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Construction & engineering law in 2011

The year started with a cut that many welcomed. In 2009 theOFT fined 103 construction firms a total of £129m mostly over artificially highbids designed to lose contracts but keep places on tender lists. Twenty-five ofthe firms appealed. A few were exonerated. Each of the others had their finescut by up to 94% partly because the OFT hadn’t fully accounted for coverpricing being “long-standing, widespread and endemic throughout the industry”.The OFT warned firms against future cover pricing. Meanwhile many faced theopposite problem of suicide bids.

Throughout the year the government indicated it would helpUK businesses win public sector contracts, but seemed slow to realise that thismay only help UK public procurement lawyers. A cause celebre was Siemens’winning of a £1.4bn contract to supply trains for the Thameslink service at theexpense of Bombardier. Bombardier would make the trains in the UK but Siemenswould not. Shortly afterwards the competition to supply trains for Crossrailwas postponed into 2012.

In 2011 French engineer Alstom continued litigating againstEurostar and Siemens over another train contract - just one of a recent upsurgein procurement challenges. It seems to be the first case in which the newremedy of declaring an awarded contract ineffective has been sought. The remedywas refused partly because the claim was out of time. With the deadline forbringing procurement cases recently reduced from three months to 30 days thiswon’t be the last claim to fail for lateness.

More recently Transparency International reported that thepublic works and construction sector is seen as the world’s most corrupt sector(still). This followed the delayed coming into force of the UK’s Bribery Act2010. One of the act’s key aspects was the criminalising ofbusiness-to-business bribery but the change that attracted most attention was anew strict liability offence. Commercial organisations may be guilty if briberyis carried out on their behalf by someone anywhere in the world. The onlydefence is having in place “adequate procedures”. The government gave guidanceon what this means as well as on the act more generally, in another attempt tohelp UK business, but TI condemned its “deplorable” diluting of the act.Prosecutors’ discretion is key to the act’s application and how that discretionis applied will be closely monitored. The industry is being targeted.

Another delayed act was the revised Construction Act. It hasrequired the industry to overhaul its payment practices and standard forms butthe costs are likely to outweigh any benefits. The new act brings uncertaintiesover when and how it applies. Technology and Construction Court guidance isneeded on what the new notices that must be issued require for specifying the“basis” of the sum that is to be paid. As if to prove the difficulties with thenew act, the new Infrastructure Conditions of Contract suite (which replacesthe ICE suite) was amended 11 weeks after being published.

While the latest stats from Glasgow Caledonian Universitysuggested that the number of adjudications has fallen by about 40% from a peaktwo years ago, the TCC had a busy year. In London the High Court TCC moved intothe new Rolls Building. It will share the same roof as the Commercial Court andmay soon share that court’s rejection of pre-action protocol requirements.

Although Olympics-related cases have stayed out of thecourts, big cases this year included ADT being 25% liable over the design of a firesuppression system for a popcorn factory that burnt down and the latest part ofa case over a large housing development in Hartlepool with deficientfoundations.

The review of the cost of litigation in England and Wales,by the former head of the TCC, Lord Justice Jackson, is prompting many changes.The TCC is piloting more active management of cases by cost budgeting in whichthe court engages with the parties over their estimated costs for the variousstages of the litigation. Our system should soon permit parties to pay theirlawyers a share of any damages recovered in court or arbitration.

Another leading construction lawyer of our time, Sir AnthonyMay, retired from the Court of Appeal in 2011. Earlier in the year he decidedthat an employer could not recover from his contractor for defects that thesubcontractor would have remedied at no cost. The employer had not mitigatedhis loss by asking the contractor to make good. Those pursuing defects claimsare duly warned.

In the Supreme Court expert witnesses lost their immunityfrom suit for negligence when giving evidence or for associated work. This isanother cut that all should welcome, including experts who are now less likelyto be subjected to judicial criticism they cannot answer. Next year of coursepromises more cuts. Hopefully even more of them will be positive ones.

This article first appeared in Building on 16 December 2011with the title Legal developments in 2011: Year of the Long Knives.

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