Building
brief
April 2002 – edition 2
Contents
Editorial ................................................................................................................................................. 1
Another try-on ........................................................................................................................................ 2
Delay and disruption – the answer is at hand .......................................................................................... 3
Champagne, chardonnay or cappuccino ................................................................................................. 4
Withholding payment of an adjudicator’s award ....................................................................................... 5
Water, sewage and more water: recent developments in the law of nuisance ........................................... 7
Enron – insolvency and the grandchildren’s furniture ............................................................................... 9
Limitation of liability clauses: a reminder ............................................................................................... 10
Limit your unpaid services .................................................................................................................... 12
Employment Bill 2002........................................................................................................................... 13
Collapse of the World Trade Center ...................................................................................................... 14
Editorial
Welcome to the latest edition of Building Brief. For those of you who have not already met him, we are
particularly pleased to introduce Philip Vallance QC who has joined our London Construction division as
an employed barrister. As many of you will know, Philip has had a glittering career at the bar and,
undoubtedly, is one of the leading advocates of our time. He has been involved in numerous high profile
cases including seven trips to the House of Lords and two to the European Court of Justice. In one of his
articles in this edition he looks at recent updates in the law of nuisance which is a subject close to his heart
having been the successful advocate in the Cambridge Water case.
Also in this edition, amongst other articles, Michael Salau looks at the draft delay protocol, Ross Baker
examines the rules regarding the withholding of the payment of an adjudicator’s award and Matthew
Hammond provides a reminder of the ever important subject of limit of liability clauses.
As many of you will know, the firm frequently provides employment advice to construction clients. In this
edition Andrew McDonald, head of the London Employment unit, has contributed an article dealing with
the significant changes in the areas of workplace dispute resolution and employee maternity/paternity
rights as announced in the new employment bill. As mentioned in the last edition (and as many of you
have requested) if you would like to receive Building Brief by e-mail as a PDF file, please e-mail
liane.evans@blm-law.com.
Keith Lonsdale
Building
brief
1
Another try-on
From time to time contractors who choose not to pay for All Risks or Product Liability insurance cover
come up with new and ingenious arguments as to why the Public Liability cover they have purchased
should extend to indemnify them against economic loss sustained in consequence of their own
defective workmanship.
A particularly barefaced example occurred in James Longley & Co Ltd v Forest Giles Ltd (Court of Appeal,
18 July 2001 – unreported). Here, G (a flooring subcontractor) installed a defective vinyl sheet floor and as
a result became liable to the main contractor (L) for some £70,000 repair costs and some £160,000 delay
and disruption damages. G had not taken out All Risks cover, still less any form of product guarantee
insurance. G’s Public Liability policy was in standard form, with the usual exceptions in relation to defective
works.
G nevertheless argued that insurers should indemnify it against its liability to L under the main insuring
clause (‘all sums for which the insured shall be liable at law for damages in respect of … damage to
property’) on the grounds that:
(1) careful analysis of the £70,000 repair costs showed that some £25,000 related to the removal and
replacement of fittings other than the floor itself; and
(2) since ‘damage’ was defined by the policy as ‘damage shall include loss’, then, even if there had not
been relevant damage to property, there had been ‘loss’.
The court dismissed both arguments.
As to (1): The plain intent and purpose of a Public Liability policy is to indemnify against liability in respect
of damage to third party property extraneous to the works, and since the £70,000 related in its entirety to
the cost of replacing the defective floor the subdivision was ‘neither realistic nor sensible’.
As to (2): ‘Damage shall include loss’ merely indicated that loss of property as well as damage to it, was
covered, ‘so that in effect the insurance is against ‘loss of or damage to’ the property of another’.
Usefully, the court reiterated that:
it is not the usual intention, in a contractor’s Public Liability insurance, to give cover in respect of defective
workmanship which requires rectification but does not cause physical damage to the personal property of a
third party or interference with a third party’s property rights as opposed to their purely economic interests.
The undersigned, who appeared for insurers, was not called upon.
