  9. The Contracts now include a “Contract Checklist” to help with ease of use and to ensure that the parties to the contract are fully aware of what they are agreeing to when entering the contract.

The revised RIBA Building Contracts 2018 are welcome additions to the wide range of standard form construction contracts currently available. They are simple and easy to use with the guidance provided and offer greater provisions for flexible payment, sectional completion, contractor design and required specialists which are not often seen in other contracts at the lower-end of the market.

The degree to which the industry adopts and uses these contracts remains to be seen, however given the right project circumstances they may be appropriate for some small to medium scale projects.

For more advice on construction and engineering contracts please contact Andrew Noble on (0191) 226 7910 or andrew.noble@sintons.co.uk.

Sintons’ construction & engineering team wins praise from Legal 500 2018

The specialist Construction & Engineering team at Sintons has won praise from Legal 500 2018 for its expertise in both contentious and non-contentious matters.

The team was hailed for its relationships with a wide array of industry stakeholders, including developers, contractors, funders and consultants, and for its “particular expertise” in healthcare development work.

The team works with a wide array of clients, including NHS Trusts, care home companies and development businesses across the UK.

Alex Rayner, partner and head of Construction & Engineering, is praised for his work on a wide range of matters, with partner Graeme Ritzema and associate Kevin Anderson hailed for their expertise on contentious matters.

Mark Quigley, managing partner at Sintons, said: “Our Construction team works with clients around the UK on a host of new development projects, and its strength across an array of sectors is something that few can rival. We handle both contentious and non-contentious work for major clients and our team continues to grow on the back of our increasing caseload.

“We are very pleased with this endorsement from Legal 500 2018, which rightly acknowledges our strength and capability in this very specialist area.”

Eagles ‘Nest’ nears completion

The development of one of the biggest and most significant sporting facilities in the North East in recent years has been supported by law firm Sintons.

Esh Group Eagles Newcastle are building a new stadium in Newcastle to jointly act as a home for its basketball team – the North East’s most successful sporting team, and the most successful franchise in British basketball history – and for its award-winning Eagles Community Foundation (ECF).

The multi-million pound, state-of-the-art development, off Scotswood Road in Elswick, has been in the planning for many years. Construction got underway in November last year, although has seen some delays as a result of the severe weather in February and March, but the Eagles are now targeting an opening before Christmas.

The 2,800-seater stadium will allow the Eagles to have their own home for the first time, having previously been based at Sport Central at Northumbria University, and will allow the club to pursue its long-term dream of competing on the European stage.

It will also be the focal point for the ECF and its engagement with the wider community. While the Foundation will continue its work with local schools and groups across the region, the stadium will become a base for its work and will welcome local sports clubs and organisations of all age groups and abilities – becoming a focal point for leisure and grassroots sport in the West End of Newcastle.

The stadium development has been done in partnership with Newcastle City Council, the North East Local Enterprise Partnership (LEP), Sport England and Newcastle College.

Law firm Sintons has been legal advisor to the Eagles throughout the project, overseeing the extensive negotiations prior to construction work beginning. A specialist team at the Newcastle law firm, led by Partner Adrian Dye, handled a range of matters including funding and securing lease of the site.

Paul Blake, managing director of the Eagles, says: “This is a very exciting time for everyone associated with the club and the Foundation, we have waited a long time for our stadium and completion is now on the horizon. We are hoping to be in before Christmas and then we will be able to open our doors for basketball and for engagement with the wider community. We will play a handful of games in the new season at Sport Central and then transfer over to our new home.

“There is a really good feeling around at the minute among everyone – players, supporters, season ticket holders, sponsors – you can feel there is genuine excitement about us moving into our stadium. We’re grateful for all the support we continue to receive from everyone who has been on this journey with us.”

Sintons partner Adrian Dye, alongside senior associate Emma Pern, handled the corporate and commercial aspects of the Eagles stadium deal. Consultant Claire Morgan and partner Mark Dobbin oversaw the real estate matters.

Adrian says: “This is one of the biggest and most significant new sports developments in the region for many years, and the dedication of Paul and his team to making it happen has been outstanding. As well as the huge different it will make to the Eagles and their ability to compete on a European stage, it will also be highly significant for the Foundation and the inspirational work it does at a grassroots level, and indeed for the wider West End of Newcastle.

“We are delighted to have been involved in bringing this impressive new development to fruition. The negotiations we engaged in prior to construction beginning were highly complex, but we were able to bring them to a successful conclusion for all parties, and particularly for our client. We wish Paul and everyone associated with the Eagles every success in their new home.”

Construction team expands with appointment of newly-qualified solicitor

A young construction lawyer has qualified as a solicitor, securing a job in Sintons’ highly-esteemed specialist Construction & Engineering team.

Andrew Noble, who has been a trainee at the Newcastle law firm for two years, has impressed during his time working in Construction & Engineering at Sintons, supporting the strong growth of the department and its work with clients across the UK.

Now, in recognition of his efforts, Andrew – who graduated in Civil Engineering before deciding to train as a lawyer – has secured a role as a solicitor in Sintons’ specialist team, which is widely regarded as one of the most capable in the North East. Led by Partner Alex Rayner, the department has seen significant and sustained growth in recent years, and now acts for major clients both regionally and nationally.

Andrew said: “I have enjoyed my time in the Construction & Engineering team immensely and am naturally delighted to be given a permanent role as a solicitor. I have been continually challenged during my time here and have been included in the most significant of transactions – it really has been ‘in at the deep end’ but it has been the best possible training for me, and Alex has been fantastic to work alongside and learn from.

“The reputation we have as a team is outstanding, both in terms of the work we do and the quality of our client service, and that is something I will take great pride in helping to develop even further.”

Alex Rayner, Head of Construction & Engineering, said: “Andrew has been a real asset to our team during his training and we are very pleased to welcome him permanently. Our quality of work and reputation means we are growing continually, winning work right across the UK and being involved in major projects both nationally and internationally, and the addition of a new solicitor will help us to develop even further.

“Andrew’s ability, enthusiasm and diligence have been outstanding and we all wish him every success in this latest phase of his career with Sintons.”

Allocating the risk of concurrent delay in construction contracts

The Court of Appeal has confirmed in its recent judgment in North Midland Building Limited v Cyden Homes Limited [2018] EWCA Civ 1744 that the parties to a construction contract are free to agree express provisions allocating the risk to the contractor of a concurrent delay caused by both contractor and employer fault events.  The wording of the relevant provision in the contract was:

“any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account”.

The above provision was intended to reverse the effect of the 2012 case of Walter Lilly and Co Limited v Giles Mackay and Another [2012] EWHC 1773 (TCC) in which the contractor was allowed an extension of time for such a concurrent delay.

The contractor, North Midland, sought a declaration from the court that the clause was void on the basis that denying it an extension of time where there were concurrent delays (one of which being a Relevant Event) was contrary to the prevention principle and therefore time should be set “at large”.

As a reminder, the prevention principle is based on the premise that it is wrong for an employer to hold a contractor to a completion date, and deduct liquidated damages accordingly, where the employer has prevented the contractor from being able to complete the works on time.  Where the prevention principle applies time for completion is set “at large” and the contractor is obliged only to complete the works “within a reasonable time”.

