Practical Law Construction Christmas quiz 2016

Question 1 (liability for gratuitous advice)

Construction professionals often help friends who are having some work done, but could you be putting yourself at risk by offering guidance over a glass of festive mulled wine?

Which of the following is true? (One or more statements may be correct.)

(a) As long as you don't enter into a contract/appointment, you can't be liable.

(b) A professional designer in the construction sector can owe a duty of care in tort, which imposes liability for pure economic loss.

(c) If it exists, a professional's liability for pure economic loss covers only advice given, not other services that are performed, such as inspecting the execution of works by a contractor.

(d) You should always refuse a friend's request for advice.

Answer

Statement (b) is true.

Alexander Nissen QC's judgment in Burgess and another v Lejonvarn [2016] EWHC 40 (TCC) considered these issues. Even without any contractual relationship, a duty of care can arise in tort and that may give rise to liability for pure economic loss, covering not just advice given but also other services provided.

However, don't let this limit your Christmas generosity too much. The court emphasised that "this was not a piece of brief ad hoc advice of the type occasionally proffered by professional people in a less formal context". This was a significant project approached in a professional way, with services provided over a relatively long period and involving considerable commitment on both sides. In addition, the professional consultant had hoped to receive payment for services that might be necessary later in the project.

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Question 2 (varying a contract)

After months of negotiation, you finally execute your building contract in time for the Christmas holidays. You don't want to risk it being changed without serious thought, so it includes a clause requiring any amendment to be in writing.

Does that prevent the parties agreeing an oral variation to their contract while you are enjoying your Christmas dinner?

(a) Oh no it doesn't.

(b) Oh yes it does.

Answer

Oh no it doesn't. An anti-oral variation clause in a contract does not prevent a subsequent variation of the contract orally, or by conduct.

In MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553 the Court of Appeal held that a clause requiring contract variations to be in writing and signed did not prevent a valid variation by oral agreement, thus endorsing the obiter comments made by the Court of Appeal in Globe Motors, Inc and others v TRW Lucas Varity Electric Steering Ltd and another [2016] EWCA Civ 396.

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Question 3 (arbitrator impartiality)

You are referring a dispute to arbitration, because you don't mind working over Christmas. Obviously, you want an unbiased arbitrator. In Cofely Ltd v Bingham and another [2016] EWHC 240 (Comm) the court exercised its power under section 24 of the Arbitration Act 1996, which allows the court to remove an arbitrator in circumstances that give rise to justifiable doubts as to their impartiality.

Which of these grounds did the court accept cumulatively gave rise to a real possibility of bias? (One or more statements may be correct.)

(a) The fact that the other party's representatives favoured using this arbitrator and tried to exclude other arbitrators from being nominated without legitimate reasons. (This fact had been revealed by Ramsey J's earlier judgment in Eurocom Ltd v Siemens plc [2014] EWHC 3710 (TCC), in relation to potential adjudicators.)

(b) The arbitrator's response to requests for information was evasive, defensive and unjustified.

(c) The arbitrator's defensive and hostile stance when he convened a hearing.

(d) The fact that the arbitrator had acted so frequently as an arbitrator or adjudicator in cases where the other party's representatives were involved.

(e) The arbitrator's aggressive and unapologetic witness statement opposing the section 24 application.

Answer

All five of the statements were accepted as grounds that, taken together, justified the arbitrator's removal under section 24 of the Arbitration Act 1996.

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Question 4 (interim payments)

You are building a new grotto for Santa. The work is expected to take ten months, ending in time for Christmas. You don't trust Santa, so you insist that your building contract includes a detailed payment schedule setting out the precise dates that are relevant to the payment mechanism for each month, ending in December.

Which of these is true? (One or more statements may be correct or incorrect.)

(a) There is no point setting out interim payment dates beyond December. After all, the grotto will be complete by then.

(b) If the work does continue into next year, you will still be able to claim monthly interim payments. That is an implied term of the contract.

(c) If the work does continue into next year, this payment mechanism does not comply with the requirements of section 109 of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996). Therefore the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649) (Scheme for Construction Contracts 1998) will apply and confer a statutory right on you to claim monthly interim payments from January 2017 until practical completion.

(d) You will not be able to claim any interim payments if the work continues after the end of December and must wait until the final payment date for any further payment.

Answer

Statement (d) is true.

