Construction newsletter - July 2017

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Welcome to the July edition of our construction newsletter. 

NEC4 Launched

The hotly anticipated suite of new NEC4 contracts has now hit the shelves.

The offspring of NEC3, itself launched 12 years ago, the NEC4 suite has been forged from user and industry best practice. According to the ICE, the NEC4 "recognises the need for contract administration, terminology and risk management to evolve".   The stated intention is that the new suite will provide greater flexibility, clarity and ease of use.

Much of what appears in NEC3 will remain familiar as NEC has sought to evolve the suite rather than carry out radical overhaul.  However, the inclusion of several new 'Core' and 'Secondary' clauses (to cover issues such as Assignment, Warranties, Early Contractor Involvement and BIM will add a little bulk to the famously slender contracts, possibly leading to fewer bespoke 'Z' clauses.

The suite also includes 2 new contracts: the Design Build & Operate (DBO) and the consultative Alliance Contract (ALC).

As has been well-publicised, the NEC3 was (and is) used in many prestigious UK projects such as Crossrail, the Tideway Tunnel and London 2012, as well as being used globally.  According to the NEC Users Group, the new suite 'puts the core principles of collaboration and open communication into a wider range of contractual structures, helping to achieve consistent positive behaviours across and even bigger variety of projects and programmes'.  Posterity will, no doubt, judge when this claim is borne out.

The importance of (not) being idle

The decision in the case of Al-Rawas v Hassan Khan & Co highlights the importance of keeping a watchful eye on limitation periods when a counterclaim may be likely. The rules of limitation still apply when bringing a counterclaim and the exception for counterclaims applies only when the limitation period expires after the underlying claim is commenced.

The claimant in this case was a firm of solicitors, acting for the defendants in proceedings relating to multiple disputes. The claimant commenced proceedings against the defendants for unpaid fees and disbursements totalling more than £640,000. The defendants responded to the claim by making a counterclaim against the claimant for professional negligence.

The claimant argued that the counterclaim was time-barred as it had been more than 6 years since the cause of action had occurred. The defendants relied on the exclusion under section 35(3) of the Limitation Act 1980 under which the court will not allow a new claim other than an original set-off or counterclaim to be made after the expiry of the time limits. The claimant argued that this did not dis-apply the limitation period for the counterclaim.

However, the Court found that section 35(3) did not create an exception for the counterclaims (which, had they been brought as standalone claims, rather than as a response, would indeed have been time-barred).

This issue can be relevant when considering whether an issue should be forced at the end of a limitation (or, alternatively, whether to 'let sleeping dogs lie') since the defendant might be able to avail itself of the extended period in which to bring its own (counter)claim.

Adjudication enforcement – Apply to stay or get on and pay?

In recent years there has been a proliferation of Defendants utilising the Part 8 procedure to challenge enforcement of 'smash and grab' adjudications. Two recent TCC decisions provide guidance on the court's approach to this issue.

In Structure Consulting Ltd v Maroush Food Production Ltd, O'Farrell J refused to grant the Defendant a stay of execution of an enforcement judgment. The stay was sought on the basis that the Defendant had issued separate (Part 8) proceedings for a declaration that the payment notices (the subject of the original adjudication) were invalid. If the court had agreed that the notices were not valid, the adjudicator's decision would have fallen away.

The existence of ongoing Part 8 proceedings was not considered to be special circumstances and there was no reason to delay enforcement of the adjudicator's decision. The Defendant was ordered to pay up (thus reinforcing the principle of 'pay now sue later'). Whilst each case will be decided on its facts, the TCC are continuing to approach the question of granting a stay robustly.

In Hutton Construction Ltd v Wilson Properties (London) Ltd, Coulson J set out guidance for when a Part 8 challenge is appropriate. In such cases, the parties are encouraged to co-operate and consent to both (1) enforcement and (2) Part 8 proceedings being heard together.

The judge also discouraged (in strong terms) Defendants using Part 8 unnecessarily as a block to enforcement, warning that those who do so and fail are very likely to pay their opponent's costs on an indemnity (rather than standard) basis. Similarly, Claimants who wrongfully refuse to agree to Part 8 proceedings being heard jointly with enforcement proceedings may suffer cost consequences in the event that those proceedings are later successful.