Post on 25-Jan-2017
8.30am Registration and breakfast
9.00 Welcome and introduction - Francis Ho
9.05 Sustainability: The Need for Change - George Adams
9.35 Insurance, Bonds and Guarantees - Francis Ho
10.05 Case Law Update - Louise Forbes
10.35 Coffee Break
10.55 Liquidation Damages - Ben Worthington
11.15 CDM 2015 - Philip White
11.45 Q&A
11.55am Refreshments and Networking
www.constructiveblog.com Construction Law Conference 2015
Agenda
Agenda
Sustainability:
The Need For
Change
George Adams
Energy and Engineering Director SPIE Ltd
Leader CIC Green Panel
Olswang Construction Law Conference 2015
I = P × A × T
Where:
I = Environmental impact
P = Population
A = Affluence
T = Technology
Ehrlich, P.R. & Holden, J.P.
(1974)." American Scientist
62(3): 282–292
SO FAST TO LEARN - SO SLOW TO CHANGE
City Heat island was first investigated and
described by Luke Howard in the 1810s LONDON
Olswang Construction Law Conference 2015
"You ask what is our aim? I can answer in one
word: Victory however long and hard the road may
be. For without victory there is no survival.“
Winston Churchill
Average global temperature UP 1 degree C .
USA 5 % world's population - 22 % Global emissions.
15 % Carbon Emissions deforestation/land use change..
Human consumption - outstripping Earths ability by 50%
Heading for 4 to 6 degree C of Global Warming
Investments still hugely related to fossil fuel producing organisations
Existing buildings produce 40% of carbon emissions
Population heading towards 9 billion or more
INVESTING A FRACTION OF GDP INTO GW THAN STERN RECOMMENDED
The new victory:
The journey of
adaption in the face of
inventible Climate
Change
Olswang Construction Law Conference 2015
Rank Country TOTAL % of
GDP R&D Ref Year
1 United
States 2.7% 2011
2 China 2.08% 2013
3 Japan 3.67% 2011
4 Germany 2.3% 2011
5 South
Korea 4.36% 2012
6 France 1.9% 2011
7 UK 1.7% 2011
8 India 0.9% 2011
9 Canada 1.8% 2011
10 Russia 1.0% 2011
IN 2007 STERN SAID INVEST 2% OF GDP INTO GW - OR ELSE!!!!!
Olswang Construction Law Conference 2015
BEHAVIOUR
U.S. oil imports from
OPEC were at one of
their highest monthly
levels in 2008.
Since then, the
hydraulic fracturing
boom has increased
U.S. oil production
Last November China agreed to “make best
efforts to” have its carbon dioxide emissions peak
around 2030 and to increase the share of non-
fossil fuels in primary energy consumption to
around 20 per cent by 2030.
Last November, President Obama reached a
climate agreement with China where he agreed to
reduce U.S. carbon dioxide emissions by 26 to 28
per cent below the 2005 level in 2025
Olswang Construction Law Conference 2015
Tonnes Co Emissions
Per Person Per Year
UK 9.2t Co2
2010
China 4.9t Co2
2010
Reduction 2.0t Co2
2010
80%
• Reduction by 2050 to 2t Co2 Per Person Per Year
• Convergence by 2050 to 1t Co2 Per Person Per Year
It’s a People Problem
Olswang Construction Law Conference 2015
THE NEED FOR MASTER PLANNING
• WASTE
Organised Collection and Value
Added Recycling
• AIR QUALITY
Identifying and removing big
polluters
• GREENING CITIES
Identifying and developing areas
for strategic green
• BLUE
Finding ways to get water into
urban areas to work with Green
• ENERGY
Finding efficient sources/
distributions with more local/city
locations
The Value of Actions The Cost of Inactions
Economic
Environment Social Su
sta
ina
ble
• Whole Life Approach
• Reducing Life Cycle Carbon
• Increasing Economic Viability of the Asset
• Targets for Reducing Build and Operating Costs
• Value Sustainability Targets
ADAPTIVE
CITIES
SIG
Mitigation Task
Group
Adaptation
Task Group
Planning Task
Group
Water Task
Group
Environment
for People
Task Group
Materials Task
Group Buildings Task
Group
Energy Task
Group Supply
Energy Task
Group Demand
Low Carbon
Economy Task
Group
Technical and
Method Task
Group
Urban Greening
Task Group
Task Leader
Panel Members Corresponding
Members
Other Contacts
or Contributors
Task Group Planning
Year 1 (June) Year 2 Year 3 (June)
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Task 1 Mitigation
Task 2 Adaptation
Task 3 Planning
Task 4 Greening
Task 5 Water
Task 6 Built Environment
Task 7 Materials
Task 8 Building Stock
Task 9 Energy Supply
Task 10 Energy Demand
Task 11 Low Carbon
Task 12 Technology
Services to be Agreed
Activity level 4 4 4 4 4 4 4 4 4 4 4 4
Adaptive
Cities
Olswang Construction Law Conference 2015
With temperatures approaching
3°C (5.4°F) in 2050 above the
20th century average, the most
extreme rainfall events are now
20% more intense than before
Credit: Conservation International
We will have many surprise in this new world
Olswang Construction Law Conference 2015
Carbon emissions from earlier decades remain
locked into the system.