This issue arose in Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] EWHC 168 (TCC) (see Legal update, Contractor had no contractual right to apply for interim payment even though works ongoing (TCC)), which was upheld by the Court of Appeal in Balfour Beatty Regional Construction Ltd v Grove Developments Ltd v [2016] EWCA Civ 990 (see Legal update, Contractor had no contractual right to apply for interim payment even though works ongoing (Court of Appeal)).

For more information, see Blog posts:

Question 5 (Brexit)

You can't decide whether Brexit will make your Christmas better or worse, but you'd like to be armed with some facts when, inevitably, someone starts an argument about it over the Christmas pudding.

Which construction-related legislation owes its existence to the UK's membership of the EU? (It may be more than one.)

(a) The Construction (Design and Management) Regulations (SI 2015/51).

(b) The Construction Products Regulations 2013 (SI 2013/1387).

(c) The Party Wall etc. Act 1996.

(d) Late Payment of Commercial Debts (Interest) Act 1998.

Answer

The legislation mentioned in (a), (b) and (d) all owes its existence to EU law. Specifically:

The Construction (Design and Management) Regulations (SI 2015/51) were originally introduced in 1994. They were based on and transposed into domestic law from European Directive 92/57/EEC on minimum safety and health standards for temporary or mobile construction sites. For more information, see our CDM 2015 toolkit.
The Construction Products Regulations 2013 (SI 2013/1387) implemented the Construction Products Regulation (305/2011/EU) in the UK. For more information, see Practice note, Construction products regulation.
The Late Payment of Commercial Debts (Interest) Act 1998 was implemented following a European Commission recommendation on payment periods in commercial transactions (95/198/EC). It was then amended to comply with European Union Directive 2000/35/EC. For more information, see Practice note, Interest under the Late Payment of Commercial Debts (Interest) Act 1998.

For more information on the Party Wall etc. Act 1996, see PWA 1996: a toolkit to the Party Wall etc. Act 1996.

Perhaps these facts will impress only those with an interest in construction law, so for a wider range of information, see our Brexit landing page.

Question 6 (extensions of time)

You really admire how Santa delivers all those presents on time every year. If only construction projects were so reliable.

Which of these statements is true, unless the contract provides otherwise?

(a) An extension of time will always be added contiguously to the previous date for completion, not discontinuously in discrete periods of time. This applies even if the contractor is in culpable delay when the event triggering the extension of time occurs.

(b) An extension of time will usually be added contiguously to the previous date for completion, not discontinuously in discrete periods of time. However, this does not apply where the contractor is in culpable delay when the event triggering the extension of time occurs. In these circumstances any extension of time will be added as a discrete period.

Answer

Statement (a) is true, see Carillion Construction Ltd v Woods Bagot Europe Ltd and others [2016] EWHC 905 (TCC), as discussed in:

Question 7 (deletions from a contract)

You are negotiating a contract late on Christmas eve and agree one last deletion from its wording. You make the amendment by striking through the wording of the standard form contract that the parties have agreed to delete.

Which of these is true? (One or more statement may be correct.)

(a) A court can never have recourse to deleted or omitted wording when interpreting a contract.

(b) A court can refer to deleted words in a printed, standard form to resolve the ambiguity of a neighbouring paragraph that remains.

(c) A court can refer to deleted words to resolve ambiguity even if no printed form is involved.

Answer

Statements (b) and (c) and are true.

The Court of Appeal's judgment in Narandas-Girdhar and another v Bradstock [2016] EWCA Civ 88, considered this issue by reference to previous case law. It approved the first instance judgment in Mopani Copper Mines plc v Millennium Underwriting Ltd [2008] EWHC 1331, in which Clarke J stated that:

"The diversity of authority… renders it difficult for a judge of first instance to recognise when recourse to deleted words may properly be made. The tenor of the authorities appears to be that in general such recourse is illegitimate, save that (a) deleted words in a printed form may resolve the ambiguity of a neighbouring paragraph that remains; and (b) the deletion of words in a contractual document may be taken into account, for what (if anything) it is worth, if the fact of deletion shows what it is the parties agreed that they did not agree and there is ambiguity in the words that remain. This is classically the case in relation to printed forms (Mottram Consultants, Timber Shipping, Jefco Mechanical Services), or clauses derived from printed forms (Team Service), but can also apply where no printed form is involved (Punjab National Bank Ltd)."

Lewison LJ referred to Narandas-Girdhar in a subsequent Court of Appeal judgment, stating that "in interpreting a written instrument the court may look at words which the parties have deleted… Ex hypothesi deleted words have no operative force in the contract as made, but nevertheless they may be used as an aid to interpretation." (Barnardo's and others v Buckinghamshire and others [2016] EWCA Civ 1064.)

