The Week That Was - 25 November 2022
Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.
Northumbrian Water – challenge to adjudicator's decision
The recent decision in Northumbrian Water Ltd v Doosan Enpure Ltd and another [2022] EWHC 2881 (TCC) (14 November 2022) highlights the significance of submissions in enforcement proceedings when challenging the validity of an adjudicator's decision.
The adjudicator had previously decided that the Claimant's (NWL) termination of contract for noncompliance with contractual obligations, or alternatively its termination of convenience, was valid and made an award of £22.5 million against the defendants. This went unpaid.
The defendant gave a notice of dissatisfaction and also issued an application under s9 of the Arbitration Act 1996 to stay the enforcement proceedings for arbitration. The application failed and the adjudicator's decision was enforced. In particular O'Farrell J noted that, in the notice of dissatisfaction, the defendants had accepted some parts of the adjudicator's decision. Therefore this constituted partial acceptance and any right to challenge it was lost.
You can read more here.
New guidance seeks to encourage changes to the provision of security
The NEC and the Construction Leadership Council (CLC) have published joint guidance dealing with retention payments under NEC3 and NEC4 contracts.
The guidance highlights alternatives to the long-standing contractual practice of retention payments in the industry. Whilst retention payments are intended to provide security against defective work or supply chain insolvency, they can negatively affect cash flow by creating pressures on contractors and their supply chains through late and non-payment of retentions or upstream insolvency.
Alternatives suggested by the guidance that may provide adequate protection include:
- a performance bond (Option X13),
- a guarantee from the ultimate holding company (Option X4) or
- a retention bond
You can read more here.
CE marking period extended to 31 December 2024
The period during which CE marking may be used in Great Britain was previously set to expire on 31 December 2022. The deadline has now been extended by two years, to 31 December 2024 as amended by the draft Product Safety and Metrology (Amendment and Transitional Provisions) Regulations 2022 which were laid before Parliament this month. The extension aims to alleviate the burdens on business caused by shifts in supply and demand as well as the war in Ukraine and the subsequent rising energy costs. The Government's guidance has been updated to reflect the changes.
Business can choose to use the UK Conformity Assessed (UKCA) mark immediately, which replaces CE marking post-Brexit.
You can read more here.
Tax increases announced in 2022 Autumn Statement (Medium-term Fiscal Plan)
The Chancellor of the Exchequer, Jeremy Hunt, announced this month that there will be tax increases directed at reducing the "fiscal blackhole". The announcement involved lowering the additional rate of income tax threshold and increasing the energy profits levy from 25% to 35% from 1 January 2023. It also introduced a new electricity generator levy of 45% from 1 January 2023.
These tax announcements were expected by many, however other announcements in the Autumn 2022 statement were unexpected, such as the reversal of the recent increase of the SDLT nil-rate threshold from 31 March 2025 for residential properties.
You can read more here.
Manor Co-Living Ltd v RY Construction Ltd [2022] EWHC 2715 (TCC) - TCC confirms that an adjudicator should not restrict its own jurisdiction
The Technology and Construction Court (TCC) considered the extent to which a referring party could narrow the scope of the dispute in the notice of adjudication and thereby limit the adjudicator’s jurisdiction to consider parts of the responding party's defence that fell outside of the confined scope of the dispute. It concluded that both are fact-specific and need to be considered on a case-by-case basis.
Affirming Global Switch Estates 1 Ltd v Sudlows Ltd, the TCC confirmed that a responding party was entitled to raise any defences it considered properly arguable to rebut a claim. If an adjudicator fails to consider defences raised by the responding party, that may amount to a breach of the rules of natural justice. However, the use of the word ‘may’ suggested that not all failures will be a breach of natural justice. In this instance, the adjudicator had considered MCL's defence but simply found against it.
You can read the judgment here.
Councils cut construction spending in wake of inflation
As a result of rising inflation costs, local councils are scaling back or cancelling construction projects and re-evaluating their capital expenditure budgets. Stoke-on-Trent City Council's cabinet recently approved a report that recommended reducing the capital programme by £14.5m overall, including cutting £3.3m relating to an enterprise zone. Somerset County Council’s executive last week forecast a £38.2m budget gap, which will require it to review and reprioritise the existing capital programme.
Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, says that Councils "are having to make some difficult decisions on the capital programme where the same amount of capital perhaps buys a bit less than it did" when the schemes were planned, and tenders in the current market are coming at higher levels than expected. However, this is only likely to affect projects where a construction contract has not already been signed.
You can read more here.
CN Transforming Construction Conference taking place in London
The Construction News CN Transforming Construction conference is taking place in London on 30 November 2022, in collaboration with Local Government Chronicle Future Places. Expert speakers will discuss the changes introduced by the Building Safety Act 2022, productivity and efficiency gains that can transform performance in construction and the outlook for construction activity. Attendees will also have a chance to engage with senior local government representatives regarding the issues faced by the construction industry.
This will provide a great opportunity to meet others within the industry and obtain insights on the construction industry over the next 24 months.
You can read more here.
Thanks to Amy Taylor, Mahsheed Ibram and Faye Hopton-Cottrell for contributing to this week's edition.
Disclaimer: The information in this publication is for guidance purposes only and does not constitute legal advice. We attempt to ensure that the content is current as at the date of publication, but we do not guarantee that it remains up to date. You should seek legal or other professional advice before acting or relying on any of the content.