This delayed reaction continues to affect
weather patterns and climate stability.
As will the ongoing destruction of the Earth's
rainforests, some of which are transitioning
from carbon sinks to carbon sources.
In 2050 the past still presents a challenge
Olswang Construction Law Conference 2015
2.14
In 2013 UK COAL imports were 49 million tonnes, an
increase of 10 per cent on 2012
In 2012 UK imports had risen 38 per cent compared to
2011 (33 million tonnes).
2.13
The UK was the second largest EU hard
COAL producer accounting for 13 per
cent (16 million tonnes) of total EU
production (125 million tonnes).
UK Gov
Digest of United
Kingdom Energy
Statistics
31 July 2014
Construction Law Conference 2015: Insurance, Bonds and Guarantees 5 February 2015
Francis Ho, Head of Construction francis.ho@olswang.com | +44 20 7067 3505 | @fkyh
Insurance in 2015
• BIM and professional indemnity insurance
• Level 2 and Level 3
• Role of Information Manager in design
• Cyber liability
• Integrated Project Insurance
• Not yet making waves
• Parkwood Leisure v Laing O’Rourke Wales & West and Hurley Palmer Flatt v
Barclays Bank
• Third Party (Rights Against Insurers) Act 2010 and Insurance Bill
www.constructiveblog.com Construction Law Conference 2015
Third Party (Rights Against Insurers) Act 2010
• Coming into force delayed repeatedly but may follow passing of Insurance Bill this
year
• Replaces Third Party (Rights Against Insurers) Act 1930:
• Insolvency
• Allows third party to claim against an insured’s liability insurance
• Transfers insured’s rights to third party
• Disclosure of policy information by insolvency practitioners
• Covers all insurance, including PI, employer’s liability and public liability
• Likely to increase claims by third parties against insurers
www.constructiveblog.com Construction Law Conference 2015
Third Party (Rights Against Insurers) Act 2010
• No longer mandatory to sue/arbitrate insured to obtain judgment/settlement (i.e.
no need to restore dissolved companies to register)
• Covers wider range of insolvency situations for individuals, partnerships and
corporations
• Exceptions to insurer defences:
• Non-notification or non-performance by insured
• “Pay first” clauses do not generally apply
• Third party can obtain information about policy from anyone able to provide it.
Information must be provided within 28 days
www.constructiveblog.com Construction Law Conference 2015
Insurance Bill
• Insurance historically underpinned by common law and Marine Liability Act 1906
• Governs business insurance; being fast-tracked through Parliament. May be
passed in March 2015
• “Fair presentation of risk” in a way that would be “reasonably clear and accessible
to a prudent insurer” (clause 3)
• Remedies for breach of clause 3 will be “proportionate” and depend on what
insurer would have done differently but if breach was reckless or deliberate,
insurer can avoid contract and keep premium
• Prohibits “basis of contract” clauses (clause 9)
www.constructiveblog.com Construction Law Conference 2015
“Fair presentation of risk” (clause 3)
• Disclosure in a manner which would be reasonably clear and accessible to a
prudent insurer
• Every material representation as to a matter of fact is substantially correct, and
every material representation as to a matter of expectation or belief is made in
good faith
Alternatively …
• Disclosure of every material circumstance which the insured knows or ought to
know or disclosure which gives insurer sufficient information to put a prudent
insurer on notice that it needs to make further enquiries
www.constructiveblog.com Construction Law Conference 2015
Insured’s knowledge (clause 4)
• Individual will also know what those procuring the insurance policy know
• For insureds which are not individuals, same as above but insured also deemed
to know what senior management knows
• However, insured’s agent no longer under separate obligation to disclose
www.constructiveblog.com Construction Law Conference 2015
“Basis of contract” clauses (clause 9)
• Already prohibited in consumer insurance contracts (Consumer Insurance
(Disclosures and Representations) Act 2012)
• Convert statements made in proposal forms or policy documents to warranties
• Allow insurers to avoid liability for claims if there are incorrect statements
(Genesis Housing Association v Liberty Syndicate Management)
• Breach of warranty no longer discharges insurer’s liability from time of breach but
suspends it until remedied (clause 10)
www.constructiveblog.com Construction Law Conference 2015
Bonds – Recent trends
• More demand for performance bonds than pre-recession
• A “harder” insurance market?
