JCT Newsletter February 2012

FEBRUARY 2012

JCT NEWS

THE JCT CONTRACTS UPDATE FOR THE CONSTRUCTION PROFESSIONAL

LOW-CARBON BUILDING THAT DOES NOT COST THE EARTH The recently completed iCon in Daventry, previously reported on in JCT News, is a landmark building for a number of reasons. Not only because it is one of the most sustainable buildings in the country, or that it houses companies that innovate in sustainability and the built environment, but it was the first project in the UK to use the JCT’s new sustainability clauses and guidance.

Constructed using a JCT Design and Build contract, the prominent new building is sited at a gateway position in the town, to demonstrate Daventry’s regeneration aspirations. Costing £8.5million, the 4,000m2 landmark building was developed and project managed by West Northamptonshire Development Corporation (WNDC), and is now owned and run by the University of Northampton. The aim is for the iCon to become a national centre of excellence for sustainable construction and green

technologies, halting the migration of such expertise south to London.

The new sustainability provisions introduced by JCT for its standard forms of building contracts in 2009 created a framework within which the client and the project team could consider sustainability. The aim was to encourage the use of materials and methods of working which improve environmental performance and sustainability. Specific measures aim for reductions in waste, energy consumption, mains water consumption, CO2 emissions, materials from non-renewable sources and commercial vehicle movements, together with the maintenance or optimisation of biodiversity and ecologically valuable habitat(s), and improvements in whole life performance of the works and the completed development.

Chris Garden, WNDC director of regeneration and development, said: “The new contract certainly made the contractor think about sustainability, and their very positive and constructive response helped them onto the shortlist. “iCon was probably not the ideal ‘first use’ of the new contract provisions as the employer had already thought about sustainability and included numerous such requirements within the project specification. However, more generally, the new provisions have helped change the behaviour of both employers and

iCon Daventry

4

5

The Journey to Deep Green The JCT Povey Lecture 2011

JCT Launches Sustainability: Life Cycle Consultation JCT Essay Competition For Students

6

Is the elephant test the best approach to defining practical completion?

Shona Frame Macroberts LLP

8

Limitation: Some Thorny Issues Robbie Leckie & Ruth Wilkinson - Dundas & Wilson LLP

iCon Daventry. Photography by Andrewhatfield.co.uk

contractors by including sustainability as an integral part of the contracting process.”

Northampton-based Winvic Build was the successful contractor following a single stage tender process. John Austin, director, said: “The new JCT sustainability provisions were included in the tender pack, and came as a complete surprise, although many of them were already contained within the employer’s requirements.”

John Austin agreed that iCon probably was not the best first use of the new JCT contract Continues on page 2

10

Concurrent Delay Julian Record - Drivers Jonas Deloitte

>>

12

JCT News Flash Find out the latest on JCT services and products.

SWEET & MAXWELL

0630141A JCT NEWS JANUARY 2012.indd 1

18/01/2012 14:40

FEBRUARY 2012

JCT NEWS 2 >>

provisions and guidance, but felt that it was leading to a general behaviour change in the industry. He continued: “The new provisions make first the employer and then the contractor consider sustainability in the design and construction of a project.

“Although some will continue to pay lip service to sustainability, I am sure that many others will begin to include specific provisions to improve performance.

However, although it is difficult to provide specific targets as all projects are different, the next step for JCT must be to give guidance for setting targets and benchmarks for specific performance.”

Professor Peter Hibberd, JCT chairman, added: “Introducing the provisions and guidance has led to sustainability rising up the building agenda.

“Clients and contractors are encouraged at an early stage in the procurement process to consider sustainability in greater depth and as an integral part of that process.

We have not been prescriptive; it is not practical or appropriate to impose rigid requirements as every project is different.

Instead, we have created a structured framework under which parties to a contract are encouraged to consider sustainability. As JCT contracts are used on the majority of building projects, the introduction is bound to result in more projects taking action to improve sustainability.

“The next step on the sustainability path will be to consider the introduction of more defined requirements that might be linked to performance payments.” JCT has just started an industry consultation to obtain views about these issues and its

next steps (www.jctltd.co.uk/life-cycleconsultation.aspx).

The iCon is a demonstration of a client and contractor working successfully together to produce an outstanding building. Designed by Consarc Architects, the iCon provides accommodation for up to 60 new and innovative businesses, as well as on-site support and advice. It also features a conference hall for up to 300 people, a public piazza, exhibition space, and a café. It is a highly innovative building using a range of new technologies which has enabled it to achieve a remarkable carbon footprint of only 15kg CO2/m2 per year. This compares to the 89kg normally achieved by a conventional air conditioned building.

Modern sustainable buildings tend to have far lighter structures than their predecessors; iCon is no different, with a timber frame building using post-and-beam construction. As the building does not have thermal mass and cannot absorb or dissipate energy, it is susceptible to rapidly varying temperatures due to solar and internal heat gains. To counter this, new phase-change material (PCM) panels have been installed in the ceiling and walls. They contain a substance that changes from a solid gel to a liquid as the temperature rises. Such a change of state occurs by the panels absorbing ambient heat as the room temperature rises (at around 22 degrees), storing it until the temperature drops again (at around 18 degrees), and then releasing it back into the room.