Philip Vallance QC
Building
brief
2
Delay and disruption – the answer is at hand
As many of you are aware, the Society of Construction Law has issued a draft protocol in order to assist
the recording and the managing of delay on construction matters, magnificently called ‘The Protocol for
determining extension of time in compensation for delay and disruption’. A panel of experts from all
sections of the construction industry participated in the process including BLM and it is hoped that the
protocol will be used to assist in providing guidance in dealing with all matters of time and delay.
Perhaps the most interesting element of the protocol is that it attempts to assist in the drafting of contracts
and to improve on the way in which the standard form contracts deal with issues such as extensions of
time, delay and disruption. Most handily, the main points of the protocol are set out in the
summary which attempts to summarise the protocol’s response to the main areas of disputes, ie whether
or not a contractor is entitled to an extension of time or otherwise? Who owns the float? What happens if
there is concurrent delay? The protocol provides sound and practical advice and explains the concept and
ideas behind such issues and is particularly helpful in providing advice to architects or any construction
professional who has to handle a delay and expense claim.
The protocol has already received a certain amount of publicity within the construction press and as a
document, attempts to address issues which are consistently being litigated, arbitrated or adjudicated. The
ethos of the protocol should be applauded, but it remains to be seen whether, in its final form, it will
‘provide the material for the parties to avoid unnecessary disputes’. I suspect that the protocol can do little
more than act as a guiding hand, although, if the parties to a contract agree, the protocol can be used as
an aid to deciding issues that are not clearly covered by a contract, which might include matters such as
the ownership of float and concurrency of delay etc.
The protocol has already been through a public consultation process and it was originally envisaged that
the final protocol would be published by the end of March 2002. However, as the protocol has generated
such a large amount of interest and the Society has received so many submissions, it now plans to publish
a re-draft of the protocol in early May 2002 to take account of the comments received to date. Once it is
published, I would urge you all to obtain a copy, not least for its concise explanation of such terms as
PERT, slack and negative total float, although the calculation of the Eichleay formula remains a mystery to
me!
Michael Salau
Building
brief
3
Champagne, chardonnay or cappuccino
Picture the scene. You receive the call from Counsel’s clerk telling you that he has a copy of the eagerly
awaited judgment, that the judgment will be handed down tomorrow, but not to worry, because your clients
have won. After phoning the clients and informing them of details of where and when to attend court (you
are generally embargoed from disclosing the result until just before the judgment is handed down)
thoughts turn to smiling faces crossing the road after leaving the court on the way to the nearest wine bar.
But a word of caution.
The general rule used to be that the unsuccessful party would be ordered to pay the costs of the
successful party. The position is no longer quite so straightforward. Under Part 44.3 of the Civil Procedure
Rules, whilst the ‘general’ rule is that the unsuccessful party will be ordered to pay the costs of the
successful party, the court now has a discretion to ‘make a different order’.
The general rationale behind the rule was to move away from the position that any success was sufficient
to obtain an order for costs towards the situation where costs more accurately reflected the level of
success achieved by the receiving party. In exercising their discretion, the court must have regard to all
circumstances including the conduct of the parties which covers such issues as to whether it is reasonable
for a party to raise, to sue or contest a particular allegation or issue. In simple terms, if the argument is
successful, clients may get their costs; if it is not, they may not.
In my experience the courts are adopting an inconsistent approach to the exercise of their discretion
ranging from old style loser pays winner’s costs, regardless of whether all arguments were successful, to
the sophisticated analysis of how costs should be split.
The impact of the rule is perhaps no more graphically felt that in construction and engineering type cases
where, frequently, many different issues are in dispute. A party could find that whilst, for example, overall
they have successfully defended a claim, as some of their arguments have not succeeded they are
penalised in terms of their cost recovery. The simple answer, to make sure you find yourself drinking
champagne rather than the cappuccino, is just to take the good points and discard the fringe points as
early as sensible analysis will allow.
Keith Lonsdale
Building
brief
4
Withholding payment of an adjudicator’s award
Has the decision in Solland International Ltd v Daraydan Holdings Ltd (2002, unreported) clarified the case
law on avoiding payment of an adjudicator’s decision by way of setoff defence or counterclaim?