• Performance bonds more likely to expire at practical completion
• ABI model form of guarantee bond remains the general choice
www.constructiveblog.com Construction Law Conference 2015
Common types of bonds
• Construction bonds:
• Performance bonds
• Advance payment bonds
• Retention bonds
• Off-site materials bonds
• Bid bonds
• s.38 and s. 104 bonds
• Conditional or on demand?
www.constructiveblog.com Construction Law Conference 2015
Conditional and on demand bonds in the UK market
www.constructiveblog.com Construction Law Conference 2015
Usually conditional Usually on demand
Performance bond (real
estate developments)
Retention bond
Advance payment bond
Bid bond
Off-site materials bond
Performance bond
(complex engineering
projects)
How to prevent a call: Conditional bonds
• Surety puts Employer to proof
• Surety’s liabilities same as Contractors so it may be released for:
• Forbearance given by Employer to Contractor
• Material alteration of Construction Contract without Surety’s consent
• Employers should consider “indulgence” clause
• Expiry date or event relating to bond occurs
www.constructiveblog.com Construction Law Conference 2015
How to prevent a call: On demand bonds
• Very difficult, even if Contractor can dispute any allegation of breach
• Fraud
• Illegality (usually effective, depending on governing law of country of enforcement)
• Unconscionability (Singapore)
• Court order/injunction to either (i) restrain Employer from making call or (ii) Surety from
making payment upon receipt of Employer’s notice
• Courts reluctant to intervene in contract relations between parties
www.constructiveblog.com Construction Law Conference 2015
Drafting and commercial considerations for Employers
• Is insolvency a breach of contract (cf. ABI form)?
• Is bond assignable if underlying contract is assigned (or novated)?
• Does Surety have satisfactory financial covenant?
• Is Surety based in Employer’s home country?
• If bond is to be on demand, is this sufficiently clear in drafting?
www.constructiveblog.com Construction Law Conference 2015
Drafting and commercial considerations for Contractors
• What is the cost and has it been priced for?
• If Employer’s main concern is insolvency, will conditional bond suffice?
• Unfair calling insurance and Uniform Rules for Demand Guarantees for on
demand bonds
• Clause in Construction Contract to allow Contractor to recover overpayment
under on demand bond
• Longstop date?
• Risk of “pay or extend” with on demand bonds
www.constructiveblog.com Construction Law Conference 2015
Parent company guarantees
• What’s the difference between a parent company guarantee and a performance
bond?
• Should Employer seek both?
• “Substituted performance” clauses – sometimes seen
• Payment guarantees from Employers still unusual in UK market. Escrow
arrangements relatively common
www.constructiveblog.com Construction Law Conference 2015
Guarantees – Drafting considerations
• Draft as a deed to avoid questions of consideration and for limitation period
reasons
• Liability limited to that of subsidiary under underlying contract
• Is bond assignable if underlying contract is assigned (or novated)?