This gives a thermal mass equivalent to concrete!

construction, apart from concrete for part of the foundations and underground car park. The building was super-insulated and achieves an airtightness of 5.5m2/hr/ m2, almost double that required by the building regulations. No air conditioning has been included, with the building being naturally ventilated using simple passive technology that does not require human input. The building also recovers heat using an exhaust heat air pump.

Other elements include high efficiency glazing, linked daylight dimming systems which reduce light output when sufficient daylight is available, saving up to 60 per cent on energy consumption, and the building benefits from a comprehensive building management system which monitors internal and external factors, recording energy consumption, and adjusting building services accordingly.

All these elements have been integrated to achieve an ‘excellent’ BREEAM rating. The reason why it is not ‘outstanding’ is simply because the iCon site was ‘greenfield’ and not ‘brownfield’, and in any case, the ‘outstanding’ category was not in existence when the building was conceived.

There is increasing pressure upon improving sustainability in design and construction of buildings, and in their operation during their life cycle. Although in some cases this may involve additional capital cost, this will be more than recouped through energy savings over the life of the building. iCon is a demonstration of a low-carbon building which does not have to cost the earth as it cost £150/m2 to category-A fit-out.

No wet trades were used in the

SBCC CONFERENCE The SBCC, member and sister body of JCT, held its Annual Update Conference at the Royal College of Physicians in Edinburgh.

The conference covered the payment changes included in the JCT/SBCC 2011 editions to reflect the amendments to the Housing Grants, Construction and Regeneration Act 1996 (which came into force in Scotland on 1st November) and the updates on terrorism cover and the Arbitration provisions, revised to take account of the Arbitration (Scotland) Act 2010. Delegates also heard views on the payment provisions from a panel comprising a contractor, a sub-contractor, a sub-subcontractor and an adjudicator.

The topics also included the benefits of SBCC contracts, standard form contracts for Scotland; the impact of City Inn Ltd v Shepherd Construction Ltd; and other recent cases.

Barry White, Scottish Futures Trust, gave a key note presentation on “The quest for value in Scotland’s construction industry”.

Other speakers included Shona Frame, Mike Barlow, Jonathan Gaskell and Lindy Patterson QC.

SWEET & MAXWELL

0630141A JCT NEWS JANUARY 2012.indd 2

18/01/2012 14:40

3

Peter Hibberd

Chairman’s Letter

ECONOMIC REALITIES AND CONSTRUCTION OUTPUT In my first chairman’s letter in April 2009 I wrote about the economic uncertainty and potential for change in the construction industry and indeed the economy as a whole, suggesting that the then current recession would last for much longer than most of the early predictions. By traditional definitions we came out of recession but at the time of writing there is much talk about the possibility of a double dip or worse. How reliable are economic indicators as to what is happening and how should we be feeling about the future?

GDP in the UK grew every quarter from 1992 (Q2) until 2008 (Q1) – even when adjusted for inflation; it then fell for seven consecutive quarters. In 2009 (Q3) it turned and has risen each quarter bar one, however, the current level of output is still significantly lower than it was at its peak and is at a level similar to that in 2006. If one looks at the inflation adjusted per capita figures the picture is even more stark as it shows that the UK has shrunk from a peak in 2007 (Q1) and is now at levels last seen in 2004.

Therefore it is not surprising that there is much concern and unrest about the current economic position. However, the figures only tell part of the story because of significant difference across the country and indeed within the various sectors which make up the construction industry.

So regardless of their reliability, each individual and each company will feel differently – with only relatively few that are optimistic despite some positive developments in the Chancellor’s Autumn Statement.

Construction activity peaked in 2008 but has since seen a significant decline from that date with a 16% decline in 2009 and a further 1.6% decline in 2010. The current forecast by MBD is that although we will start to see some growth in construction it does not expect construction output to return to the levels seen prior to the downturn over the next five years. Other forecasts from the CPA and Experian seem to confirm this view. Over the last few months with the debt crisis in the Euro Sovereign States getting worse by the minute and the inability of banks to fund much of the activity that could lead to growth it has become clear that this has been creating even greater uncertainty and providing conditions that will constrain the level of construction work. Whatever the eventual outcome of the sovereign state debt crisis it is very unlikely it will stimulate much growth in the short term, at worst it could stymie growth for years to come. The banks may then find that even where they have funds available there is little take up because of the nature of the uncertainties that prevail.

With hindsight the situation we are currently experiencing is in some respects not that surprising; we were lulled into a sense that year on year growth was a natural phenomenon whereas experience tells us that we live within an economic cycle. Such a cycle is probably inevitable but we can alleviate the effect of such cycles or more likely make matters much worse. Clearly, stoking up an economy (even if it’s called investment) creates a boom and what inevitably follows is bust or if you prefer a decline. That is what has happened, the banking crisis simply being a part of that process, albeit a major one on this occasion. The knock on effect for construction is evident.