The Court of Appeal concurred with the first instance judgment and dismissed the contractor’s appeal.  In doing so Lord Justice Coulson, giving the leading judgment, set out (amongst others) the following reasons for rejecting the prevention principle argument:

  • The clause is clear and unambiguous and plainly seeks to allocate the risk of concurrent delay to the contractor. There is no reason in law why effect should not be given to that clear wording; and
  • The prevention principle is an implied term and not an overriding rule of public or legal policy; as such the parties were therefore free to contract out of it. In this case the parties had expressly agreed that concurrent delay would not entitle the contractor to an extension of time even if one of the applicable delay events was an act of prevention.

Lord Justice Coulson added however that it would be different had the contract not provided that the relevant acts of prevention triggered an entitlement to an extension of time, in which case the prevention principle would apply on the happening of such an event and time would be set at large.

Comment

The Court of Appeal’s judgment is somewhat unsurprising, giving effect as it does to the primacy of the contract that the parties had agreed, particularly given the clear and unambiguous drafting used.  Lord Justice Coulson referred to building contracts as being “a detailed allocation of risk and reward” and it is up to the parties when drafting the contract to decide with whom that risk and reward should lay.

Indeed it is this “risk and reward” dichotomy that lies at the heart of negotiation building contracts; a well advised employer may seek to shift as much risk as possible on to the contractor and similarly a well advised contractor will either resist that risk allocation or alternatively ensure that there is sufficient reward for accepting it.

For advice on these or any specific construction related matters, please contact Alex Rayner, Head of Construction & Engineering on 0191 226 7908 or alex.rayner@sintons.co.uk for a free initial consultation.

New medical premises provide for future of primary care

A new medical development is being created in Gateshead to replace outdated current facilities and to provide for the future of healthcare in the local community.

Glenpark Medical Practice, in Dunston, is being replaced with a new-build state-of-the-art medical centre only 200 metres from its current site on Ravensworth Road.

Its current building dates back to 1904, when it was built as a private residence, and does not provide the space the practice needs to accommodate growing patient numbers and the increasing demand for the services it offers.

The new development, which forms part of the wider £20m Ravensworth Road regeneration project, will create a modern medical centre which includes eight GP consulting rooms, treatment and nurses’ rooms and car parking provision. It will also allow for future expansion to help cater for the growing population and increasing development of housing in the area, and provides for the future of primary care in the locality.

Work on the medical centre, which is being built by Keepmoat, is now underway with a provisional opening date set for early 2019, when all services will transfer from the existing premises to the new site across the road.

Glenpark Medical Practice serves over 9,000 patients at its site on Ravensworth Road and at the Dunston Medical Centre, drawing primarily from Dunston but also from many of the surrounding areas of Gateshead.

Dr Bronwyn Tasker, senior partner at the practice, said: “We are delighted that construction work has started on our new practice building. As a practice, we strive to provide the best possible health care and modern, purpose-designed premises will enable us to look to build on the range of services we offer our patients, as well as giving easier access for our patients with disabilities and those with young children.”

Glenpark Medical Practice has been supported with the new development by law firm Sintons, whose nationally-renowned specialist healthcare team act for GPs across the UK. Associate David Naughten handled the real estate work, with Alex Rayner, Partner and Head of Construction and Engineering, overseeing the construction aspects.

David said: “The creation of the new Glenpark Medical Centre will replace outdated premises which were no longer fit for purpose, so this is very good news indeed that work is now underway and the opening of the new facility is now on the horizon. This development forms part of a wider regeneration project along Ravensworth Road, and is improving provision for local residents in a number of areas; a new medical centre will be a vital new asset for the community.

“As specialist advisors to GPs across the North East and throughout the UK, we were able to clearly and effectively advise Glenpark on the process of taking these new premises, and we will continue to support them throughout the development.” 

Loss and expense – are you missing out?

Most standard form construction contracts provide for the contractor to recover the costs incurred as a result of certain “employer risk delay events”.  In the JCT suite of contracts this is known as “loss and/or expense” whereas NEC3 users will be familiar with the term “compensation events”, which deal with both extensions of time and costs consequences.

In our experience a contractor will usually recognise that they may have an entitlement to additional cost as a result of delay or disruption of the works, however often they fail to properly present that claim. This may result in a reduction in the value of their entitlement or in some extreme instances a complete failure to recover.

The purpose of this note is to summarise some of the key themes arising from contractual loss and expense claims (as opposed to a breach of contract claim).  Each case will differ in its contractual wording and application; specific advice should be sought accordingly.

1. Time doesn’t always equal money

It is important to note that just because an employer risk delay event arises, that does not automatically give rise to a right to claim loss and expense. For example there are certain events for which an extension of time may be granted, without cost (“exceptionally adverse weather conditions” under the JCT suite being a prime example).  It is therefore crucial to check your contract to ensure the cause of the delay entitles the contractor to recover any associated costs.

Further, the contractor will ordinarily still have to demonstrate an element of cause and effect before he will be entitled to recover his loss and expense, i.e. the employer risk delay event actually caused the contractor to incur the costs being claimed.

2. Beware of conditions precedent and time-bar clauses

Check your contract and comply with any notice provisions relating to loss and expense. Some standard form contracts make the provision of notices a condition precedent to the recovery of loss and expense and others go further by imposing time bars in the event that the contractor does not issue a notice or submit the relevant information within a specified time. This could be fatal to a contractor’s entitlement to loss and expense and must be carefully monitored.  Internal pre-contract meetings should be used to flag up any such clauses.

3. Beware of using “prelims”

One of the most common failings we see in contractor’s claims for loss and expense is the reliance upon a simple pro rata of its time related (“prelim”) costs as set out in the tender.  Unless the contract specifically provides for this approach (which is unlikely) then the true measure of loss and expense is likely to be the loss and expense actually suffered by the contractor, which often bears little or no resemblance to that which it is set out in the prelims.

That is to say that prelim rates are generally a fixed-rate applied across the duration of the construction phase and therefore does not take into account the fluctuating costs associated with a construction project. During times of high productivity (generally in the middle third of a project) the costs associated with running the site are likely to be higher than at the very beginning or very end of a project.  During that high cost period the application of a prelim rate to the period of delay may therefore result in the contractor recovering significantly less than its actual cost.

4. When to measure the incurred cost

Another common mistake we see contractors make is to calculate the amount of loss and expense by reference to the duration at the end of the programme by which the completion date is extended.  As explained above, the time related costs of running the site are likely to be lower during this period than at the time when the effect of the delay was felt on site.

The correct approach is to assess the loss and expense by reference to the period of the delay on site rather than the period “dotted on” at the end of the project.

5. Heads of claim

Once an entitlement has been established, the notice provisions have been followed and the period of delay identified, the next step is for the contractor to set out its heads of claim.  The following are the most commonly used in loss and expense claims:

Prolongation Costs

This head of claim can be split into two distinct categories, on-site overheads and head office overheads / loss of profit.

On-site overheads are the costs associated with running the site for a longer period than the contractor anticipated and will include items such as labourers, site accommodation, plant, temporary works, fencing and security, scaffolding, temporary services and insurance.  These costs should be relatively easy to demonstrate by reference to invoices and should be readily available.

Head office overheads / loss of profit may be recoverable on the basis that the contractor cannot divert resources to other projects which would have resulted in a contribution to its head office overhead and profit. Such costs are ordinarily recovered either by evidence of the actual overheads incurred or by reference to a percentage uplift to the increased cost (often calculated using a formula such as Hudson’s or Emden’s).  In relation to loss of profit, the contractor may be required to demonstrate that it turned away tender opportunities as a result of the delay – records of missed and lost tender opportunities will be persuasive evidence for this head of claim.

