FROM THE EDITOR Welcome to the 33rd issue of BuildLaw® in which we draw on the experience and expertise of leading experts in the field to bring you commentary, articles and reviews on topical matters relating to construction law. In this issue we feature delay analysis. We also look at challenging an adjudication determination in various jurisdictions, the perennial chestnut - who are the parties to the contract? force majeure clauses and causation, current problems besetting the New Zealand construction industry, and more. In ‘Case in Brief’ Jeremy Glover discusses the recent UK Court of Appeal decision in North Midland Building Ltd v Cyden Homes Ltd John Green [2018] EWCA Civ 1744 in which the Court gave a clear indication that contractual terms will be honoured when deciding questions of construction (even if they appear harsh and unfair) and that common Subscribe law principles such as the Prevention Principle cannot be relied upon to BuildLaw to read down or strike down a contractual provision agreed upon by the parties - in this case one that allocated the risk and responsibility of concurrent delay to the contractor by stipulating that where there ZA J is concurrent delay, the contractor would not be entitled to an extension of time. £ » I wish to take this opportunity to thank all our contributors. We are most grateful for the support we receive from dispute resolution professional, law firms, and publishers, locally and overseas, that allows —_ Us to share with you papers and articles of a world class standard, and to bring you a broad perspective on the law and evolving trends in the delivery and practice of domestic and international dispute resolution and construction law. Contributions of articles, papers and commentary for future issues of Buildlaw@ are always welcome, | do hope you find this issue interesting and useful. Please feel free to distribute BuildLaw® to your friends and colleagues ~ they are most welcome to contact us if they wish to receive our publications directly. jing Disputes Tribunal 1. BuildLaw | November 2018 www.buildingdisputestribunal.co.nzContents FROM THE EDITOR Achange in mindset is essential to address problems in the 03 construction industry BUILDLAW® IN BRIEF 31 _ Deatorno deal? Another lesson 2 9 ye erpstal pallor tie. inensuring your contract is prospective or retrospective clearly set up approach to delay analysis 33 > JohnGreen: honorary life 16 CASEIN BRIEF membership SOCL North Midland Building Ltdv Cyden Homes Ltd [2018] EWCA 36 Civ 1744 Force Majeure clauses and causation 19 Challenging an Adjudication Decision 40 liance fined $540,000 for misleading representations about steel mesh “This publication has been optimised for online reading, The downloadable pdf version might not accurately reflect its ‘actual online design. FOLLOW US IN Linked [fi mt SOCIAL MEDIA — “fieBuildLaw Subtle but significant change to NEC4 (ECC) NEC has remained true to its core values in its latest update of contracts in the form of the NECA. There is still a clear focus on issuing a contract in simple English which drives good project management and flexibility and the NEC website is keen to highlight this fact by describing the new suite of NEC4 contracts as “significant evolution, not revolution”. Clarity is still at the heart of contract to drive effective project management. Robert Weatherly recently noted in of Mills & Reeve's Practical Completion blog that 2 subtle, but useful change has been the compensation event at clause 60.1(14) which identifies ‘Client (previously Employer) risk’ events. Previously Client risks were defined as any event “stated in this contract” and it was often argued that the definition should could be construed broadly to include anything contained in the ancillary documentation including the Risk Register notwithstanding that the Risk Register is intended to be nothing more than a tool for the Project Manager to manage risk. Clause 60.1(14) of NEC4 now clearly refers to Client risks as being those “stated in these conditions of contract’, thereby limiting the risks to those contained in the Core Clauses (mainly clause 80.1), the W to Z clauses, and those listed in the Contract Data, where additional Client risks can be recorded, if there are any. BEAL CodeMark product certification body accreditation suspended As of 12 September 2018, BEAL Certification Service Limited's (BEAL) accreditation as a CodeMark product certification body under the Building Act 2004 has been suspended by the Joint Accreditation System of Australia and New Zealand (JAS-ANZ). The suspension is due to BEAL not meeting 3 BuildLaw | November 2018 :-In Brief i v CODEMARK CodeMark scheme accreditation requirements. The suspension may be lifted by JAS-ANZ if BEAL resolves the issues that led to its suspension — BEAL has been given until 3 October 2018 to resolve the issues. While suspended BEAL cannot evaluate and certify any new building products. All current CodeMark product certificates issued by BEAL remain valid and can be relied on by building consent authorities. JAS-ANZ is appointed by MBIE and is responsible for the accreditation and ongoing monitoring of product certification bodies for the CodeMark product certification scheme. Building Amendment Bill The Canterbury and Kaikoura earthquakes highlighted gaps in current legislation for managing buildings after an emergency, including the need to better manage the transition from civil defence emergency management powers to business-as-usual powers under the Building Act. www.bulldingdisputestribunal.co.nzThe Building Amendment Bill has been introduced to Parliament and had its first reading on 11 September 2028, with the aim of creating a better process around management and investigation powers for buildings post-earthquakes. The Bill amends the Building Act 2004, and proposes two new sets of powers for territorial authorities and the Ministry of Business, Innovation and Employment (MBIE) to improve the system for managing buildings after an emergency and to provide for investigating building failures. The Bill proposes new powers that aim to address risks to people and property from buildings during and after an emergency. The proposed amendments seek to create a system that is clear, has proportionate impacts on personal and property rights, and ensures that heritage values are appropriately recognised. Managing buildings after an emergency The Bill introduces into the Building Act an end-to-end process for managing buildings from response to recovery following an emergency. The Bill provides powers to territorial authorities (and where a state of emergency or transition period is in force, the relevant civil defence emergency management person) to manage buildings during and after an emergency event, including among others: + inspecting and placing notices on buildings; + evacuating and restricting entry to buildings; + closing roads and cordoning stree + requiring further information from building, owners, such as detailed engineering assessments; and www buildingdisputestribunal.co.nz + demolishing or carrying out works to buildings that pose a risk of injury or death (including through impacts to critical infrastructure) or a risk of damage or disruption to neighbouring buildings, critical infrastructure, and public thoroughfares. Investigating building failures The Bill proposes amendments to the Building Act that provide MBIE with a clear set of legislative powers to investigate significant building failures to determine the circumstances and causes of those failures. The key focus of the proposed powers is to learn lessons in order to improve building regulation to help avoid similar occurrences in the future. The Bill proposes that the powers of investigation can be used only when there has been a building feilure that resulted or could have resulted in serious injury or death. The amendments in the Bill will enable MBIE, on its own initiative or at the request of the Minister responsible for the Building Act, to investigate the circumstances and causes of building failures, including to: + secure, or direct any person to secure, the site to be investigated for a reasonable period; BuildLaw| November 2018 4BuildLaw: In Brief & + enter a property and carry out inspections (which may include the taking of samples and evidence); + require information relating to the building failure from any person who might hold relevant information; + share relevant information related to the building failure with the regulatory bodies responsible for handling complaints and discipline in the building and construction sector; and + publish reports and findings. Submissions on the Bill are now being accepted and will close on 25 October 2018, MBIE seeking feedback on proposed new edition of cceptable Solution (C/AS2) publishes guide to altering existing buildings MBIE is seeking your feedback on a proposal to publish a new edition of Acceptable Solution (C/AS2) - a merger of the six separate Fire Acceptable Solution documents (C/AS2-7). The consultation runs from Monday 3 September 2018 until Friday 30 November 2018. The proposed C/AS2 amends a number of omissions and inconsistencies following stakeholder engagement in recent years on the draft edition of the new Acceptable Solution. In particular, three technical issues have been identified and included in the proposed C/AS2 Acceptable Solution as changes to performance settings: + adjusting the setting to prevent buildings within 1m of the boundary being constructed with no fire separations (eg all glass facades located on the property boundary) + removing “capable of storage consideration” and replacing it with a metric as per the settings prior to 2012 5 Buildaw | November 2018 + simplifying the content in C/AS2 by referencing D1/AS1 (Acceptable Solution for access routes) rather than repeating the content from D/AS1. The consultation is a major piece of work focusing on Building Code clause C - Protection from Fire that requires targeted ‘engagement with stakeholders who have previously contributed. Any changes as a result of the consultation will come into effect with the bi-annual Building Code system update scheduled for June 2019. View the full proposal and information on how to provide feedback on the MBIE Corporate website. Adjudicator’s reasons: a nuanced approach? (Clayton Utz - Major he & construction 5 Minute ix 17 Arecent decision of the Victorian Supreme Court, Nuance Group (Australia) Pty Ltd v Shape Australia Pty Ltd [2018] VSC 362, emphasises the need for adjudicators to work out how much is actually payable to the contractor. Justice Digby held that the adjudicator effectively worked backwards, starting with the claimed amount and then deducting amounts he thought were not properly claimable www.buildingdisputestribunal.co.nz(including those falling within Victoria's “excluded amounts” regime). Section 23 of the Victorian SOP Act "at a minimum requires a determination as to whether the construction work the subject of the claim has been performed and its value”. Even though Justice Digby recognised that "bare reasons which render the Adjudicator’s determination comprehensible will suffice", not even this relatively low standard was reached. The adjudicator had failed to undertake the determinative task required, and the determination did not contain comprehensible reasons explaining the quantification of the adjudicated amount. Therefore, the determination was void. Battle of the forms: lump sum or cost plus construction contract? (Clayton Utz - Major projects & construction 5 Minute Fix 17) A recent NSW Supreme Court decision has highlighted the need for contracting parties to be wary of how their objective intentions could be assessed after modifying or replacing previous legal agreements. Stepanoski v Astan [2018] NSWSC 1160 considered a battle of the forms for a construction contract. The parties had initially signed a Cost Plus Contract, but later signed a Lump Sum Contract which was backdated to the date of the Cost Plus Contract. The issue arose as to the extent to which the Lump Sum Contract was intended to replace the Cost Plus Contract. Justice Emmett had regard to the defendant's, monthly progress claims. These sometimes attached tax invoices headed "Cost Plus Building Contract Value ..." , however they also: + referred to the exact amounts specified in the Lump Sum Contract under the schedule of progress payments; + mentioned the amount of the lump sum as the contract value; and www.buildingdisputestribunal.co.nz + did not particularise the defendant's expenditure incurred in performing the works. Further evidence also indicated that certain payments were made to the defendant over and above the amount actually expended by him at that time. Despite the "minor inconsistencies" in the material, overall the evidence was inconsistent with there being a Cost Plus Contract on foot. Justice Emmett held that irrespective of when the Lump Sum Contract was signed, the act of signing clearly indicated the parties’ intention to be bound by the Lump Sum Contract with effect from the date that it bore. Retentions under the spotlight Since 