• Should be drafted as an indemnity (primary obligation) as well as a guarantee
www.constructiveblog.com Construction Law Conference 2015
Construction Law Conference 2015: Case Law Update 5 February 2015
Louise Forbes louise.forbes@olswang.com | +44 20 7067 3632 | @forbes_louise
Bristol Groundschool v Intelligent Data Capture & Ors
Implied duty to act in good faith
• There is an implied duty to act in good faith in ‘relational’ contracts
• A relational contract is broadly defined as one in which there is a high degree of
communication, cooperation and predictable performance based on mutual trust
and confidence and involve expectations of loyalty which are not legislated for in
the express terms of the contract but are implied between the parties
• The duty of good faith incorporates a requirement of honesty
• The test for honesty is whether the conduct would be regarded as ‘commercially
unacceptable’ by a reasonable and honest person
Where this might apply
• Any service contract which is more than a ‘one-off’ provision of services
• A contract for the design/manufacture/supply of materials on an on-going basis
www.constructiveblog.com Construction Law Conference 2015
Eurocom Limited v Siemens plc
Adjudicator appointment fixing
Facts of the case:
• In August 2012, Eurocom started an adjudication and appointed an adjudicator
(the first adjudicator).
• In November 2013, Eurocom, represented by Knowles, served a notice of
adjudication on Siemens (the second adjudication).
• Knowles applied to RICS for the appointment of an adjudicator and, in answer to
the question “Are there any Adjudicators who would have a conflict of interest in
this case?”, listed 13 individuals who should not be appointed, including the first
adjudicator “who has acted previously”.
www.constructiveblog.com Construction Law Conference 2015
• The RICS appointed Tony Bingham as the adjudicator (the second adjudicator),
but did not copy the adjudicator application form to Siemens until January 2014,
at which point Siemens asked Knowles for an explanation regarding the alleged
conflicts of interest. No response was received.
• In May 2014, Eurocom commenced enforcement proceedings and Siemens
resisted on a number of grounds, the most interesting one being that the second
adjudicator’s appointment was invalid because of the information Knowles
provided to RICS in making the application and/or because RICS failed to raise
conflicts of interest with Siemens.
www.constructiveblog.com Construction Law Conference 2015
The ruling
• Ramsey J held that the plain and ordinary meaning of the words Knowles used in
the adjudicator application form was that it was advising RICS that the people
named should not be appointed because they had a conflict of interest.
• He said that this statement was false in relation to the first adjudicator and a
number of other potential candidates.
• Ramsey J also said that there was “a very strong prima facie case that [Knowles]
had deliberately or recklessly answered the question” about conflicts of interest
so certain individuals who Knowles “did not want to be appointed” were excluded.
• This was a fraudulent representation to RICS that invalidated the second
adjudicator’s appointment, meaning that he lacked jurisdiction.
www.constructiveblog.com Construction Law Conference 2015
Tips for success
Tip 1: the conflicts box is only for genuine conflicts
• Only enter names in the conflicts box if those individuals have a genuine conflict
of interest. Even if you don’t enter any names in the box, in theory you should not
end up with an adjudicator who has a conflict. This is because the adjudicator
approached for the nomination has a duty to disclose any conflicts, and not to
accept the appointment if conflicts exist.
Tip 2: take care if naming individuals you don’t want appointed
• In theory, even after Eurocom v Siemens, there is nothing to stop a referring party
from making representations and enclosing a list of “unsuitable” adjudicators with
the adjudicator application form, however the referring party could simply refuse
to refer the dispute to that individual and just reapply to the ANB. As we learnt
from Lanes v Galliford Try, adjudicator shopping is permitted.
www.constructiveblog.com Construction Law Conference 2015
Tip 3: be proactive and suggest suitable candidates
• You could consider putting forward a list of names you considers would be
suitable to be appointed as the adjudicator. Alternatively, the referring party could
state the qualifications of the required adjudicator to narrow down the field (for
example, ask for a legally qualified quantity surveyor).
• However, too much prescription might result in a skewing of the nomination
process.
A useful reminder
• This case is a useful reminder that, while the TCC is an ardent supporter of
adjudication, it will come down hard on parties and their representatives if they
don’t play by the rules of the game.
www.constructiveblog.com Construction Law Conference 2015
MT Højgaard v EON Climate Renewables UK Robin Rigg East Limited
Fitness for purpose vs. compliance with specification
• MT Højgaard (‘MTH’) entered into a contract with E.ON, the employer, for the
design, fabrication and installation of the foundations for offshore wind turbine
generators
• The foundations were found to be defective and required remedial work
amounting to €26,500,000
www.constructiveblog.com Construction Law Conference 2015
Contract contained the following provisions:
GENERAL OBLIGATIONS (8.1)
The Contractor shall, in accordance with this Agreement, design, manufacture, test,
deliver and install and complete the Works:
i. With due care and diligence expected of appropriately qualified and
experienced designers, engineers and constructors......
