Lessons learnt from

Failures and Litigation

Ian Webber
Oops………!

2
Causes of Litigation

28%
36% Desk Study

Unforseen Ground
Conditions
Poor Construction

28% 8%
Failure of Design or
Specification
Desk Studies

The lack of a proper desk study is in my experience the main

reason for jobs going wrong and ending up in claims and
litigation.

• What should a desk study contain

• A borehole should only be carried out to confirm what you

already know.

• Examples
• South West Scotland
• North West England
• North West Ireland
Desk Studies

Appendix A of BS5930 gives an outline to the general information

required for a desk study.

• Old and Current Mapping

• Air Photos

• Geological and Environmental Information

• Previous site investigations

• Geomorphology and Walkover

……much of which is available online.
Desk Studies – Old maps

Old and Current Mapping

http://www.old-maps.co.uk - Ordnance Survey and County

Series mapping dating from c. 1843 to c. 1996
DESK STUDIES – WARNING!

Although web pages like Old Maps give a good overview of

what changes have occurred on a site the time difference
between surveys can mean critical developments are missed.

Services such as Envirocheck can carry out a more in depth

desk study for a fee.
Desk Studies

Aerial Photos

Google Earth (Free)

Can purchase historic aerial photos from websites such as

http://www.oldaerialphotos.com/, however these may require
time to be scanned and delivered

http://www.blueskymapshop.com allows high resolution

images to be purchased

Aerial photo interpretation may need specialist input

Sink hole in karstic limestone
North West England.
This aerial photo was the
key piece of evidence for a
£6million claim
Desk Studies

Geological and Hydrological Information

http://www.bgs.ac.uk/ - information available on both the

webpage and igeology smartphone app.

https://www.gsi.ie Information available on webpage.

Geological Map
Hydrological Map
Desk Studies

Previous site investigations

http://www.bgs.ac.uk/ - contains borehole information for

locations throughout the U.K.

http://www.hagdms.co.uk – records held by the Highways

Agency

https://www.gsi.ie - Contains borehole information,

but limited outside major cities
Overlaid Borehole Information
HA GDMS Information
Geomorphology

“What you look for should be suggested by the natural

environment and by the nature of the construction problem to
be solved”

Glossop 1968

Most of us are amateur geomorphologists and should be able

to tell ground conditions from walkover surveys.
Walkovers and Local Knowledge

Hard strata Soft Strata

Local Knowledge
River Valley

P. P.
G.G. Fookes,
Fookes 1997
1997
Glacial Terrain

P. G. Fookes, 1997
Examples where boreholes wouldn’t help

• SW Scotland Site of a sports complex.

• NW England Extension to a factory.

• NW Ireland Foundation failure at Hotel site

Concrete Maturity Testing - Savio DeSouza

22
SW Scotland - 1960
SW Scotland - 1970
SW Scotland - 1985
North West England

Existing

Proposed

26
North west England

Existing

What happened next

Proposed

Concrete Maturity Testing - Savio DeSouza

28
Foundation Failure - North West Ireland

32
Foundation Failure - North West Ireland
Foundation Failure - North West Ireland

34
Lessons Learnt

• A borehole should only be carried out to confirm what you

already know.
– If you don’t know the variability of what you are going to find
then you can’t position your borehole
– The type of borehole depends on the properties of what you
are investigating. Rotary coring rock is different from piston
sampling alluvium.
• A good desk study can allow you to provide much of the
design in advance of the site investigation…….but may require
some specialist input.

35
Poor Construction Methods or Controls

A significant number of failures and hence litigation is as a

direct result of activities on site compromising design
assumptions or failure of QA on site. This is often the lack of
design representation on site and therefore lack of clear
communication between the constructors and the designers.

• Northern Ireland.

• SW England.

• HS1

36
Northern Ireland
SW England Factor of safety of piles installed

38
SW England

PILES SUSPECTED
TO HAVE
FALSE
RECORDS
HS1

What happened?

• Basic design was an reinforced earth

embankment supported on vibrated concrete
columns

• The specification called for all columns to be

integrity tested.

40
HS1

• During a random site visit it was observed that

one of the columns had necked.

• On checking the integrity test records this column

• receipts attached...various and a further 210 columns had shown signs of
necking in the integrity tests.