31 March 2017, all new and renewed non-residential construction contracts have been subject to a retentions trust regime following amendments to the Construction Contracts Act 2002 (the Act). In essence, retention moneys are deemed to be held on trust, meaning they are not available to the general pool of creditors provided they can be traced, BuildLaw | November 2018 6BuildLaw: In Brief On 31 July 2018 Ebert Construction Ltd (Ebert) was placed into receivership. Ebert owes trade and unsecured creditors approximately $24.5m, plus another $9.3m in retention money. Upon receivership, it had less than $10,000 in its other bank accounts, which were set off against a credit card debit balance in excess of that amount. Ebert's receivers have indicated that approximately $3.7m of the $4.6m that is captured by the new retention regime is held ina separate retentions trust account (the Fund). No amounts are expected to be paid relating to subcontractor claims in the receivership or liquidation, save for those claims to the Fund. The challenge for Ebert's receivers (and affected principals/subcontractors) will be establishing entitlement to retentions as they fall due, which may be legally and administratively complex Ebert's receivers have applied to the High Court for directions on whether the receivers should be appointed by the Court as receivers to manage and distribute the Fund, which subcontractors have a claim to the Fund and on what basis and, how to distribute the Fund if, as expected, there is shortfall. Receiver Richard Longman of PWC said "The act itself is not clear, it's the first time act has actually had to be used so there are many different permutations as to whose money has been held," he said. "We want to see that money paid out as soon as we possibly can, and that's why we've taken the action." This is the first high profile insolvency event where the new regime will operate in an attempt to protect retentions. The matter is set down to be heard in the High Court in Wellington on 8 November 2018. T BuildLaw | November 2018 www.bulldingdisputestribunal.co.nzPROPOSED AMENDMENTS TO THE THAT AP TRAT LCT CST MCR UM Cm OU Rem 4B) e8 and NZIAC, published online each February, May, August, and November. ReSolution ere Me RU Aa oe en oe Uren ec eO RU CS UT Ror ei MLC ORE eco) broad spectrum of dispute resolution practices. SUBSCRIBE TODAY =" www.nziac.com | www.nzdrc.co.nzUNITED KINGDOM THE CRYSTAL BALL OR THE MICROSCOPE: DECIDING ON A PROSPECTIVE OR RETROSPECTIVE APPROACH TO DELAY ANALYSIS MANOJ BAHL In the recent case of Fluor v Shanghai Zhenua Heavy Industry Co[2018]* the difference between prospective and retrospective approaches to the analysis of delays was considered. Introduction Delay analysis is a widely debated element of construction law due to the number of projects that are not completed on time, the financial implications of such late completions and the often contrasting conclusions arising from the method of analysis used to assess effect of delays. Specialist delay experts are normally engaged by each party to a dispute to evaluate delay by way, ideally, of a critical path analysis. However there remains no general consensus as to which method of analysis is to be preferred and, instead, the choice is normally a consequence of the contractual, factual and legal aspects at play. These aspects are often unique toa project and, as such, add to the lack of a common approach and symmetry in selecting and undertaking a delay analysis. The facts This dispute related to the construction of 140 wind turbine generators within the Greater Gabbard wind farm off the coast of Suffolk. The Claimant, Fluor, entered into an EPC contract for the foundations and infrastructure works for this scheme and in turn engaged the Defendant, Shanghai Zhenua Heavy Industry Co, to fabricate and provide the steel foundation structures. 9 BuildLaw | November 2018 Following delivery of these items it was discovered that there were, amongst other issues, defects in the welds of the structures which, as asserted by Fluor, ted to large delays? to the project (as well as additional costs) due to the need to employ a lengthy inspection and repair regime. The Court was required to consider the cr path before and after the defects had been discovered and whether a prospective or retrospective approach to delay analysis ought to be adopted to correctly identify the critical path and quantify the critical delay incurred. Retrospective and prospective assessments of delay A delay analysis is a forensic investigation into the events or issues that delay a project. These delays can be critical (delaying the completion date as a whole) or non-critical (affecting progress but with no direct effect on the completion date). Each method of delay analysis falls, broadly, into one of two categories; prospective or retrospective. (i) Prospective analyses (the crystal ball) Prospective methodologies (such as ‘time ‘impact' or ‘impacted as-planned’ analyses) involve theoretically assessing criticality and www.buildingdisputestribunal.co.nzthe likely impact of a delay contemporaneously (at the time the events in question occurred) on the progress and completion of the works based upon that which was known ‘on the ground’ at that time. The basis for this methodology, whether applied before or after the delay effect has occurred, is to impact a specific and anticipated (forecast) delay onto a programme, usually the contractor's as- planned programme or a progressed version of this, to model the theoretical effect of the delay to the project completion date. In light of this, this approach is commonly used and favoured by contractors to contemporaneously demonstrate what extension of time is due as a consequence of employer delay events, as the works progress, given it only requires an analysis of what critical delay could reasonably have been expected to occur. (ii) Retrospective analyses (the microsope) Alternatively a retrospective approach to delay analysis (such as ‘planned versus as- built’, ‘time slice’ or ‘windows’ methodologies) considers subsequent events, and other issues affecting progress, to determine the actual impact of delays on the works and whether the events in question actually caused delay to completion, as a matter of fact, when the progress of the work www.buildingdisputestribunal.co.nz as a whole is considered. This approach seeks to identify what the actual delays to the project were by analysing how the works actually progressed. In doing so it investigates what actually happened, what the delays were and thereafter what caused the delay. In light of this it is often favoured by employers (or their representatives) given that it requires that the critical delay caused by the excusable delay needs to be established as a matter of fact. Therefore the choice between which approach to adopt is central to measuring the extension of time as well as the evidential burden required to establish entitlement. Do both approaches lead to the same result? Previously, in Walter Lilly & Company v Mackay & another [2012J° , the Courts, in considering the use of prospective and retrospective delay analysis methodologies for determining the extension of time due, noted in dicta that “.. if each approach was done correctly, they should produce the same result.” However, in passing judgement in this recent, case, the Courts have now accepted that “a prospective analysis - in other words considering the critical path at any particular point in time as viewed by those on the ground at that time - does not necessarily produce the same answer BuildLaw | November 2018 LOTHE CRYSTAL BALL OR THE MICROSCOPE. ~ CONT, as an analysis carried out retrospectively.” This revised position accepts that each analysis approach would result in a different conclusion and acknowledges that a retrospective analysis, if done correctly, should (a) be informed by what actually happened, and (b) take into account a number of delays; both considerations which a prospective approach would not consider. Additionally both approaches are, to some degree, subjective which further gives rise to differing results. A prospective analysis is dependent upon the programme utilised and the means by which the delay event has been impacted onto it. The results of this analysis are also dependent upon the delays which are impacted and, in modelling delays in isolation, there is the risk of not considering other delays which may be in operation, be they potentially dominant, concurrent or parallel. A retrospective analysis can also be subjective in nature on the basis that frequently a number of delays and causes for these may be present and, in arriving at a conclusion as to which delay is dominant, concurrent or in parallel, there is usually the need to apply experience and judgment. 11 Buildtaw | November 2018 Is one approach to be preferred over the other? The Court, in this recent judgement, indicated that a prospective approach to delay analysis *... is the correct approach when considering matters such as the award of an extension of time...” From a practical perspective this is sensible given that, in the interests of a project as a whole, it would be beneficial for extension of time applications and assessments to be dealt with and accounted for at the earliest possible opportunity. This approach would lend itself to a contemporaneous and prospective assessment of delay even though it would remain, despite best endeavours, to be as accurate as possible in any forecasts used, theoretical in nature given that the eventual actual delay caused by the event is not assessed given that the subsequent progress of the works would not be considered. It was however further added in this same judgement that “...some form of retrospective analysis is required” in relation to the facts. This requirement that a retrospective approach was required in this case would appear to. follow the established principles as to the assessment of damages for breach of contract and sits more comfortably within the framework of existing case law which requires that a Contractor must demonstrate, as a matter of fact, that the event complained of, and relied upon actually caused a delay to the completion date. A proper retrospective approach satisfies this requirement given that it should be based on fact and take into account what actually happened after the delay event occurred. Accordingly a retrospective review of the facts would take account any subsequent measures taken by the Contractor to mitigate delay by way of re-sequencing, resource reallocation or acceleration. This position also lends itself to the reality of many time related disputes in that applications and decisions in relation to delays are often www.buildingdisputestribunal.co.nzthemselves delayed meaning that 2 retrospective approach tends to be applied, taking account of the factual position as it evolves and plays out. So which approach should you use? In order to provide a relevant and credible delay analysis in support of an application for an extension of time, it is crucial that the most appropriate approach to delay analysis is adopted. Whilst the circumstances in which the law might prefer a prospective approach over a retrospective approach appear somewhat unsettled following the Court's mixed guidance in this judgement, a number of factors influence the selection of approach including most significantly, the requirements of the contract and any established principles for assessing delay. 