BuildLaw, Issue 16: December 2012

Welcome to the December 2012 Issue of BuildLaw in which we bring you articles from New Zealand, Australia, and the United Kingdom on building and construction law matters.

You can either download and print the complete newsletter or read those articles of interest.

Articles in Issue 16 are as follows:
Editorial Who is Liable for Defects after concluding a Settlement Agreement?
John Green's comments on articles in this issue and developments in the industry since our last issue as well as a summary of industry relevant events of 2012 - the year in review.

Including commentary on the Christchurch Re-Build, Amendments to the Construction Contracts Act and the Leaky Building Crisis.

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The answer to this question requires examination of a fundamental aspect of contract law – what did the parties intend? In Point West London Limited -v- Mivan Limited [2012] EWCH 1223 (TCC) the court considered whether the phrase “full and final settlement in respect of any and all outstanding matters” was intended to release the contractor from its liabilities for defects which both parties knew about at the time the settlement agreement was concluded, but which remained unresolved.

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Professional Appointments: Limitation Clauses Risk-Avoidance, Transfer, Acceptance or Management
In a recent case the court found that a limitation of liability in a contract between a Project Manager and an Employer was unenforceable.

This case concerned a dispute between the Project Manager and the Employer in respect of the construction of new boarding accommodation at Ampleforth College. The works were one of three projects in relation to the college in which both parties were involved. There was no dispute as to the quality of the works but there were significant delays to completion.

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When the representative of the Highways Department announced that no extensions of time or additional cost would be granted for weather events, you could hear a pin drop.  The surprise of the legal team representing the Government of Hong Kong in the construction of the Tsing Ma Bridge – to be the longest suspension bridge in the World at that time (early 1990’s) – was tangible, as we considered the consequences of such a significant transfer of risk.

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Global Claims 1 Business Day Not enough to Crystallise a Dispute
Global claims were defined by Byrne J in the Australian case John Holland Construction v Kvaerner RJ Brown as being a claim where: “the claimant does not seek to attribute any specific loss to a specific breach of contract, but is content to allege a composite loss as a result of all the breaches alleged, or presumably as a result of such breaches as are ultimately proved”.

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A common reason to challenge the jurisdiction of an adjudicator is that the responding party has not been given enough time to consider the claim before the adjudication is commenced. In a recent judgment, Akenhead J found that one business day was not a sufficient period within which to infer that a dispute had crystallised but five days probably was. The parts of the adjudicator’s decision where he did not have jurisdiction were easily identifiable and could therefore be severed from the remainder to render the decision partially enforceable.

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Love me Tender—Maybe, Maybe Not! Honourable Intentions
The importance of clear and careful tendering arrangements has been underscored by two recent High Court decisions with each case yielding a different result.

The first case - a victory for the tenderer

In Roading & Asphalt Limited v South Waikato District Council,1 Justice Keane upheld Roading & Asphalt’s (RAL’s) claim that the Council had breached the express terms of its tender for a contract for solid waste disposal operations and an implied duty to treat all tenderers fairly and equally when it awarded the tender to a tenderer whose bid was higher than RAL’s in circumstances where the Council’s terms of tender stated that it would evaluate the tenders according to the “Lowest Price Conforming Method”.

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Construction projects are technical in nature and are often hugely complex. The contract needs to reflect this complexity and will involve some negotiation even where a standard form contract is to be used.

Contractors are reluctant to commit resources to a project in the absence of a formal agreement guaranteeing payment and clients need to get their projects moving. Letters of Intent are often used as a device to try and meet these requirements. Reality bites when these end up being the only paper work for the project and the parties fall out.

The Courts have consistently cautioned against starting work on a construction contract without having a contract in place. When presented with a Letter of Intent one of the first things they will consider is whether it is legally binding.

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Key Considerations when Defects are Rectified by the Owner Old Habits Die Hard—Building Information Modelling saves time and money so why is it being ignored?
Key Points:

If you're going to get a third party to rectify defects, you'll need to consider four key issues.

1. Construction contracts often provide the owner, the contract administrator, or both of them, with the power to require the contractor to rectify defects. Frequently the construction contract ties this power to defects liability period requirements. When an owner decides to arrange for a third party (who is not the contractor or a party contracted to the contractor) to rectify the defects, and those defects actually exist, there is an issue as to whether the owner is entitled to recover the costs of rectification as damages.

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Remember the Bird’s Nest and the Water Cube at the Beijing Olympics? The intricate beauty of those structures was achieved using a revolutionary design approach called BIM or Building Information Modelling. Sydney’s iconic Opera House has also used BIM to guide its renovations and facilities management program.

BIM discards the old way of building design where the upfront architectural work is often done with little input from other project participants such as engineers, contractors and facilities managers.

Instead, BIM brings together all parties early in the project and connects them into a  virtual ‘design’ forum to review the simulated structure, ask questions, share information and raise issues.

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Summary of Law Commission Review of Joint and Several Liability Ownership—Sub-Contractor’s Equipment—Removal of Equipment from Site

The Law Commission is undertaking a review of the application of the joint and several liability rule (JSL) in New Zealand. The JSL rule creates full liability for the last man standing, or the deepest pocket. The Law Commission will consider if the rule should be retained, replaced, or amended, either generally or in relation to particular professions. The Issues Paper was released on 21 November 2012, and submissions are called for by 31 January 2013.

The objective of this memorandum is simply to summarise the key issues considered by the Law Commission in this Issues Paper, so that after reading these few pages (rather than the full 75 page report) you can consider whether your business should make submissions on this matter.

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The case of Alstom Power Ltd v Somi Implanti, [2012] EWHC 2644 (TCC), concerned an application for declaratory relief relating to the ownership of a sub-contractor's equipment that was brought to site in connection with the construction of a power station.

The Facts

Alstom Power Limited ("Alstom") was appointed by RWE npower Plc ("RWE") as main contractor to engineer, procure and construct a substantial power plant in Pembrokeshire. Alstom retained an Italian sub-contractor, SOMI Impianti Srl ("SOMI"), to carry out various electrical and mechanical works in two work packages under the terms of a sub-contract dated 16 April 2010 ("the Sub-contract").

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Article 1: “Cadbury v ADT” & Fifty Shades of Grey


A dispute about the extent of liability for a fire at a popcorn factory was largely to do with the terms of the contract – just like Fifty Shades of Grey


Fifty Shades of Grey by EL James, have you read it? I have, just. It has set the book world on fire. It’s all about getting into contract. About all those rules of offer and acceptance; all about the battle of the forms; stuff for grown-ups too.

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Article 2: “Compensation: Cost of cure or reduced value of house – which?”


Here’s a case where homeowners took a builder to court for damages when cracks appeared in their homes. The question was how to calculate what compensation to pay


This story begins 20,000 years ago. Shepherd Homes Plc built 94 new houses at Eden Park, Hartlepool. They are “executive homes”, lovely on the face of things. Look at them on Google Street Map. Seventy-one of the homeowners had to sue Shepherd because the piling contractor seemingly got caught out. Just as the ice age was closing, that confounded melting ice exposed the glacial till.

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