• The testing had been done, the results filed, but

no one looked at them!!!

41
Lessons Learnt.

• The interface between responsibility for design and

construction has become blurred with modern contracts

• There needs to be suitable monitoring and construction

records to demonstrate that the design is working as
anticipated.

• The interface with design needs to be continued throughout

the construction process and that interface needs to be
clearly understood.

42
Failure of design or specification

Design failures

• SE England

• Northern Ireland.

• West Yorkshire

• Dubai

43
SE England

44
SE England

45
SE England

46
Northern Ireland (again!)

Webber
Associates
Northern Ireland

48
Northern Ireland

49
West Yorkshire

50
West Yorkshire

51
Effective stress slope stability 1

Dry Slopes
Factor of Safety = tanø /tanα

Saturated slopes
Factor of Safety = tanø /2*tanα
Therefore for a Ø of 30o and a
factor of safety of 1.3 this relates to safe slopes of 1:2.25 (24o) for a
dry slope and 1:4.5 (12.5o) for a slope with ground water at surface.
Dubai

53
Cofferdam Design

54
Lessons Learnt.

• Design rarely goes wrong because we didn’t use the more

complicated methods of analysis.

• Simple hand calculations will normally highlight any issues.

• Only once have I found that someone got the sums wrong
and that led to failure.

• Normally it is either a lack of understanding of the ground

model, or lack of understanding of the variables.

55
….and sometimes we just can’t tell

56
North West Ireland

57
Static Cone Test

Sleeve Friction, fs (kPa)

0.0 2.5 5.0 7.5 10.0 12.5
Friction Ratio,
Total Cone Resistance, qt (kPa) Rf (%)
0 100 200 300 400 500 0 2 4 6 8
0

6
Depth (m)

10

12

14
Static Cone Test

Sleeve Friction, fs (kPa)

0.0 2.5 5.0 7.5 10.0 12.5
Friction Ratio,
Total Cone Resistance, qt (kPa) Rf (%) Moisture Content (%)
0 100 200 300 400 500 0 2 4 6 8 0 200 400 600 800
0

6
Depth (m)

10

12

14
Static Cone Test

Sleeve Friction, fs (kPa)

0.0 2.5 5.0 7.5 10.0 12.5
Friction Ratio,
Total Cone Resistance, qt (kPa) Rf (%) Moisture Content (%)
0 100 200 300 400 500 0 2 4 6 8 0 200 400 600 800
0
Very Soft Peat

2
Very Soft
4 Organic Clay

6
Depth (m)

10

Very Soft
12 Sensitive Clay

14
Postulated Failure Surface

60 0 100 m
Peat
Fill River
40

Limestone
20
Organic Clay Sensitive Clay

Initiated by excavation near toe of fill

Postulated Failure Surface

60 0 100 m
Peat
Fill River
40

Limestone
20
Organic Clay Sensitive Clay

Back-calculated shear strength 1.5 kPa

Conclusions

• Time spent in court is wasted time and money.

• Most failures are because designers have not understood the

ground model. The information is there if people look at it.

• Modern contracts have failed to address good QA

procedures on site. Lack of site control results in a lot of
claims. Bring back the “Engineer” or his equivalent

• Design failures are normally simple. Designers rely on

calculation rather than concept.

• “Any design which relies for its success on precise analysis

is a bad design” Soil Structure Interaction, published by Institution of Structural Engineers (1984)

• Very occasionally there are unforeseen ground conditions.

63
DISPUTE RESOLUTION
 Outline

• Ground Risk – Contract Terms & Claims.

• Liability for Design.