1. Adhere to the contract requirements The contractual provisions dealing with extensions of time are central in determining the correct approach used to demonstrate an entitlement to an extension of time, be that either contemporaneously or retrospectively after the event. The JCT Standard Form of Building Contract and the Infrastructure Conditions of Contract provides for an extension of time to be assessed during the currency of the works which would suggest that it would lend itself towards assessment of delay on a prospective basis although this would not preclude the use of a retrospective approach to assess actual delays incurred, following timely notification, as the works progress. However, in addition to this, there is also the opportunity under these forms for a final retrospective assessment of any further extension of time which may be due after the works have been completed. In doing so there is the ability to provide additional relief where the original assessment and award underestimated the delays incurred (although there is no opportunity to reduce any www.buildingdisputestribunal.co.nz THE CRYSTAL BALL OR THE MICROSCOPE. ~ CONT. previously awarded extension of time). Itwould appear therefore that there would be some flexibility in the use of a delay analysis approach under both these standard forms of contract. The NEC form of contract contains language which appears however to be far more prescriptive in terms of the approach to delay analysis which is to be adopted. It calls for a prospective approach in the analysis of delays and requires assessment of the contractor's applications on a prospective or forecasted basis, at the time the relevant compensation event occurs. This fits in with the ethos of this suite of contracts which revolves around the employer, project manager and contractor working together to facilitate the smooth running of the project and to avoid disputes at the end of a project by having the machinery available to deal with issues during delivery. Notwithstanding this, last year in the Northern Ireland High Court decision relating to NIHE v Healthly Buildings (Ireland) Limited [2017]', it was decided that * despite the prospective wording of the contract, a retrospective approach to assessing delay was permissible, in line with the general approach to assessment of damages, given that the parties had failed to follow the prescribed approach. BuildLaw | November 2018 12It was the Court's view that an assessment should either be carried out prospectively at the time or, if this was not done, retrospectively instead once the actual impact of the compensation event had materialised. The reasoning was that if the parties had failed to follow the contractual mechanisms in place, and a dispute had arisen, the benefits of the NEC suite (in avoiding disputes) were considered to have been lost and instead the assessment of damages was to be in accordance with the general principles of English law in that only actual costs can be recovered. Whilst running counter to the ethos of the NEC suite which requires a prospective approach to be taken in such assessments, in arriving at this view the judge questioned why he should “shut my eyes and grope in the dark when the material is available to show what work they actually did and how much it cost them”. Although not binding on the English courts this decision is persuasive and introduces yet again some uncertainty into this debate as to 13; BuildLaw | November 2018 the correct approach for the analysis of delays. 2, Follow established principles for assessing delay Another recent case relating to Fluor, albeit this time Australian, was Santos Ltd v Fluor Australia Pty Ltd [2017] . The decision here has provided authority to the guidance set out in the Society of Construction Law's Delay and Disruption Protocol (2nd edition)”. This Protocol was first developed in 2002 to provide guidance on the assessment of delay, extensions of time and compensation arsing due to disruption. It is often used as a basis for selecting an appropriate delay analysis. method, or as an objective reference to critique the efficacy of a method utilised. The Protocol was updated in February 2017 as a response to the ongoing debate in the Courts as to whether delay impact should be assessed prospectively or retrospectively and which method of critical path analysis ought to be preferred. www.buildingdisputestribunal.co.nzThe first edition of the Protocol championed a prospective approach and a ‘time impact analysis’ as the preferential means of assessing entitlement to an extension of time, regardless of whether the assessment was to be made contemporaneously, distant from the event or after the works had been completed. Following criticisms of this recommendation over the years, notably in Adyard Abu Dhabi v SDS Marine Services [2011]° , and the Courts increasingly straying away from theoretical delay analyses preferring instead that any claim for an extension of time should be based in fact, the second edition of the Protocol separates its recommendations for the assessment of delay between that which take place contemporaneously and that which takes place after the event. The Protocol maintains a clear preference that, wherever possible, the parties should avoid a ‘wait and see’ approach to assessing the time impact of delays (Core Principle 4). Instead it recommends that delays are dealt with contemporaneously by both parties using a prospective approach with a ‘time impact analysis’ again the preferred method for the assessment of delays in order that any applications for an extension of time can be made and dealt with as close in time as possible to the delay event's occurrence. There is however acknowledgement in this, revised version of the Protocol that when an extension of time claim is being assessed at a time distant from the events in question, a “prospective analysis of delay ... may no longer be appropriate’. In these circumstances the Protocol does not recommend a clear single method of delay analysis which ought to take precedence over another and instead now advocates that the parties use an appropriate method, be it prospective or retrospective in nature, which produces a “common sense” result. Core Principle 7 of the Protocol also recognises the challenges faced with regards to accurate forecasting of the impact of delay events contemporaneously. In these instances it recommends that an extension of time should be granted for the predictable \www.buildingdisputestribunal.co.nz UNITED KINGDOM effect (at the time of the delaying event occurring), thereafter, extensions of time should be assessed on an incremental basis retrospectively as and when the actual impact of the delaying event unfolds. Conclusions The decision in Fluor v Shanghai Zhenua Heavy Industry Co acknowledges that the delay analysis approach adopted is key to quantifying delays. Itrecommends that a prospective approach should be used for the assessment of an extension of time contemporaneously; a position consistent with the Society of Construction Law’s Delay and Disruption Protocol (2nd edition) which advocates that a ‘time impact analyses’ is utilised to assess delays as they occur. This position appears however to be at odds with other case law which prefers a retrospective and fact based assessment of delay in arriving at an assessment of an extension of time to capture the full effects of any delay, once known. This retrospective assessment is to be based on common sense and the assessment of damages in accordance with the general principles of English law. This difference is likely to continue to fuel the debate between parties as to which form of delay analysis is to be preferred. Practical guidance Notwithstanding the above arguments, the practical advice from this decision, and the other areas explored within this paper, would appear to remain consistent. This would be to abide by what the contract expressly requires in terms of the notification and the assessment of delays. Whilst some contracts allow for a broad ranging factual enquiry as to the cause of delay, others provide little scope for this and are limited to the facts known only at the time the events in question occurred. In light of this it seems doubtful that any general rule can be formulated for the assessment of entitlement to extensions of time as ultimately the question will depend on the terms of the contract. BuildLaw | November 2018 L&Where the parties follow the contractual mechanism for assessing delay there will be little concern as to the debate between prospective and retrospective approaches. Whilst it may appear unattractive to a tribunal to ignore entirely what is known to have ‘occurred since the delay event in question, in cases where the contract clearly requires a prospective approach, there is no provision permitting a retrospective post-completion review of entitlement, and where the contractor had complied with all the steps required of it to obtain an award contemporaneously, itis likely that any dispute would again be resolved upon the basis of a End Notes ———S [2] Fluory Shanghai Zhenua Heavy Industry Co Ltd [2018) WHC. 2} The original delay was compounded by the fact that no marine installation work was able to take place over the winter months and as a result of an alternative vessel having to be procured to undertake the re-scheduled works (ata stower rate Cf production than originally envisaged}. [5] Walter Lilly & Company Ltd v Mackay and another [2022] EWHC 1773 wholly prospective analysis. It is only where the parties fail to follow the contractual mechanism, or where an extension of time is considered by a tribunal or the Courts a long after the occurrence of the events, that it would be counter-intuitive to ignore what in fact actually happened through the adoption of an exclusively prospective approach. Reprinted with kind permission. This article first appeared in Construction Law Review 2018, published by the Chartered Institution of Civil Engineering Surveyors [4lNorthern ireland Housing Executive v Healthy Buildings (Iceland) Limited [20171 NOB 43. [5] n relation to a NECS Professional Services Contract. [6] Santos Ltd v Fluor Australia Pty Ltd [2017] QSC 153. [7] Society of Construction Law Delay and Disruption Protocol 2nd Edition: February 2017. [8] Adyard Abu Dhabi v SDS Marine Services [2011] EWHC 848. ABOUT THE AUTHOR Manoj Bahl Manoj Bahl is a Managing Director at FTI Consulting. He is a member of the Forensic and Litigation Consulting practice and is based in London. He is both a chartered civil and building engineer with over 15 years of experience working in a consulting, contracting and claims environment. FTI CONSULTING 15 Buildiaw | November 2018 www. fticonsulting.cot www.buildingdisputestribunal.co.nzUNITED KINGDOM CASE IN BRIEF North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744 By Jeremy Glover Here, the claimant, the contractor and the defendant, the employer, had agreed certain bespoke amendments to the JCT Design and Build Contract 2005, one of which concerned the way in which extensions of time would be dealt with in certain circumstances. The parties had amended clause 2.25.1.3(b) to include the following: "3. and provided that (a) the Contractor has made reasonable and proper efforts to mitigate such delay; and (b) any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account then, save where these Conditions expressly provide otherwise, the Employer shall give an extension of time by fixing such later date as the Completion Date for the Works or Section as he then estimates to be fair and reasonable.” By way of a refresher, the CA provided the following definition of concurrency as given in the case of Adyard Abu Dhabi v SD Marine Services[2011] EWHC 848 (Comm), where Hamblen J (as he then was) said: "A useful working definition of concurrent delay in this context is ‘a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency’ - see the article Concurrent Delay by John Marrin QC (2002) 18(6) Const. L.J. 436." Indeed, the CA also noted that concurrent delay was not a concept that was ever considered by the courts until the late 1990's. Here the works were delayed, and a dispute arose between the parties as to the proper extension of time due to the appellant, NMBL. A major element of that dispute centred on the extent to which Cyden could take clause 2.25.1.3(b) into account. At first instance Mr Justice Fraser had decided that they could. On appeal LJ Coulson considered the concept of prevention. He referred to the three principles set out in the Multiplex v Honeywell case, namely that: (i) Actions by the employer which are perfectly legitimate under a construction contract may still be characterised as prevention, if those actions cause the delay beyond the contractual completion date. (ii) Acts of prevention by an employer do not set time at large, if the contract provides for an extension of time in respect of those events. (iii) Insofar as the extension of time clause is ambiguous, it should be construed in favour of the contractor.” BuildLaw | November 2018 16.CASE IN BRIEF - CONT * Note that what this case does not do, and LJ Coulson made it quite clear that this was not an issue he was considering, is to give a general statement on a contractor's entitlement to an extension of time in circumstances of concurrent delay. The court was solely considering the bespoke concurrency clause agreed by the parties. LI Coulson, agreeing with Mr Justice Fraser, said that: “In my view, clause 2.25.1.3(b) is unambiguous. It plainly seeks to allocate the risk of concurrent delay to the appellant.The consequence of the clear provision was that the parties have agreed that, where a delay is due to the contractor, even if there is an equally effective cause of that delay which is the responsibility of the employer, liability for the concurrent delay rests with the contractor, so that it will not be taken into account in the calculation of any extension of time.” In light of the Judge's conclusion, the only remaining issue was whether there was any reason in law why effect should not be given to that clear provision. NMBL suggested, “boldly” in the words of LJ Coulson, that the prevention principle was a matter of legal policy which would operate to rescue NMBL from the clause to which it had freely agreed. This suggestion was rejected for the following reasons: (i) The prevention principle is not an overriding rule of public or legal policy, like for example the rule which strikes down liquidated damages as a penalty. (ii) The prevention principle is not engaged because pursuant to clause 2.25.5, "any impediment, prevention or default, whether by act or omission, by the Employer” gave rise to a prima facie entitlement to an extension