Construction has over the years gone through many such adjustments but this time a greater adjustment has been and will continue to be necessary because the volumes reached now appear to be unrealistic – something that could not be maintained. If one then considers the Government Construction Strategy one sees the drive for improved efficiency, which however one looks at it is intended to produce more output for the same or less cost. With Government making up a very high percentage of the construction workload and with the continuing highly charged debate regarding PFI it is not difficult to see that growth in UK construction is going to continue facing some very difficult times.

One of the most pressing issues for construction is how through such times it adjusts its use of the skilled pool of labour because, if the above analysis is correct, much of the current labour force will be underemployed unless opportunities can be found. Some companies will be able to seek more work internationally but unless they have already placed themselves accordingly they will find it increasingly difficult, especially in the short term to make much headway in that direction. Although in the longer term the best opportunities for growing construction are overseas there are still things that can be done to improve opportunities in the UK, not least resolving the issues that surround PFI and finding a proper footing for financing and paying for construction. Even where international opportunities can be found these will only have a limited impact on UK employment because companies mainly will be employing local on-site construction personnel.

I referred in ‘Changing Times’ (JCT News – February 2011) as to how the current planning policy does not provide the answer to providing a sustainable built environment and invited a debate on how we could build a better one. On Continues on page 4

0630141A JCT NEWS JANUARY 2012.indd 3

>>

18/01/2012 14:40

FEBRUARY 2012

JCT NEWS 4

the surface, the Government’s proposed planning framework appears to answer some of those questions by involving local communities in the decision making process but there is scepticism about how it is likely to operate in practice. This is, of course, partly fuelled by the activities of the house building lobby and the fears that it raises in some people of a concrete jungle. House building is necessary but should it be a driver of growth, however welcome it might be to the construction industry, or should it be simply a part of a wider debate on how a better built environment can benefit our society? Surely it is the wider debate that we need, not narrow special pleading, and we will then start to develop a vision of what our built environment should look like and in so doing create the right opportunities for growth.

If this can be achieved we may then be able to utilise the construction industry’s human resources.

So should we feel pessimistic about the future for the construction industry? Certainly not – the industry will always have a future and play a vitally important role. It just may not be the industry that you would like it to be and it certainly will not be what it has been in the past. The ability to adapt to a changing structure whilst increasing construction productivity with a proportionately smaller UK work force will be a major test for everyone who currently works in the construction industry.

Peter Hibberd Chairman of JCT

The buildings in the UK included the Brent Civic Centre, One and two Kingdom Street, London (part of the Paddington Central development) and a secondary school in Cambridge. Green construction is good for our planet and it is good for business.

Brent Civic Centre

THE JOURNEY TO DEEP GREEN – THE JCT POVEY LECTURE 2011 This year’s JCT Povey Lecture was held at the Local Government House in London where a distinguished audience heard Mike Putnam, President and CEO of Skanska UK, give a talk about Skanska’s Journey to Deep GreenTM: a journey of sustainability.

He explained how Skanska’s sustainability agenda embraces social, environmental and economic elements and its use of the Skanska Color PaletteTM. The Color Palette is a tool that can be used to clarify expectations and targets: it provides

a visual means of illustrating where the company is in practice and the progress that is being made. The Color Palette focuses on 4 areas, namely, energy, carbon, materials and waste; it is coloured from vanilla through green to deep green. Vanilla representing compliance, deep green representing the ultimate objective of a near zero impact on the environment - green being somewhere in between.

The talk gave examples of buildings here in the UK and in Sweden, Norway and the USA which had been designed and built as a part of the journey.

Mike Putnam threw down a number of challenges to politicians and the UK construction industry. The challenge to politicians and officials at local, regional and national level was to break down barriers and to be bolder in outlook – a vision and a passion were required.

They should also provide incentives and not rely solely on regulation – the carrot and stick approach. The challenge to clients, architects, surveyors and the supply chain is to set more demanding targets and to look more closely at the whole life cycle of their own projects.

He concluded by saying that although we work in a competitive world much can be gained from sharing knowledge and working together in a collective desire to build a society that minimises environmental impact, saves energy, reduces greenhouse gas emissions, prevents waste, avoids using hazardous substances and saves water. A society that is less dependent on nonrenewable resources.

The full text of the Povey Lecture can be found at www.jctltd.co.uk/povey-lecture.aspx.

SWEET & MAXWELL

0630141A JCT NEWS JANUARY 2012.indd 4

18/01/2012 14:40

5

JCT LAUNCHES SUSTAINABILITY: LIFE CYCLE CONSULTATION

LKDN4X~IUWIUYF FDGQadfyiOIUYF JCT recently launched a consultation on sustainability and life cycle matters in the context of construction procurement and building contracts. The purpose is to provide a focus for sustainability to improve the property and construction industries’ performance and to help deliver the Government’s Strategy for Sustainable Construction.

committed to reduce carbon emissions in the UK by 2050.