• Dispute Resolution.
Ground Risk – Contract Terms
& Claims
 Ground Risk
JCT Contracts
• Most JCT contracts are silent on the issue of ground
conditions so, in the absence of any bespoke
amendments, the common law applies.
• The common law position is that the contractor’s
obligation to complete the works includes doing
anything indispensably necessary to complete the works
– including dealing with unforeseen ground conditions.
• Note: JCT Major Project uses a ‘reasonable
foreseeability test’ instead.
 Ground Risk
JCT Contracts
• The contractor ordinarily bears the risk (in terms of time and money)
of ground conditions.
• This is the case unless information forming part of the contract
concerning ground conditions (e.g. a site investigation report) is
acknowledged as having been relied upon by the contractor and turns
out to be incorrect.
• Even without such an acknowledgement, incorrect information may
amount to a representation on the part of the Employer which the
contractor has relied upon to his detriment – this may allow the
contractor to claim damages.
• A claim of this nature may be problematic to bring.
• Employers commonly include bespoke wording to the effect that the
contractor is not able to rely on the information provided.
 Ground Risk
JCT Contracts
• It is common for bespoke clauses to be added, expressly
pushing the risk of ground conditions onto the contractor.
• Objecting to such clauses is difficult though, when they
effectively spell out the common law position.
• However, it may be possible to get the employer to agree to:
• allow the contractor to rely on site information provided; and/or
• include a reasonable foreseeability test.
 Ground Risk
NEC3 Contracts
• Clause 60.1(12) – it is a Compensation Event if the
Contractor encounters physical conditions which:
• are within the Site;
• are not weather conditions; and
• an experienced contractor would have judged at the date
of the contract to have such a small chance of occurring
that it would have been unreasonable to allow for them.
• Only the difference between the physical conditions
encountered and those for which it would have been
reasonable to have allowed is taken into account.
 Ground Risk
NEC3 Contracts
• Clause 60.2 – in judging the physical conditions for the
purposes of assessing the CE, the Contractor is assumed to
have taken account of:
• The Site Information (the site and its surroundings).
• Publicly available information referred to in the Site
Information.
• Information obtainable from a visual inspection of the Site.
• Other information which an experienced contractor could
reasonably be expected to have or obtain.
• The Contractor cannot, and should not, rely on the Site
Information alone.
 Ground Risk
NEC3 Contracts
• A much more favourable approach to the Contractor than
under JCT, but it poses some difficulties.
• How can you determine what the notional “experienced
contractor” would have allowed for?
• From whose perspective would it be reasonable to allow for a
condition?
• What “other information” could an “experienced contractor”
have been reasonably expected to obtain?
• How do you work out the difference between physical
conditions which are a CE and physical conditions which it
would have been reasonable to allow for?
 Ground Risk
Infrastructure Conditions of Contract Design & Construct Version
• Clause 12(1) – if the Contractor encounters physical
conditions (other than weather conditions or conditions due
to weather conditions) or artificial obstructions which could
not in his opinion reasonably have been foreseen by an
experienced contractor, the Contractor shall give notice to
the Employer’s Representative.
• Clause 12(2) – at the same time, or as soon as reasonable
thereafter, the Contractor must also give notice pursuant to
clause 44(1) if he intends to claim an extension of time and
pursuant to clause 53 if he intends to claim additional
payment.
 Ground Risk
ICC Design & Construct Version
• Clause 12(3) – when giving notice under clauses
12(1) and/or 12(2), or as soon as practicable
thereafter, the Contractor must give details of:
• any anticipated effects of the condition or obstruction;
• the measures he is taking or proposes to take;
• the estimated cost consequences;
• the extent of the anticipated delay.
 Ground Risk
ICC Design & Construct Version
• Clause 12(6) – if, in the opinion of the Employer’s Representative, the
condition or obstruction could not reasonably have been foreseen by an
experienced contractor, and the Contractor has made a claim under
clause 12(2), the Employer’s Representative shall determine the delay
suffered and the amount of any costs which may reasonably have been
incurred, together with a reasonable percentage addition for profit.
• The ascertained delay will then give rise to an extension of time under
clause 44(3).
• The extra cost will be paid subject to clause 53 (i.e. subject to the
Contractor having provided adequate particulars of the costs). This is odd
wording given that the cost has already been determined and is
presumably to be interpreted as requiring the particulars to be provided
before the determination is made.
 Ground Risk
Other ICC Contracts
• The Ground Investigation Version, Target Cost Version
and Measurement Version all follow the same principles
and procedures as the Design & Construct Version.