of time. (iii) The prevention principle has no obvious connection with the separate issues that may arise from concurrent delay. (iv) Clause 2.25.1.3(b) was designed to do no more than reverse the result in the Walter Lilly case that where delay is caused by two or more effective causes, one of which entitles the contractor to an extension of time as being a relevant event, the contractor is entitled to a full extension of time. (v) Clause 2.25.1.3(b) was an agreed term. This was the most important of all. 17 BuildLaw | November 2018 www.buildingdisputestribunal.co.nzCASE IN BRIEF - CONT LI Coulson noted that in the Walter Lilly case, it would have been open to the parties to draft "a proviso to the effect that an extension of time should be reduced if the causation criterion is established”, thereby allowing for a different allocation of risk. That was what the parties here chose to do.The Judge said that: “A building contract is a detailed allocation of risk and reward. If the parties do not stipulate that a particular act of prevention triggers an entitlement to an extension of time, then there will be no implied term to assist the employer and the application of the prevention principle would mean that, on the happening of that event, time was set at large. But it is a completely different thing if the parties negotiate and agree an express provision which states that, on the happening of a particular type of prevention (on this hypothesis, one that causes a concurrent delay), the risk and responsibility rests with the contracto The clause here was “clear and unambiguous’. It stipulated that where there is a concurrent delay (properly so called), the contractor will not be entitled to an extension of time for a period of delay which was as much his responsibility as that of the employer. That was an allocation of risk which the parties were entitled to agree. Finally, it was suggested that even if clause 2.25.1.3(b) was enforceable (so that NMBL was not entitled to an extension of time for concurrent delay), there was an implied term which would prevent Cyden from levying liquidated damages. It would be “bizarre” if Cyden could recover liquidated damages for a period of delay for which it was responsible. It could not be said that the liquidated damages flowed from a delay for which the claimant was responsible. This suggestion was rejected for a number of reasons. These included that if clause 2.25.1.3(b) was a valid and effective clause then it would expressly permit the employer to levy liquidated damages for periods of concurrent delay, because it would not grant NMBL relief against such liability by extending the completion date. Finally, the Judge noted that: “Ido not consider that this result is in any way uncommercial or unreal. A period of concurrent delay, properly so-called, arises because a delay has occurred for two separate reasons, one being the responsibility of the contractor and one the responsibility of the employer. Each can argue that it would be wrong for the other to benefit from a period of delay for which the other is equally responsible. In Walter Lillyand the cases cited there, under standard JCT extension of time clauses, it has been found that the contractor can benefit, despite his default. By clause 2.25.1.3(b), the parties sought to reverse that outcome and provided that, under this contract, the employer should benefit, despite the act of prevention. Either result may be regarded as harsh on the other party; neither could be said to be uncommercial or unworkable.” ——————— ABOUT THE AUTHOR Jeremy Glover Partner Specialising in construction, energy and engineering law for most of his career, Jeremy advises on all aspects of projects both in the UK and abroad, from initial procurement and strategic project advice to dispute avoidance and resolution. FENWICK ELLIOTT www.bulldingdisputestribunal.co.nz BuildLaw | November 2018 18HONG KONG CHALLENGING AN ADJUDICATION DECISION Albert Yeu This article considers the various ways of challenging an adjudication decision in a construction dispute. An analysis of the courts’ recent judgments on challenges and enforcement of adjudication decisions in different jurisdictions will be discussed, with an aim to assist adjudicators adopting the proposed security of payment legislation in Hong Kong. Introduction Statutory adjudication is widely regarded as an effective means for resolving construction disputes in many jurisdictions. In Hong Kong, it had long been recognized for its value over a decade ago’. In Tang's report 2001, para 5.77, he recognized that: “Good cashflow management is essential to the success of contractors and subcontractors. Clients should recognize that contractors’ business viability depends more upon cashflow than profit margins. Subcontractors are likewise dependent on cashflow. The prospects of prompt payment for completed work offer a strong incentive to contractors and subcontractors to deliver quality service... There is much room for improvement in the area of security of payment to contractors and subcontractors.” Further, in para 5.80, he recommended “that further consideration should be given to the merits of, and the need for, enacting security of payment legislation having regard to local circumstances and in the light of overseas experience...” In the last decade, the security of payment legislation has been enacted in 6 countries and 12 jurisdictions. Case law has been established in relation to different areas of controversies. Amongst them, the enforcement and challenges of adjudication decisions are of the most importance. The UK is the pioneer of the security of payment legislation, The English legal system 19 BuildLaw | November 2018 doctrine of natural justice that protects against arbitrary exercise of power by ensuring fair play, is based on two fundamental rules: (1) Audi alteram partem (hear the other side) — a person directly affected by a decision must be given a full opportunity to prepare and submit his or her case and comment on the opposing party's case; and (2) Nemo judex in causa sua (no man shall be a judge in his own case) - no decision is valid if it was influenced by any financial consideration or other interest or bias of the decision maker. In April 2016, the Development Bureau of the Hong Kong Special Administrative Region Government published a report on public consultation on the proposed Security of Payment Legislation (SOPL) for the construction industry in Hong Kong”. The SOPL aims at regulating strategic and effective payment systems in the construction industry In the public consultation exercise *, the following question was put to the public: “The adjudicator shall be entitled to disregard any submission or evidence or part thereof submitted by the claiming party to the extent that the adjudicator considers the same comprises submissions or evidence which the responding party was unaware of at the time the notice of adjudication was served and which should reasonably have been served with a Payment Claim or otherwise in advance of the notice of adjudication and which cannot fairly be considered and responded to by the responding party in the adjudication.” www.buildingdisputestribunal.co.nzA majority of the respondents agreed with this with some of the following comments raised: 1. The power to disregard submissions and evidence should extend to submissions and evidence from the responding party too, because of fairness and avoiding a dispute becoming too complex to decide fairly resulting in the adjudicator resigning, 2. The power to disregard submissions and evidence could lead to a “case within a case” generating arguments and costs that would be best avoided with a simpler model being to limit parties to (in effect) documents and evidence exchanged before the adjudication commencement. 3. The inconsistent application of this power will make the claimants prepare every payment claim like an adjudication submission, The power to disregard submissions and evidence from the responding party does not necessarily provide fairness to the proceedings. Primarily, the reason for limiting submissions and evidence from the claiming party is because it has unrestricted time to prepare a payment claim and it ought to have included every document required to support its case. The responding party in contrast only has limited time to prepare a payment schedule/response* under the security of www.buildingdisputestribunal.co.nz CHALLENGING AN ADJUDICATION - CONT. payment legislation in different jurisdictions. The following discusses the enforcement of recent adjudication decisions in four jurisdictions. Singapore Bintai Kinclenko Ptd Ltd v Samsung C&T Corporation (2018) SGCA 39 A dispute arose out of a construction contract for construction works about additions and alterations to Suntec City's convention centre and retail podium. Bintai and Samsung exchanged payment claim and payment response. Despite the total dispute amount that arose between the parties, Bintai served a notice of intention to apply for adjudication only for one item, namely the release of the first half of the retention monies. In the Adjudication Application there were also three issues in dispute: (a) the retention monies; (b) some backcharges for scaffolding works; and (c) some variation works certified and paid in earlier payment responses. In arriving at the adjudicator's decision, he considered and gave his findings in respect of the release of the first half of the retention monies but not the two issues on backcharges and variation works. In the High Court, the judge had set aside the BuildLaw | November 2018 20CHALLENGING AN ADJUDICATION = CONT. adjudication decision on the basis that the adjudicator had failed to consider these two issues raised in the Adjudication Response and this failure constituted a breach of natural justice’. This breach of natural justice was material and caused Samsung prejudice and a proper consideration of the two issues could have changed the adjudicators mind as to the final outcome of the adjudication because the disputed amount of these two items exceeded Bintai’s claim of retention monies. In the court of appeal®, the court dismissed the appeal and affirmed that 1) there was a breach of natural justice; and 2) the breach was sufficiently material as to cause prejudice to Samsung. The court held: “49 First, these issues were clearly essential to the resolution of the Adjudication Application. They had been raised in the Adjudication Response, which featured a response amount if the Adjudicator had gone on to consider and had then concluded that Samsung was entitled to be paid by Bintai in respect of the backcharges and variation works..., then Bintai’s Adjudication Application would have been defeated by Samsung's Adjudication Response. Hence, there is simply no escaping the fact that these were essential issues that had to be dealt with by the Adjudicator.” “50 However, it was evident from the Adjudication Determination asa clear and virtually inescapable inference that the Adjudicator did not apply his mind at all to the issues of the backcharges and variation works As we had observed at [20] above, not a single paragraph in the Adjudication Determination related to the issues of the backcharges and variation works.” The Adjudicator had breached the rule of natural justice by failing to consider a matter clearly raised in the Adjudication Response. Malaysia, Emerald Capital (Ipoh) Sdn Bhd v Pasukhas Sdn Bhd (WA-24C-133-07/2017) In March 2018, the High Court of Malaya at 2.1 BuildLaw | November 2018 Kuala Lumpur handed down a judgment and allowed the enforcement of an adjudication decision ona dispute between an employer and main contractor. There were two originating summonses being heard together. The first was the employer (plaintiff) that sought to set aside the decision under s.15(b) and (d) of the Construction Industry Payment and Adjudication Act 2012. The other was the main contractor (respondent) that sought to enforce the decision against the employer. One of the matters considered by the court was whether there was a breach of natural justice for the alleged failure of the adjudicator to consider the employer's set-off claim. The court held: “Lam satisfied that in this case the Adjudicator had rightly declined jurisdiction to consider matters that took place after the dispute had been referred to Adjudication in the Notice of Adjudication and that the reference here to the quotations given after the Payment Response was designed to shore up and support the defence of a contractual set-off which had not arisen yet... Reading the Adjudication Decision as a whole, the Adjudicator had dismissed the set-off on merits as well as on jurisdiction. With respect to merits this Court would not interfere as it involves a mixed finding of fact and law. With respect to jurisdiction, | am satisfied that the Adjudicator had come to the right conclusion as the facts supporting the set-off were matters that arose post the service of the Payment Response and the Adjudicator had rightly declined to consider for the reasons above stated.” The court made reference to Penang High Court OS No.: PA-24C-06-10/2017 in Mecomb Malaysia Sdn Bhd v VST M & E Sdn Bhd: "36. The notice of adjudication in the Adjudication was filed on 17 April 2017. www.buildingdisputestribunal.co.nzHowever the Defendant's statement of final account was only issued on 20 April 2017 or even later. In this regard, s.7 in particular s. 7(3) of the CIPAA provides as follows: “7. Right to refer dispute to adjudication (1) An unpaid party or a non-paying party may refer a dispute arising from a payment claim made under section 5 to adjudication. (2) The right to refer a dispute to adjudication shall only be exercised after the expiry of the period to serve a payment response as specified under subsection 6(3). (3) A dispute referred to adjudication under this Act is subject to the Limitation Act 1953 [Act 254], Sabah Limitation Ordinance [Cap. 72] or Sarawak Limitation Ordinance [Swk. Cap. 49] as the case may be." It is provided in s. 31 of the Limitation Act 1953 as follows: “31. Provisions as to set off or counterclaim For the purposes of this Act, any claim by way of set- off or counterclaim shall be deemed to be a separate action and to have been commenced www.buildingdisputestribunal.conz on the same date as the action in which the set- off or counterclaim is pleaded.” 