The Week That Was - 31 March 2023

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

Bombshell judgment at the University of Exeter

The Technology and Construction Court has ruled that the University of Exeter is not entitled to cover under its property insurance policy with Allianz after a controlled WWII bomb explosion caused damage to University buildings and loss of rent. 

The bomb was discovered by contractors during construction and was destroyed in a controlled detonation.  Certain University buildings were damaged and the University lost rent while students were temporarily evacuated.  While the Policy contained a war exclusion, the University argued that the proximate cause of damage was the human intervention to detonate the bomb, rather than war.

The Judge found that the dropping of the bomb was the proximate cause and, even if the controlled detonation were considered, the dropping of the bomb remained a proximate cause.  Thus, the Court held that Allianz was entitled to a declaration that the claim was not covered by the Policy.

For more information, please see this link.

Responsible Actors Scheme

On 14 March 2023, the Government issued a statement confirming that 39 housing developers had signed the Government's Developers' Remediation Contract (the Contract) but 11 developers had not done so.

The Government has threatened serious consequences for those developers who do not sign up to the Contract, with Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, stating the Government is "coming after" those developers and they would not be able to "operate freely in the housing market".  The Government has now published details of a 'Responsible Actors Scheme' it intends to introduce via regulations pursuant to the terms of the Building Safety Act to implement these comments.

The Responsible Actors Scheme confirms that those developers who have signed up to the Contract must identify and remediate, or pay to remediate, life-critical fire safety defects in residential buildings over 11m in height which they have developed or refurbished in the last 30 years, while those developers who do not sign the Contract "will be prohibited from carrying out major development and gaining building control sign-off".

For more information, please see here.

Demolition firms fined £60m for bid rigging

The Competition and Markets Authority (CMA) has fined 10 construction firms a total of nearly £60m for illegally colluding to rig bids or demolition and asbestos removal contracts, and has secured the disqualification of three directors of firms involved in unlawful conduct across 19 contracts worth £150m.

The CMA's long running investigation which began in 2019 has culminated in total fines of £59,334,957 for collusion on prices through illegal cartel agreements when the relevant firms submitted bids in competitive tenders for contracts.

The CMA found that these bids were rigged to deceive the customer that they were competitive when that was not the case as some firms had agreed to submit bids that were deliberately priced to lose the tender.  In addition, some of the firms were involved in bids where the designated 'loser' was set to be compensated by the winner, with such compensation being higher than £500,000 in one instance.

For more information, please see here.

The Court of Appeal considers the enforceability and effect of a contractual dispute resolution procedure (DRP)

The Claimant issued proceedings without following the DRP.  At first instance it was held that the DRP was a condition precedent to court proceedings, but because certain aspects were not defined with "sufficient clarity and certainty" it was unenforceable.  That said, even if enforceable, the judge said that in the circumstances of this case, a stay was "the default remedy".

The matter was appealed on the basis that the Judge at first Instance was (i) wrong to find that the DRP was unenforceable, (ii) wrong to find that a stay was the "default remedy", and (iii) had erred in the exercise of her discretion because (among other things) she had not taken Kajima's limitation defence into account.  

• The Court of Appeal dismissed all three grounds of appeal and upheld the Judge's decision.  In summary:
• The judge had been right to find that the DRP was unenforceable, with the contract being insufficiently clear to make it binding.
• The Court of Appeal considered (obiter) the other two grounds of appeal and found the Judge had not erred in the exercise of her discretion. She had previously set out why setting aside or striking out would be a "draconian remedy, wholly unsuitable for the circumstances of this case".  The judge had used "default remedy" as shorthand to describe the usual (as opposed to inevitable) order that the court will make where proceedings are started in breach of a mandatory contractual DRP.
• The deprivation of a limitation defence is an important element of the balancing exercise, but it cannot alone be decisive.  The Court of Appeal held that "the balancing of the relevant factors on the particular facts of this case, even giving the greatest possible weight to the deprivation of a limitation defence, still results in a proportionate order for a stay, not a strike out".

The full judgment of Kajima Construction Europe (UK) Ltd and another v Children's Ark Partnership Ltd [2023] EWCA Civ 292 (Holroyde, Coulson and Popplewell LJJ) can be found here.

Proposals by Government to grant further powers to landlords to evict tenants in a bid to tackle antisocial behaviour

Prime Minister Rishi Sunak has sought to address increased public concerns about antisocial behaviour in recent proposals.  As part of the new plan unveiled by the Prime Minister:

• Landlords will be able to evict tenants with two weeks' notice who are disruptive to neighbours, who cause disturbance through noise, drunken behaviour, drug use, cause damage to property or fall behind on their rent.
• Clauses specifically banning antisocial behaviour will need to be included in all new private tenancy agreements, with the notice period for eviction on these grounds being reduced from four to two weeks.
• If you rent out your property on Airbnb you will need to register on a new database, making it easier for local councils to deal with complaints about problematic guests.

Click here for further details on the above and the Government's plan to crack down on anti-social behaviour.

Thank you to Ellen Ryan, Harry Collins, and Tom Westford 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.