Finance charges

In circumstances where the contractor is borrowing money to fund the project, there may be finance charges which are prolonged as a result of the delay, these may be recoverable as loss and expense.

Disruption

The rationale behind this head of claim is ordinarily that acts of the employer have hampered the contractor’s efficient use of its plant and labour. The most common way of demonstrating this head of loss is the “measured mile” method whereby the contractor’s ordinary levels of efficiency on other parts of the works are compared against the disrupted element, giving rise to a difference in productivity which can be converted into loss and expense.

The costs of compiling a claim

In some circumstances a contractor may be able to recover the costs of compiling its claim, on the basis that but for the delay and/or disruption it would not have incurred those costs.

6. Records, records, records

It is difficult to overstate the importance of good record-keeping when it comes to loss and expense claims. Accurate records of the following information will greatly increase a contractor’s ability to substantiate and corroborate its claim:

  • Invoices and proof of payment
  • Site diaries
  • Site reports of progress and activities
  • Site measures
  • Day work records
  • Photographic surveys (including date, time and location)
  • Labour allocation sheets

Finally, clarity of information and presentation is an important part of a successful loss and expense claim. The person assessing such a claim is likely to be more receptive (and the contractor’s prospects of recovery are therefore enhanced) to information which is well presented and clearly explained, whether it be the Architect/Contract Administrator/Employers Agent/Quantity Surveyor in the first instance or an Adjudicator/Arbitrator/Court in the event that a dispute arises.

For advice on these or any specific construction related matters, please contact our team for a free initial consultation.

The end of smash and grab adjudication?

The recent case of Grove Developments Limited v S&T (UK) Limited [2018] EWHC 123 (TCC) has potentially put a large hole in the practice of “smash and grab” adjudications, whereby the payee under a construction contract is able to obtain the entire amount of their application as a result of the paying party’s failure to issue payment or pay less notices, irrespective of whether the claim is “right or wrong”.

In what is likely to be Mr Justice Coulson’s final substantive judgment as a TCC judge he has reversed a line of authority set by cases including ISG Construction Limited v Seevic College [2015] 2 All ER Comm. 545 and Galliford Try Building Limited v Estura Limited [2015] BLR 321 which established the principal that the failure to serve a payment notice or pay less notice amounted to “deemed agreement” of the value stated in the application, therefore preventing the paying party from launching a counter adjudication to establish the “true value” of the account.

Mr Justice Coulson found six separate justifications for his conclusion that there is a “powerful reason” not to follow the authority in ISG v Seevic and Galliford Try v Estura, which can be broadly summarised as follows:

  1. The court has the power to decide the “true value” of a certificate and an adjudicator should have the same wide powers as the court.
  2. The Construction Act contains no limitation to the nature, scope and extent of the dispute which either side can refer to an adjudicator.
  3. The dispute that the paying party would seek to refer in the second adjudication is a different dispute to that which was determined in the first.
  4. The contract in question distinguished between the “sum due” and “the sum stated as due” and to prevent the payer from commencing adjudication to determine the “sum due” would be to ignore this careful drafting.
  5. Considerations of “equality and fairness” mean that the payer and payee should not be subject to the “radical different treatment” or “one-way street” that the authorities had created.
  6. There is nothing in the Act or the Scheme which distinguishes between interim and final payments, as ISG v Seevic sought to do.

Comment

This judgment is likely to be welcomed by paying parties who previously faced the prospect of having to wait until the final account to establish the “true value” of the account and recover sums paid on a “smash and grab” basis.

Critics may argue that that the judgment strikes at the heart of the Construction Act mantra of ensuring proper cash flow, however I do not believe that is the case. A payee will still be able to commence a “smash and grab” adjudication to obtain a quick (and relatively cheap) decision which the payer will have to comply with until the conclusion of any “true value” dispute, which will not always be capable of being commenced immediately, particularly where the account is complex or high in value.

Accordingly whilst is true that this judgment is likely to have a significant impact on the number of adjudications that payee’s commence on a “smash and grab basis”, it does not render such an approach entirely redundant as it will still be a useful tool in some circumstances.

Payees may still decide to launch a “smash and grab” adjudication in an attempt to hold the money in the short term and boost their chances of being able to successfully negotiate a global settlement with the paying party.  When faced with the prospect of a subsequent expensive, time consuming and ultimately uncertain dispute as to the “true value” of the account this may lead to earlier settlement negotiations than would have previously been the case.

For advice on these or any specific construction related matters, please contact our team for a free initial consultation.

Sintons promotes two new Partners

Law firm Sintons has promoted two of its lawyers to become Partners.

Donna Anderson and Alex Rayner have both been awarded Partnership in the Newcastle-based firm, in recognition of their achievement in their respective practice areas.

Leading employment lawyer Donna acts for major public and private sector clients across the North East and beyond, and was recently instrumental in setting up Sintons’ specialist immigration law service.

Alex, Sintons’ Head of Construction and Engineering, has helped to grow the firm’s construction department into one of the most highly esteemed construction specialists in the region, regularly acting on matters across the UK.

Following the promotion of Donna and Alex, which takes effect from 1st February, Sintons will have 33 Partners. The growing firm has also recently made a raft of other senior appointments, with a number of lawyers relocating from outside the North East to join Sintons.

Mark Quigley, managing partner of Sintons, said: “Donna and Alex are outstanding lawyers in their respective fields, and through their proven track records of providing outstanding legal advice alongside an unrivalled client service, have made a significant and valuable contribution to their departments and the firm as a whole. We are very pleased to be able to recognise that by giving them Partnership.

“Our vision as a firm is to set the standard for legal excellence, and in doing so, to become the law firm of choice for individuals, businesses and organisations both regionally and nationally. Our people are central to our continuing success, and as well as bringing new legal talent into Sintons, we are committed to recognising and rewarding the excellence we already have within the firm.”

Making an interim payment claim? Then make it obvious (Part 3)

Those of you who are avid readers of our construction blogs will recall that we commented on the issue of Payment Notices in two blogs in 2015, first in relation to the judgment in Caledonian Modular Ltd v Mar City Developments Ltd and then following a similar theme in Henia Investments Inc v Beck Interiors Ltd.

At the time we commented that Contractors wishing to succeed in using the Construction Act payment provisions for so-called ‘smash and grab’ adjudications would need to ensure that their interim payment applications were sufficiently obvious as to their substance, form and intent.

For anyone interested in this theme I commend the first TCC judgment of 2017 in Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) [2017] EWHC 17 (TCC) as a useful summary of the law to date, as well as providing an interesting distinction as to the differing rules that will be applied to paying and receiving parties notices.

Briefly, in Surrey and Sussex v Logan the Contractor was arguing that during final account negotiations it had served a valid default payment notice in accordance with the contract which had been unanswered, thus entitling it to the claimed sum of circa £1 million (a classic ‘smash and grab’ argument).

The Employer on the other hand disputed that a valid default payment notice had been issued by the Contractor and argued that in any event it had issued a pay less notice (in the form of its Final Certificate) meaning that it was only obliged to pay the sum of circa £14,000.  Unusually the dates of the respective notices were not in dispute, but rather the content.

Without reciting the detailed facts, the Contractor had issued an e-mail the night before (shortly before midnight) a meeting with the Contract Administrator to discuss the final account, attaching a spreadsheet which included a worksheet headed “Interim Payment Notice (Clause 4.10)” and setting out the amount of its claim and further worksheets of detailed backup to the gross amount.  The Employer did not issue a pay less notice as such but instead, following the unsuccessful meeting, issued its Final Certificate setting out its contention that the Contractor was entitled only to a further £14,000.

