CM’s regular legal columnist looks at key trends and cases coming up this year that will affect construction.
Now that we are a year into the Construction Act amendments, projects subject to the new Act should be sufficiently advanced for the little niggles to have started to appear and the possibility of adjudications therefore more likely.
One question being asked at the moment is whether opening up the Act to oral or partly written contracts will increase the number of adjudications. In my view, it is unlikely to have any significant impact. Parties to construction contracts in other jurisdictions, such as Australia, have had the ability to refer oral or partly oral/written contracts since the introduction of adjudication in some states in 2002 and it does not appear to have raised any significant issues or trends worthy of note.
A current hot topic in the adjudication world is the impact of Solent Interiors Systems v Southampton FC. The case was heard by Mr Justice Akenhead on 15 November and judgment is expected in the new year. The case involves a payment dispute under the new payment regime. Southampton FC issued non-compliant pay less notices and Solent were awarded the sums subject to the pay less notices. Southampton failed to pay and Solent sought enforcement. Whilst the points of law do not appear groundbreaking, it does mark a milestone in the life of the Housing Grants, Construction and Regeneration Act.
Legal advice privilege
The subject of legal advice privilege remains an unresolved topic and is of particular interest to the construction sector. Mr Justice Akenhead in Walter Lilly & Co v (1) MacKay (2) DMW Development (2012) confirmed that legal advice privilege will apply only to advice from practising lawyers and barristers. However, the applicability of litigation advice privilege to advice provided by claims consultants in contemplation of adjudication remains open.
The boundaries of legal advice privilege are also being pushed in the recently heard supreme court case, R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another, which is one to watch. The judgment is due to be handed down in early 2013. The issue being decided is whether legal advice privilege should apply to accountants providing tax advice in the same way it does to advice provided by lawyers. Lord Pannick QC argued that the law should adapt to the fact that most tax advice is now given by accountants rather than lawyers.
It is unlikely that the supreme court will intervene and extend the privilege rule to non-lawyers. Such a change would need to have statutory support.
PF2 and Midland Expressway
With the chancellor’s autumn statement and the introduction of PF2 (the successor to PFI), the problem with liability and responsibility in the supply chain highlighted in the Midland Expressway case remains an issue for project companies. This was a missed opportunity in the amendments. That said, the PF2 scheme will start in earnest in the new year with the Priority Schools Building Programme being the first tranche of infrastructure to be procured using the model.
On NEC3, will the lack of judicial guidance be addressed in 2013? NEC3 remains the public sector contract of choice and if PF2 and the Energy Bill measures are implemented it is bound to feature heavily. Looking to current NEC3 projects, Crossrail should hit some significant milestones next year, one being on tunnelling, with the tunnel boring machine Phyllis currently under Hyde Park and due to arrive at Bond Street in early 2013. The first phase of the Queen Elizabeth Olympic Park is due to open from July 2013. Will this project go as well as the Olympic procurement or will disputes arise here?
Whilst the figures on the industry have not made comfortable reading over the last few years, the chancellor’s announcement of £5bn capital investment over the next two years together with the clarity on the successor to PFI are an encouraging start to 2013.
Joanne Kelly is a partner in the construction and engineering department at Taylor Wessing; email [email protected]