Many varied strategies for resisting payment of an adjudicator’s decision at the enforcement stage have
been tried by losing parties since the introduction of the Housing Grants, Construction and Regeneration
Act 1996 (‘HGRA’). The usual methods of arguing adjudicator error, natural justice and jurisdictional issues
have all been attempted by losing parties, and the courts have given decisions in a coherent manner since
the first adjudication was considered in the courts in Macob v Morrison (1999).
An alternative procedure for avoiding payment of the adjudicator’s award by presenting a defence of setoff, or a counter-claim, at the enforcement stage has been tried in a number of cases, although the
chances of success have always been unpredictable. The recent case of Solland v Daraydan suggests
that the chances of avoiding full payment of an award are now slim.
The procedure originates in HGRA s 111, which provides that if a party wishes to withhold payment under
a contract then it must serve a notice. Applying this to a payment due under an adjudicator’s award, does
this therefore mean that a losing party of an adjudication may then serve a notice that it intends to withhold
payment of the adjudicator’s award on the grounds that it has a cross-claim or set-off defence?
This question was first asked and decided in VHE Construction plc v RBSTB Trust Co Ltd (2000). Judge
Hicks QC examined the issue and on the facts of that case decided that no adequate notice to withhold
payment had been served and the crossclaim failed under s 111. However, Judge Hicks also decided
that an adjudicator’s decision was final and could not be amended by a set-off defence or cross-claim. He
stated that there was an obligation to ‘comply without recourse to defences or cross-claims not raised in
the adjudication’. That seemed to have settled the matter until the question was again asked in David
McLean Contractors Ltd v Swansea Housing Association Ltd (2001), and this time the answer seemed to
be different. The successful party in this case tried to enforce the adjudicator’s decision by summary
judgment, safe in the knowledge that the award would not be reduced by a defence or cross-claim
following VHE Construction above.
Judge Lloyd QC did not agree and decided that a party was entitled to deduct for liquidated and
ascertained damages (LADs) due from an adjudicator’s award, on the basis that the adjudicator simply
determines the dispute referred to him. In this case the dispute was the correct valuation of an interim
payment, of which the cross-claim was relevant (despite not being addressed by the adjudicator). The
losing party in the adjudication was granted summary judgment of its crossclaim and told that it was right
to withhold the money.
The tentative approach following David McLean was that provided a losing party had a real cross-claim of
LADs which had not already been adjudicated upon, an adequate notice to withhold payment had been
served within the specified time limit and provided the parties had not agreed to limit or exclude their rights
of set-off, then the amount could be setoff against the adjudicator’s award.
Judge Seymour QC reconsidered the issues in Solland. His decision is in line with VHE Construction, as
he ordered enforcement of the adjudicator’s decision in full and did not allow payment to be withheld.
His reasoning was that the decision in David McLean turned on its own particular facts. He felt that in the
course of deciding how much was due to the contractor, the adjudicator had to consider whether the
contractor was entitled to any extension of time and, if he was, how much. In doing so, the adjudicator had
inadvertently identified part of the delay which would entitle the employer to claim LADs for the
period of delay not covered by the extension of time. In establishing that the employer had a claim for
LADs, provided there was an adequate notice of intention to withhold payment, there was no reason why a
set-off was not appropriate.
Judge Seymour in Solland sought to show that the decision of Judge Lloyd in David McLean was wholly in
line with the decision of Judge Hicks QC in VHE Construction, although the outcome in David McLean
differed owing to the employer’s entitlement to LADS not covered by the extension of time identified by the
adjudicator. However, with respect, it does not seem that the two decisions can be easily reconciled, and
further clarification from the courts will be necessary before a consistent approach is established.
It now appears that the doors opened by David McLean have been closed, although perhaps not locked,
and adjudicator’s decisions are protected from set-off defences at the enforcement stage when an
entitlement to LADs has not been referred to in the adjudication. In practice, unless a losing party has a
very strong case for LADs which have been identified but not decided upon by the adjudicator, then it
Building
brief
5
will need to bear the burden of the adjudicator’s decision in the interim period before the decision is altered
by further arbitration, litigation or agreement.