A valid Interim Application?

In finding that the Contractor’s default payment notice was valid, Mr Alexander Nissen QC (sitting as a High Court Judge) reiterated that:

“There is a high threshold to be met by any contractor who seeks to take advantage of these provisions whereby a sum automatically becomes payable if a timely employer’s notice is note served”.

Mr Nissen was satisfied that the application was in “substance, form and intent” an Interim Payment Notice.  You will recall in our previous blog we identified that making reference to the applicable clause reference could assist in these circumstances and in this case the fact that the Contractor did exactly that was persuasive in coming to this finding.  Further, the application was labelled ‘Interim Payment Notice’ and the valuation date cited was consistent with the relevant due date under the contract, all of which pointed toward the Interim Payment Notice being valid.

A valid pay less notice?

Unfortunately for the Contractor the Court also found that the Employer’s Final Certificate was an adequate Pay Less Notice, therefore entitling the Contractor to the £14,000 valued as opposed to its claimed £1 million.

In reaching this decision the Court explained that notices from the paying party such as a Pay Less Notice could be construed more generously than notices from a Contractor, focussing upon the “overall message and purpose which the email and attachments would have conveyed to the reasonable recipient”.  In this case the Court decided that the Final Certificate broadly conveyed the overall message and purpose that as against the Contractor’s £1 million claim it was only entitled to £14,000 and this was sufficient to demonstrate the requisite intention to pay less.

Comment

This judgment provides a useful reminder to Contractors that they must ensure that applications for payment and default payment notices are correct in timing, substance, form and intent.

It also confirms that notices issued by paying parties can be construed far more generously, with significant additional leeway afforded against the technical requirements of such notices.  Having said this, our advice to paying parties would always be to avoid any doubt and ensure that notices such as pay less notices are properly labelled and issued in order that a reasonable bystander could be in no doubt as to the intention of that notice under the contract.

Contractors may argue, perhaps justifiably, that it was not the intention of parliament to introduce such differing standards and that this judgment produces an imbalance between the parties that assists the kind of cash flow problems that the Construction Act was introduced to prevent.

On the other hand paying parties such as Employers may argue that such a distinction is justified on the basis that a pay less notice does not signal the end of the Contractor’s entitlement as it is entitled to refer the value of the payment to adjudication or litigation/arbitration.

For advice on these or any specific construction related matters, please contact our team for a free initial consultation.

Construction Team excel in Chambers 2017

The construction team at Sintons has been highly ranked by Chambers 2017 for its legal capability and “excellent” levels of service.
After winning praise earlier in the year from Legal 500, the construction team has been hailed by the latest Chambers legal guide for its work in both contentions and non-contentious matters, and its “significant” public sector capability.

The team was praised for its work in a wide array of matters, from the construction of care homes to handling a new major residential development.

Alex Rayner, an Associate in the construction team, was singled out as a leading member of the team, with Chambers saying he “stands out for his professionalism and attention to detail” in his work with contractors, developers, funders and consultants.

Alan Dawson, Chairman of Sintons, said: “Our construction team has built a reputation over the last few years as one of the regional leaders in its field, with the capability to handle major development work. The cornerstone of Sintons is the outstanding and very personal service we provide to our clients, so it is very pleasing to see that acknowledged by Chambers alongside our legal excellence.”

JCT 2016 Suite of Contracts Update

The Joint Contracts Tribunal continues to release its 2016 suite of contracts and, following the earlier release of the Minor Works and the Short Form Sub-Contracts (June 2016), we now (September 2016) see the release of the Design and Build Contract and Sub-Contract.

It is perhaps an observable fact that it is the design and build contract that has come before the release of the standard building contracts. Perhaps this is a sign of the trends within our industry; a move towards more design and build projects. Alternatively, perhaps it is nothing more than the fact that there is only one design and build contract to proof read, whilst there are several traditional contracts to come. Either way, Employers will no doubt soon invite contractors to tender upon the JCT Design and Build Contract, 2016, so what has changed?

The answer is perhaps “not much”. In a period of relative “legal” stability for our industry (at least since the 2011 JCT contracts were released), this is more a refining than a reshaping exercise.

Besides some changes in terminology, we note updates such as the following:

  • performance bonds and parent company guarantees are now included as an express option (instead of being added repeatedly  by bespoke wording);
  • the payment mechanism is streamlined – notably as regards resolving loss and expense claims quickly; &
  • new wording takes account of recent legislation, such as the Public Contracts Regulations 2015 and the CDM Regulations 2015. We also see wording to take account of the JCT’s own Public Sector Supplement of 2011 (which discusses fair payment, transparency and building information modelling in public sector contracts).

In essence, the contract is now updated to better reflect the current public sector methods and standards of procurement; with perhaps the impact that many of those developments will find their way into private sector contracts, as and when employers decide that these new rules are positive.

Whilst it will take a more detailed note or a good seminar to bring yourself fully up to date (and here we can help you, as Alex Rayner is currently preparing a seminar, details of which will follow), perhaps we need only surmise what we think is the JCT’s main aim with this new contract; “similar, but better”.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

Sintons’ Construction team highly rated by the 2016 ‘Legal 500’

The construction team at Sintons has been rated highly by Legal 500, with three of its lawyers ranked among the best around.

The team has been praised by Legal 500 2016 for its capability and expertise, in which Sintons has been ranked as one of the best construction law firms in the region.

Furthermore, its three lead lawyers – Partner Graeme Ritzema and Associates Alex Rayner and Kevin Anderson – have been hailed as ‘recommended lawyers’ for their expertise.

Graeme earned particular praise for his “excellent contract and construction law litigation skills”.

The Legal 500 is widely regarded as the clients’ guide to the best law firms and top lawyers in the UK. Research is based on feedback from clients, submissions from law firms and interviews with leading lawyers and a team of researchers who have unrivalled experience in the market.

Alan Dawson, Chairman of Sintons, said: “Our construction team has grown in both size and reputation in recent years and we are delighted that Legal 500 has recognised our levels of capability and expertise we have in this field.  This is an excellent endorsement of our work.”

JCT Minor Works Building Contract 2016 Launched

As previewed in our last update, the JCT has launched its 2016 Edition of the Minor Works (MW 2016) suite of contracts.

Below we have sought to provide you with an overview of some of the changes made (this list is not exhaustive):

Payment

  • MW 2016 tightens up the interim payment provisions and introduces Interim Valuation Dates (IVD’s) as a defined term.
  •  The due date for each payment now runs from the IVD (7 days later) whereas previously the due date was at 4 weekly intervals from the commencement date.  This new structure is more certain insofar as determining when the due date actually lands.
  • The Contractor is now entitled to make an application for payment each month, not later than each IVD.  The MW 2011 did not provide for this, instead simply relying upon the Architect/CA issuing an interim certificate.
  •  The Contractor is now entitled to monthly interim payments in the period between PC and the final payment, amended from the MW 2011 position of payments every two months.

Termination

  • The termination provisions have been amended so as to take account of regulation 73 of the Public Contract Regulations 2015, which deals with the circumstances under which the contract was tendered.
  • MW 2016 contains a new clause permitting either party to terminate “if there is a material loss of or damage to any existing structure”, however this right to terminate is subject to it being “just and equitable” to do so.

CDM Regulations 2015

  • Perhaps unsurprisingly MW 2016 incorporates those amendments published as JCT Amendment 1: CDM Regulations, to deal with the updated legislation.