• The With Quantities Version and Minor Works Version

adopt the same reasonable foreseeability test - but
have much less detailed procedures.
 Ground Risk in Practice:
Geotechnical Baseline Reports
• A geotechnical baseline report (or “GBR”) is a document
which sets out the expected/anticipated ground conditions on
a project.
• It acts as a quasi-specification for the ground, detailing the
expected conditions, much like one would expect a
specification to detail other elements of the construction
project.
• In a contractual context, a GBR can be used to apportion
liability and decide whether or not conditions are
“unforeseen”.
 Ground Risk in Practice:
Geotechnical Baseline Reports
• The introduction of a GBR into a contract manages the risk in
respect of ground conditions.
• A GBR may contain a number of statements (depending upon
site conditions), which cover items such as:
• rock masses and the respective strength, permeability etc. of that
material.
• anticipated sub-soil conditions or obstructions (e.g. the presences
of rock masses, old foundations etc.).
• Groundwater conditions, water compositions (geochemistry).
• Descriptions of services/utilities or other geotechnical hazards.
• Anticipated response of ground to planned construction
methodologies.
 Ground Risk in Practice:
Geotechnical Baseline Reports
• Using a GBR allows the contractor to place a more accurate
bid (at tender stage) based on risk, or allows the parties to
negotiate risk with more certainty.