ii. So that the Works, when completed, comply with the requirements of the
Agreement...
iii. So that each item of Plant and the Works as a whole shall be fit for its purpose
as determined in accordance with the Specification using Good Industry
Practice...
iv. So that the design of the Works and the Works when completed by
the Contractor shall be wholly in accordance with this Agreement and shall
satisfy any performance specifications or requirements of the Employer as set
out in this Agreement...
www.constructiveblog.com Construction Law Conference 2015
EMPLOYER’S REQUIREMENTS (3.2.2)
The design of the foundations shall ensure a lifetime of 20 years in every aspect
without planned replacement...
www.constructiveblog.com Construction Law Conference 2015
• MTH had completed the works in accordance with international standard DNV-
OS-J101 (“J101”) and consequently had performed the contract using good
industry practice
• Unfortunately, J101 contained a fundamental error
• The foundations did not therefore meet the absolute specification of a 20 year
lifetime
• The judge ruled that the two obligations were not incompatible, but because MTH
had expressly warranted that the construction be fit for purpose for at least 20
years, they had breached the ‘fitness for purpose’ element of the contract
• The court provided guidance that defects caused by errors in specifications will
not be the contractor’s responsibility unless the contractor expressly guarantees
the construction to be fit for a specific purpose
www.constructiveblog.com Construction Law Conference 2015
Tips for success
• Be aware of the nature and extent of your/the contractor’s contractual obligations
• Express inclusion of fit for purpose language trumps industry standard
www.constructiveblog.com Construction Law Conference 2015
West v Ian Finlay & Associates
Net Contribution Clauses (‘NCCs’)
• Used in construction contracts to split liability between different members of the
professional team
• Without an NCC the paying party can recoup losses from other members of the
team, but only where there was an existing contractual liability between those
team members and the Employer
• For the professional team they are perceived as a ‘fair’ way of apportioning loss
based on liability between the team for that loss
• For the Employer they create uncertainty surrounding the potential recovery of
losses – if one of the named parties to the NCC becomes insolvent, the Employer
will have to cover that portion of loss themselves
www.constructiveblog.com Construction Law Conference 2015
The case
• Consumer contract
• Unfair Terms in Consumer Contracts Regulations 1999 (UTCC) were considered
• Judge ruled that the inclusion of the NCC was fair given that:
• NCCs come as standard in RIBA forms of appointment
• The wording in the contract was very clear and ‘could not have been missed’
• The Wests could have chosen another architect if they were unhappy with the
inclusion of the provision
www.constructiveblog.com Construction Law Conference 2015
Tips for success
• If you’re going to accept an NCC clause (and, indeed, if you aren’t!) make sure
you hire a financially sound team
• Be wary of ambiguous wording – if you want to rely on an NCC, make sure the
clause makes it clear with whom liability is shared and on what basis
• The clearer the wording, the more likely the clause is to be valid
• It’s unclear yet whether the courts would take the same view for commercial
projects, but it seems likely
www.constructiveblog.com Construction Law Conference 2015
Hurley Palmer Flatt Ltd v Barclays Bank plc
Third party rights – the right to adjudication
• Remember Parkwood?