57. Consequently and since the Defendant's statement of final account was non-existent when the notice of adjudication was issued, it wasn'ta set off that had accrued in defence of the Plaintiff's payment claim. In other words, it wasn't an adjudicatable defence within the core jurisdiction of the Adjudicator. In the ‘circumstances, | find and hold that the Adjudicator not only didn’t fall into error but was actually correct in refusing to assume jurisdiction to entertain the Defendant's ‘statement of final account. As stated by him, the position might be different if the Defendant had issued such as a negative penultimate payment certificate after payment certificate no. 15 before the issuance of notice of adjudication by the Plaintiff. 58. In the premises, | find and hold that the Defendant failed to prove there was either breach of natural justice on the part of the Adjudicator or clear error seen in the Decision.” The fact of the case was analogous to Mecomb, where the quotations for supporting the set-off BuildLaw | November 2018 22CHALLENGING AN ADJUDICATION- CONT. claim due to defective work were only given after the date of the payment response and the adjudicator considered this and found that he had no jurisdiction to take that evidence into account in reaching the decision. The adjudicator did not breach the rules of natural justice by doing so. United Kingdom Vinci Construction UK Ltd v Beumer Group UK Ltd [2018] EWHC (TCC) (24 July 2018) Vinci entered into a sub-contract with Beumer in November 2012 for the design, manufacture, fabrication, supply, delivery, offloading, installation, testing, commissioning, and user training in respect of the baggage handling system forming part of the new Pier 1 at the South Terminal of Gatwick Airport. The sub-contract includes provision for adjudication under Option W2 of the NEC3 Engineering and Construction Sub-Contact with some amendments. Clause W2.1(1) expressly provides that “Lalny dispute arising under or in connection with this Sub-contract may be referred to and decided by the Adjudicator. A party may refer a dispute to the Adjudicator at any time” 23 Buildtaw | November 2018 The subject reference to adjudication is the seventh adjudication between the parties. The adjudicator issued his decision on 2 May 2018. By letter on 8 May 2018, Vinci made demand ‘on Beumer for payment of the adjudicated sum in respect of liquidated damages plus interest. By letter on 14 May 2018, Beumer advised that it did not intend to pay the adjudicated sums because they were dissatisfied with the adjudication decision. Vinci applied for summary judgment on 16 May 2018 to enforce the adjudication decision The main reason for Beumer resisting Vinci's enforcement of the adjudication decision was that it alleged the adjudicator breached the rules of natural justice in the following three aspects: (1) The adjudicator made findings which were inconsistent with findings made in a previous adjudication, with the result that the adjudicator not only decided something which had already been decided but did so ina manner inconsistent with the previous decision; (2) The adjudicator did not give any or any adequate reasons for his decision in relation to the key issues in the dispute; and (3) The adjudicator did not disclose or order Vinci to disclose material from a previous adjudication (between Vinci and another sub- contractor) which Beumer had a good reason to believe would have demonstrated that the case Vinci was advancing in this adjudication was inconsistent with the case it had advanced in that other adjudication. In regard to the 2nd argument, the English legal position is that: (2) “complainant would need to show that the reasons were absent or unintelligible and that, as a result, he had suffered substantial prejudice’, (2) “provided that the broad thrust of the reasoning is provided’, the court should enforce the decision.” www.buildingdisputestribunal.co.nzCHALLENGING AN ADJUDICATION - CONT. (3) “it is enough that he made it clear that he had considered all of the documents and submissions supplied by the Defendant... and that he had considered those contra-charges and rejected this”, It is not easy to establish a breach of natural justice in the circunstances. Contentions related to the 3rd argument were interesting. The adjudicator was alleged to have breached the rules of natural justice for the failure to disclose or order Vinci to disclose, the decision of a previous adjudication between Vinci and another sub- contractor. That decision would have shown an inconsistent position taken by Vinci in the current case. The court drew a conclusion that there was no evidence to show an inconsistency and the adjudicator was not requested to order a disclosure of the document. The result might have been different if the adjudicator was expressly requested to exercise this power and he refused to do it. North Australia Inpex Operations Australia Pty Ltd v JKC Australia LNG Pty Ltd The Supreme Court of the Northern Territory quashed an adjudicator’s decision under the North Australia’s Construction Contracts (Security of Payments) Act 2004 on the grounds that there had been a substantial denial of natural justice. The key aspect of this case was about s.20 of the North Australia’s Act: “The provisions in the Schedule, Division 5 about the following matters are implied in the construction contract that does not have a written provision about the matter: (a) when and how a party must respond to a payment claim made by another party; (b) by when a payment must be made.” Schedule, Division 5 relates to response to wwwbuildingdisputestribunal.co.nz payment claims, in particular clause 6(2) provides: “The party must: (a) within 14 days after receiving the payment claim: (i) give the claimant a notice of dispute; and (ii) if the party disputes part of the claim - Pay the amount of the claim that is not disputed; or (b) within 28 days after receiving the payment claim, pay the whole of the amount of the claim.” The adjudicator found uncertainty in the payment terms of the contract and sought the parties’ submissions about this. Furthermore, the adjudicator asked the parties the question as to whether the implied provisions under s. 20 should or should not be imported into the contract because of the uncertainty. Despite BuildLaw | November 2018 24CHALLENGING AN ADJUDICATION - CONT counsel for both parties submitting that there was no uncertainty about how and when payment must be made, the adjudicator made a decision on the basis that the implied terms set ‘out in Division 5 of the Schedule of the North Australia’s Act were implied into the contract. This decision had a crucial effect because Inpex issued a notice of dispute only on the 21st day after receiving a payment claim. Therefore Inpex was obliged to pay the full disputed amount regardless of the merits of the case. The adjudicator’s decision set out: “As noted, on 24 November 2016 Inpex issued the Notice of Dispute, 21 days after the Payment Claim was lodges. | have no evidence Inpex issued a notice of dispute, compliant or otherwise, within 14 days after receiving the Payment Claim as required by clause 6(2)(a) of the Schedule. In the absence of any compliant notice of dispute and pursuant to clause 6(2)(a) of the Schedule, which was necessarily implied into the Contract, Inpex was obliged to pay the Payment Claim in full when payment fell due on 1 December 2016, that is 28 days from 3 End Notes eee 1 Tang's Report 2001. 2 Report an Public Consultation on Proposed Security of Payment Legislation forthe Construction industry, April 2016 Development Bureau, {3 Proposed Security of Payment Legislation for the Construction Industry Consultation Document, June 2025. Development Bureau. 4g, 5.1BA(2](b) and s.184(5)(b) of the Queenstand’s Building and Construction industry Payments Act 2004 5 Bintai Kindenko Pte Lid v Samsung C&T Corp [2017] SGHC 25, BuildLaw | November 2018 November 2016.” The court referred to the adjudicator's request of 25 January 2017 that submissions “must be strictly confined to the question raised”, namely “whether the provisions implied into deficient construction contracts by section 20 of the NT Act should or should not be imported into the EPC Contract”, which precluded Inpex from making submissions on the consequences of failing to meet the implied terms. This amounted to a breach of natural justice and the adjudication decision was set aside. Conclusions The rules of natural justice underpin the enforceability of adjudication decisions even though the adjudication proceedings are sometimes referred to as ‘rough justice’ Depending on the drafting of the security of payment legislation, adjudicators must be mindful of the following conduct which might constitute a breach of natural justice rendering their decisions unenforceable in court: 1) Failure to consider an issue stated in the adjudication document 2) Failure to deciding a material issue that has influence on the outcome of decision 3) Failure to give any reason for a decision 4) Failure to allow the parties to comment on the disclosure procedure 5) Failure to allow the parties to comment on the adjudicator's findings on any preliminary issue 321 6 Bintai Kindenko Pte Ltd v Samsung C&T Corp [2018] SGCA 39 7 New Engineering Contract ~ Engineering and Construction ‘Sub-Contract, institution of Civil Engineers 8 Carillion Construction Limited v Devonport Reyal Dockyard [2005] EWHC 778 (TCC) 9 Balfour Beatty Engineering Services HY Limited v Shepherd Construction Limited [2009] EWHC 2238 (TCC) 10 Viridis UK Lit EWHC 268 ited v Mulalley & Company Limited [2024] wwwbuildingdisputestribunal.co.nzABOUT THE AUTHOR Chartered civil engineer and chartered project management surveyor with extensive experience in design and construction of tunnel, bridge, highway, water and flood prevention scheme in Hong Kong. Experienced in consultancy procurement and tendering for a variety of construction contracts. Accredited NEC3 ECC Project Manager. Experienced with NEC3 ECC, remeasurement type, works order type, lump sum with BoQ and design&sbuild contracts. Legally trained arbitrator (HKIAC), adjudicator, mediator and expert witness in the UK, Malaysia, Australia Albert Yeu and Hong Kong. Construction Arbitrator in engineering and construction disputes in general civil engineering works, roads and drainage, water, bridges, tunnel and highway sectors Regularly appointed arbitrator, construction adjudicator and mediator. To request the appointment of Albert Yeu, please contact the Registrar: NZIAC NzpRC — registrar@nziac.com registrar@nzdrc.co.nz registrar@buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz BuildLaw | November 2018 26‘THE APPLICATION OF CONTRACTS IN ENGINEERING AND CONSTRUCTION PROJECTS i‘ ae 424pp Pb: 9 TTT Rear lic isa eG Mee ge tate Orr miele mediator and dispute board una ela ea Cela LATe} engineering disputes. Teer Ite i) eon ee eaten y Paes Taylor & Francis Group i Routledge 27 BuildLaw | November 2018 The Application of Contracts in Engineering and Construction Projects Donald Charrett Pb: $294.00 Written by an engineer and construction lawyer with many years of experience, The Application of Contracts in Engineering and Construction Projects provides unique and invaluable guidance on the role of contracts in construction and engineering projects. Compiled of papers written and edited by the author, it draws together a lifetime of lessons learned in these fields and covers the topics a practicing professional might encounter in such a project, developed in bite-sized chunks. Key topics included are: «the engineer and the contract +the project and the contract savoidance and resolution of disputes -forensic engineers and expert witnesses sinternational construction contracts For more information and to order visit: wwwroutledge.com/9781138543621 ‘www.buildingdisputestribunal.co.nzNEW ZEALAND A CHANGE IN MINDSET IS ESSENTIAL TO ADDRESS PROBLEMS IN THE CONSTRUCTION INDUSTRY PART A - SOME PROBLEMS Every prospective project owner and developer is now severely disadvantaged by the absence of a large pool of financially strong contractors. This situation has been self-inflicted by themselves and their predecessors. It is often said that risk allocation is inappropriate, and this is best illustrated with examples. Its totally irresponsible for an employer to require a contractor to take all the risk in relation to ground conditions. Let the present claim for over AUD 1 billion against NSW Transport be a lesson to everyone, whether you are building an underground railway or a house, or something in between. That claim is for damages for deceptive and misleading conduct in relation to underground issues. It seems to be an example of the consequences of an owner trying to be too clever. Itis totally irresponsible of an employer to. hold over the head of the contractor the right to give some work to others in the future; and it is totally irresponsible to retain the right to make significant programming adjustments yet deny a variation to the contractor. These are simple examples of numerous situations where contractors are being regularly asked to take risks which they are not equipped to either manage or price. Another common example is thrusting onto the contractor the risk of future design issues when the owner retains control of design. There is an obsession with accepting the lowest price regardless of good reasons, often, not to. www.buildingdisputestribunal.co.nz Derek Firth There is an obsession about requiring tendering for every project when that is not always appropriate. In Fletcher's heyday, that company was well known within the construction industry for two strategies. First, it went through a period of many years when it negotiated as many contracts as it could and avoided tendering wherever it could. This significantly reduced its, risk, but it also ensured that the employer ended up with a financially strong and very reliable contractor. Secondly, it had a reputation in the industry for looking after its subcontractors. They are the lifeblood of any major contractor. It was not the fault of Fletcher that the opportunity to obtain negotiated work significantly fell away. It was probably due to the short sightedness (and inexperience) of those at the procurement end who could not stand the thought of missing out on an alternative contractor being a fraction cheaper. Some of these issues are not only about owners and their consultants, but also their bankers, and their consultants. They do not seem to understand that it is better to pay a slightly higher price and have the security of a financially sound contractor with a reputation for consistent quality workmanship. Some seem to think that shaving a few dollars off another contractor's margin to enable it to secure the job will provide the best outcome. This could not be more short-sighted and wrong, Unfortunately, consultants advising owners who wish to impose draconian contract conditions and shave the margins to the bare BuildLaw | November 2018 28A CHANGE IN MINDSET IS ESSENTIAL bone would rather assist them to implement these very unwise tactics than see the owner shift to another consultant who will quickly accommodate their foolish requirements. Although it is blatantly obvious to everyone in the industry, no one seems to want to believe that if the contract has been concluded on the basis of draconian contractual provisions, minimum margins and generally an overriding anti-contractor approach, then what will happen is that the contactor will be on an attacking position from the outset. It will want to preserve its chiseled margin and it will want to ensure it does not lose money asa result of the unfair provisions. It will therefore adopt a claims mentality from the outset - probably preparing strategies for claims even before it establishes on site. - CONT The first, and likely to be the most effective solution will be a change in mindset. Owners and their consultants will be likely to achieve the best results if they stand back from inappropriate procurement tactics and take a broader view of getting the right contractor for the appropriate job at a fair price and based on fair conditions. A mindset of saving a few dollars and imposing harsh conditions because they think that is how it should be done, will continue to not work Ironically, many very experienced employers and very experienced consultants have no difficulty with this and adopt good approaches The problem lies with a very large number of less experienced people coming into a busy BUILDING DISPUTES TRIBUNAL RESOLVING BUILDING, CONSTRUCTION AND INFRASTRUCTURE DISPUTES FAIRLY, PROMPTLY & COST EFFECTIVELY TOPO crc aun UL Tests Tana Pee: Resta led as th building ai Se este Teen Teese ey building ney iding Dispute nationwic Ue Reel CUE emt le eae provider of sp eee tray Reels] www. buildingdisputestribunal.co.nz djudication Arbitration Early Neutral Evaluation 29 BuildLaw | November 2018 Arb-Med registrar @buildingdisputestribunal.co.n: Mediation Expert Determination Dispute Review Boards www.buildingdisputestribunal.co.nzA CHANGE market and wanting to prove themselves. Another solution which can often require an enormous level of will-power is to complete the design before tenders are called or a contractor is asked to price the work. We are riddled with projects where owners are always trying to “beat the gun”. Neither they nor their advisors want to see the wisdom in having design finality before an effective price is determined. The alternative will always bring future difficulties. The fallacy with an obsession for always requiring tendering can be simply illustrated. Consider a project such as a hotel or a block of apartments which is likely to cost in the region of say $80m. That is not the amount which will avoid being tested in a negotiated contract, This is because usually about 80% of it is competitively bid anyway through the tendering for subcontract work. Only about 20% of that price is what is really being negotiated, being the margins and some builder's work. ABOUT THE AUTHOR Derek Firth is an Auckland Barrister practicing as an arbitrator, mediator and adjudicator. He is a Fellow of AMINZ and a Fellow of the Chartered Institute, UK. Derek has had a number of party and Court appointments under the ICC Rules and is one of the leading dispute resolution practitioners in New Zealand, particularly in construction, property and commercial disputes. IN MINDSET IS ESSENTIAL - CONT. Good quantity surveyors will have a very accurate knowledge of the going rate for the various margins (on-site and off-site overheads and profit) and they will know if a contractor is underpricing or over pricing those parts of the price. What on earth is there to be gained by shaving a little off one or more of those margins and ending up with a contractor which is not as financially sound or does not have as good a track record as a contractor which is trying to retain normal market margins. Absolutely nothing, so why do owners consistently try to do it? Obviously, if one decides to proceed with a negotiated contract it is essential to require agreement by a date which still leaves time to tender if agreement can't be reached. All consultants (lawyers, architects, engineers, project managers and quantity surveyors) should stand up to their clients and explain to them why short cuts, harsh clauses and penny- pinching are counterproductive in many ways. Derek is the New Zealand Alternate Director of the ICC International Court of Arbitration (Paris) and has been appointed as Member of the New Zealand Order of Merit (MNZM). He is Chairman of the Dilworth Trust Board, a Trustee of the Melanesian Trust Board; Chairman of BioDiesel Oils NZ Limited and a director of a number of companies in the InterTech Group in Australia. To request the appointment of Derek Firth, please contact the Registrar: registrar@buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz BuildLew | November 2018 30.UNITED KINGDOM DEAL OR NO DEAL? ANOTHER LESSON IN ENSURING YOUR CONTRACT IS CLEARLY SET UP The recent English case of Williams Tarr Construction Limited v Anthony Roylance Limited and Anthony Roylance [2018] EWHC 23 highlights the importance of taking time at the commencement of a project to set out the basis ‘on which parties intend to contract with each other. WTC was the main contractor on a housing development in Cheshire. The works included the construction of a retaining wall to the south of the site, the original intention had been that the wall would be a blockwork wall but this was subsequently revised to stone-filled gabion baskets. During the course of the works unexpected ground conditions were encountered which caused problems with the retaining wall. WTC engaged either Anthony Roylance Limited or Anthony Roylance in his individual capacity to either design a solution so that the retaining wall would be fit for purpose or to design a drain to assist with water inflow problems so that the rear of the retaining wall could be accessed, And therein lies the rub. WTC believed that it had engaged Mr Roylance in his capacity as an individual to design a solution to the problems with the wall so that the wall would be fit for purpose. Mr Roylance for his part disagreed with this analysis, WTC had contracted with his limited company on a far more limited scope to design a drain for the wall, he had not designed the 31 BuildLaw | November 2018 wall, he had not taken on the obligation to. ensure that the wall would be fit for purpose. The court found that each party had become fixed in their view and were unable or unwilling to accept that matters may have been more complex than their own view. In addition Mr Roylance had produced design drawings in about 2010. When problems first came to light it was thought to be asa result of errors in workmanship rather than design. This avenue was pursued for some time with the subcontractor who constructed the wall and it was not until almost six years after the original discussions took place regarding the design of the wall that a claim was intimated. Due to the passage of time and the fact that the matter had been put out of everyone's heads for a significant period the court found the witness evidence, although honestly given, to be of little assistance. Therefore the task for the court was to consider each piece of correspondence between the parties to determine what had been agreed and between whom. The documents were often unclear, for example a design had been produced for the retaining wall by Mr Roylance, Mr Roylance claimed this was an “as-built” drawing produced simply as a record of what, was already on site, WTC claimed that there were additional details on that drawing added by Mr Roylance in an attempt to resolve the difficulties with the wall. As to the parties to the contract WTC said that, the bulk of the documentation pointed to Mr Roylance acting in his personal capacity, he did not use headed notepaper or refer to his limited company in his communications. Mr Roylance stated that payments were processed through the limited company and that a draft collateral warranty produced by WTC had referred to Mr Roylance’s company number. www.buildingdisputestribunal.co.nzThe Court's Decision The court found that whilst the position was far from clear, it was possible that WTC did believe that the scope of the appointment was much wider but found on balance that this was not the case and that, viewing the documentation ‘ona whole the design of the wall had been produced by the supplier of the gabion baskets and that the scope of the appointment was limited to the additional drain. The court accepted that Mr Roylance had considered himself to be operating through his limited company but that that had not been sufficiently communicated to WTC and that on balance the contract was between WTC and Mr Roylance in his personal capacity. Key Points WTC and Mr Roylance failed to put in place any clear agreement identifying the parties to the DEAL OR NO DEAL? - CONT contract or what the scope of the appointment was to be. As a result neither party achieved a satisfactory result. Although Mr Roylance was able to convince the court that the scope of his works was limited and therefore avoid liability for the failures in the wall, he did leave himself personally exposed in circumstances where he had set up a limited company to protect against precisely that. The court said that WTC probably believed that Mr Roylance’s appointment was wider than it actually was; their failure to record that resulted in them being unable to recover losses for the failure of the wall. The main lesson arising from this case is the importance of setting out at the outset, the basis on which you are contracting or you may find that what you understood to be the deal is not the case at all. ol aire Ouro) David Arnott Partner www.bulldingdisputestribunal.conz Sara Lanniga Associate BuildLaw | November 2018 32NEW ZEALAND