• As the parties have a point of reference, it is easier to reach

an agreement in respect of the apportionment of risk, with
the contractor only taking the risk of conditions outside a set
(and clearly defined) range.
 Ground Risk in Practice:
Geotechnical Baseline Reports
Advantages of Using GBR
• More certainty when dealing with risk elements.
• Ability to price risk more accurately.
Disadvantages of Using GBR
• Can be expensive – difficult to justify on smaller projects.
• Potential to oversimplify complex risks.
 Ground Risk in Practice:
Van Oord v Allseas
• Allseas was engaged as principal contractor to carry out
offshore and onshore work in connection with a gas field
development in Shetland.
• Van Oord and Sicim Roadbridge formed a joint venture
(“OSR”) to carry out onshore civils works for the laying of a
gas export pipeline.
• OSR brought various claims against Allseas for disruption
and prolongation, including a claim arising out of alleged
unforeseen ground conditions.
 Ground Risk in Practice:
Van Oord v Allseas
• Clause 12 of the contract allowed claims for sub-surface
conditions different from those described in the contract,
provided that:
• the conditions were ones that an experienced contractor
could not reasonably have been expected to foresee
following an examination of the contract documents; and
• notice was given in accordance with clause 22.
• Clause 22 required notice to be given within 5 days of the
occurrence of an event and full substantiation to be given
within 12 days of the occurrence of an event.
 Ground Risk in Practice:
Van Oord v Allseas
• OSR claimed that they had intended to construct a stone
road and lay the pipe in a trench excavated in untreated
ground alongside the road.
• Immediately upon starting work, OSR discovered peat which
was deeper than had been shown in the pre-contract site
survey.
• As a result of this, OSR had to build a stone embankment and
lay the pipe within the embankment.
• OSR argued the peat levels were not reasonably foreseeable
and where the actual site conditions differed from the pre-
contract probe survey results, they had a claim for
unforeseen site conditions.
 Ground Risk in Practice:
Van Oord v Allseas
• The court rejected the ground conditions claim for a
number of reasons:
• OSR had failed to comply with the contractual
notice provisions.
• The ground conditions were not markedly
different from what was described in the
contract documents.
• The ground conditions were reasonably
foreseeable.
• There was no evidence of delay being caused by
ground conditions.
 Ground Risk in Practice:
Van Oord v Allseas
Failure to comply with notice provisions
• The ground conditions were discovered by OSR on 11/12
October 2011.
• Therefore notice should have been given under clause 22
by 17 October 2011.
• The first correspondence which could be argued to
constitute notice was given on 19 October 2011.
• That notice was out of time, did not refer to clauses 12 or
22 and was not a notice of unforeseen ground conditions.
• OSR sought to rely on various other pieces of
correspondence, but again, they were all out of time.
 Ground Risk in Practice:
Van Oord v Allseas
Ground conditions not different from contract documents
“… not only were the sub-surface conditions not different from those
described in the Contract documents, but any suggestion by OSR that they
were different emerged very late and somewhat half-heartedly.”
• OSR’s pleaded case relied on the results of a probe survey
which was not a contract document.
• The contract drawings show varying depths of peat, “which
was exactly what was found… the conditions actually
encountered were broadly those shown in the relevant batch
of Contract drawings”.
 Ground Risk in Practice:
Van Oord v Allseas
Ground conditions not different from contract documents
• Even if the probe survey had been a contract document, it
would not have helped OSR because the survey results did
not indicate that the site conditions encountered were much
different from what was shown on the contract drawings.
• There was also no evidence that the ground conditions
encountered after mid-October 2011 were significantly
different to that set out in the probe survey.
“There were not always reliable records of the ground conditions
actually encountered, metre by metre, after 12 October, and no
attempt to compare the actual with the coloured-up chart of
Mackintosh probe results provided before the Contract was
agreed.”
 Ground Risk in Practice:
Van Oord v Allseas
Ground conditions were reasonably foreseeable
• Ground conditions are not unforeseeable simply because they
are not expressly identified in pre-contract information.
“… an experienced contractor at tender stage would not simply
limit itself to an analysis of the geotechnical information
contained in the pre-contract site investigation report and
sampling exercise... seems to me to be simple common sense by
any contractor in this field.”
• OSR did not produce expert evidence on this aspect of the
claim, but this was “not itself fatal to the claim”.
 Ground Risk in Practice:
Van Oord v Allseas
Ground conditions were reasonably foreseeable
• OSR’s claim was based on the “fundamental misassumption”
that they were entitled to treat the probe results as a
guarantee, which was not the case.
“Contractors are provided with all available information as to
ground conditions, but ultimately it is a matter for their judgment
as to the extent to which they rely upon that information. In my
view, it is wrong in principle for a contractor to argue that, merely
because, in some particular locations, the conditions were different
to those set out in the pre-Contract information, those different
conditions must somehow have been unforeseeable.”
 Ground Risk in Practice:
Van Oord v Allseas
Ground conditions were reasonably foreseeable
• An experienced contractor would know that ground
investigations are only 100% accurate in the precise locations
where they are carried out.
“It is for an experienced contractor to fill in the gaps and take an
informed decision as to what the likely conditions would be
overall… they cannot now make a claim because, putting their case
at its highest, there were some more deep pockets of peat in the
Southern section than were shown in the Mackintosh probe
results. They could reasonably have been expected to assume that
there could well be more, or different, such pockets of peat in the
ground.”
 Ground Risk in Practice:
Van Oord v Allseas
No evidence of delay
• The programme OSR relied on was acknowledged by OSR to
be “fundamentally flawed” and therefore was “an unreliable
basis for the calculation of any claim, much less claims said
to be worth £10m odd”.
• OSR’s claim was essentially a global claim which operated on
the basis that the entirety of the delay and disruption was
caused by the site conditions – “There is no
acknowledgement or allowance in the pleaded claims for any
delay and disruption which might have been due to OSR, nor
any obvious way in which a lesser entitlement has been
claimed or might be calculated.”
 Ground Risk in Practice:
Van Oord v Allseas
No evidence of delay
• There was a large volume of contemporaneous documents
but:
• They were “of much greater assistance to AUK [Allseas] for
what they do not say, than they are to OSR for what they do
say”.
• The documents “do not emphasise to any degree the matters
upon which OSR now seek to rely… there is little indication in
the contemporaneous documents that, at the time, OSR put
any great emphasis on these matters”.
• To the extent that the contents of the documents comprised a
test of the credibility of OSR’s claim, “they comprehensively
fail that test”.
 Ground Risk in Practice:
Van Oord v Allseas
No evidence of delay
• OSR argued that the documents did not support their case
because Allseas had requested that daily progress reports
exclude matters of a contractual nature.
• The court rejected this argument.
“… a report that men or machinery were standing idle on a particular day
is not a contractual issue, but a matter of fact, a report linked to progress
and resource allocation. The alleged reasons for the standing time might
be a contractual issue, but the reporting or recording of the fact that
there was such standing time is precisely what needed to be included…
That the reports and other contemporaneous documents in this case
make so few references to standing time or disruption… are plainly
factors undermining the credibility of OSR’s claims.”
 Ground Risk in Practice:
Van Oord v Allseas
• This case, which was a costly disaster for OSR, is a good
reminder that a successful claim requires:
• Detailed contemporaneous records (meeting minutes,
daily records, emails, progress reports etc) which support
the case being advanced.
• Notices to be given on time and strictly in accordance with
the requirements of the contract, making clear references
to the relevant clause numbers being relied upon.
 Ground Risk in Practice:
Bacal Construction v NDC
Bacal Construction (Midlands) Limited v The Northampton
Development Corporation
• In this case, the contractor asked questions of the employer
in respect of the soil conditions on site.
• The quantity surveyor, acting on behalf of the employer, told
the contractor to assume that the soil was good.
• The soil was not good and soft spots were subsequently
discovered.
• As the employer was deemed to have warranted that the
ground was good, the contractor had a valid claim for its
additional cost.
 Ground Risk in Practice:
Co-op Insurance v Henry Boot
Co-Operative Insurance Society Ltd v Henry Boot
(Scotland) Limited
• CIS engaged HBS to demolish, design and
reconstruct a property.
• The contract contained a provision with similar
wording to that of the JCT D&B Contract clause
2.1.1.
• Soon after commencement of the works, water and
soil flooded the excavations. HBS sought to recover
its costs from CIS.
 Ground Risk in Practice:
Co-op Insurance v Henry Boot
• HBS argued it was entitled to rely on a soil
investigation report, provided by CIS, which
misrepresented the water levels expected.
• The contract documents did not list the report.
• However, HBS still argued that it was incorporated
into the contract by virtue of it being referred to in
one of the drawings.
Held
• The judge held that the report was not incorporated
as it was not identified in the contract documents.
 Ground Risk in Practice:
Co-op Insurance v Henry Boot
• It is very important to always undertake your own
site investigation (where appropriate).