As part of its carbon reduction commitment, various policies, such as the CRC Energy Efficiency Scheme, feed-in tariffs and the Green Deal, have been introduced. Coupled with this focus on reducing carbon is the growing concern over increasing energy prices, in particular in the long term.

It follows an earlier consultation in 2008 to obtain views on sustainability, which subsequently reinforced the inclusion of sustainability clauses in JCT contracts and the publication of new sustainability guidance, Building a sustainable future together in 2009 (recently revised 2011).

Property companies and other large property procurers have an interest in the long-term performance of their buildings, not merely their construction or refurbishment. In addition, evidence suggests that institutional investors, tenants and others are increasingly interested in the performance of buildings.

This new consultation will seek views and opinions from construction and property professionals, the supply chain and other interested parties on life cycle matters, in particular, the importance placed upon the long-term performance of a building in terms of sustainability.

Dr Andrew Flood, chair of the JCT sustainability working group, explained the context: “The Government has

However, at present the property and building industries are arguably fragmented. Employers often separate development teams from asset management teams, while contractors are appointed separately from facilities managers. This does not help with joined-up thinking in terms of building design, procurement and life cycle matters.”

The consultation, which is online (www.jctltd.co.uk/life-cycle-consultation.aspx), will run until 5 April 2012. The results of the consultation will be published this Summer.

JCT ESSAY COMPETITION FOR STUDENTS As part of its Education and Training Initiative, JCT has launched an essay-writing competition for construction students.

A range of prizes from £250 for runners-up and £1,000 for winners are available to help students with the cost of their courses.

JCT is keen to help students develop their understanding of construction contracts – knowledge that will be crucial no matter what career in the construction industry they are studying for.

To find out more and enter the competition, simply scan the QR code, or visit www.jctltd.co.uk/student-competition.aspx

0630141A JCT NEWS JANUARY 2012.indd 5

18/01/2012 14:40

FEBRUARY 2012

JCT NEWS 6

REUTERS/Alex Domanski

IS THE ELEPHANT TEST THE BEST APPROACH TO DEFINING PRACTICAL COMPLETION? SHONA FRAME - MACROBERTS LLP

Practical completion is notoriously difficult to pin down with a definition. The editors of Keating note that it is “perhaps easier to recognise than to define”. Through various cases, the courts have attempted definitions so that there are now a number of candidates for this.

However, could it be that it might simply be necessary to accept that this is a term which defies definition but that in reality causes little difficulty. This is not something which would be novel to the courts. For example, Lord Justice Stuart-Smith in the Court of Appeal in Cadogan Estates Limited v Morris, 1998 resorted to the following in relation to the validity of a notice under the Leasehold Reform, Housing and Urban Development Act 1993: “This seems to me to be an application of the well known elephant test. It is difficult to describe, but you know it when you see it.”

The phenomenon has also extended to the courts in the US where the phrase “I know it when I see it” was given judicial approval.

Supreme Court Justice Potter Stewart described the threshold test for pornography in Jacobellis v. Ohio (1964) by stating: “I shall not today attempt further to define the kinds of

material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it …”

Another candidate, although this one comes without judicial endorsement, is the duck test: “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.”

Drafters of standard form contracts have tended to shy away from a definition of practical completion, perhaps due to the difficulties of finding a suitable definition.

The approach of JCT in the Standard Building Contract is to make reference to a Practical Completion Certificate being issued “when in the opinion of the Architect/Contract Administrator practical completion of the Works or a Section is achieved and the Contractor has complied sufficiently with clauses 2.40 [supply of Contractor’s Design Documents] and 3.25.4 [provision of information for the health and safety file].”

In the Design and Build form the approach is the same with the Practical Completion Statement being issued “when practical

completion of the Works or a Section is achieved and the Contractor has complied sufficiently with clauses 2.37 [supply of Contractor’s Design Documents] and 3.16.5 [provision of information for the health and safety file].”

In the Minor Works form: “The Architect/ Contract Administrator shall certify the date when in his opinion the Works have reached practical completion and the Contractor has complied sufficiently with clause 3.9.3 [provision of information for the health and safety file].”

JCT appears to be taking the “know it when you see it approach” with these references, leaving it to the relevant parties to the contract to decide when is the appropriate stage of completion for practical completion to be achieved.

As far as assistance from the courts is concerned, there are the following cases.

In City of Westminster v J Jarvis & Sons Ltd (House of Lords, 1970) the court was concerned with the meaning of the phrase “delay on the part of nominated subcontractors”. In the course of discussion on

SWEET & MAXWELL

0630141A JCT NEWS JANUARY 2012.indd 6

18/01/2012 14:40

7

this topic, the judges gave consideration to what constituted completion with reference to the clause which provided that when in the opinion of the architect the works were practically complete, he was to issue a certificate to that effect.

