Construction Law Update – December 2018

7th January 2019

Read our sector update for December, on the changes and updates in the world of construction as well as any relevant news.

Demise of the “smash and grab” adjudication?


The significant decision of the Court of Appeal in the early part of November raises (amongst other things), a number of questions as to how matters concerning the issuing of notices will be dealt with. Importantly, a party seeking a true valuation of an interim application in circumstances where it has failed to serve a pay less notice (or served an invalid one) must first pay the notified sum before commencing an adjudication on the true value of the sum applied for. So, might this signal the end of “smash and grab” adjudications? Will this prompt a significant move towards “pay now, adjudicate later”? This remains to be seen.

What are Duties … Between Friends?


The Court of Appeal’s decision on the case of an architect (possibly) mixing business with pleasure will have sent a shiver down the spine of many professionals. The ruling will have provided food for thought for anyone asked for their (free) opinion/advice on a friend’s “problem” with, for example, their building extension (or the like). Despite there having been no contract, the Court found that Mrs Lejonvarn (a qualified architect) owed a (tortious) duty of care for the free professional services provided to her “friends” in respect of their garden redevelopment. However, the TCC has handed down the 3rd ruling in this case (so far) which will have provided some comfort to professionals in this predicament (and in particular to Mrs Lejonvarn) in finding that the ‘clients’ did not suffer any loss in this instance. Despite this outcome, this series of cases still provides a timely reminder of the dangers of offering professional advice or opinion outside a formal business relationship.

Vicarious liability: beware the rogue employee


A recent judgement by the Court of Appeal will come as a wake-up call for employers regarding data security. The case concerned a senior employee who deliberately and maliciously leaked details of Morrison’s payroll database on the internet, affecting almost 100,000 of its employees. Whilst Morrisons avoided being found directly liable for the breach of data protection rules/regulations (the Court commenting that it had done all it could in terms of processes and systems), the ruling still upheld a decision that, on the facts, it was vicariously liable. Rejecting arguments that the malicious employee was not actually doing his job at the time the data was disclosed, the court agreed that the employee’s acts were sufficiently closely linked to his employment to render Morrisons vicariously liable.  Some commentators have observed (wryly or otherwise) that in making such a ruling, the courts have achieved the precise outcome that the ex-employee had sought. 

James Bessey, a partner in the construction team at Blake Morgan, comments further on this case in his article in the Building Magazine – “The scariness of vicariousness”

Liquidated damages and EPC contracts


The issue of whether contractual Liquidated Damages (‘LDs’) might amount to a ‘penalty’ still attracts much debate and discussion (both during negotiations and, it seems, on application of the damages. This is despite the landmark ruling by the Supreme Court in Cavendish Square v El Makdessi and ParkingEye Ltd v Beavis.  GPP –v- Solar provides further fuel for this fire but its outcome suggests that each case will continue to turn on its own facts.  GPP entered into five EPC contracts, all in broadly similar terms. The projects were delayed and the employer claimed LDs. The parent company guarantor argued that the LDs clause was a penalty and, in any case, the delay was a force majeure event within the terms of the contract. Finding that the LDs were not excessive, the Court ruled that the parties were “experienced and sophisticated commercial parties, of equal bargaining power, who were well able to assess the commercial implications” of the clause. There was also no evidence of force majeure within the meaning of the contract and, even if there had been, the contractor had failed to give sufficient notice of it to GPP. Depending on the contract, shortfalls (in rates/prices etc) may be compensated by way of a separate and additional remedy of damages. 

Worth a read…

Proposal for a New Approach to Building: Call for Evidence – Infrastructure and Projects Authority. Click here to read the government’s latest step towards promoting modern methods of construction.

Scrap permitted development rules on office conversions to housing: LGA. Click here for an interesting article from the Local Government Lawyer which raises the argument of need for office space versus the need for housing.

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