Garry Winter’s Case notes

Illustration: Jason Ford Though the amount of debt available

to councils provides a good indicator of whether they could be generating construction work, it’s not a dead certainty by any means. Some authorities, points out Parker, may simply not want to borrow. Or they may have debt head room, but because of other factors, the interest rate at which they can borrow may be too high to make it viable. So in terms of business development,

It concluded: “Efficient operation of the

HRA could lead to the build-up of some £50bn of new investment resources across the country, over 30 years (£25bn in today’s money). Councils can now look at their housing as a real asset capable of generating additional investment resources.” The report’s author, Richard Parker, a partner with the firm, says: “In essence every council should be better off. They can spend the revenue how they like, but they will be limited to what they can borrow.” One of the many complicating factors in this new regime is that as part of the settlement councils have to take on a certain amount of historic debt. In total this amounts to £29bn between them. This debt has been apportioned among the councils using a formula that works on the basis of averages across the country and inevitably produces anomalies. They have also been given a debt ceiling, and the amount they can borrow is known as the debt head room.

construction firms will find it hard to pinpoint those authorities with the greatest potential workloads. “In the past people could track quite easily who had the cash through things like the Decent Homes programme,” says Parker. “Now it will require a greater assimilation of data — and greater understanding of the client base than before.” The newfound freedoms could catalyse all sorts of new arrangements and joint ventures which, he says, construction firms should be proactive in setting up. Chris Moquet, business development partner at consultant Calford Seaden, who has also been poring over the figures, agrees it’s difficult to track which council may be in a position to spend. “Our view is that there will be more money available in Greater London and that that could be quite substantial. But there will be a lot of suck and see. But less interference will equate to proper planned programmes of maintenance,” he says. So, a period of short-term pain may seem inevitable, but in the longer term construction firms are optimistic. Wates’ Trusler concludes: ”What we’re seeing is a bit like one massive large-scale voluntary stock transfer — all with different customers. Most people see this as a step in the right direction, it’s just a question of how long it will take to settle down.”

Jerram Falkus Construction v Fenice Investments Technology and Construction Court, July 2011

Jerram was employed by Fenice under a JCT design and build contract to construct a development in Camden, north London. The contract contained some amendments, including deletion of the extension of time clauses permitting the employer to grant further time to the contractor resulting from any impediment, prevention or default by the employer and work or failure to carry out work by statutory bodies. Other amendments sought to

make the final account and adjudicator’s decisions conclusive in certain circumstances, including where the dispute was referred to adjudication after the final account submission. Here, it required a challenge to the decision by litigation or arbitration within 28 days to prevent the decision becoming binding. The original contract

completion date was 25 May 2009, but under the remaining extension of time provisions that had been extended to 15 June 2009. In fact, practical completion was not achieved until 9 September 2009. Jerram’s view was that Fenice

was responsible for the delay and as such included a claim for loss and expense in its final account, alleging a balance was due of £311,393.78. Fenice disagreed and levied liquidated damages for the delay. In September 2010 Fenice

referred the dispute to adjudication in which it sought a declaration that Jerram was not

Garry Winter’s analysis

This case provides useful guidance on several matters. Regarding conclusiveness, while ordinarily adjudicator’s decisions are only temporarily binding until resolved by litigation, arbitration or agreement, as this case shows there is nothing preventing such decisions from becoming conclusive in certain circumstances.

This case also highlights the

loss”. To lessen this risk, it should be made explicit in the contract which losses will be deemed “consequential”; n a provision limiting liability for consequential losses may be subject to the Unfair Contract Terms Act 1977 if the employer is a “consumer” for the purposes of this Act (eg a homeowner), or the employer is a “business” and the contract is on the defaulting party’s

standard written terms. If the Act applies, the limitation provision in the contract must be “reasonable”. The standard form building contracts

seek to comply with the Act by limiting the contractor’s liability rather than excluding liability entirely. By Steven Hayward, a solicitor in the construction and engineering team at IBB Solicitors

potential pitfalls in amending extension of time provisions. Contrary to common belief, extension of time clauses are for the benefit of the employer by permitting the contractor more time to complete for events which occur which are the employer’s responsibility. Without such clauses, the employer cannot hold the

contractor to the completion date if by their own act or omission they have prevented this. In such circumstances time becomes “at large”, meaning the contractor is no longer bound by the completion date or the liquidated damages provisions and their duty is to complete within a reasonable period. Had the relevant event

contract clauses not been deleted Jerram would have been unable to forward the time at large allegation and avoid the consequences even if it was correct on the cause of delay. The court has clarified

that if there are concurrent delays for which the contractor is responsible, a claim for time being at large will be unsuccessful.

Garry Winter is a senior consultant with Knowles, a Hill International company. Tel: 01962 842929

CONSTRUCTION MANAGER | MARCH 2012 | 21

entitled to any further extension of time. Jerram said the delay was due to the employer delaying decisions, issuing late instructions and delays caused by EDF and British Gas. As the clauses permitting the employer to extend the completion date for such acts had been deleted, Jerram claimed Fenice could no longer extend time and as such time was at large. In October 2010 the

adjudicator decided in favour of Fenice. Jerram, unhappy with the decision, sought to litigate the matter, but did not issue proceedings until March 2011, more than 28 days after the adjudicator’s decision. In court, along with

responsibility for the delay and its associated costs or damages, Fenice also alleged the adjudicator’s decision was conclusive, preventing the court from considering the matters. The court concluded that under

this contract, where adjudication was started after submitting the final account, a challenge to an adjudicator’s decision was required within 28 days of that date. Jerram had not done so and so the decision was conclusive.

Jerram’s view was that Fenice was responsible for the delay and as such included a claim for loss and expense in its final account