Viscount Dilhorne set a high standard namely that “One would normally say that a task was practically completed when it was almost but not entirely finished but “practical completion” suggests that that is not the intended meaning and that what is meant is the completion of all the construction work that has to be done.” It was said that there should not be defects apparent at this date and that a practical completion certificate cannot be issued where these exist although it could be issued where there were latent defects which only become apparent later.

In H.W. Nevill (Sunblest) Ltd v William Press & Son Ltd, 1981, Judge Newey QC’s view was: “I think that the word “practically” in Clause 15(1) gave the architect a discretion to certify that William Press had fulfilled its obligation under Clause 21(1) where very minor de minimis works had not been carried out, but if there were any patent defects in what William Press had done the architect could not have given a certificate of practical completion.”

The Court of Appeal of Hong Kong commented on this issue in the much criticised case of Big Island Contracting (HK) Ltd v Skink Ltd, 1990. The contract allowed for payment of 25% of the contract price on practical completion.

There the court found there to be no distinction between practical completion and substantial performance. Practical completion was found not to have been achieved on the basis that the work contracted for was… neither “finished” nor “done” in the ordinary sense. This case was subsequently overruled by the Court of Final Appeal in the Mariner case below.

Back in the English courts, in the following year the issue again arose in Emson Eastern Ltd (in receivership) v

0630141A JCT NEWS JANUARY 2012.indd 7

EME Developments Ltd, 1991. Judge Newey QC said that the matrix of facts against which the building contract should be construed is what happened on building sites generally. There was a recognition that a construction project is not like the manufacture of goods in a factory. Factors such as size of the project, site conditions, use of many materials and employment of various types of operative make it impossible to achieve the same degree of perfection as a manufacturer. The judge took into account the overall contract scheme.

After practical completion the employer took occupation and the contractor was required not to do more work but to remedy defects. It was said: “In my opinion there is no room for “completion” as distinct from “practical completion”.

Because a building can seldom if ever be built precisely as required by drawings and specification, the contract realistically refers to “practical completion”, and not “completion” but they mean the same.”

Mr Justice Bokhary P.J. in the Hong Kong Court of Final Appeal in the case of Mariner International Hotels Ltd v Atlas Ltd, 2007 provided a definition of what “practical completion” is understood to mean in building contracts in general. Preferring the arguments put forward by Counsel for Mariner in which he had referred to practical completion as a “well known legal term of art with an established meaning in building contracts” it was said by Mr Justice Bokhary: “In my view, what clause 2.01(b) means by “practical completion” is a state of affairs in which the Hotel has been completed free from any patent defects other than ones to be ignored as trifling.” and “True it is that the standard of freedom from non-trifling patent defects is an exacting one. But it does not, after all, demand more than the avoidance of what is apparently defective and, moreover, apparently so to a degree exceeding what can be ignored as trifling.”

There does seem to be a theme throughout these cases of practical completion requiring a stage of completeness with an absence of anything other than minor patent defects.

Why does a definition matter? Practical completion forms an important milestone in any project. Consequences which flow from practical completion having been achieved include that the employer takes possession of the site, it triggers the start of the Rectification Period, it allows release of the first half of the retention and it marks the end of the period for which liquidated damages can be applied. It also signals a change in insurance provision with the contractor’s responsibility for this coming to an end. It could be argued that a definition brings clarity so that the moment of these consequences applying is known.

Would a definition of practical completion bring such clarity and assist in the management of a project? It is suggested that this is not required. The cases referred to above cover a period of 40 years. During this time the courts have only been troubled with this issue on a handful of occasions. Even within the cases, the various courts found it necessary to look to the facts of each individual case and take into account the practical realities of a building site and no definition would prevent the need for that. The suggestion in Mariner of practical completion being a legal term of art with an established meaning would appear to be the reality. Perhaps it is indeed the elephant test which is the most appropriate one to apply to the question of whether or not practical completion is achieved. In that case, JCT can safely maintain its current approach.

Shona Frame is a Partner at MacRoberts LLP. She is accredited by the Law Society of Scotland as a Specialist in Construction Law and sits on the Scottish Building Contract Drafting Committee. She can be contacted on shona.frame@macroberts.com.

18/01/2012 14:40

FEBRUARY 2012

JCT NEWS 8

LIMITATION: SOME THORNY ISSUES ROBBIE LECKIE & RUTH WILKINSON - DUNDAS & WILSON LLP

Missing a limitation deadline is a lawyer’s worst nightmare – since an expired limitation period can operate as a complete defence to a claim, it is one of the first things to consider whenever a claim is to be brought or defended. However, working out when the limitation period expires is not always straightforward. For instance – have the statutory limitation periods been reduced or extended by the contract? Are you dealing with a claim under contract or tort (which have different limitation rules)?

And what do you have to do in order to stop the period from running? This article looks at some of those issues and considers the approach taken by the courts in some recent cases.

What are the applicable limitation periods?

Limitation periods in England and Wales are laid down in the Limitation Act 1980.