• Reliance on a document supplied to you will not

necessarily discharge your obligations under the
contract.
 Ground Risk in Practice:
Shepherd Homes Ltd v ERL & GPL
• Shepherd were developing a site in Hartlepool. The
intended scheme comprised of 94 houses.
• The condition of the ground was poor and,
consequently, piling was required to improve the
foundations.
• Encia, the civil engineering contractor, engaged
Green Piling to carry out the piling works.
• Encia was a much larger company than Green Piling.
By comparison, Green Piling had an annual turnover
of around £335,000.
 Ground Risk in Practice:
Shepherd Homes Ltd v ERL & GPL
• The works were carried out in two phases between
July 2001 and September 2002. By May 2003 the
houses began to show signs of cracking caused by
settlement.
• The losses incurred by Shepherd were estimated to
be in excess of £10m.
• Shepherd commenced a claim against Encia alleging
that the piling design was defective and Encia, in
turn, commenced a claim against Green Piling.
• In an attempt to limit the claim, Green Piling
referred to a cap on its liability, which was set out in
its T&Cs (limiting its liability to the contract price,
just under £250,000).
 Ground Risk in Practice:
Shepherd Homes Ltd v ERL & GPL
• In response, Encia argued that:
• the cap was an unfair term; and
• in the alternative, Green Piling had waived the cap on
liability by agreeing to maintain PI cover at £1m.
• The Court held that the cap was not unfair and would apply.
Of the two parties, Green Piling had considerably less
bargaining power. The cap was not concealed or unusual and
Encia had accepted the terms without commenting on the
cap.
• Green Piling’s agreement to maintain £1m in PI cover was
not a waiver of its rights as it was reasonable that claims on
the insurance may be spread across a number of defects.
Liability for Design
 Fitness for Purpose v Reasonable Skill & Care
What’s the difference?
• A contract which requires design to be carried out with
reasonable skill, care and diligence does not require any
guaranteed result. If the design is defective, there will be
no liability provided the design was carried out with
reasonable skill, care and diligence.
• A contract which requires:
• the design to be fit for purpose; and/or
• the design to meet certain results (e.g. performance
specification),
requires a guaranteed result. If the design does not meet
that result, liability arises automatically.
 Fitness for Purpose v Reasonable Skill & Care
How do you know what you have signed up to?
• Reasonable skill and care clauses tend to be explicit…
“The Contractor warrants that there has been exercised and will be
exercised in the design of the Works all the reasonable skill, care
and diligence to be expected of a duly qualified and experienced
architect undertaking the design of works similar in scope and
character to the Works.”
• …but are sometimes a little harder to spot…
“… the Contractor shall in respect of any inadequacy in such design
have the like liability to the Employer, whether under statute or
otherwise, as would an architect or, as the case may be, other
appropriate professional designer…”
 Fitness for Purpose v Reasonable Skill & Care
How do you know what you have signed up to?
• Any potential fitness for purpose obligations/design
guarantees should be qualified with a reasonable, skill care
and diligence obligation.
• For example, the word “ensure” in this clause would have
created a guarantee, but replacing it with a skill, care and
diligence obligation reduces risk:
“The Contractor shall ensure use the level of reasonable skill,
care and diligence stipulated in clause 2.17.1 to see that the
Works satisfy any performance requirements or
specifications set out in the Employer’s Requirements.”
 Fitness for Purpose v Reasonable Skill & Care
How do you know what you have signed up to?
• A simple way to try to overcome any hidden fitness for
purpose obligations/design guarantees is to add overriding
reasonable skill and care wording, for example:

“Nothing in this Contract imposes on the Contractor any

standard of care in relation to design that is higher than the
standard of care imposed on the Contractor by clause
2.17.1.”

Note: this example wording is specific contractors using JCT D&B

2011, but the principle can be applied to others.
 Fitness for Purpose v Reasonable Skill & Care
• Limiting design liability.

• Avoid fitness for purpose obligations.

• Avoid absolute obligations where possible.

• Cap on liability.

• Exclusion of liability for certain types of loss.

• Net contribution clause.

Dispute Resolution
 Dispute Resolution
3 main options:
• Adjudication
• Parties have right to refer dispute to adjudication at any time.
• Adjudication conducted in accordance with the Scheme for
Construction Contracts.
• Adjudicator nominating body should be specified in the Contract
Particulars.
• Arbitration OR litigation
• One option must be selected using the Articles.
• Mediation
• Optional – Parties to give it “serious consideration”.
• Parties free to agree mediator and mediation procedure.
 Understanding Adjudication
Is there a “construction contract”?
• Must be a contract for the carrying out of
“construction operations” – see s104 of the
Construction Act.
Is the “construction contract” in writing?
• Pre 1 October 2011 – s107 of the Construction Act –
construction contracts must be in writing.
• Post 1 October 2011 – s107 of the Construction Act
repealed – construction contracts no longer have to be
in writing.
• However, there will be evidential difficulties if the
contract is not in writing.
 Understanding Adjudication
• Is there a dispute?
• A “dispute” includes any difference between the
parties – s108 of the Construction Act.
• Term ‘dispute’ will be given a wide meaning.
• The dispute must be a ‘crystallised dispute’.
• A letter before action may crystallise the dispute.
Beck Interiors Ltd v UK Flooring Contractors Ltd (2012) –
for a dispute to crystallise you must give the other party a
reasonable amount of time to respond.
 Understanding Adjudication
Nature of the Dispute
• The adjudicator only has 28 days to reach a decision
(although this can be extended).
• How detailed is the claim?
• If the claim is very detailed it may be unsuitable for
adjudication.
• If there are a lot of documents to consider the claim may be
unsuitable for adjudication.
• Adjudication is rarely suited to highly complex disputes
or disputes involving new points of law.
• Best suited to financial disputes e.g. final accounts,
claims for unpaid sums, valuation of variations.
 Understanding Adjudication
Cost Implications
• Potential costs:
• Legal representation (lawyer/claims consultant).
• Management time.
• Risk of having to pay adjudicator’s fees if unsuccessful.
• Adjudication not suitable for very low value disputes
– the cost is simply disproportionate.
• An adjudicator does not have power to award a
successful party’s costs against the other, regardless
of the decision.
 Understanding Adjudication
Timing
• Are you sufficiently well prepared?
• Your documents and case should be ready before you
serve the notice of adjudication.
• Are key people in your organisation available for the
next 6-8 weeks or so?
• Given the tight timeframe of adjudication, your key
people will have to respond quickly.
• Is the project at a stage where kicking off an
adjudication would be appropriate?
 Understanding Adjudication
Advantages
• Quick decision – usually within 6-8 weeks.
• Generally viewed as cheaper than litigation.
• Privacy – adjudications are not public knowledge.
• You can choose an adjudicator with specialist
knowledge of your dispute (subject to contractual
provisions).
• Can restrict the scope of the issues the
adjudicator is allowed to consider.
 Understanding Adjudication
Disadvantages
• No guarantee of payment even if your claim is successful.
• Decisions have to be enforced in court if they are not
complied with.
• Legal costs can rarely be recovered from the losing party
(unlike in court).
• Tight timescales can make it difficult for the parties and
the adjudicator to properly address all issues in dispute.
• Difficult to have a decision overturned unless the
adjudicator has no jurisdiction or has acted unfairly.
 Adjudication Procedure
• Notice of Adjudication and Referral Notice are key.