Ross Baker
Building
brief
6
Water, sewage and more water: recent developments in the law of
nuisance
Given that the tort of nuisance owes its origins to the Assize of Novel Disseisin (as discussed by Ranulf
Glanvill CJ in 1189) it is a testament to its powers of survival that it continues, to this day, to serve a useful
function in the allocation of risk and responsibility on an over-crowded island. One reason for its survival is
that it has by and large remained immune to the ‘moralisation’ of tort law witnessed in the late 19th and
20th centuries, whereby ever wider areas of human activity are discussed in terms of fault, and thus
subjected to the remorseless expansion of the empire of ‘negligence’. Whether this immune system will
continue to keep nuisance alive much longer must be open to doubt in the light of recent Court of Appeal
decisions.
(1) Bybrook Barn Centre v Kent CC
Conventional wisdom has it that ‘that which is not a nuisance at the time it is done, cannot become so by
length of time’ (Radstock Co-op v Norton-Radstock UDC (1968) Ch 605). Thus at first instance in Bybrook
Barn Centre v Kent CC (2001) BLR 55, Kent County Council successfully argued that it could not in
principle be liable in nuisance for flood damage caused by the fact that a culvert channelling a stream
beneath one of the roads for which (as Highway Authority) Kent CC was responsible, perfectly adequate
when first built in the 1950s, had become insufficient (in terms of size) to cope with additional flow of water
in the stream brought about by more recent developments (construction of the M20 motorway and a
business centre) upstream in its catchment area, over which development Kent CC had no control.
The Court of Appeal overturned the first instance ruling and held Kent CC liable on the basis that:
(i) ‘Statutory bodies do not occupy a special position so far as liability for nuisance is concerned unless
statute puts them in that position’
(ii) Kent CC knew that the culvert had become under-sized and could, at reasonable and proportionate
cost, have built a larger one
(iii) The law has moved on since Radstock and similar decisions: see Goldman v Hargrave (1967) 1 AC
556 and Leakey v National Trust (1980) QB 485. Modern nuisance law now imposes on occupiers of land
a measured duty to take reasonable steps to prevent their property from becoming the cause of
foreseeable damage, and in this respect Kent CC as highway authority was no different from any other
occupier: ‘a defendant is not entitled simply to say that something was not causing a nuisance when it
came on his land or when it was constructed and thus no liability can be imposed on him. A defendant’s
duty is to do that which is reasonable for him to do.’
(2) Marcic v Thames Water Utilities Ltd
In Marcic v Thames Water Utilities Ltd (CA, 7 February 2002 – unreported) the Court of Appeal again drew
upon the ‘measured duty’ identified in Goldman and Leakey to illuminate and do away with another dusty
rubric of nuisance law. Marcic was the case where at first instance the court rejected the claim (namely for
damages as a result of surface and foul water backing up from sewers rendered inadequate by
progressive urbanisation) based on nuisance, but found for Mr Marcic under section 6 of the Human
Rights Act. The Court of Appeal both dismissed Thames Water’s appeal against the Human Rights finding
(a story for another day) and allowed Mr Marcic’s appeal against the rejection of his claim in nuisance,
which rejection had been based upon a long line of cases (Glossop v Heston and Isleworth Local Board
(1897) 12 ChD 102, Robinson v Workington Corp (1897) 1 QBD 619, etc) which drew upon the hallowed
distinction between ‘misfeasance’ and mere ‘nonfeasance’ to hold that sewage undertakers (like other
bodies) could not be held liable for merely ‘doing nothing’. (The socio-political rationale which underlies
this rule – and which itself remains valid despite the Marcic decision – is that to hold otherwise would be to
compel a public body to exercise its statutory powers – ie to spend money – and thus to enter an arena
which should be the province of the ballot-box rather than the courts.)
The Court of Appeal got round Glossop by:
(i) observing that Mr Marcic was not seeking to compel Thames Water to perform any statutory duty to
drain his own property, but was merely claiming damages in nuisance for the consequences of Thames
Water’s drainage of the property of others; and
(ii) finding that, on the facts, Thames Water could, with proportionate cost, abate the nuisance. This finding
in turn meant that Thames Water (‘operating a commercial venture’ and thus in no more favourable a
position than any other landowner) was, in accordance with the principles identified in Goldman and
Building
brief
7
Leakey, ‘under a duty to Mr Marcic to take such steps as, in all the circumstances, were reasonable to
prevent the discharge of surface and foul water onto Mr Marcic’s property.’