Actions for breach of contract must be brought within 6 years, unless the

contract is executed as a deed in which case the period is 12 years. Most claims in tort have the same period, 6 years, as for a claim under a simple contract.

However, a distinction applies between claims made in contract and tort when considering when the limitation period will start running. This is from the date on which the “cause of action” accrued.

For contract claims, the cause of action accrues on the date of the breach of contract – regardless of whether any damage is suffered, and regardless of whether the other party knows of the breach. For claims in tort, the cause of action does not generally accrue until damage is suffered.

There are statutes which deal with certain specific types of claim where different limitation periods may apply.

These include latent defects claims under the Latent Damage Act 1986 (3 years from the date of knowledge of damage with a 15 year longstop); claims under the Defective Premises Act 1972 (6

years from completion of the dwelling); and contribution claims under the Civil Liability (Contribution) Act 1978 (generally two years from judgment being awarded against the party claiming contribution).

It cannot be assumed that the expiry of the contractual limitation period will bring an end to all liability – a contribution claim can be made after the expiry of the limitation period in the contract from which such a claim in contribution is made, by virtue of the 1978 Act. Tort versus contract A cause of action in tort can arise much later than the cause of action in contract, meaning that whereas a claim in contract may be time barred, a claim in tort may not be. However, the recent case of Robinson v PE Jones (Contractors) Ltd [2011] EWCA Civ 9 confirms that it will often be impossible to make a claim in tort against a contractor for defective works because the cost of correcting the contractor’s defective works will generally

SWEET & MAXWELL

0630141A JCT NEWS JANUARY 2012.indd 8

18/01/2012 14:40

9

constitute a “pure economic loss” which is not recoverable in tort unless there has been a special “assumption of responsibility”.

When does the cause of action accrue in contract?

With contractors, because generally there is an obligation to “carry out and complete” the works right up until Practical Completion, a cause of action relative to these works will not accrue until that date.

With designers there may again be ongoing obligations for example to review/revise the design so that any cause of action relative to faulty design may not accrue until the designer has completed the design process. There may also be more than one cause of action and therefore more than one date of accrual.

Can you extend/limit a limitation period?

The attestation provisions in JCT contracts provide for execution under hand (simple contract) and for execution as a Deed and also a space for other forms of attestation where required.

However, some construction contracts stipulate the limitation period expressly.

Collateral warranties, for example, may be entered into some time after the building contract to which they relate.

This could mean that the limitation period expires under the building contract but subsists under various warranties. To avoid this, the limitation period is often tied to practical completion of the works – normally, 6 years or 12 years thereafter.

Nothing stops the parties from agreeing different limitation periods from that under the Limitation Act 1980. However in order to have the effect of overriding the Limitation Act 1980 very clear words must be used. An example of wording which is commonly used, but which did not achieve this objective, arose in Oxford Architects’ Partnership v Cheltenham Ladies College [2006]

0630141A JCT NEWS JANUARY 2012.indd 9

EWHC 3156 (TCC). In that case, the relevant clause stated (in summary): “No action or proceedings for any breach of this Agreement or arising out of or in connection with all or any of the Services undertaken by the Architect in or pursuant to this Agreement, shall be commenced against the Architect after the expiry of [six] years from completion of the Architect’s Services, or, where the Services specific to building projects Stages K-L are provided by the Architect, from the date of Practical Completion of the Project.”

The judge held that whilst this provided an additional contractual time bar preventing the College from bringing proceedings after the dates specified, it did not affect the architects’ ability to rely on statutory limitation defences if they arose earlier. There was nothing in the clause to state that the rules in the Limitation Act were intended to be modified or waived – therefore, the claim was time barred as it had been brought more than six years from the date of breach. If the intention had been to extend the Architects’ liability until six years from Practical Completion, notwithstanding the terms of the Limitation Act, then this could and should have been clearly stated.

The courts are likely to uphold contractual limitation periods. A recent example of this is Inframatrix Investments Ltd v Dean Construction Ltd [2011] All ER (D) 270 (Jul). In this case the contract had been executed as a deed but included a provision which sought to prevent claims being brought more than one year after Practical Completion or, if earlier, the date the contractor last performed services. The Court found that this provision was enforceable and granted the Defendant’s application to strike out the claim. However, this case has been granted leave to appeal.

Interrupting a limitation period

That means either court or arbitration proceedings must be brought before the expiry of the limitation period.

Commencing adjudication proceedings is not enough. When faced with an impending limitation deadline, action must be taken quickly.

One option is to ask the other side to enter into a standstill agreement, where the parties agree to extend the limitation period and/or not to rely on limitation defences if a claim is brought within a particular period. Whilst this may seem to go against a potential defendant’s interests, it may be preferable to the alternative of both parties being bounced prematurely into unwanted litigation.

