The end of the beginning: 2021 in construction law

As many of us contemplated a return to normality this year, the Supreme Court followed suit. It was concerned, in Triple Point vs PTT, with a (software) contract that was terminated before completion was achieved, with work much delayed. It reversed the Court of Appeal ruling that after termination the delay liquidated damages provision did not apply, even to pre-termination delay. We have returned to where we thought we were. Absent contrary wording, liquidated damages accrue for pre‑termination delay, while general damages cover post-termination delay.

Liquidated damages were also considered by the Technology and Construction Court (TCC) in Eco World vs Dobler. It held that a liquidated damages clause was valid and enforceable despite its non-provision for any reduction following partial possession of the works. The TCC added that if the clause had been void or unenforceable, the limit of 7% of the contract sum would still have capped the otherwise payable general damages.

A contractual cap of £500,000 on “all claims” was at issue in Mott vs Trant. The TCC held that there was no presumption against such clauses applying to deliberate and repudiatory breaches of contract. Exclusion and limitation clauses should be construed by way of the normal principles of contractual interpretation.

Similarly wide-ranging matters of contractual interpretation were addressed by the Supreme Court. It issued an expedited judgment on the extent to which various business interruption insurance policies cover first-wave covid-19 losses (FCA vs Arch). Some see the judgment as favouring policy-holders.

The Supreme Court gave renewed clarity on arbitrators’ duties of disclosure and impartiality in Halliburton vs Chubb in late 2020. The case arose because an arbitrator was appointed for multiple disputes arising out of the same subject matter.

Such disputes also gave rise to the problem in Secretariat vs A Company. The Court of Appeal injuncted an expert services group from acting against as well as for the same party in overlapping disputes over the same project. That was despite separately located experts being offered via different legal entities.

It was problematic factual rather than expert evidence that was the subject of Blue vs Bug-Alu. The TCC applied rules (which came into force in April) to eradicate the improper use of trial witness statements as vehicles for narrative, commentary and argument. The court ordered parts of the trial witness statements to be redrafted to comply with the new rules.

Compliance is central to the JCT’s Dispute Adjudication Board Documentation 2021. It seeks to provide a Construction Act-compliant option for dispute boards, which remain rare in the UK largely because of the success of statutory adjudication. One issue is whether a three-person dispute board is act-compliant.

It is hard not to notice the rise in challenges to publicly procured contracts over the last year or so – especially to contracts placed during the pandemic

The act was also the focus in Toppan vs Simply. The TCC held that there was no statutory right to adjudicate under a collateral warranty because it had been executed after the works were completed and, moreover, remedials were carried out by another contractor. While the warranty referred to future performance, it was not an agreement for carrying out construction operations.

Adjudication was the subject of John Doyle vs Erith. In 2020 the Supreme Court told us that a company in liquidation is not ordinarily barred from adjudicating (Bresco vs Lonsdale). Now we know from the Court of Appeal that if that company obtains a favourable adjudicator’s decision, it will not just be a rare case but a very rare case where a judgment is given requiring payment. This will hurt litigation funders who buy claims from companies in liquidation. The law giveth and the law taketh away. 

One exception is where the adjudicator has finally (and not just provisionally) decided the net balance between the parties. This can happen where the contract deems the decision finally binding absent a timely notice of dissatisfaction. The NEC conditions do this. In Transport for Manchester vs Kier the TCC rejected claims that a notice of dissatisfaction was invalidly served and did not comply with the NEC’s requirement that notices should be communicated separately from other communications. It held that a valid notice must be clear and unambiguous to show that the decision was disputed but did not have to condescend to detail to set out the grounds on which it was disputed. 

The NEC conditions were also considered in Van Oord vs Dragados. A Scottish appellate court stated that the NEC’s requirement of “mutual trust and co-operation […] reflects and reinforces the general principle of good faith in contract” in Scots law. The development of this area of law remains very much a work in progress – including in English law where, currently at least, a duty of good faith will not be implied in the general run of construction contracts.

Meanwhile, the government’s Construction Playbook extolled the benefits of collaborative working with an eye on public works contracts. However, it is hard not to notice the apparent rise in challenges to publicly procured contracts over the last year or so – especially to contracts placed during the pandemic. The government giveth and the government taketh away.

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