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Question 8 (concurrent delay)

Which of the following statements about concurrent delay are true? (One or more statement may be correct.)

(a) Concurrent delay, in the context of construction and engineering projects, is a period of delay that is caused by two events, one the contractor's contractual responsibility and one the employer's contractual responsibility. It is unnecessary for the events causative of delay to occur simultaneously, but the consequences of the two events must be felt at the same time.

(b) Concurrent delay, in the context of construction and engineering projects, is a period of delay that is caused by two events, one the contractor's contractual responsibility and one the employer's contractual responsibility and both the events causative of delay occur simultaneously and the consequences of the two events are felt at the same time.

(c) Concurrent delay, in the context of construction and engineering projects, is a period of delay that is caused by two or more effective causes of delay which are of approximately equal causative potency.

(d) In cases of concurrent delay the contractor is entitled to an extension of time but is not entitled to recover any time-related costs.

(e) On the first day of Christmas my true love gave to me, two turtle doves.

Answer

Statements (b) (currently), (c) (currently) and (d) are true.

When concurrent delay is established, the orthodox approach, known as the Malmaison approach after the decision of Dyson J (as he then was) in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32, is that the contractor is entitled to an extension of time (which acts as a defence to the employer's claim for liquidated damages), but is not entitled to recover any time-related costs. The more tricky issue is the definition of concurrent delay for the purposes of the Malmaison approach. In other words, when does "true" concurrent delay occur? While many judges and commentators generally accept what is termed the "John Marrin definition" of concurrent delay (paragraph (c) above), this is difficult to apply in practice. Does it mean that there is concurrent delay when:

The contractor risk event and the employer risk event occur at different times but have concurrent effect (in other words, the consequences of the two events is felt at the same time) and they are of "equal causative potency"?
The contractor risk event and the employer risk event occur at the same time because where an existing event has caused delay to completion, subsequent delay events do not cause delay to completion at all unless they increase the delay already caused by the existing event?

The recent decision in Saga Cruises BDF Ltd and another v Fincantieri SPA [2016] EWHC 1875 (Comm) adopts the latter approach (see Legal update, No loss argument, concurrent delay and LDs (Commercial Court)). (The court commented that, in cases like this, it is important to distinguish between:

A delay that, had the contractor not already been delayed would have caused delay but, because of an existing delay, made no difference.
A delay that is actually caused by the event relied on.

The court held that the delaying events for which the employer was responsible were, in effect, supervening events that occurred against the backdrop of the contractor's existing delay, and which therefore had no effect upon the completion date.

The consultation draft of the second edition of the SCL Delay and Disruption Protocol also appears to support this position. In essence, it provides that, where an employer delay to completion occurs after a contractor delay to completion but continues in parallel with it, that is not concurrent delay. The employer delay has no impact on completion in these circumstances.

This is probably not the end of the concurrent delay story and this case and the approach taken by the SCL Protocol is likely to provoke further debate as to the correct approach to concurrent delay claims under English law.

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Question 9 (adjudication)

In mid-December you receive multiple referrals to adjudication under the Scheme for Construction Contracts 1998, all relating to the same construction contract. Some Grinch is trying to steal your Christmas! But has the Grinch slipped up with his choice of adjudicator?

Which of the following is true? (One or more statement may be correct.)

(a) You can refer the same dispute to different adjudicators.

(b) You can refer different disputes to the same adjudicator at the same time.

(c) You can refer different disputes to the same adjudicator, as long as you don't do it at the same time.

(d) You can refer different disputes to different adjudicators at the same time.

Answer

Answers (c) and (d) are correct.

Statement (a) is untrue because a dispute cannot be referred if it is "the same or substantially the same as a dispute already decided by an adjudicator" arising out of the same contract (see Dyson LJ in Quietfield Ltd v Vascroft Contractors Ltd [2006] EWCA Civ 1737).

In relation to statements (b), (c) and (d), Deluxe Art & Theme Ltd v Beck Interiors Ltd [2016] EWHC 238 (TCC) confirmed that, under paragraph 8(1) of Part I of the Scheme for Construction Contracts 1998, an adjudicator cannot adjudicate on more than one dispute "under the same contract" at the same time without the parties' consent (see Legal update, Under Scheme adjudicator needs consent to adjudicate more than one dispute at same time (TCC)).

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How did you do?

None correct: Patent defect.

1-4 correct: Latent defect.

5-8 correct: Temporary disconformity.

9 out of 9: Stirling Prize nomination!