The significance of this development is perhaps most readily appreciated by noting that ‘nonfeasance’
(doing nothing) simply becomes irrelevant as a defence once occupiers of land are subject to an
overarching but ‘measured’ duty ‘to do whatever is reasonable in all the circumstances to prevent
hazards on the land, however they may arise from causing damage to a neighbour’. By definition, such a
duty is a duty to act to prevent harm as well as a duty not to act so as to cause harm.
(3) British Gas plc v Stockport MBC
British Gas plc v Stockport MBC (2001) EnvLR 763 concerned damage caused by the sudden and
unexpected escape of water from a (private) waterpipe serving a block of flats. The Court of Appeal
dismissed the claim in nuisance, on the basis that: ‘no case has yet held that it would be right to
impose any such duty [viz the ‘measured duty of care’] before the defendant is put on notice of what he is
required to do’. Of greater interest is the way in which the court dealt with the claim based on the rule in
Rylands v Fletcher (strict liability for the escape of hazardous things), with particular reference to
the ‘natural user’ exception to that rule. Previously, such cases as Collingwood v Home & Colonial Stores
(1936) 3 AllER 200 had drawn an intelligible and simple distinction between large service pipes (nonnatural) and small domestic pipes (natural). Here, however, the court held that the service pipe fell within
the ‘natural user’ exception because its use was no more than was ‘necessary for the common and
ordinary use and occupation of land and houses’. One has to wonder where this line of reasoning (which
goes counter to the suggestion of the House of Lords in Cambridge Water v ECL (1994) 2 AC 264 that
excessive use had been made of the ‘natural user’ exception) will end: what of bulk oil tanks in domestic
use? What of septic tanks?
Further, in rejecting the claims both in nuisance and under the rule in Rylands v Fletcher, the Court of
Appeal went some way towards adopting a heresy which has recently begun to appear, namely that
Cambridge Water states that liability (ie for accidental damage) cannot arise under either head if the
defendant is making no more than ‘reasonable use’ of his land. This confuses the concept of ‘reasonable
user’ which governs use of land as between neighbours in terms of nonneighbourliness, and principles
applicable to liability for accidental damage. A moment’s thought will demonstrate that if what I am doing
on my land causes accidental, physical damage to someone’s property, then the fact that what I was doing
was in itself reasonable in ‘character of neighbourhood’ terms is simply neither here nor there when it
comes to determining liability for such damage. I suspect the last word has not yet been said on this
subject.
Philip Vallance QC
Building
brief
8
Enron – insolvency and the grandchildren’s furniture
The spectacular collapse of the world’s largest energy company is a reminder that all may not be as it
seems, particularly when it concerns the assets or worth of a company, a hard lesson learned many times
over in the construction industry where numerous contractors and developers go into liquidation.
At the end of last year the House of Lords, in Gerald Clifford Smith (administrator of Coslett (Contractors)
Ltd) v Bridgend County Borough Council ended up deciding an important issue arising out of Coslett’s
insolvency.
The parties had entered into a contract under the ICE 6th Edition. Section 63 of that contract provides that
in the event of the contractor’s insolvency, the employer can complete the works using the contractor’s
plant, equipment, temporary works and unused material, which can then be sold and the proceeds applied
to satisfy any sums due from the contractor to the employer.
Bridgend followed exactly this path selling the plant to the contractor engaged to complete the works.
They were sued in conversion (unlawful appropriation of another’s property) by the liquidator. The initial
decision in the TCC was finally upheld in the House of Lords. They found that clause 63 had created a
floating charge over Coslett’s machinery, but unless that charge was registered (which it was not) then it
was void both against the company and its administrator.