Our advice, as ever, is to review your contract at the outset of any project and make sure you are aware of the provisions and what you must do to comply with them, bearing in mind that often the standard form contracts are amended.  You may also need to amend your standard form sub-contracts to take account of the changes made to the MW 2016, particularly in relation to the payment provisions.

We will of course be on hand to assist with any amendments and ‘health checks’ required.  Further the JCT is set to release more contracts later in the year, including a new D&B 2016 suite.  Please contact us if you would like to register your interest for training on the changes to that suit of documents.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

 

JCT 2016 Suite of Contracts, watch this space

You may not be aware but the Joint Contracts Tribunal (JCT) is set to launch a new 2016 Edition suite of its contracts later this year. At the moment it appears that the documents will be released on a piecemeal basis, with the Minor Works contracts to be released first, although the exact dates are yet to be provided.

What will change?

Given the comprehensive use of the JCT contracts within the industry the changed being made to them will have a significant impact. We will provide you with a more detailed note once the contracts are released and the detail is clearer, but in the meantime the JCT has provided a summary of the main points of change on its website, including:

  • Provisions incorporating the new CDM Regulations 2015.
  • Amended payment provisions – there appears to be a focus upon bringing the JCT contracts in line with the government’s Fair Payment Charter, including:
  • Establishing Interim Valuation Dates which will operate at main contract, sub-contract and sub-subcontract levels.
  • Continuing the monthly payment cycle after practical completion up to the due date of Final Payment.
  • Revising and simplifying the payment provisions more generally, including introducing a procedure for prompt assessment of Loss and Expense claims, providing further flexibility in relation to Fluctuations Provisions, and consolidating the provisions containing the notice requirements of the Housing Grants, Construction and Regeneration Act 1996.
  • Parent Company Guarantee’s and Performance Bonds – JCT 2016 will include provisions for the grant of security documents.
  • An extension to Insurance Option C to overcome a difficulties currently experienced by tenants and domestic homeowners in obtaining Existing Structures cover for Contractors. There will also be amendments to clarify the interaction between Insurance Options A and B.
  • Further changes to improve functionality and user-friendliness across the suite, including minor updates and clarification of the intellectual property provisions, and incorporating (where appropriate) the provisions of the JCT 2012 Named Specialist Update.

What will I need to do?

Apart from understanding the new documents and training users in order that the contracts can be operated successfully, we anticipate that work will need to be done to update systems and documents to accommodate the changes.  For example contractors will need to amend their standard form sub-contracts if they currently incorporate and amend JCT 2011 sub-contracts.

We will of course be on hand to assist with any amendments and ‘health checks’ required, and to provide any necessary training.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

How to Get Paid in the Construction Industry

As you will all know well, payment issues in the construction industry are common causes of disputes, occupying time, effort and energy at every level.  Unfortunately there is no magic remedy to ensure you get paid on time, every time.

There are however, certain steps you can take to increase your chances of getting paid and I thought it would be helpful to provide a brief reminder on a couple of key points:

  • Negotiate Your Contract

Contractors and Sub-Contractor’s sometimes come to see us with a payment dispute, only for us to discover that the payment terms they have signed up to are unduly onerous meaning that they are either not yet entitled to the payment, or they have lost their entitlement altogether.  This is not just confined to lengthy and complex provisions regarding due dates and final dates for payment, but also include a myriad of conditions precedent designed to act as hurdles to payment.

The message here is simple, review the contract at tender stage and seek to negotiate the payment terms and provisions.  It’s true that in some cases the Employer or Main Contractor will refuse to budge, but you might be surprised how often you can soften the terms slightly in your favour; which can only be to your advantage.

In extreme cases there may be no discernable payment provisions in place at all.  It goes without saying that clearly defined payment terms (in accordance with the Construction Act where necessary) are crucial to enable both parties to determine what sums will become due and when.  It is not advisable to rely upon the implied payment terms of the Scheme for Construction Contracts and it is far better to agree clear payment terms at the outset.

  • Know your Contract

It is essential that you are familiar with the terms under which you are contracting. Knowledge is power and you must put yourself in a position where you are at least as conversant with the ‘rules’ as the party you are contracting with.  Failure to do so is akin to agreeing to play a card game without first getting acquainted with the rules, you are bound to lose!

In terms of payment, make sure you know:

  • When your applications are to be submitted, in what form and how they are to be submitted;
  • When any payment notices have to be issued by the other party;
  • The date by which a pay less notice must be issued by the other party;
  • When the final date for payment arises in respect of each payment; &
  • Whether there are any other obstacles you must navigate before being entitled to payment, such as notices of delay or variation where additional time and money are concerned.

If necessary, seek advice on these points – it doesn’t have to cost much to do so.

  • Comply, Comply, Comply

There is only one sin worse than failing to know the rules of the game, and that is failing to play by them.  Once you have ascertained what the relevant contractual provisions are, make sure you have systems in place to ensure they are complied with.  Failure to do so could be fatal to your entitlement to payment.

In some cases by simply complying with your obligations under the contract to make an application for payment, you may be entitled to recover the entirety of that sum by virtue of the paying party failing to keep up with its paperwork.  Indeed the Construction Act as amended is drafted in this way to encourage cash flow in the industry.

  • Seek advice as early as possible

Once you are faced with a situation of non-payment, the options open to you may be numerous, including suspending all or part of your works or removing unfixed materials from the site.  However these options must be treated with caution and your entitlement to use them will be subject to and dependent upon strict compliance with the terms of your contract – you should seek advice as before taking this action so to avoid putting yourself in breach of contract.

It is likely that there will be a number of dispute resolution options available to you in the event of non-payment and again, the earlier you take advice the better.  That is not to say that you cannot seek to negotiate with the paying party, and indeed often this will provide a resolution before significant costs are expended, but it will enable you to have a grasp of your options and the cost implications of those options.  In turn this information will provide you with the tools to make a commercial decision upon how to deal with the issue.

We provide a range of flexible cost models for construction adjudication, including fixed and capped fee arrangements which provide you with the certainty you need to carry out a cost versus benefit analysis.  Almost no dispute is too small to refer to adjudication and we can tailor our involvement to suit most commercial situations.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

Court adds further teeth to adjudication enforcement

The Technology & Construction Court (TCC) has long been a strict enforcer of adjudicator’s decisions since the very first enforcement case of Macob Civil Engineering v Morrison Construction Ltd, which set the tone for the courts attitude to the process.

“…The intention of Parliament in enacting the Act was plain. It was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis…The timetable for adjudication’s is very tight…and are likely to result in injustice. Parliament must be taken to have been aware of this…Crucially, it has made it clear that decisions of adjudicators are binding and are to be complied with until the dispute is finally resolved.”

This was further confirmed in Bouygues (UK) Ltd v Dahl-Jensen UK Ltd insofar as the courts acknowledged that adjudicators will make mistakes in fact and law; but if they have answered the right question wrongly the decision will still be enforced.