We were delighted to attend the Society of Construction Law’s annual dinner last week at which our managing director and founder, John Green, was recognised for his extensive contributions to the practice of construction law with an Honorary Life Membership. John is one of New Zealand's best known and most respected construction arbitrators, adjudicators, and mediators, having been appointed in more than 1,200 building disputes to date. He is also the founder and driving force behind the establishment and development of the Building Disputes Tribunal, the New 33 BuildLaw | November 2018 Zealand International Arbitration Centre (NZIAC), the New Zealand Dispute Resolution Centre (NZDRC), the BuildSafe Security of Payment Scheme (BuildSafe), and the New Zealand Family Dispute Resolution Centre (FDR Centre). The SOCL's award of an Honorary Life Membership recognises John’s contributions to the practice of construction law and dispute resolution in the construction industry, which go far and beyond simply establishing his own practice. Rather, it celebrates the contributions John has made over a period of more than 30 years including establishing the Building Disputes Tribunal, improving access to justice by designing, developing and delivering effective and cost efficient dispute resolution processes and services, supporting, training and mentoring students, colleagues and contractors alike, regularly speaking and engaging with the construction and legal sectors at seminars, conferences and workshops, establishing and providing substantial open source resources to both sectors including the highly respected quarterly journals, BuildLaw and ReSolution, and the BuildRight suite of Conditions of Contract for residential building, acting as a Weathertight Homes Adjudicator for almost 10 years, establishing the BuildSafe Security of Payment Scheme, and actively participating in and volunteering countless hours of time to various community, interest and membership groups. This has included serving two terms as Chairman of a school board of trustees, serving the Master Builders Association of which he was President,12 years as Council member of the Arbitrators’ and Mediators’ Institute of New www.buildingdisputestribunal.co.nzZealand (AMINZ) including two years as President, as well as being a founding Council Member of the Society of Construction Law. Although he will probably never tell you, he has also regularly appeared on television in relation to building dispute matters including as a regular advisor on Fair Go as well as a starring role as the mediator in the TV series, Trade Wars. What many people also do not know is how John even came to be working in this area, having started his life as a contractor quite literally sneaking out of school to “dig ditches". At the start, it was John's contracting experience, and in particular his experience as a litigant seeking to recover payment due under construction contracts, that caused him to engage first hand in dispute resolution processes. As a party to those processes, he quickly concluded that there had to be a better and more efficient way of resolving building and construction disputes than litigation through the courts. This led John to go on to study law and arbitration only to find that the practice of arbitration in the early 90's was no better or different than litigation. John responded by developing new and innovative arbitration rules and procedures that better met the needs of the sector. This then led to the establishment of the Building Disputes Tribunal which is widely recognised and respected as the leading private specialist dispute resolution service for the building and construction sector in New Zealand. John's desire to identify and deliver practical and effective processes from the end consumer's point of view has contributed significantly to the success of the business. models he has developed. The key motivation has always been to selflessly serve the community and to contribute to the positive development of processes and those individuals who deliver those processes. How do | know so much about John’s background? It’s not because John is a self- promoter. That is certainly not the case ~ he would be the last to sing his own praises. | know because I'm John's daughter and also because | have had the pleasure of working www.bulldingdisputestribunal.co.nz NEW ZEALAND with him for the last two and a half years to continue to develop his vision of providing accessible, proportionate, and effective dispute resolution services both in New Zealand and further abroad. | see first hand day in and day out how much time and energy John invests into his work and serving the needs of the community. John Quincy Adams once said: “If your actions inspire others to dream more, learn more, do more and become more, you are a leader” | believe these words perfectly define the leader that John is. The example he sets for us all as to what we can seek to achieve, and more importantly, how we should go about achieving it, is an inspiration. | could not be more proud to call John both my colleague and my father and | would like to take this opportunity to not only celebrate his successes by sharing this with you, but also to thank the Society for recognising John and all his contributions to date. by Catherine Green Catherine Green, Executive Director Building Disputes Tribunal BuildLew | November 2018 34NEW ZEALAND DISPUTE RESOLUTION CENTRE ____.NZDRG~ . Fair, prompt and cost effective dispute resolution § and conflict management services _UNITED KINGDOM FORCE MAJEURE CLAUSES AND CAUSATION Adrian Bell, Victoria Peckett, Phillip S Ashley and Aidan Steensma A Commercial Court decision earlier this month has considered the extent to which a force majeure clause requires a party to prove that it would otherwise have performed its obligations in the absence of any force majeure event. In upholding such a requirement, the court emphasised the nature of the clause before it as an exceptions clause and di ‘inguished previous case law dealing with force majeure clauses which Lead to the termination of a contract. The case leaves a question as to how force majeure clauses which fulfil both purposes, such as that contained in the widely used FIDIC or LOGIC forms, are to be interpreted under English law... Introduction Force majeure clauses are commonly found in international construction, oil and gas and energy contracts. They typically excuse a party from performance and/or allow a right of termination upon the happening of events which render performance of the contract impossible, whether temporarily or permanently. A force majeure clause may apply only to certain events or generally to matters beyond the control of the parties. Such clauses typically require a force majeure event to have "prevented" performance of the contract or that impossibility of performance has arisen "as a result of" the force majeure event. This causative language poses an issue as to whether the clause applies only if a party can show that it would have performed the contract but for the force majeure event, not merely that the event made performance impossible regardless of whether performance would otherwise have been achieved. In short, whether the “but for” test applies. Previous English cases (including a decision of the House of Lords) have held that force majeure clauses which reflect the common law www.buildingdisputestribunal.co.nz doctrine of frustration and provide for the termination of a contract do not require a “but for" test for causation to be satisfied (despite the use of causative language such as the word “prevented"). This mirrors how the doctrine of frustration operates at common law. A second line of English cases distinguishes between clauses which suspend performance so that the party concerned is not in breach of contract and other clauses which merely exempt a party from liability for breaches caused by a force majeure event. The question before the court in the present case was whether a force majeure clause which merely exempted a party from liability should be interpreted as not requiring the “but for” test to be satisfied. Classic Maritime Inc v Limbungan Makmur SDN BHD Classic, a ship owner, entered into a long term contract of affreightment with Limbungan for the carriage of iron ore pellets from Brazil to Malaysia. Limbungan intended make shipments under the contract using iron ore pellets obtained from the Germano iron ore mine in Brazil, owned by Samarco. On 5 November 2015 a tailings dam forming part of the mine burst, leading to loss of life and the biggest BuildLaw |November 2018 36FORCE MAJEURE CLAUSES AND CAUSATION -CONT environmental disaster in Brazil's history. The ‘but for’ test upheld Production was halted and Limbungan was unable to fulfil its obligation to make Limbungan relied on the cases noted above shipments under the contract. dealing with force majeure clauses which result in the discharge of a contract akin to the Classic sued Limbungan for damages. As the common law doctrine of frustration. The court freight rates in the contract were agreed prior accepted the strength of this line of authority to the collapse in demand for steel in 2009, and acknowledged that the wording of the they were more than seven times the market _—_clause before it was in essence the same as rate at the time the dam burst, giving a sizeable considered in those cases. Nevertheless, the claim for damages. court considered that a different approach was warranted for clauses which merely exempted Limbungan defended the claim on the basis of 3 Party from liability for non-performance: a force majeure clause in the contract providing that: "... the Charterers... shall [not] be “There appears to me to be an important Responsible for loss of or damage to, or failure to difference between a contractual frustration supply, load, discharge or deliver the cargo clause and an exceptions clause. A contractual resulting from: .. accidents at the mine or frustration clause, like the doctrine of Production facility... always provided that such frustration, is concerned with the effect of an events directly affect the performance of either event upon a contract for the future. It operates party under this Charter Party..." to bring the contract, or what remains of it, to an end so that thereafter the parties have no obligations to perform. An exceptions clause is concerned with whether or not a party is exempted from liability for a breach of contract at a time when the contract remained in existence and was the source of contractual obligations. It is understandable that a contractual frustration clause should be construed as not requiring satisfaction of the “but for” test because that is not required in a case of frustration.” There was no argument about whether events constituted an “accident at the mine”, as referred to in the clause. However, Classic argued that due to the collapse in demand for steel, Limbungan would not have been ina position to meet the required shipments under the contract even if the dam hadn't burst. On the facts, the court agreed with Classic and found that Limbungan would not have made the shipments regardless of the production stoppage. This raised an issue as to whether the force majeure clause applied in such But tonoavail circumstances. The application of the “but for" test meant that the force majeure clause did not apply and Classic had made out its claim for breach of contract. Somewhat paradoxically, however, the force majeure clause was found to defeat the quantum of Classic’s claim. H Classic's damages claim was calculated by reference to the position it would have been in had Limbungan made the required shipments under the contract (i.e. absent the breach of contract). Although that is an entirely conventional approach to damages, the court found it to be “unrealistic” because it ignored why Lumbungan was in breach of contract. Lumbungan was in breach not simply because it didn't make the shipments, but because the 37 BbuildLaw | November 2018 www.buildingdisputestribunal.co.nzFORCE MAJEURE CLAUSES AND CAUSATION -CONT force majeure clause did not excuse non- performance due to Lumbungan not being ready and willing to make the shipments even in the absence of the production stoppage. The correct comparison, according to the court, was with the position that would have occurred had Lumbungan been ready and willing to make the shipments. In that case, the shipments would have been prevented by the production stoppage and the force majeure clause would have applied. Classic had not therefore suffered any loss as a result of Lumbungan’s breach and was not entitled to substantial damages. Conclusion and implications This is an important decision which has a number of implications for the drafting and interpretation of force majeure clauses. As noted above, the English courts presently draw a distinction between force majeure clauses where: (i) the obligation to perform is suspended or discharged upon the happening of specified events; and (ii) liability for failure to perform upon the happening of specified events is