Construction law
Prepare this report on the legal issues arising from the scenario where there is a delay in construction works involving a JCT contract.
This should address the requirements outlined and be fully and appropriately referenced. Legislation and case studies should be used throughout.
Question
In the city of Newerpool, in the North of England, there was a gap site close to the
city centre. The site had been fenced off for several years after the previous building was demolished but eventually, an entrepreneur, Raeburn Hendrie, acquired the site with a view to building a mixed use development which will combine retail and office space. That project is now underway.
Raeburn considers this project – when complete – will be well placed to capture the
changed market for workspace rental as the north of England recovers from the
pandemic.
Raeburn engages a well–known architect, Rees Barr, to create the new building. He wants something that will make people ‘want to come to the property and then to stay there.’
Rees engages a design and project management company, PMHN LLP, to help with the detailed design (with Raeburn’s agreement).
Raeburn engages Whyte Robinson Boyd PLC (“WRB”) as the main contractor. He does this under a bespoke contract which is written with the conventional risk allocation of a standard form.
The contract provides for sectional completion in two phases: the first phase is for the
anchor leisure facility which makes up the ground floor of the structure, and the second phase is for office and retail facilities which are found on the higher floors. This model allow the leisure facility to open and start generating income.
The contract contains the following provisions:
The extension of time, and loss and expense attributable to delay, provisions are
closely modelled on those in the JCT Standard form of contract, except to the
extent to which they are inconsistent with the below.
The provision for liquidated and ascertained damages (LADs) is that these will be
be paid at the rate of £150,000 per week or part thereof for delays to eachphase.
These are capped at £1,500,000.
The contract provides that the “caps on liquidated damages will not apply if the
contractor negligently failed to mitigate any delay”.
The contract provides that the contract administrator will award a “good faith
assessment” (the words substituting for ‘fair and reasonable assessment’ in the
JCT) of an extension of time for delay PMHN are the contract administrator.
The works run late. In the first instance, this is because there is a delay in achieving the local authority permission for the work to start. The contract is silent on who is
responsible for this.
This delay takes the works into a season of poor weather which would not have otherwise been the case. This further slows progress.
WRB respond by bringing in some plant and machinery to try and deal with the effects of the weather. They also bring in additional labour. The machinery is not however effective as the temperatures on site are below the levels at which the machinery will operate effectively. PMHN tell them that ‘they must try harder’ to catch up, at this point.
WRB claim for extension of time, in accordance with the contractual provisions. In their assessment, PMHN accept the bases of claim advanced except that they do not consider the weather to be exceptional. They do not allow any additional time for that. PMHN do not specifically address responsibility for local authority permission but their assessment seems to assume that this was a risk for Raeburn.
The overall time awarded is however only a fraction of what was claimed for – even taking account of the weather event.
As a result, the overall delay following the extension of time for the first section exceeds 20 weeks. It also impacts on phase 2.
Raeburn argues that the failure to deal with the delay means that the cap on liability is
removed and damages continue to run.
WRB’s commercial manager for the project, Sara Loth, comes to you to seek an analysis of the position. Sarah assures you that they have complied with the contractual mechanisms for notification of the delay but she is not sure if they have demonstrated the delay in the best way possible. In particular, she considers that they had some particular issues because some of the delay was caused by slow progress rather than completely halting work.
Sara considers that the application of the contractual assessment by PMHN has strayed a long way from that which was intended by the parties.
She says that WRB’s view is that they could not have completed within the time allowed – for reasons outside of their control. She is clear that WRB did as much as they could –within the contractual framework – to complete the works on time.
Sara wonders whether the operation of the contract by PMHN in these circumstances is so wrong as to invalidate the process altogether – and what the arguments based on that might be. She is concerned that Raeburn may also challenge the process on the basis of the ‘permissions’ point and what the merits of that argument might be.
Sara says that before she raises any formal dispute resolution proceedings, she will need to provide a report to the WRB in–house lawyer and potentially to the divisional vice president, for approval. She needs something which is authoritative and comprehensive in identifying and explaining the relevant legal issues and the potential strong and weak arguments available – as well as a conclusion on the merits of what needs to happen next.
In the meantime, she is also seeking (from elsewhere) some detailed delay analysis – so you do not need to worry about that issue, beyond its impact on the legal issues in your answer.
Prepare this report on the legal issues arising from the scenario set out above, for Sara. This should address the requirements she outlines and be fully and appropriately referenced.