AMD Environmental Ltd v Cumberland Construction Company Ltd

In the recent case of AMD Environmental Ltd v Cumberland Construction Company Ltd Mr Justice Coulson has fired more than a warning shot to parties considering resisting enforcement of an adjudicator’s decision.  In finding that Cumberland’s challenges to enforcement were ‘hopeless’, he concluded that:

32 – I add two points to the written transcript of my ex tempore judgment, summarising my views on two consequential matters, namely interest and costs

33 – Mr Thompson argued for interest at 8.5% pursuant to the Late Payment of Commercial Debts (Interest) Act 1998. Mr Davis asked for 2.5%. I noted that typical figures in the Rolls Building are between 4 or 5%. However, I decided that, in this case, the right figure was 6%. That is because this adjudication decision should have been honoured some time ago, and the arguments in support of the defendant’s position were properly categorised as hopeless. The TCC is concerned that too many adjudication decisions are not being complied with, and that there are too many disputed enforcements where the grounds of challenge are without merit. Thus a high interest rate under the Act will be awarded in such cases

34 – For the same reasons, I acceded to Mr Thompson’s submission that AMD were entitled to indemnity costs. There is plenty of authority that indemnity costs are appropriate in a case of this kind, where the challenge to the decision is without merit….(Emphasis added)

The message is clear; refusal to comply with an adjudicator’s decision without valid reason will result in a high interest rate awarded against you.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

CITB Predicts Construction Growth

The construction industry is set to grow 2.5% in the next 5 years and will create 232,000 new jobs in the process, according to the Construction Skills Network report released today by the Construction Industry Training Board (CITB).

According to the report, the commercial construction sector will grow 3.4% per annum during this period, whilst private housebuilding is set to return to pre-recession levels. The report goes on to explain that infrastructure is expected to be the ‘star performer’ due to projects such as HS2

As a result of the foregoing demand for construction professionals is set to increase, particularly for construction trade supervisors (2.4% a year on average), architects (2.2%), surveyors (2.1%) and other construction professionals and technical staff (2%).  

Steve Radley, Director of Policy at the CITB said:

“We can’t build the Britain we want without growing apprenticeships – and the careers they lead onto. That’s why it is vital that these new statistics, showing solid, sustained growth, inspire more people join the construction industry.

“We also want to attract workers who have left the industry to return, and upskill those currently in the sector, so we can deliver major projects and new housing faster and better.”

To read the press release follow this link.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

Conditions Precedent

Let us identify two competing interests present in every construction contract:

  • The employer wishes the highest specification for the lowest cost; &
  • The contractor wants to build only the minimum work in the design for the maximum profit (not cost).

This tension gives rise to conditions precedent. Let us imagine that a variation has been instructed:

  • The employer wants to be certain as to the time and cost impact immediately (indeed he may even wish to withdraw the variation if it is too costly); &
  • The contractor, on the other hand, doesn’t mind doing the work, but would rather be paid his actual cost than his best guess at the outset.

In construction contracts, conditions precedent essentially say the following: “unless you (1) do this (2) by then, (3) you lose that.” In our defects example, the clause might thus say; “unless the contractor notifies that it will suffer a time and/or cost impact within five days of any instruction to vary the Works, he will not be entitled to do any extra time and/or cost” (but will still do the varied work).

This may seem grossly unfair to the contractor; after all he is busy on site and may not have the resource to submit the necessary paperwork on time, or he may not be certain immediately the instruction is given that the time and/or cost will in fact increase.

Worse, it is often argued that the condition precedent is buried within a clause; for example somewhere within the variation mechanisms in our example above.

The courts, however, generally uphold condition precedent clauses, as the employer can always explain the need to be certain as to the (varied) time and cost of his project. Unlike consumer contracts, where consumers can say that a business should do enough to bring a difficult clause to their attention, commercial entities rarely have such benefit when contracting (i.e. commercial (or even private) employer to commercial contractor).

The advice to contractors is thus to be absolutely certain to identify every single condition precedent in your contract.

The wording needs to be carefully agreed; for example:

  • Who can the employer communicate with (for fear it lands on a site desk and gets covered in PPE and missed);
  • Do you act within five days of the instruction or within five days of it first becoming apparent to you that there will be a time and/or cost impact;
  • Do you notify the actual impact (even by way of a forecast) so that it can be agreed in advance or do you merely notify the possibility for later assessment;
  • Do you have to submit an updated programme; and/or
  • Do you start the varied work before you are told that your time and/or cost are agreed?

During the contract, compliance with the condition precedent is thus paramount. Don’t leave it to chance; refer to the relevant clause in your communication and say: “I got this instruction on this date. Clause x says that I have to notify that there is a (potential / actual) time and/or cost impact within five days of the instruction. I am thus notifying you today; which is day four.”

Equally, check the contract mechanism for the giving of such notices. Very rarely contracts are explicit that notices must only be by registered post deemed to arrive two working days after they are sent. So for a five day deadline, you would have to post your notice by the prescribed method by day three, if it is to arrive by day five. Can you use email and is it deemed received immediately? Does an email sent after 5:00pm arrive the next working day?

Also, check the format and content requirements of the notice that you give; is a programme showing an impact to the critical path enough without further explanation? Is a site meeting (for which minutes are produced) enough to be the required notice?

A condition precedent is not to be feared; but it is to be complied with.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

Unforeseen Ground Conditions

When we talk about traditional building contracts, which party is best placed to accept the risk of any unforeseen ground conditions?

  • Is it the employer who owns (and one assumes knows) the ground and can have it surveyed at any time he likes?
  • Is it his design team, who design a building that one assumes can be built in the prevailing environment?
  • Or is it the contractor, who generally prices the design information that he is given (perhaps including the employer’s survey) and who is very unlikely to start taking core samples to investigate the ground before he tenders?

The common law, which is the law that applies in the absence of any express contractual provisions, has divided matters into two schools of thought:

  • If the unforeseen ground conditions merely alter the method of working, the change in method is found to be at the contractor’s risk since he is after all responsible for using whatever method he sees fit to construct the given design; &
  • But if the design itself must change, it is inherent that this is a variation to the design that the contractor must build, which means that this is (at least potentially) a variation for which the employer should pay.

Of course, in the latter scenario, if the employer considers that his design team were negligent in failing to take stock of the prevailing ground conditions, he may wish to pursue his rights against those parties; for example the surveyor who did not find the detrimental ground conditions.

But this ignores the realities of life on site; the survey almost certainly was not all-encompassing. A common scenario is that the survey takes limited samples and correctly comments upon those samples. During the works, however, the problem ground is found somewhere other than where those few samples were taken.

So what express wording do we wish to provide? Certainly the employer might say he is happy with the common law position; he has given a survey that is correct only in so far as it goes, the contractor takes the risk of any changes to his methods and the employer may have to take the risk if the design changes.

The express contractual situation often turns upon how the survey is given to the contractor:

  • The employer may expressly warrant that the report is both accurate and complete. The employer appears to be expressly accepting liability, if the ground conditions differ from those in the report;
  • The employer may give an express disclaimer that he is not liable as to whether the report is accurate and complete and that it is for information only (often adding that the contractor must verify such data for himself before tender). The employer appears to be expressly denying liability; &
  • The employer may in fact hand over the report but give no warranty as to whether the report is accurate and complete (i.e. not expressly accepting liability) or any disclaimer that he is not to be held liable for its content (i.e. not expressly denying liability). Is this therefore arguable both ways?

Of course an express term, saying that it takes priority over any other conflicting part of the contract, declaring exactly where liability lies should resolve this issue altogether.

But then again, what if the contractor is expressly made liable, the employer hands over a survey with his disclaimer, but the survey has been negligently prepared and the contractor decides to rely upon it as the only data to hand at tender? Can the contractor pursue the surveyor, declaring himself to be a party that was likely to rely upon the survey and thus that the surveyor owed him a duty of care?

