Looking back at the legal year: 2024 in construction law

Seven years after the Grenfell Tower disaster, the final report of the public inquiry into the fire was published in September. It criticised the makers of fire safety rules and most of those who should have ensured compliance with them. The strongest criticism was reserved for many of the relevant cladding and insulation manufacturers. It remains to be seen how far the report’s wide-ranging recommendations will be implemented.

Fire safety defects were the subject of Abbey vs Simply. An adjudicator decided a contractor was liable for such defects to a tenant under a collateral warranty. The Supreme Court held that collateral warranties fall outside the Construction Act, save where unusually there is a distinct duty to carry out work for the warrantee. As a result, the adjudicator’s decision was void for lack of jurisdiction. Thus, ordinarily a warrantee will be unable to adjudicate a warranty breach unless the warranty expressly provides for adjudication.

Defects of another kind were at issue in Irwell vs Arcadis. Arcadis said its design errors caused no delay as the works of the (sub)contractor, Ideal, were late. However, Ideal (which was insolvent and not a party) could equally have said that the delay would have occurred anyway owing to Arcadis’s design errors. The Technology and Construction Court (TCC) strove to avoid the claimant, who bore no fault, “unjustly falling between two stools”.

As Ideal was the dominant cause of delay, Arcadis’s design errors were not an effective cause of project-level delay costs. However, Arcadis was liable for site-level preliminaries where its design errors were a co-extensive cause. The court contrasted contractual claims for extensions of time or delay costs based on employer risk events when contractor risk events would in any case have prevented timely completion. The TCC also held that Arcadis’s £10m cap on liability excluded interest and legal costs, but ultimately this did not matter. 

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The option of an overall cap on liability was raised in the JCT’s 2024 suite of contracts – in a footnote. Other changes made by the JCT include an article requiring parties (in the style of the NEC forms) to work in a “co-operative and collaborative manner, in good faith and in a spirit of trust and respect” (previously this was an optional extra). The JCT now confirms that delay liquidated damages stop accruing upon termination, after which employers get general damages for late completion.

The JCT’s enduring requirement for variations to be instructed, or confirmed, in writing was considered in Vainker vs Marbank. The TCC held that, while an email or issue of a drawing may suffice, the writing requirement was a condition precedent to the contract sum being adjusted. Contractors should take note. Otherwise they will have to, for example, prove an estoppel to prevent an employer avoiding paying for a variation that does not meet the JCT’s writing requirement.

This year saw the first judgments on building liability orders (Willmott Dixon vs Prater), by which the corporate veil may be pierced, and remediation contribution orders (Triathlon vs Stratford

In MY vs 74 Hamilton it was an employer that fell foul of an amended JCT contract, which stated the contractor had no liability for any sum unless notified of it not later than four months after the date of the contract. The notice sent on Monday 3 July 2023 was fatally one day late. The TCC held it did not matter that the deadline day was a Sunday.

In FES vs HFD three Scots appellate judges held that the timeliness of an application for loss and expense was a condition precedent under certain JCT conditions. While the JCT did not spell out the consequences of lateness, it was apparent that any entitlement would be lost. As a standard form, the contract was apt to be interpreted principally by textual analysis.

This was called “an intense focus on the words used” in Providence vs Hexagon. The English Court of Appeal held that standard JCT conditions entitled a contractor to terminate when its employer was twice late paying it. On the first occasion the contractor gave a warning notice before it was paid 13 days late. Termination was not permitted by that delay but it was permitted as soon as the employer was late making another payment (it ended up being five days late). Employers should beware.

Topalsson vs Rolls-Royce also concerned termination. The contract stated that “the total liability of either party to the other” was limited to €5m. Before the cap was applied, Rolls-Royce was entitled to €8m, while Topalsson was owed €800,000 for its work. The Court of Appeal held that “total liability” suggested “a totting up, not a netting off” so Rolls-Royce was entitled to €4.2m rather than the €5m awarded by the TCC. Much depends upon a cap’s drafting.

In Innovate vs University of Portsmouth the TCC held that generally worded exclusion and limitation clauses covered any liability for fraudulent breaches of contract by a party’s employees or the party itself, as distinct from fraudulent (mis)representation which the clauses expressly excluded. It also held that the clauses were reasonable for the purposes of the Unfair Contract Terms Act 1977.

For many there is no avoiding liability for defective dwellings under the Building Safety Act 2022 with its retrospective limitation periods. This year saw the first judgments on building liability orders (Willmott Dixon vs Prater), by which the corporate veil may be pierced, and remediation contribution orders (Triathlon vs Stratford). In addition, the Court of Appeal gave guidance on allocations under the Building Safety Fund for fire safety remedial work (Redrow vs Secretary of State). As I write, the Supreme Court is hearing the appeal in URS vs BDW. Expect more soon.

Rupert Choat KC is a barrister, arbitrator and mediator at Atkin Chambers