A similar provision to section 63 appears in the Standard Form JCT Contract at 27.6.1, it is perhaps only
because plant used by civil engineering contractors is so much more valuable that we have not had a case
before now on this clause of the JCT. Appearances are deceptive. An outsider looking at the site, knowing
nothing of ICE s 63, would assume that the contractor’s plant belonged to him and, in the event of his
insolvency, would be available to his general creditors. A closely interested third party might well have
done a company search which would have told them that this was not the case (if the s 63 charge had
been registered).
This requirement of registration under the Companies Act is a reflection of much earlier statutes concerned
with the apparent or actual disposal of assets. Under the Bill of Sales Act 1878 a donor of chattels who
keeps possession of them (say for example valuable furniture) has to register that gift
under the Act otherwise the gift is of no effect in the event of bankruptcy or execution by a sheriff or bailiff.
So if you have given away all your valuable Hepplewhite chairs to your grandchildren, but still want to sit
on them, make sure you have registered a donation before your debts catch up with you!
More seriously, if employers now wish to maintain the rights that they thought they had under section 63
(or under JCT 27.6.1) the execution of a registrable floating charge by a contractor might well join the
litany of other documents that have to be executed before a construction project can (legally) get off the
ground.
Robert Stevenson
Building
brief
9
Limitation of liability clauses: a reminder
The courts’ attitude to limitation of liability clauses has taken
a significant shift in recent years. Where are we now?
The effect of UCTA
Under the Unfair Contract Terms Act 1977 (UCTA), where one party enters a contract on the basis of ‘the
other’s written standard terms of business’, any clause seeking to limit or exclude liability must be shown to
be reasonable. In the case of St Albans City and District Council v International Computers Ltd [1995] SFR
686, it was held that one of the parties would be dealing on the other’s standard terms of business so long
as those standard terms remained ‘relatively untouched’.
Wherever this is the case, UCTA’s reasonableness requirement kicks in. UCTA states that the clause must
be ‘fair and reasonable … having regard to the circumstances which were, or ought reasonably to have
been, known to or in the contemplation of the parties when the contract was made’.
The traditional approach
The traditional approach taken by the courts was summarized in the case of South West Water Services
Ltd v International Computers Ltd (1999) BLR 420. In this case, the defendant had contracted to supply IT
systems. The systems failed and the claimant suffered substantial loss. On the facts, International
Computers Ltd were dealing on their standard terms and conditions, subject to modification by negotiation,
which effectively left the standard terms and conditions untouched.
Therefore, UCTA applied and the reasonableness requirement had to be met. It was held that since the
entire agreement was purported to exclude liability for fraudulent misrepresentation made prior to the
contract it failed to satisfy the requirements of reasonableness.
The effect of this decision was to make it extremely difficult for suppliers to limit legal liability by contractual
provision, even when the relevant contracts were far from being a ‘standard contract’ where all terms are
imposed on the user on a take it or leave it basis. The approach taken by the courts was criticised by many
parties as leaning too far in the direction of protecting users at the expense of suppliers.
The current approach
A recent Court of Appeal ruling has, however, turned matters on their head. Watford Electronics Ltd v
Sanderson CFL Ltd (1999) questions whether purchasers can challenge the validity of limitation of liability
clauses by asserting that they fall foul of the terms of UCTA.
The Court of Appeal, on similar facts, took a different approach from that in South West Water. On the
subject of entire agreement clauses the court stated that such clauses could be given effect in a
commercial context between parties of equal bargaining power (the earlier Court of Appeal case of
Grimstead & Son Ltd v McGarrigan was cited). It was pointed out that these clauses assist in avoiding the
uncertainty of litigation based upon oral statements made in the precontract meetings and enable the
parties to measure the risk allocated between themselves which is then reflected in the price.
On the issue of reasonableness, the court took account of the fact that Watford’s standard terms of
contract contained similar clauses to those of Sanderson; thus they were aware that exclusion or
restriction of certain types of liability is likely to determine the price at which a supplier sells its products.
Further, the clause dealt with the allocation of the risk of indirect or consequential loss between the parties
and this was likely to have been reflected in the price. Bearing all this in mind the clause was fair and
reasonable.
Alongside the Watford case, the case of BHP Petroleum Ltd v British Steel plc (1999) is authority that
clauses limiting liability are not to be construed in such a hostile fashion as clauses excluding liability
altogether. For this purpose a clause imposing a time limit should be treated in the same way as one
imposing a financial limit.