• The beneficiary of a third party right does not have the right to refer their dispute
to adjudication unless expressly provided for in the underlying contract
• Ramsey J focused on the specific wording in the contract and the underlying
legislation (specifically the Contracts (Rights of Third Parties) Act 1999)
• He also drew and analogy with arbitration-related legislation and said that, if the
contract intends to confer adjudication rights to third parties, the adjudication
clause ought expressly to refer to them
www.constructiveblog.com Construction Law Conference 2015
RIBA Short Works Contracts
• The Concise Building Contract (CBC) and the Domestic Building Contract (DBC)
• Offer alternatives to the JCT Minor Works Building Contract (MWBC)
• ‘Not designed to compete with the MWBC’
www.constructiveblog.com Construction Law Conference 2015
Features
• Offers wording for sectional completion
• Room for a works programme and a risk register
• Possibility of advanced and milestone payments
• Furnished with collateral warranties and third party rights
• Plain language
• Accessible online
Points to be aware of
• Assignment language refers to ‘burdens’
• CDM Regulations are not explicitly referred to
• LADS only available on the advice of the architect/contract administrator
www.constructiveblog.com Construction Law Conference 2015
Points to be aware of
• Assignment language refers to ‘burdens’
• CDM Regulations are not explicitly referred to
• LADS only available on the advice of the architect/contract administrator
www.constructiveblog.com Construction Law Conference 2015
Construction Law Conference 2015: Liquidated damages 5 February 2015
Ben Worthington, Senior Associate ben.worthington@olswang.com | + 44 20 7067 3541
Liquidated damages - the basics
• Pre-determined sum payable payable by the defaulting party in the event of a
specified breach of the contract
• Liquidated v unliquidated damages
• Exclusive remedy for the breach: Temloc Ltd v Errill (1987)
• Must be a genuine pre-estimate of loss: Dunlop v New Garage Motor Co (1915)
• Judged at the date of the contract, not the breach
• Court is pre-disposed to uphold liquidated damages provisions
www.constructiveblog.com Construction Law Conference 2015
Why use liquidated damages?
• Avoid complexity of establishing claims
• Save time and cost
• Certainty
• Price the risk
www.constructiveblog.com Construction Law Conference 2015
Recognising a penalty clause
• Not enough to show that operation of the provision might result in a recovery
greater than the loss suffered: Philips Hong Kong Ltd v AG of Hong Kong (1993)
• Alfred McAlpine Capital Projects v Tilebox Ltd (2005):
• Is the purpose of the clause to intimidate or penalise?
• Is the sum reasonable?
• Is the sum extravagant or unconscionable by comparison with the greatest
loss that might be suffered?
www.constructiveblog.com Construction Law Conference 2015
The modern approach
• Talal El Makdessi v Cavendish Square Holdings BV (2013)
• Consider whether the relevant provision is extravagant and unreasonable
• But even if it is, the clause may not be a penalty if there is a commercial
justification
• Court considered whether LDs provision was extravagant and unreasonable but
made clear that this was NOT “determinative as to whether the clauses are penal”
• it was relevant because if the clauses are genuine pre-estimates they can
cannot be penal
• BUT “A commercial justification may mean that a clause which is not a
genuine pre-estimate is not penal.”
www.constructiveblog.com Construction Law Conference 2015
Bluewater Energy Services v Mercon (2014)
• sub-contract for the construction of a
tower mooring system in the Caspian
sea
• Bluewater terminated the contract
• claims in respect of payment, unlawful
termination and extensions of time
www.constructiveblog.com Construction Law Conference 2015
Bluewater Energy Services v Mercon (2014)
• Liquidated damages were payable where "Key Personnel" were replaced
without approval
• Mercon argued these were penalties - the purpose was to deter a party
from breaking the contract, not compensate
• Bluewater argued that rates were a genuine pre-estimate of loss based
on the potential disruption to the project caused by changes in Key
Personnel
www.constructiveblog.com Construction Law Conference 2015
Bluewater Energy Services v Mercon (2014)
• Held:
• The liquidated damages provision was enforceable
• Law on penalties is a “clear interference with the freedom to contract”
• The sums agreed by the parties were not unconscionable,
extravagant or exorbitant
• Personnel are central to the successful performance of projects
• The opportunity for Bluewater to approve or disapprove the
replacement of Key Personnel was “an important safeguard for the
proper performance of the Contract”
www.constructiveblog.com Construction Law Conference 2015
Unaoil v Leighton Offshore (2014)
• Parties tendering for a project to build an oil pipeline in Iraq
• MoA - Leighton required to pay $40m if it was (i) awarded the contract but
(ii) failed to sub-contract oil pipeline work to Unaoil
• Contract package worth $75m at date of MoA
• MoA later varied – contract package reduced to a minimum of $55m but
liquidated damages remained at $40m
www.constructiveblog.com Construction Law Conference 2015
Unaoil v Leighton Offshore (2014)
• Held:
• Not a penalty clause when the MoA was first agreed
• The question of whether the clause was a penalty in this case had to
be judged at the date of the amendment to the MoA
• Once the contract price was reduced, LDs of $40m were "extravagant
and unconscionable with a predominant function of deterrence"
• There was no commercial justification for the provision
www.constructiveblog.com Construction Law Conference 2015
Summary
• Courts remain extremely reluctant to interfere
• But will interfere in the right circumstances
• Courts less concerned whether LDs represent a genuine pre-estimate of
loss
• Green flag to include higher rates of liquidated damages?