The key elements of this issue are whether:

  • The surveyor owed any duty of care to that potential (future) contractor as he was preparing his survey. The answer often relies upon an exclusion of liability made by the surveyor in his appointment and report that only the employer may rely upon it; &
  • The contractor was actually entitled to rely upon it.

In short, the parties need to be explicit as to which party assumes which risk. That assumption of risk can then be priced accordingly and one must hope that the priced risk pays off.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

Delay Damages

The definition of completion in the construction industry does not normally mean entire completion of the work; rather the definition allows for practical completion of the works but for minor defects that do not materially impact upon the employer’s ability to use the works.

A contract must always have a date for completion of performance by both parties. If the contract itself fails to state one, the common law (that is the law that fills in the blanks) will give a reasonable time for performance, to be calculated by the court in all of the relevant circumstances.

Step one is of course to confirm if the original deadline for completion still applies. Here we look to both extensions of time (for example due to variation of the contract by the employer creating a varied work scope that will take the contractor longer to complete) and disruption (by which a cause that is not the contractor’s risk in the contract delays or disrupts his work).

In both cases, we amend the original deadline (using the contractual mechanism or giving a reasonable time in the absence of an express method) to arrive at the varied deadline for completion.

But what if the contractor then fails to complete on time, even by this varied date?

Generally, time is not described as being “of the essence” to a construction contract, such that the contract does not terminate for that delay, but rather delay damages are paid. As an aside:

  • Time can expressly be declared to be of the essence; or
  • It can become of the essence (generally when the delay has already become intolerable and a further, reasonable and final deadline is imposed).

For this discussion, however, let us assume that time is not and never becomes of the essence.

If the contractor has missed his (varied) deadline, the employer is thus entitled to delay damages. These can be either liquidated or unliquidated:

  • Unliquidated damages require the employer to perform a reflective and meticulous reconstruction of his actual losses resulting from the delay. These can include both direct loss, such as still having his project team on site and indirect, such as a delay to his income because his new property is not open and trading. This is not an exercise that the employer is likely to relish; &
  • Perhaps given the evidential burden of proving his actual loss, the industry thus turns to liquidated damages. These rely upon a genuine pre-estimate of what the employer’s losses might be, such estimate being made before the contract is signed. Once a delay actually occurs it then does not matter what the employer’s actual loss is (be it higher or lower), he is simply paid at the liquidated rate.

The contractor’s only chance to retrospectively challenge the rate of liquidated damages is to prove that they are a punitive rate, which could never have reflected the employer’s likely actual loss. Such challenges are thus both rare and difficult to prove; as one must ask why a contractor signed up to what he now calls a punitive rate in the first place.

An added layer of difficulty arises if one then factors in concurrent delay; that is two sources of delay; one of which is the contractor’s risk and the other of which is the employer’s risk:

  • The legal idea is that one event of delay has two causes, for which the two parties are respectively liable; &
  • The wider industry idea is that there are two events of delay that impact upon the programme at the same moment in time, for which the parties are respectively liable.

Both kinds produce intense disputes. In the legal idea, the courts look for the dominant cause of the single event of delay and apportion blame to that dominant cause. Concurrency is thus when no dominant cause can be found.

Practically, however, what is likely to be the outcome is that the contractor:

  • Gets an extension of time to cover the period in which the employer delays him (so he does not pay delay damages); but
  • Is not paid prolongation costs for the plant, manpower and machinery, etc. that he needs on site anyway as a result of his own delay.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

Making an interim payment claim? Then make it obvious (Part 2)

Those avid readers of our blog will remember that a couple of weeks ago we wrote about the need for contractors to make their Interim Applications within the timescales set out within the contract, and to make it obvious that they are making such an application, following the case of Caledonian Modular Ltd v Mar City Developments Ltd ([2015] EWHC 1855 (TCC)).

The Technology and Construction Court has provided yet further guidance in relation to the making of Interim Applications in the case of Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC).

In Henia the court was asked to decide two issues relating to the interim payment process in the context of a JCT Standard Building Contract without Quantities 2011.  The court also dealt with an interesting issue regarding extension of time and liquidated damages, but that it for another blog!

Issue 1 – was the Contractor’s Application No 18 an effective or valid Interim Payment Notice? 

The Contractor had seemingly issued its Interim Application without paying attention to the date by which it was supposed to do so under the Contract, thereby missing the date for the April 2015 valuation by 6 days and being some 3 weeks early in respect of the May 2015 valuation.  The Contractor argues that its Interim Application 18 was to be treated as its early application for the May valuation.

In rejecting the Contractor’s argument, Mr Justice Akenhead found that:

  • the April payment cycle was the 18th relevant due date under the Contract, therefore by using the words “Interim Application for Payment No: 18” the intention appears to be that it was a late application in respect of April rather than an early application in respect of May (which would be number 19);
  • there was nothing on the application which pointed towards it relating to the May due date, indeed the Contractor only valued the works in its application up to the end of April, rather than forecasting its work to the May due date;
  • the application was as consistent with being issued late in error or in hope that it would be valued in April as it was with being intended to be the May application; and
  • crucially, the Contractor did not say at the time of the application that it has missed the April application date and that the application was intended to relate to the May date.

 Issue 2 – was the Employer’s Pay Less Notice effective or valid?

This issue turned essentially on whether the Employer could use a Pay-Less Notice to challenge what had been certified by the CA, as opposed to merely setting up cross claims or other deductions.

Mr Justice Akenhead decided that there was nothing in the wording of the JCT contract that the Employer cannot legitimately challenge the amount certified by the CA, or indeed the amount within a Contractor’s default notice.  The Pay-Less Notice can not only raise deductions and legimitate set-offs but also may deploy the Employer’s own valuation.  In this case the Employer had merely put forward the CA’s latest evaluation of the account and, in the judge’s words, ‘would have provided an adequate agenda for an adjudication as to the true value of the Works’.

The judge stated that it was ‘mutually foreseeable by both contracting parties’ that the Employer might wish to challenge an Interim Application or Interim Payment Notice (i.e. in a default payment notice) issued by the Contractor, or alternatively challenge the CA’s assessment.

Comment

There are clear messages arising from this case for Contractors, Employers and Consultants certifying under the JCT payment machinery:

Contractors:

  • Know you contract and make your interim applications on the correct dates.
  • If you are making an interim application, make it abundantly clear that you are doing so, including marking the documents with the correct application number.

Employers:

  • Know your contract and make sure you issue your Pay Less Notices on the correct dates.
  • The Pay Less Notice can be used to deploy your own valuation of the works and is not limited to set-offs and counterclaims.  You may wish to use the Pay Less Notice to challenge the certifier’s valuation, or a default payment notice issued by the Contractor.

Certifiers:

  • Know the contract and make sure you issue your notices on the correct dates.  The CA in this case had issued both Interim Certificates 18 and 19 late.  This could potentially leave you open to claims from the Employer.

We recommend that you take advice as to the terms of your contract at the earliest possible stage, ideally before it has been entered into, in order to avoid potentially costly disputes caused by one or more party not complying with its obligations.

For advice in relating to your contracts or your construction disputes, please contact our construction team.

Making an interim payment claim? Then make it obvious

Contractors are increasingly referring disputes to adjudication on the basis that the Employer has failed to issue valid payment or payless notices (see ISG Construction Ltd v Seevic College, Galliford Try Building Ltd v Estura Ltd and M J Harding v Paice). This sort of ‘technical argument’ in adjudication can have the effect of entitling the Contractor to the entirety of its interim payment application, irrespective of what might be the correct valuation of the account.