• Notice of Adjudication:
• Sets out a brief summary of the claim and the redress
sought.
• Used to commence the entire adjudication process.
• Defines scope of what adjudicator is asked to decide.
• Most important document in the process – crucial to
get it right.
 Adjudication Procedure
• Referral Notice:
• Prepare as much of the Referral as possible before
serving the Notice of Adjudication.
• Sets out the claim in detail.
• Should be clear, concise and provide the adjudicator
with a clear picture of the claim.
• Prepare the Referral on the basis it is the Referring
Party’s ‘one shot’.
• Accompanied by relevant supporting documents
(cross-referencing essential).
• Ensure the redress sought in the Notice matches the
redress sought in the Referral.
 Adjudication Procedure
• Follow the correct procedure:
• Serve Notice of Adjudication in accordance with
notice provisions of the contract.
• Scheme or contractual adjudication?
• Serve Notice then apply to adjudicator nominating
body (Lee v Chartered Properties [2010]).
• Apply to the correct nominating body.
• Request an appropriately qualified/skilled
adjudicator – does your dispute need a lawyer, a QS,
a building surveyor…?
 Adjudication Procedure
Claim under the contract for redress

Crystallisation of the dispute

Service of the Notice of Adjudication

Any challenge to the Adjudicator’s jurisdiction

Appointment of the Adjudicator and Service of the Referral Notice

 Adjudication Procedure
Response

Reply and/or any further submissions

Further investigation by the Adjudicator

The Adjudicator’s decision

Enforcement of the Adjudicator’s Decision (if no compliance)

 Litigation
When Can You Litigate?
• You can litigate whenever you have a legal dispute
with another party.
• Although not an absolute necessity, you should only
start litigation proceedings if you have complied
with the “Pre-Action Protocol”.
• Failure to comply with the Pre-Action Protocol can
result in a costs sanction.
 Litigation
Cost Implications
• Potential costs:
• Legal representation.
• Court fees.
• Management time.
• If you are unsuccessful, you may have to pay the other
side’s costs.
• If your claim is successful, you may be able to recover
some, but not all, of your legal costs. However, you will
normally have to fund the litigation upfront.
 Litigation
Time Implications
• Litigation is not a speedy process, especially when
compared to adjudication.
• Even low value claims can take months to resolve.
• High value, complex cases can take years to come to a
conclusion.
• It can takes years from commencing your claim to
receiving final judgement.
 Litigation
Advantages
• Well suited to low value claims for unpaid debts.
• The majority of legal costs are normally recoverable if you are
successful (except Small Claims).
Disadvantages
• High value/complex disputes can take a long time to resolve and
can be very expensive.
• You will normally have to fund the litigation upfront even if you
recover costs at the end.
• Litigation is not confidential. The judgment may be made publicly
available.
 Meditation
What is Mediation?
• A trained third party mediator meets with the parties
and attempts to facilitate a settlement.
• The mediator has no power to impose a settlement; the
parties have to come to an agreement themselves.
• Mediation often helps the parties see the claim from
the other side’s perspective and agree on a compromise
which is acceptable to both parties.
• The agreement reached is then recorded in a binding
settlement agreement.
 Meditation
Advantages
• Private and confidential.
• Mediation is often successful. Many disputes settle
late in the day as the parties realise they no longer
wish to waste time on the matter.
• In comparison to other forms of dispute resolution,
mediation is relatively cheap.
Disadvantages
• Fees can be prohibitive for low value disputes.
• Unsuitable for straightforward claims for non-
payment of a debt.
 Questions?
This presentation contains information of general interest about
current legal issues, but does not provide legal advice. It is prepared
for the general information of our clients and other interested
parties. This presentation should not be relied upon in any specific
situation without appropriate legal advice. If you require legal
advice on any of the issues raised in this presentation, please
contact one of our specialist construction solicitors.
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