• Make sure discussions relating to the agreement of the liquidated
damages provision are recorded
• Consider the impact of any amendments to the contract
www.constructiveblog.com Construction Law Conference 2015
Progress on Health & Safety
• Significant culture change
over last 10-15 years
• Long-term downward trend
fatals/major injuries
• Greater focus on health
• Greater ownership by
industry
• More integrated approach
to managing H&S
Challenges for the industry
• Leadership in procurement
• Effective management and co-ordination
• Understanding and delivering a competent workforce
• Two tier industry
• Preventing occupational disease
Challenges for the industry (cont)
• Sufficient focus on major incident potential?
• Designing out problems
• Growth in bureaucracy – needs to be tackled
• Still too much non-value adding activity
• Are all decisions/approaches sensible and proportionate?
Government drivers
• Growth
• Better regulation through:
– simplification
– reducing red
tape/bureaucracy
– focus on risk
– proportionality
– consistency
CDM – policy drivers
• No changes on the
standards to be achieved on
sites
• Those who ‘create’ risk
responsible for ‘managing’ it
• Structural simplification
• EU Directive implementation
• Simplified and targeted
guidance
What CDM 2015 achieves
• Simplified Regulations
• Strengthened client role
• Removal of exemption for domestic clients
• Embedding the co-ordination function within the project team
• Removal of explicit competence requirements
• Greater relevance to small projects
• Applies to all construction projects
CDM 2015 – clients
• Influence performance
through the procurement
process
• selecting and appointing
the right team
• setting the standards
• making the arrangements
• holding Principals to
account
CDM 2015 – Role of Principal Designer
and Principal Contractor
• Building collaboration between the co-ordinators and client
• Improving risk identification, management and control
• Working through the project – sharing and using risk information
• Improving risk management in design and ownership
• Those who create risk ‘manage’ it
• Skills and knowledge will develop over longer term
Dutyholders – Principal Designer
Main duties include:
• plan, manage, monitor and
coordinate the pre-construction
phase
• ensure designers comply with
their duties
• ensure cooperation with client and
others
• support the client
• provide a conduit for information
flow between design and build
teams
Dutyholders – Principal Contractor
PC manages and coordinates
the construction stage of the
project
Additional requirements include:
• liaison with PD, throughout
their appointment
• providing information to PD
relevant to H&S file
• engaging and communicating
with the workforce
CDM 2015 – competence
‘Corporate competence’
• Selection of supply chain
with relevant experience
and organisational
capability – due diligence
• Industry led approach
required – PAS 91
• Need to remove non-value
adding activities
CDM 2015 – where are we now?
• The regulations now signed
by the Minister
• Draft guidance on website
• Work on updating webpages
• Getting ready internally for
coming into force
• Developing proposals for
slimmed down signposting
ACoP
CDM 2015 – where are we now?
(cont)
• Much already familiar
• Compliance
expectations
unchanged
• Continued work on
competence
CDM 2015 – guidance
• Legal commentary (L-Series)
• Duty holder-specific guidance authored by industry – aimed at smaller projects.
• Revised HSE web pages
• Development of template H&S plans – smartphone app?
• Other industry products
Operational priorities
• Main inspection effort smaller projects, refurbishment and asbestos
• Addressing underlying causation
– following incident; and
– where risk not managed
• Challenging senior management – Senior level leadership
• Early engagement on major project
• Engaging and helping small firms:
– Working Well Together events
– simplified guidance
Some observations
• No change in enforcement policy – NOT Fee For Intervention driven
• Interesting challenges on enforcement
• Need to understand intervention approach
• Looking at long term change – where we wanted to be 20 years ago on PD
• Construction work very varied – impossible to create perfect fit in all circumstances
In Summary
• Revised CDM Regulations:
– simplification
– improved collaboration
– Responsibilities in supply chain
– focus on real issues
• Opportunity for industry to
demonstrate sensible approach
• Practical & pragmatic approach
required
• All have a role and responsibility –
though reappraisal for some