Ensuring clauses are effective
Following the Watford case it is more difficult for a purchaser to go back on an agreement where there is
no obvious unfairness or unreasonableness. Where an agreement is reached between two experienced
Building
brief
10
business parties with equal bargaining power, one can assume that the clause is there to provide the
parties with commercial certainty, and that the price agreed reflects the apportionment of commercial risk.
To avoid limitation of liability clauses being struck out in future, suppliers should endeavour to draft clauses
that limit liability as opposed to excluding all liability, as the court will be less hostile in construing these
clauses. Clauses should also be drafted so that they can be construed as reasonable subject to UCTA, in
the event that the reasonableness requirement needs to be met. Finally, the price should reflect
the apportionment of liability undertaken in the contract, including the ability of either party to insure
against risk of failure. If all this is done, the courts are unlikely to interfere.
Third party rights
One final point is that the rights of third parties must always be taken into account when drafting
contractual terms. With the advent of the Contracts (Rights of Third Parties) Act 1998 (which is applicable
to contracts entered into on or after 11 May 2000) a third party will be able to enforce rights under a
contract where:
(a) this is expressly provided for
(b) the contract confers a benefit on that third party, and
(c) the third party is identified (by name, class or description)
The parties should take care to ensure that, if such third party rights are not intended, they are excluded in
accordance with the provisions of the Act.
Matthew Hammond
Building
brief
11
Limit your unpaid services
Most, if not all, standard form and bespoke deeds of appointment include amongst the normal services to
be provided advice and assistance to the client in the event of claims by the contractor in connection with
the execution of the works.
Many such clauses define the cut-off point for such normal services as the commencement of litigation or
arbitration. This point may now be far too late to avoid the consultant in a considerable amount of work that
is neither planned nor budgeted for. Adjudication is now a right in all construction contracts, the defence or
prosecution of an adjudication can be very time consuming and invariable the employers will
seek their consultant’s assistance. To ensure that this additional time is paid for the cut-off point should be
the service of a notice of adjudication by the contractor (or the preparation of an adjudication claim if the
employer is to be the applicant).
Similar considerations apply to litigation. The pre-action protocol for construction disputes now calls for a
considerable amount of preparatory work, presentation and attendance at meetings before a summons is
even issued. Again, the cut-off point needs to be the delivery of a letter which initiates the pre-action
protocol.
Robert Stevenson
Building
brief
12
Employment Bill 2002
The new Employment Bill will bring significant changes in the areas of work place dispute resolution and
employees’ maternity/paternity rights. As well as these changes, the bill will also provide enhanced rights
for union learning representatives (ULRs).
Dismissal, disciplinary and grievance procedures
The key element in the dispute resolution changes relate to the introduction of statutory dismissal and
disciplinary procedures (DDPs) and statutory grievance procedures (GPs). It is likely that these procedures
will supersede any current procedures within employees’ contracts. The new statutory procedures will be
the de minimis benchmark which must be adhered to. They cannot be bypassed in any way but they
may be added to by an employer’s own contractual terms. The effect of non-compliance with the statutory
DDP is likely to be that an employer will be deemed to have dismissed an employee unfairly. It will
therefore be essential for all employers to identify the relevant DDP and to comply with the procedures. It
is likely that the bill will impose a more onerous requirement on employers than at present to explain in
writing the reasons for dismissal of an employee as part of the DDP. Employees’ rights are further
protected in that tribunals will be allowed to award an increase of up to 50% on any award made where it
is held that an employer has not complied with the standard procedures in the DDP.
Employers will also have to pay more attention to providing a written statement of terms and conditions at
the start of an employee’s contract. The intention is that this will highlight to both employer and employee
the basic statutory grievance and disciplinary procedures available. The smaller employers,
who have previously been exempt from this requirement will now be losing that exemption.
Maternity/paternity rights
A key element for fathers is the introduction of two weeks’ paid paternity leave from 2003. This will apply to
fathers of both natural and adopted children. Providing the employee fulfils certain conditions relating to
length of service, the purpose of leave and notice requirements then the employee’s rights to leave and
work on return with protection from unfair dismissal will be guaranteed. The pay for this period will be the
lesser amount of £100 per week or 90% of the employee’s earnings.
