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The Week That Was - 17 September 2021

17 September 2021. Published by Ben Goodier, Partner and Sarah O'Callaghan, Senior Associate

Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.

Extension of fixed costs announced

On 6 September 2021, the Ministry of Justice published its response to the consultation to extend fixed recoverable costs (FRC) to more cases.  This follows Sir Rupert Jackson's Supplemental Report on Fixed Recoverable Costs in July 2017.

It is proposed that FRC be extended to all fast track cases valued up to £25,000, with the fast track expanded to include simple intermediate cases valued between £25,000 and £100,000.  To address concerns about a "one size fits all" approach, the intermediate cases will be placed in 4 bands in order of complexity, with band 4 as the most complex.  Counsel's fees will remain ring fenced in Band 4 cases, as well as Noise Induced Hearing Loss cases.

In addition, the consequences of a successful Part 36 offer are to be strengthened, with a 35% uplift allowed.  This is to be assessed against the settled claim, not the estimated claim, to avoid inflated claims.

To read the Government response, please click here.

"Breach of natural justice" by adjudicator

The case of Downs Road Development LLP v Laxmanbhai Construction (U.K.) Limited concerns Part 8 proceedings disputing an adjudicator's decision on the true value of an interim application (IA) where an employer had served invalid payment notices for £1 with true valuations following outside the contractual time limit. The Court held that adjudicator's refusal to consider the employer's defence that it had a cross-claim regarding defective works because it was outside of his jurisdiction was incorrect. Whilst it was likely outside of the contractual list of matters from which an IA could be calculated, it was a breach of natural justice not to consider it.

The judge also rejected the employer's suggestion that the adjudicator's assessment as to the proper amount of the IA could be severed from the breach of natural justice, which rendered the amount payable unenforceable. The alternative "would turn a single decision with an accompanying explanation of reasoning into a series of separate decisions".

To read the judgment, please click here.

Beware of waiving privilege in witness evidence

In the recent High Court case of Scipharm Sarl v Moorfields Eye Hospital NHS Foundation Trust [2021] EWHC 2079 (Comm) the court, applying CPR 31.14, ordered the disclosure and inspection of attendance notes of conversations between the claimant's solicitors and one of the defendant's employees, which were referred to in a witness statement made on behalf of the claimant. 

The court considered whether reference to the relevant documents relied upon in the witness statement had the effect of engaging CPR 31.14 and, if so, whether there had been an express or implied waiver of privilege sufficient to permit inspection of the documents. 

The decision offers some guidance on what constitutes sufficient reference to a document in order to trigger the right to inspection.

To read the judgment, please click here (subscription required).

Construction output down over material shortages

Construction output continues to fall in July 2021 owing to further material shortages and supply chain issues, with the biggest drop being in private housebuilding.  There have also been reductions in public building work and private commercial output. 

Recent data from the Department of Business, Energy and Industrial Strategy identified that construction material costs had risen more than twenty per cent in the year to July 2021, with surveyors forecasting that prices could rise a further ten per cent over the next year.  However, infrastructure and industrial construction work did show a rise in July compared with June, which reflects the Government's spending on infrastructure, and also the shift to online shopping, therefore increasing demand for industrial units. 

For more information, please click here.

Back to the 80s

Construction disputes have more than doubled in value in the last year as the long term effects of the COVID-19 pandemic continue to unravel.

As set out in the previous article, the most recent development concerns the fluctuations in price and availability of materials.  The number of projects rendered unable to proceed due to shortages has reached new heights as parties struggle to deliver projects to agreed cost.  The situation has been likened to the volatile construction environment of the 80s.  

However, all is not lost according to one expert whose solution involves the UK adopting the US approach to construction.  Such action would see projects tendered for prior to costs being decided.  It is suggested that this approach may provide a starting block for the UK to get the market moving again.  

To access the full article please click here.

Thank you to Emrys Moore, Nina Charalambous and Lowri Evans for contributing to this week's edition.