excluded. The latter being treated as. exemption clauses. A further distinction also arises as to clauses which operate to discharge the contract entirely and those which do not. The court's reasoning as to why the “but for” test applied to the clause in the present case is likely to be of general application to other force majeure clauses which merely exempt parties from liability for non-performance. In essence, the court decided that the authorities suggesting that the “but for” test concerning causation did not apply to force majeure clauses were relevant to clauses which operate to bring the contract to an end; not those merely excluding liability and leaving the contract subsisting. The genesis of this differing approach seems to be that force majeure clauses discharging the contract are treated as if they are an extension of common law frustration, where the “but for test” does not apply, but force majeure clauses excluding liability for non-performance are treated as exception clauses where the “but for www.buildingdisputestribunal.co.nz test” does apply. The correct approach to clauses which suspend performance temporarily, and which neither discharge the contract nor exclude liability for non- performance, is unclear. Itis also not entirety apparent how contracts, read as a whole, with hybrid rights of exception, suspension and/or termination for force majeure will be treated. Many force majeure clauses will fulfil both purposes of exempting or suspending performance and providing for the termination of the contract (typically if the force majeure event persists for a certain period of time). The FIDIC form of contract is one such example and is widely used on international construction projects. The LOGIC form is another and is widely used in the international oil and gas market. As a single interpretation is needed for such clauses regardless of whether the exemption/ suspension or termination provisions are relied ‘on, a conflict arises as to which of the competing approaches discussed above ought to apply. The distinctions relied upon by the court as to the characterisation of force majeure clauses pre-date recent developments as to the interpretation of limitation and exemption provisions at common law. The modern, approach is to interpret such clauses according BuildLaw |November 2018 38FORCE MAJEURE CLAUSES AND CAUSATION - CONT approach is to interpret such clauses according to their natural meaning rather than by reference to any preliminary categorisation. It remains to be seen whether the distinctions previously made as to force majeure clauses will survive these recent developments. In the meantime, parties would be well advised to pay close attention to the drafting of force majeure clauses as small changes in the language used can, on the present state of the law, have significant implications for the interpretation of the clause. The court's findings as to the assessment of damages are also significant. They would appear to make the conclusion reached as to the “but for" test largely theoretical. The court's findings mean that, for practical purposes, the defence of a claim on force majeure grounds would not need to surmount the “but for" test (save RB Adrian Bell Partner, London Victoria Peckett Partner, London perhaps where the claim is one for a remedy other than damages). The court's reasoning in this regard may well require clarification and development in future cases. The suggestion that damages should be assessed by reference to the reasons why a party isin breach, rather than solely by reference to the breach itself and its consequences, appears to be novel. A similar logic could well be said to apply toa variety of other scenarios, such as termination, where the hypothetical application of the force majeure clause (i.e. had a party otherwise been ready and willing to perform) might be said to negate a claim for damages. References: Classic Maritime inc. v Limbungan Makmur SDN BHD[2018} CM'S'§ Law . Tax EWHC 2389 (Comm). ah Phillip S. Ashley Partner, London Aidan Steensma Of Counsel, London Ranked as the world's 6th largest law firm by lawyer headcount and 6th largest in the UK by revenue, CMS works in 42 countries from 74 offices worldwide. Globally 4,500 lawyers offer business-focused advice tailored to clients’ needs, whether in the local market or across multiple jurisdictions. CMS UK, with offices in London, Bristol, Sheffield, Manchester, Reading, Aberdeen, Edinburgh and Glasgow, works across international borders and all industry sectors and commercial areas of law. Visit the firm's website to learn more. 39 Buildiaw | November 2018 www.buildingdisputestribunal.co.nzArbitration (2nd edition) Arbitration (2nd edition) is a leading text in its field, which, as with its previous edition, provides a thorough commentary on, and guide to, the law and practice of arbitration in New Zealand, The book is well respected amongst those who practice in the field of arbitration. The commentary in this new edition is informed by the collective knowledge and experience of arbitrators and co-authors Anthony Willy and Terrence Sissons. This second edition brings the text up to date and incorporates new commentary covering legal developments on: + agreements to arbitrate; + effect of delay by an arbitral tribunal in publishing an award; + appointment of arbitrators; + the power of arbitral tribunals to correct errors in awards and to Sit, atts oot provide an interpretation of a specific point or part of the award; + the requirement that an arbitral tribunal gives reasons for an award; ‘Authors + the power of arbitrators to make interim measures and preliminary Anthony Willy, Terrence Sissons orders; + circumstances in which recourse against an award is available; Available Now + enforcement of awards; + the allocation ofthe costs and expenses of arbitration. Single edition $ 150.00 +cst Arbitration (2nd edition) is also written with a diverse readership in mind, 6 ranging from professional and technical arbitrators, experienced lawyers, judges, expert witnesses and advocates, those who wish to gain formal accreditation as arbitrators, and students studying Alternative Dispute Resolution. For these reasons, the book continues to be a standard work of reference for all those with an interest in applying or learning about Bundle § 195.00 arbitration in New Zealand +UU + GST .-this edition continues with much that will be of use to the practitioner at a practical level. This kind of advice can be provided only by those with the vast experience of these authors. It cannot be extracted from a study of the legislation and decisions alone there is much that is contemporary and original, For example there is a useful reference to private arbitral institutes currently operating in New Zealand and a new chapter on ethics for arbitrators.” Hon Robert Fisher QC, LLD, FAMINZ HOW RSSRSGN i Ae ea ST ,, the answer company= W seemsoneuterscannzfestaloque € servce@monscnreuten.co.nt ie THOMSON REUTERS*NEW ZEALAND. BRILLIANCE FINED $540,000 FOR MISLEADING REPRESENTATIONS ABOUT STEEL MESH Commerce Commission Brilliance International Limited has been fined $540,000 for making false and misleading representations relating to its steel mesh products which are used to earthquake strengthen buildings. Auckland District Court Judge Robert Ronayne sentenced Brilliance on 20 charges brought by the Commission under the Fair Trading Act. Brilliance pleaded guilty to making false and misleading representations for its 147E steel mesh product which it marketed and sold as being earthquake grade ‘5008’ steel mesh between 30 September 2012 and June 2016. The offending involved eleven charges of making representations that were liable to mislead the public on their website and on product tags that its 147E steel mesh complied with the Australian/New Zealand Standard for reinforcing steel suitable for structural use in an earthquake zone when it did not. The other nine charges relate to false and misleading representations on its website that the product had been tested by independent testing laboratory SGS New Zealand, when it had not. The charges relate to approximately 35 batches of 147E steel mesh or 56,125 sheets. “The safety and durability of New Zealand's buildings depend on them being constructed with materials that comply with the relevant standards. False and misleading representations about building products are a priority for the Commission because compliance with standards is critical to both public confidence and safety,” Commission 40 Buildtaw | November 2018 Chair Dr Mark Berry said. In his judgment, Judge Ronayne said “It is self- evident that Standards are fundamentally important. The defendants conduct... plainly undermined the New Zealand Building Code and the objectives of Standards in general.” “The defendant's conduct is highly culpable because its behaviour has left consumers in a position of uncertainty because it cannot now be known whether all of the [steel mesh] complied, This position of uncertainty is what the FTA and the Standard seek to avoid,” Judge Ronayne said, In February 2016, the Commission issued a Stop Now Letter requesting that Brilliance stop representing its 147E as 500E grade steel mesh complying with the Standard. Brilliance complied with that request. The Stop Now was lifted in May 2016 after Brilliance agreed to court enforceable undertakings requiring specific independent testing for each batch of steel. Background Steel mesh cases The Commission filed charges against a number of companies relating to false and www.buildingdisputestribunal.co.nzBRILLIANCE FINED $540,000... - CONT. misleading representations about 500E steel mesh. In 5008 thee’ stands for earthquake, and the Standard specifies strength and ductility (elasticity) requirements for steel reinforcing materials. The Standard also specifies the procedures (ie, sampling and testing) that must be followed to produce steel of the specified standard, including: + manufacturing methods that must be used by steel manufacturers + chemical, mechanical and dimensional requirements of mesh + sampling and testing of each batch of mesh + identification and labelling of different grades of mesh. To be sold in New Zealand as SOE grade steel mesh, the mesh must be produced in accordance with the requirements of the Standard. If mesh is produced in any other way, it cannot be described as 500E mesh. The Ministry of Business, Innovation and Employment (MBIE) is the building regulator, www.buildingdisputestribunal.co.nz and sets and enforces the Standards and Building Code. The Commission can investigate misleading or deceptive claims about compliance with the Standard. The Commission has carried outa series of investigations into steel mesh following a complaint in August 2015. Following its investigations: * Fletcher Steel Limited was issued with a warning + United Steel Limited and Pacific Steel (NZ) Limited were issued with compliance advice + Timber King and NZ Steel Distributor were sentenced and fined $400,950 after pleading guilty to seven charges + Steel and Tube Holdings Limited pleaded guilty to 24 charges and the sentencing decision is currently reserved + 59 charges against Euro Corporation are before the Courts. BuildLaw | November 2018 41.BuildLaw® www.buildingdisputestribunal.co.nz BUILDING DISPUTES TRIBUNAL TE TARAIPIUNURA MO) NGA TAUTOHE WHARE DISCLAIME! BuildLaw' is published by Building Disputes Tribunal. BuildLaw is a newsletter and does not purport to provide a comprehensive analysis of the subjects covered or to constitute legal advice. BuildLaw js intended to promote and engender discussion, debate, and consideration ofall matters in relation to the development and application of construction law, the resolution of building and construction disputes, and the processes that are used for the resolution of those disputes. Articles, commentaries and opinions are intended to raise questions rather than to be emphatic statements on the subjects covered and the views expressed are the views of the author and are not necessarily those of the directors, servants and agents of the Tribunal. Information published is not guaranteed to be correct. current or comprehensive and the Tribunal accepts no responsibility for the accuracy of any information published in BuildLaw and no person should actin reliance on any statement or information cantained in BuildLaw, Readers are specifically advised that specialist Legal advice should be sought in relation to all matters in relation to, or in connection with, the subjects covered and articles published in BuildLaw. COPYRIGHT: This issue of BuildLaw® and all material and information contained herein are subject to the full protection given by the Copyright ‘Act 1994. In many cases the copyright of individual articles remains the property of the author and articles and commentaries should not be reproduced without frst obteining the express authorisation of the relevant third party copyright owner concerned. If you are in ary doubt as to whether 2 proposed use is covered by this licence please consult the Editar. 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