The bill will also provide for a longer period of maternity leave and additional paternity leave (up to one
year) and enhanced periods of statutory maternity pay and maternity allowances. The onus on employees
will also be stricter in providing a longer notice of the requirement for such leave.
Other developments
The Union Learning Representatives who provide guidance to their members about training requirements
will for the first time be allowed time off for these duties. This right will bring them closer to the status
enjoyed by the more senior Trade Union officials who enjoy paid leave to carry out their activities. Further
developments in the bill provide for enhanced powers for employment tribunals to strike out weak cases
before they ever reach the expensive full hearing stage and for employees who are claiming against
employers for unequal pay to clarify the issues in a questionnaire before deciding whether to go before a
tribunal. It is intended that these measures will ensure that only the most important cases end up before a
tribunal and therefore keep the legal fees to employees and employers down to a minimum.
At present, all of the above changes are still only proposals and it remains to be seen if further
amendments are made prior to the bill being passed and entering the statute book.
Andrew McDonald
Building
brief
13
Collapse of the World Trade Center
More than six months have now passed since the collapse of the World Trade Center (WTC) in New York
on 11 September 2001, but how much further are we in discovering why it collapsed?
The construction of the WTC involved building to unprecedented heights and so engineers used an
innovative structural model.
The model has been described as a rigid hollow tube of closely spaced steel columns with steel floor
trusses extending across to the central core. The 208 ft-wide façade was, in effect, a prefabricated steel
lattice with columns on 39-inch centres acting as wind bracing. The vertical steel and concrete central core
took only the gravity loads of the building and housed only lift shafts and stairwells. The floor was
constructed using prefabricated trussed steel, which was only 33 inches in depth. This spanned 60 feet to
the core and also acted as a diaphragm to stiffen the outside wall against lateral buckling forces from windload pressures. So, why did it collapse?
There are many theories. However, according to one expert in civil engineering, the structural integrity of
the WTC depended on the closely spaced columns around the perimeter. The steel trusses, which went
between the central core and the perimeter columns on each floor, supported the concrete slabs on each
floor and tied the perimeter columns to the core, preventing the columns from buckling outwards. This
expert believes that the impact of the planes crashing into the towers destroyed a large number of
perimeter columns on a number of floors which severely weakened the entire system. In addition, the heat
from the fire in the upper floors gradually affected the behaviour of the remaining materials. As the planes
had only recently taken off and were on a long-distance flight they contained large quantities of
aviation fuel which drenched the buildings causing fires which created enormously high temperatures,
reducing the strength and stiffness of the steel.
This, combined with the impact damage, he says, caused the failure of the truss system supporting a floor,
or the remaining perimeter columns, or even the internal core, or any combination of these. If the flooring
system failed, this would have caused the perimeter columns to buckle outwards.
Whichever of these happened, it would have resulted in the complete collapse of at least one floor at the
level of impact. Once one floor collapsed, all floors above would have begun to fall. As the weight of the
falling structure gained momentum, this would have crushed the floors below, resulting in the catastrophic
failure of the entire structure.
The investigation into the collapse is being conducted by the Federal Emergency Management Agency
(FEMA) and the American Society of Civil Engineers. A FEMA assessment team, which has been
examining frame-by-frame footage of the collapse, is expected to release a report of its findings some time
this year. Hopefully this will reveal the precise reasons for the collapse.
Stavry Constantinou
Disclaimer
This document does not present a complete or comprehensive statement of the law, nor does it constitute
legal advice. It is intended only to highlight issues that may be of interest to clients of Berrymans Lace
Mawer. Specialist legal advice should always be sought in any particular case.
Building Brief is published by Berrymans Lace Mawer (Registered office: Salisbury House, London Wall,
London EC2M 5QN) and printed in England by Greenaways Digital. Copyright © Berrymans Lace Mawer
2002
O:\PERSONAL FOLDERS \CIS\BUILDING_BRIEF_02_APR02[1].DOC
Building
brief
14