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Construct May 2020

Issue 123

Welcome to the May edition of Construct. Covid again provides the backdrop. I hope that you are getting to grips with managing through the lockdown and planning for the relaxation of restrictions. We know following the Prime Minister’s announcement on 10 May 2020 and subsequent clarification that relaxation will be staged and timed by reference to the 5 tests, which, rightly, place the emphasis on public health.

It always has been and remains fundamental to any construction contract that works should be carried out safely. Whilst the 10 May announcement has not changed anything legally, it is clear beyond doubt that the government is committed to an extensive programme of support to businesses in order to preserve jobs and the economy.

Doubt however remains, as far as construction is concerned, as to whether and how practice can be made to match the theory. During the pandemic the government whilst encouraging construction to continue has not always provided clear guidance as to how. There is now detailed and practical sector specific guidance available, including the safe operation of construction sites (Working safely during COVID-19 in construction and other outdoor work Guidance for employers, employees and the self-employed 11 May 2020 1). This has been supplemented by a 4th revision Site Operating Procedures published by the Construction Leadership Council 2. The onus remains on all those operating sites to work out how to ensure that work is carried out safely, having regard to public health guidance , in particular social distancing.

Uncertainties remain around extensions of time and the ability to recover loss arising from delay as referred to in the previous edition. In this edition Chris Harrall gives some practical guidance on maintaining the records and taking other steps to provide a solid negotiating platform in the future or, failing that, to back up legal claims.

Restrictions will only be released gradually as circumstances allow. The effects of lockdown will continue to be felt for some considerable time afterwards through restrictions on site operations, availability of labour and materials. Productivity will be lower even when sites are all operating again. The importance of keeping good records cannot be overstated. The lockdown and reduced productivity are likely to act as a driver for applications for both time and money, around which there remains uncertainty. Such claims if not resolved by negotiation will be the subject of formal dispute resolution, be it adjudication, litigation or arbitration.

The Cabinet Office publication, Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency 3  promotes a collaborative approach to resolving contractual issues through fair allocation of unforeseen risk by renegotiation of terms. This is in some measure reflected in NEC contracts and may be persuasive, particularly when engaging with public sector interests. It remains to be seen whether there will be a widespread adoption of responsible and fair behaviour in the enforcement and performance of contracts to protect jobs and the economy as envisaged. It may take change in the law to achieve that, which is not out of the question.

A legal based approach to contract enforcement will lead to disputes and put financial pressure on hitherto healthy businesses. In this edition we also cover developments in the law as to the circumstances in which insolvent companies can adjudicate. In future we will look at the emergence of the rescue culture in the form of tax deferment and temporary restrictions on legal remedies including winding up and forfeiture of leases together with potential changes to insolvency law.

One of the possible outcomes of Covid related delay is the termination of contracts where works have been suspended for a lengthy period. Recent cases on whether liquidated damages are recoverable in termination situations may be informative in deciding whether or not to terminate a contractor’s employment in particular where there is pre Covid delay.

I hope you find this edition relevant and helpful in the weeks and months to come.

Peter Blake

 

Links to guidance referred to above

1 https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/construction-and-other-outdoor-work

2 https://www.constructionleadershipcouncil.co.uk/wp-content/uploads/2020/05/Site-Operating-Procedures-Version-4.pdf

3 https://www.gov.uk/government/publications/guidance-on-responsible-contractual-behaviour-in-the-performance-and-enforcement-of-contracts-impacted-by-the-covid-19-emergency

Contents

Covid steps to take during lockdown

1. Notices a) All requisite notices under the relevant contract should now have been issued. If they have not, it is paramount that they are issued without further delay, particularly if your contract includes a condition precedent provision for notification of delay. These will ... Read more

Back to the tools following Covid-19

On 11th May 2020, following the Government’s announcement that the lockdown as a result of COVID-19 was to be lifted to allow those who could not work from home to return to work, guidance was produced to assist with that return.  Many sites were ... Read more

Can an insolvent party refer a claim to adjudication ?

An increase in numbers of business insolvencies is a likely consequence of the Covid shutdown. The increased importance of whether an insolvent party can adjudicate is reflected in recent court activity. This has been covered in previous editions of Construct. The issue arises ... Read more

Termination and liquidated damages

The recovery of liquidated damages where the contractor’s employment or the contract has been terminated or abandoned prior to the completion of works has come under scrutiny by the courts. A party thinking about terminating in circumstances where there is potential culpable delay ... Read more

Peter Blake

Partner, Head of Construction & development

e pblake@prettys.co.uk

t 01473 298206

Graham Mead

Partner

e gmead@prettys.co.uk

t 01473 298234

Chris Harrall

Consultant

e charrall@prettys.co.uk

t 07967 976778

Louise Plant

Senior Associate

e lplant@prettys.co.uk

t 01473 298293

Fiona Galloway

Associate

e fgalloway@prettys.co.uk

t 01473 298239

Michael Booth

CSR Co-ordinator / Pro Bono Co-ordinator

e mbooth@prettys.co.uk

t 01473 298214

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