Lawyers say downturn will lead to ‘year of adjudication’

Construction lawyers are expecting a rush of claims over payment and contract breaches in 2009, as the industry enters what one expert is calling the “year of adjudication”.

The disputes are expected to arise out of the financial difficulties triggered by the credit crunch, which have led an increasing number of firms to renegotiate prices and break contracts that were signed before the downturn.

Jane Ryland, head of construction at Cripps Harries Hall, said the rise in claims would be similar to the early nineties, when Britain last entered a recession.

She said: “After Christmas, things are going to get manic. And we will be seeing an increase in insolvency cases – 2009 is going to be the year of adjudication.”

According to research by Pricewaterhouse Coopers, construction insolvenices have risen 35% year-on-year.

After christmas, things are going to get manic

Jane Ryland, Cripps Harries Hall

Ryland said she had also witnessed several cases in which contractors were trying to increase the contract fee by threatening to leave jobs unfinished. “There is certainly a lot of tension around,” she said.

Cripps Harries Hall will next week send out advice to firms on ways to ensure they are paid for future projects.

Richard Laudy, partner at Pinsent Masons, said his firm was also expecting an increase in claims. He said: “Management of cash is naturally going to be uppermost in the minds of most companies.”

However, he warned the industry against “overreacting” to the issue. He said: “There needs to be a mature approach. A knee-jerk reaction will end up in a lot of disputes and a lot of adjudications, and this will only add to the problem.”