The decade from hell: Legal review

It’s hard to review the noughties without the recession dominating. But in fact there was bad news throughout; Time magazine recently christened it the Decade from Hell. We began with the collapse of Independent Insurance, a large insurer to the construction industry, in 2001. The insureds had to pick up liabilities of hundreds of millions of pounds and higher premiums followed, exacerbated by the 9/11 attacks.

Many others firms have gone and will go under. The Office of Fair Trading’s cover pricing crusade reminded the industry bad situations can always worsen. Firms were fined a total of £129.5m, but many are appealing.

Letters of intent still generated disputes, and new standard forms proliferated, despite the government’s desire to cull them. Among these were consultants appointment terms from the British Property Federation, the Construction Industry Council, the RICS, the RIBA and the Association for Consultancy and Engineering. These dealt differently with net contribution clauses (without which negligent consultants take on the risk of contractor insolvency). This year the clauses, which grew out of the recession 20 years ago, received support from a Scots court. In 2001, the same court upset the practice of novating consultants’ appointments to contractors and prompted further new forms.

More positively, the courts fleshed out the skeletal payment and adjudication regimes that the Construction Act imposed. Since then, about 25% of this section’s articles have featured the act, but it remains unclear if it has met its goal of improving cash flow. The limits of legislation in redressing market forces were confirmed when housebuilders last year unilaterally imposed price cuts on their suppliers – with impunity.

Although adjudication has been successful, barely a year has passed without the government considering reforming it. If the next government brings into force the changes enacted last month, payment practices and standard forms will need overhauling again. Meanwhile, we can enjoy consultation on changing the Construction Act Scheme’s default rules.

The act was exported to Australia, New Zealand and Singapore. An even more widely copied legal export was the PFI/PPP model. In the UK, PFI shifted from single projects to broader partnerships, like Building Schools for the Future. The introduction of competitive dialogue in 2006 sadly raised bid costs. Rule changes increased the scope for setting aside incorrectly procured public contracts, just after the courts showed the ease of setting aside framework agreements. Expect more wasted bid costs in future.

Meanwhile, Wembley stadium made up for the decade’s lack of mega-cases. Lord Justice Jackson refereed that one; he has now taken off the black jersey and, fortified by memories of a £1m trial bundle, will soon advise how to improve court costs rules. This should not detract from the success of 1999’s court reforms. Although the courts’ use of improved case management powers has been criticised, the reforms increased co-operation and facilitated settlements. Growing awareness of the effectiveness of alternative dispute resolution’s (ADR) helped – spurred on by the government’s 2001 pledge to adopt it whenever possible.

The court reforms came at a price, with costs front-loaded in pre-action information exchanges. Jackson’s report may help. From 2004 to 2007 he led the Technology and Construction Court out of a slough of despond, with the help of other high court judges – the Jackson Five.

Less on tune this decade were, thankfully, Y2K clauses and, sadly, the Society of Construction Law’s delay and disruption protocol. Retentions remain widespread and project bank accounts have yet to take off. Collateral warranties remain popular, despite the increasing popularity of the Contracts (Rights of Third Parties) Act 1999, aided by pioneers like 2003’s JCT Major Project Form.

In 2005, JCT issued a new suite of contracts and, in 2007, it introduced sustainability into its forms. Its contracts are used in about 75% of projects – down on 2000, owing to the rise of the NEC and other partnering forms like PPC2000. Even JCT joined the party with 2006’s Constructing Excellence contract. Less is heard of partnering now, but the NEC’s rise continues, aided by the government, Crossrail and the Olympics.

Finally, there was no lack of regulation: new CDM rules, energy performance certificates, aggregate and climate change levies, site waste management plans, Companies Act reform and the Corporate Manslaughter Act.

Three things are certain over the next decade: more regulations, more adjudications and more contracts.