However in the recent case of Caledonian Modular Ltd v Mar City Developments Ltd ([2015]) EWHC 1855 (TCC)) the court has issued the following warning to contractors seeking to benefit from such ‘technical arguments’ under the ‘New Construction Act’ payment mechanisms:

‘it seems to me that, if contractors want the benefit of these provisions, they are obliged, in return, to set out their interim payment claims with proper clarity. If the employer is to be put at risk that a failure to serve a payless notice at the appropriate time during the payment period will render him liable in full for the amount claimed, he must be given reasonable notice that the payment period has been triggered in the first place.’

In brief, an e-mail had been sent to the Employer attaching various documents just 8 days after a valid payless notice had been given. Mr Justice Coulson rejected the contractor’s claims that it had issued an interim application for payment for the following reasons:

  • Neither the covering e-mail nor the documents stated that they were a new application for payment – rather they said variously that they were a ‘final account application summary’ and an ‘updated account’;
  • The subsequent invoice sent by the contractor, which it was now claiming was a default payment notice, did not say that it was in some way a default payment notice or that the payee’s notice had already been provided.  If that had been the contractor’s position, they would have said so in clear terms; &
  • The Employer had expressly asked the contractor to confirm what the attached documents were and the explanation given by the contractor gave no suggestion that it had made a new application for payment.

Further, the claim is wrong in law as the contractor was not entitled to make an interim application when it did and it could not unilaterally issue an application early without at the very least drawing that fact to the Employer’s attention.

 Mr Justice Coulson added the following interesting observations as to the nature of the ‘technical argument’ the contractor was seeking to run:

‘I consider that the suggestion that the documents of 13 February give rise to an undisputed entitlement to over £1.5 million defies common sense, and would be contrary to the purpose of the notice provisions in the 1996 Act. It is simply not permissible for a contractor to make a claim for £1.5 million (interim application 15 on 30 January); to have it knocked back through the payless notice mechanism; to update that same claim 8 days later by adding one small variation worth £6,000; and then, by reason of that update alone, miraculously to become entitled to the £1.5 million, despite the fact that the claim for the vast bulk of that sum had already been the subject of the valid payless notice.

Such a sequence would make a mockery of the notice provisions under the Act and the Scheme. It would encourage a contractor to make fresh claims every few days in the hope that, at some stage, the employer or his agent will take his eye off the ball and fail to serve a valid payless notice, thus entitling the contractor to a wholly undeserved windfall. The whole purpose of the Act and the Scheme is to create an atmosphere in which the parties to a construction contract are not always at loggerheads. I consider that the claimant’s approach would achieve the opposite result.’

Comment

The message is clear, if you wish to make use of the Construction Act payment mechanisms, you must:

  • Make your interim application within the timescales set out in the contract, if the payer issues a valid payless notice then you must wait until the next payment cycle, unless you contract states otherwise; &
  • If you are making a claim, make it obvious that is what you are doing.  Mark the documents with the correct application number and state that you are making an application for payment.  Making reference to the applicable clause references in your contract could assist here.

For advice in relating to your construction disputes and to take advantage of our fixed price adjudication offering, please contact our construction team.

CDM Regs 2015, are you prepared?

The Construction Design and Management (CDM) Regulations 2015 came into force on 6 April 2015, replacing the 2007 Regs.

One of the key changes to the 2015 Regs is the abolition of the role of ‘CDM Co-Ordinator’, replaced by the ‘Principal Designer’ who will be responsible for planning, managing, monitoring and co-ordinating the health and safety matters during the pre-construction phase.

This amendment appears to be led by a desire to make health and safety a priority by placing the responsibility of designing out health and safety risks upon those actually carrying out the design as opposed to freestanding consultants.  The Principal Designer is essentially there to ensure that the project is safely-designed so that the Principal Contractor can safely build.

This amendment is therefore likely to mean an end to a single consultant engaged purely to carry out the CDM role on a project, although most consultants offering this service do so as a ‘bolt on’ service to their main practice in any event.

Before you panic as to your current arrangements, there are transitional arrangements in place within the Regs which mean, for example:

  • if a client has already appointed a CDM Co-Ordinator on a project then it must appoint a Principal Designer by 6 October 2015; but
  • if the project finishes before 6 October then the CDMC simply continues until the end of the project, albeit with slightly revised duties as set out within the 2015 Regs.

The 2015 Regs will of course need to be incorporated into project documentation and the industry standard form contracts will need to be amended accordingly; the JCT has indicated that it will be issuing an update in due course.

Further, those designers who are potentially going to be asked to undertake the role of Principal Designer, and this is likely to affect Architects the most, should seriously consider what this revised role incorporates before agreeing to carry the obligations contained within the Regs.  Designers should also be careful to ensure they notify their insurers of being asked to undertake this role and ensure that they are adequately insured to do so under their current policy.

The Health and Safety Executive has published some helpful and comprehensive guidance on the 2015 Regs on its website.

For Architect’s, the RIBA (Royal Institute of British Architects) has summarised some of the key changes that will affect its members and sought to provide some addition guidance.

For advice in relation to your construction & engineering projects, please contact our team.

Ensuring Your Terms & Conditions Apply

A purchaser of goods or services sends a Purchase Order to a seller with its “T’s & C’s” in faint writing on the reverse.  The seller then sends an Acknowledgement of Order referring to its “T’s & C’s” and proceeds to supply the goods or services.  The question is: “whose terms and conditions apply”?

This question came before the Technology and Construction Court recently in the case of Transformers & Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC). The judgment provides the following useful summary of the authorities concerning what is commonly known as ‘the battle of the forms’:

  • i) Where A makes an offer on its conditions and B accepts that offer on its conditions and, without more, performance follows, the correct analysis, assuming that each party’s conditions have been reasonably drawn to the attention of the other, is that there is a contract on B’s conditions: see Tekdata.
  • ii) Where there is reliance on a previous course of dealing it does not have to be extensive. Three or four occasions over a relatively short period may suffice: see Balmoral at [356] and Capes (Hatherden) [2010] 1 Lloyd’s Rep 477.
  • iii) The course of dealing by the party contending that its terms and conditions are incorporated has to be consistent and unequivocal: see Sterling Hydraulics [2007] 1 Lloyd’s Rep 8.
  • iv) Where trade or industry standard terms exist for the type of transaction in question, it will usually be easier for a party contending for those conditions to persuade the court that they should be incorporated, provided that reasonable notice of the application of the terms has been given: see Circle Freight [1988] 2 Lloyd’s Rep 427.
  • v) A party’s standard terms and conditions will not be incorporated unless that party has given the other party reasonable notice of those terms and conditions: see Circle Freight.
  • vi) It is not always necessary for a party’s terms and conditions to be included or referred to in the documents forming the contract; it may be sufficient if they are clearly contained in or referred to in invoices sent subsequently: see Balmoral at [352], [356].
  • vii) By contrast, an invoice following a concluded contract effected by a clear offer on standard terms which are accepted, even if only by delivery, will or may be too late: see Balmoral at [356].

Interestingly on the facts of this case the judge found that neither party’s terms and conditions applied to the transaction!

Comment

This case provides a useful reminder of the importance of properly incorporating your terms and conditions into transactions. Rather than relying upon an oblique reference to your ‘standard terms & conditions’ or upon previous course of dealings, the safer option is always to include your terms & conditions in quotations, purchase orders and order acknowledgements and at the same time draw the other parties attention to them. And remember, the party who fires the last shot will often win the battle of the forms.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.