The legal view: 2011

The year started with a cut that many welcomed. In 2009 the OFT fined 103 construction firms a total of £129m mostly over artificially high bids designed to lose contracts but keep places on tender lists. Twenty-five of the firms appealed. A few were exonerated. Each of the others had their fines cut by up to 94% partly because the OFT hadn’t fully accounted for cover pricing being “long-standing, widespread and endemic throughout the industry”. The OFT warned firms against future cover pricing. Meanwhile many faced the opposite problem of suicide bids.

Throughout the year the government indicated it would help UK businesses win public sector contracts, but seemed slow to realise that this may only help UK public procurement lawyers. A cause celebre was Siemens’ winning of a £1.4bn contract to supply trains for the Thameslink service at the expense of Bombardier. Bombardier would make the trains in the UK but Siemens would not. Shortly afterwards the competition to supply trains for Crossrail was postponed into 2012.

Prosecutors’ discretion is key to the Bribery Act’s application and how that discretion is applied will be closely monitored. The industry is being targeted

In 2011 French engineer Alstom continued litigating against Eurostar and Siemens over another train contract - just one of a recent upsurge in procurement challenges. It seems to be the first case in which the new remedy of declaring an awarded contract ineffective has been sought.

The remedy was refused partly because the claim was out of time. With the deadline for bringing procurement cases recently reduced from three months to 30 days, this won’t be the last claim to fail for lateness.

Last month Transparency International reported that public works and construction is seen as the world’s most corrupt sector (still). This followed the delayed coming into force of the UK’s Bribery Act 2010. One of the act’s key aspects was the criminalising of business-to-business bribery but the change that attracted most attention was a new strict liability offence. Commercial organisations may be guilty if bribery is carried out on their behalf by someone anywhere in the world. The only defence is having in place “adequate procedures”. The government gave guidance on what this means, but TI condemned its “deplorable” diluting of the act. Prosecutors’ discretion is key to the act’s application and how that discretion is applied will be closely monitored. The industry is being targeted.

Another delayed act was the revised Construction Act. It has required the industry to overhaul its payment practices and standard forms but the costs are likely to outweigh any benefits. The new act brings uncertainties over when and how it applies. Technology and Construction Court guidance is needed on what the new notices that must be issued require for specifying the “basis” of the sum that is to be paid. As if to prove the difficulties with the new act, the Infrastructure Conditions of Contract suite (which replaces the ICE suite) was amended 11 weeks after being published.

While the latest stats from Glasgow Caledonian University suggested that the number of adjudications has fallen by about 40% from a peak two years ago, the TCC had a busy year. In London the High Court TCC moved into the new Rolls Building. It will share the same roof as the Commercial Court and may soon share that court’s rejection of pre-action protocol requirements.

Although Olympics-related cases have stayed out of the courts, big cases this year included ADT being 25% liable over the design of a fire suppression system for a popcorn factory that burnt down and the latest part of a case over a large housing development in Hartlepool with deficient foundations.

The review of the cost of litigation in England and Wales, by the former head of the TCC, Lord Justice Jackson, is prompting many changes. The TCC is piloting more active management of cases by cost budgeting in which the court engages with the parties over their estimated costs for the various stages of the litigation. Our system should soon permit parties to pay their lawyers a share of any damages recovered in court or arbitration.

Another leading construction lawyer of our time, Sir Anthony May, retired from the Court of Appeal in 2011. Earlier in the year he decided that an employer could not recover from its contractor for defects that the subcontractor would have remedied at no cost. The employer had not mitigated its loss by asking the contractor to make good. Those pursuing defects claims are duly warned.

In the Supreme Court expert witnesses lost their immunity from suit for negligence when giving evidence or for associated work. This
is another cut that all should welcome, including experts who are now less likely to be subjected to judicial criticism they cannot answer. Next year of course promises more cuts. Hopefully even more of them will be positive ones.

Rupert Choat is head of construction disputes at CMS Cameron McKenna