Otherwise, the claimant may have no option but to issue a claim form. This will allow a period of up to four months for Particulars of Claim to be prepared and served. However, if a party issues proceedings which he does not intend to proceed with, merely in order to avoid the expiry of the limitation period in case something crops up, the claim could be found to be an abuse of process and struck out in its entirety: Nomura International plc v Granada Group Ltd [2007] EWHC 642.

The provisions of the Pre-action Protocol for Construction & Engineering Disputes should also be borne in mind. Whilst acknowledging that proceedings may need to be issued without complying with the Protocol in order to beat a limitation deadline, parties are required to request that the action be stayed promptly after service to enable the Protocol to be complied with. Failure to comply can lead to significant adverse costs consequences.

Robbie Leckie is a Senior Associate at Dundas & Wilson LLP. He is contactable on robbie.leckie@dundas-wilson.com.

Ruth Wilkinson is an Associate at Dundas & Wilson LLP. She is contactable on ruth.wilkinson@dundas-wilson.com.

A claim must be brought within the limitation period or else it will be lost.

18/01/2012 14:40

FEBRUARY 2012

JCT NEWS 10

CONCURRENT DELAY

JULIAN RECORD – DIRECTOR, REAL ESTATE ADVISORY, DRIVERS JONAS DELOITTE

Concurrent delay is a highly contentious issue and one which all professionals encounter at some stage in their careers. I wonder though how much more topical this whole area may become as clients and contractors increasingly find themselves in contentious circumstances due to the suicidal bidding taking place across the industry as contractors fight it out to maintain activity levels.

Let us consider the effects of this; increasing claims? Most definitely; high cost of variations? Again, most definitely; a departure from traditional suppliers as contractors also seek lower costs? I think so and I have heard of this from good authority. Doesn’t this also spell phone directory supply chains which Paul Morrell is so critical of?; contractors taking on risks they would ordinarily balk at and cutting establishment to the bare minimum in order to keep costs down?; most definitely!

Anyway you get the picture but this all points towards performance issues increasingly coming to the fore and delaying works on site, so when a Relevant Event such as an Employer change is introduced, which is the most common Relevant Event to occur, then it’s inevitable that concurrent delay issues and associated loss and expense will arise.

So how does the JCT suite and in particularly DB 2011 deal with this thorny subject? Well, the simple answer is that it doesn’t expressly do so - it only requires the Employer to fix an extension of time ‘as he then estimates to be fair and reasonable’ which I do find puzzling considering the emotive subject which it is. One can only assume that this is due to the complexities around navigating a safe route through this subject area and reflecting industry representatives’ consensus view.

Either way if an agreement can’t be reached between the parties, as to the event that caused the actual delay to completion and the entitlement to an extension of time then it falls to dispute resolution procedures, common law and the Courts to determine the position.

Here there are some interesting (and conflicting) precedents.

Traditionally the key case has been Henry Boot Construction v Malmaison Hotel (1999) which said that where there are two concurrent causes of delay, one of which is an employer risk event and the other is not, then the contractor is entitled to an extension of time for the full period of delay which is attributable to the employer risk event. This position is supported by the Society of Construction Law’s Delay and Disruption Protocol.

Following on from Henry Boot, the judge in Royal Brompton Hospital NHS Trust v Hammond (2000) provided a further explanation of what is meant by events operating concurrently, namely the events must be shown to be on the critical path of the programme as opposed to one which is merely concurrent with the critical path.

SWEET & MAXWELL

0630141A JCT NEWS JANUARY 2012.indd 10

18/01/2012 14:40

11

Julian Record

However, a recent decision in the Scottish courts has provoked a great deal of speculation where in the case of City Inn v Shepherd Construction (2010) it was decided that “where two causes, neither of which is dominant, are under consideration, a relevant event and a non-relevant event, it may be appropriate for the architect or decision maker to apportion responsibility for the delay between the two causes”. This seems perfectly sensible to me though this is contrary to the English Law approach laid down previously in Henry Boot and being a Scottish court decision is not formally binding so will remain a controversial analysis of the law in this area until tested further.

However, in addition to the principle of apportionment, the case also established a principal of dominancy, so if there is one dominant cause, all other causes will be disregarded. Again this seems a highly sensible and reasonable approach to me. For example, let’s say a contractor is 5 weeks behind schedule at a late stage in the programme due to the non performance of one of his key sub-contractors and the client then raises a variation which would otherwise have delayed the works by say 1-2 weeks. In this scenario, English law and the delay and disruption protocol would point towards a two week extension of time (plus associated loss and expense), which to my way of thinking seems unfair when there was a significant pre-existing delay.

So in the absence of further drafting on this matter from JCT and greater clarity from the courts, what should practitioners do to protect one’s interests? Well, here are a number of suggestions.

