How can we avoid the Premier League litigation firestorm coming to construction?

In our second construction webinar on 19 May, we looked at the parallel worlds of the construction industry and the Premier League.

Both worlds face similar challenges in light of the COVID-19 emergency and our aim was to explore whether the current situation is going to result in a litigation firestorm, particularly in light of the recent Cabinet Office Guidance, published on 7 May 2020.

If you would like to watch a replay (or, indeed, choose your own edited highlights package) please click here.

For those of you who missed it, we’ve compiled our own match overview outlining the main issues covered in our role-play (including the case law we referred to).

The 1st XI

The following points came up in the ‘frank exchange’ between James Bessey (Liverpool Builders) and Richard Wade (Norwich Disunited) in discussing the state of play of their building contract:

• The overall backdrop is one of conflict. Both parties are taking an adversarial approach and are not shy about confrontation. Resolving a significant dispute between them will be challenging. Against this, we saw a number of specific issues:

1. Social distancing (and health & safety generally). The parties are grappling with the contractual implications of their Health & Safety obligations and the application of the Construction Leadership Council’s Site Operating Procedures.

2. Time claims being made by the Contractor (Extensions of Time); including foreseeability of Relevant Events/Compensation Events, force majeure (possibly frustration) and others. They referenced the case of Balfour Beatty –v- Lambeth [2002] in the context of the contractor needing to carry out a critical path analysis before it could feasibly refer a complex delay claim to an adjudicator.

3. Money claims (loss & expense) which may well follow time-related claims by the contractor, for example, for prolongation or disruption. The argument around whether or not the site was shut down at the employers’ instruction indicates we may have a JCT-style contract.

4. Security of supply chains (labour and materials)

5. Time claims by client (Liquidated Damages)

6. Suspension (by either client or contractor) – whether by the contractor exercising its rights under the Construction Act or, by either party, due to the current crisis. This highlights the issue of potentially conflicting claims (and evidence) in establishing what delay was caused by which event.

7. Practical completion (and what determines PC). The parties would have had in mind the recent case of Mears –v- Costplan [2018].  This case looked at the specific requirements under a building contract which brought in requirements in a third party agreement (for a lease) leading to a situation where PC had to be determined by looking at the requirements of that ‘head’ agreement.

8. Dispute resolution (and how to go about it). The landscape is now different given the guidance issued on 7 May but it is still too early to see to what extent (and how matters covered by the Guidance might be interpreted by the courts, arbitrators or adjudicators).  It seems clear that Liverpool and Norwich do not seem to be signed up to the RICS’s Conflict Avoidance Pledge, or to be following any tiered Dispute Resolution provisions in their contract.

9. Job Retention Scheme (furlough). There was a particularly interesting question about whether the scheme might lead to instances of ‘double-counting’ possibly as part of a loss and expense claim and whether there might be some contractors that might overlook the fact that the Government has picked up some of their wages costs, in formulating claims.  This is certainly something that needs to be watched carefully!

10. Termination of contract (and the consequences). The prospect of terminating the contract came up but Norwich is clearly mindful of the consequences of termination for its liquidated damages claim, in light of the Court of Appeal’s decision in the case of Triple Point Technology –v- PTT [2019] (which provided that the Contractor’s liability for LDs may fall away entirely if termination occurs prior to PC).

The bench

In the second half we brought the ‘referee’ onto the pitch (in the form of the funder) and we looked at the following issues:

1. Third Party Interests (in this case, the funder) which brings into play the following additional factors for the client and contractor to consider:

• The funder’s right to enforce the terms of the contract
• Managing the project’s cashflow
• Invoking the terms of any relevant third party agreements (such as ‘calling in’ the loan).  Similar issues arise for other categories of third parties, such as landlords or tenants.

2. Concerns with bringing in a replacement contractor such as:

• Inevitable time and cost consequences
• Liability for design and workmanship
• Whether there is a performance bond

3. Commercial interests v contractual obligations (particularly for Norwich, who is concerned with the marketplace having all but vanished)
4. Multi-party disputes.

I hope that you found the webinar informative and entertaining. We don’t have an easy answer to the question posed by the title of the webinar but we hope that we have been able to give a few tips on some practical steps that might be taken to avoid the firestorm.

Please see our Blake Morgan events page for information on further events we are hosting as part of our webinar programme.