First, build strong foundations. By that I mean the production of good quality, well detailed design documents clearly setting out what is required in line with the client brief and scope of service. The production of these should not be rushed and they should be thoroughly quality assured to ensure there are no errors, ambiguities or inadequately detailed information; Second, make sure there is an obligation within the contract documentation for the contractor to provide regular updated programmes and method statements

0630141A JCT NEWS JANUARY 2012.indd 11

so that any delay can be managed in a proactive transparent manner. These should include progress lines, details of the critical path, activity links, no activities >20 days in duration, no open ended activities i.e. all should be linked, details of any mitigation measures to recover any delay etc; Third, maintain a schedule of employer obligations and milestones so that there are no surprises late in the programme when delay issues bubble to the surface.

Some examples include ordering of phone lines, gas and electricity meters, specialist/group 2 equipment; Fourth, implement a robust change control procedure whereby the full cost and programme implications of any change are first agreed prior to any changes being instructed. One should also re-iterate that all variations must be via the Employer’s Agent and that the contract documentation makes it clear that any changes acted upon following direct conversations between the client and contractor are null and void; Fifth, maintain open communications and use early warning notices to ensure that issues and connected matters are flagged early (ensure paragraph 12 of Schedule 2, Supplemental Provisions of the contract (DB 2011) is operative and not deleted in the Contract Particulars); and Finally, as a very last resort, one could vary the terms of the contract to try to clarify this whole area but making amendments to a standard contract is a dirty word and certainly should not be embarked upon without legal advice. Clearly, this is not something JCT would recommend.

In summary, though there is no substitute for good planning and organisation, which set strong foundations in place, good resourcing & communications and good record keeping are necessary so that delay issues can be addressed up front as part of the normal administration and decision making process rather than retrospectively in more contentious circumstances.

18/01/2012 14:40

FEBRUARY 2012

JCT NEWS FLASH

YOUR UPDATE ON JCT SERVICES AND PRODUCTS JCT CONTRACTS 2011 EDITION AVAILABLE FROM YOUR STOCKIST

The new edition of JCT Contracts – JCT 2011 – which covers the new payment legislation and other updates was published in September. The new Construction Act came into force on 1 October 2011 in England and Wales.

The JCT 2005 suite will remain available until 1 July 2012 and it is labelled to show they no longer comply with the current legislation.

The equivalent legislation came into force on 1 November 2011 in Scotland. Users in Scotland should refer to www.sbcconline.com regarding the SBCC 2011 suite.

Users in Northern Ireland should continue to use the JCT 2005 suite until the equivalent legislation comes into force in Northern Ireland (expected to be late 2012).

JCT CONTRACTS COMPLETE WORKS JCT 2011 Complete Works comprises of a full set of JCT documents, in JCT branded binders, for your library or office.

Order from your local stockist today.

JCT 2011COMPLETE WORKS ISBN: 978-0-414-04793-8

JCT NAMED SPECIALIST UPDATE This Update (February 2012) contains optional provisions for the Standard Building Contract 2011 to enable the Employer to name individual specialists as domestic sub-contractors for identified part(s) of the Works.

To download a free copy of the JCT Named Specialist Update, please go to www.jctltd.co.uk.

MAKE YOUR TRANSITION TO JCT 2011 WITH JCT TRACKED CHANGE DOCUMENTS HOW TO GET THE TRACKED CHANGE DOCUMENT YOU NEED The following Tracked Change Documents are available to order in bound hardcopy from your local stockist.

When you purchase a Tracked Change Document through Docdel, you will receive an unbound hardcopy print out of the PDF version.

All other contracts are available through Docdel by emailing: sweetandmaxwell.Docdel@thomson.com.

JCT CONTRACTS ACADEMIC BOX SET

• SBC/Q 2011 Tracked

• IC 2011 Tracked

JCT Contracts Academic Box Set (ISBN: 978-0-414-02261-4) includes:

• SBC/AQ 2011 Tracked

• ICD 2011 Tracked

• SBC/XQ 2011 Tracked

• MW 2011 Tracked

• DB 2011 Tracked

• MWD 2011 Tracked

• the complete set of JCT Contracts • the JCT Contracts Digital Service

JCT PUBLIC SECTOR SUPPLEMENT

• invitation to become a member of the JCT Education and Training Provider Group

JCT has issued a Public Sector Supplement which can be used in conjunction with the JCT contracts 2011 Edition in the procurement of public sector projects.

The Academic Box Set is a limited offer and is only available to recognised bodies whose primary purpose is the provision of education and training.

Order from your local stockists today.

MAKE SURE YOU RECEIVE EVERY ISSUE OF THE JCT NEWS

Please register at www.jctltd.co.uk/news-update.aspx to join the JCT News mailing list

The Supplement includes the following features: • Provisions to ensure alignment with the Government’s Fair Payment Guidelines.

• A model clause authorising disclosures by public sector clients in accordance with the Freedom of Information Act 2000 and the Government’s Transparency Policy.

• Reference to any agreed Building Information Modelling protocol.

To download a free PDF copy of the Public Sector Supplement, please go to: www.jctltd.co.uk/public-sector.aspx.

You can find full pricing and a list of stockists at jctcontracts.com

SWEET & MAXWELL

0630141A JCT NEWS JANUARY 2012.indd 12

18/01/2012 14:40