Construction Law Review Bulletin

Chartered Institution of Civil Engineering Surveyors
CONSTRUCTION LAW REVIEW
20th Anniversary Issue
2016
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Contents
Features
04. Forewords
44. Performance bond calls
David Loosemore, Chartered Institution
Stephanie Barwise QC and Omar Eljadi,
of Civil Engineering Surveyors, and
Atkin Chambers
Julian Bailey, Society of Construction Law
07. Civil litigation: 20 years on
Simon F Fegen, Leach Consultancy
Alexander Nissen QC, Keating Chambers
11. Articial intelligence and law

Simon Tolson, Fenwick Elliott LLP
50. Could the payment provisions of the

construction act displace capped payment
sums set out in letters of intent?
Edwina Acland, Sharpe Pritchard
16. Expert errors
52. An (e)stopped clock is right twice a

day: Is your engineers conduct a ticking
time bomb?
John Mullen, Diales
18. Foreseeing the unforeseeable

David Carrick, Hill International
Sarah McCann, Hardwicke
25. Employers claims under FIDIC

Jonathan Hosie, Mayer Brown International
55. Harding v Paice: Rhyming slang for

hard cases do not make good law?
28. Adverse weather
David Sears QC, Crown Ofce Chambers
Emily Monastiriotis, Susanne Hose and
Cover: Goja1
47. FIDIC Red Book, sub-clause 2.4
Simos Schizas, Bond Dickinson
58. The making of IChemEs new

professional services agreement
30. Payment provisions under LDEDCA 2009
John Challenger,
Peter Barnes, Blue Sky ADR
Institution of Chemical Engineers
33. Proving extension of time claims
63. Concurrent delay: Time does not

always equal money
Manoj Bahl, FTI Consulting
Andrew Bayne, Centra Consult
36. Fixed payment schedules:

Grove v Balfour Beatty
66. With great risk comes...?

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Alan Williamson, Schoeld Lothian
Gordon Lees, JGL Consulting
39. Knocked out on penalties

Kate Corby and William Jones,
69. Contract administration for claims and

claims avoidance
Baker & McKenzie
Andy Hewitt, Institute of Construction
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42. Collateral warranties
Claims Practitioners
71. Index of Construction Law

Professionals
Fenella Mason, Burness Paull
Construction Law Review 2017 copy date: 31 May 2017.
Chartered ICES
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Published by the Chartered Institution of Civil Engineering Surveyors. Statements made and opinions expressed in this publication do not necessarily reect the views of the institution, its Council of
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2016 Chartered Institution of Civil Engineering Surveyors. ISSN 0266-139X
Foreword
Construction Law Review
A celebratory issue
20 years of the Construction Law Review
David Loosemore, President, Chartered Institution of Civil Engineering Surveyors
Then and now... The articles of David Carrick, Jonathan Hosie and Alexander Nissen.
TS been 20 years since the Chartered

Institution of Civil Engineering
Surveyors rst published the
Construction Law Review. That was in 1996
a year forever associated with another
construction law development, the Housing
Grants, Construction and Regeneration Act.
And what an act it was, one that continues
to create debate amongst the brightest legal
and construction professional minds.
20 years on, I am delighted to see three
of those minds still writing for us. David
Carrick, Alexander Nissen and Jonathan
Hosie wrote for us back in the very rst
Construction Law Review and join us again
here today. They, and all the authors
who have written for us over the last two
decades, understand the need to bring
legal developments to the attention of
commercial managers, quantity surveyors,
cost consultants, estimators, project
managers the people on the ground that
these very cases affect.
I am also pleased to see our colleagues
at the Society of Construction Law once
again opening this publication. We learn
much operating in our own specialist
elds, but it is so important to look up and
share that knowledge, and friendship, with
those around us.
For those of us involved in civils
projects, 20 years is not such a long time.
You only have to look at the newly opened
Gotthard Base Tunnel to see what takes
20 years to create. Yet throughout these
major projects the HS2s, the Crossrails,
the Millau Viaducts, the Hong Kong
ZhuhaiMacau Bridges are professionals
enthused and impassioned by how they are
crafted and intrigued by the mechanisms of
interaction that go on between the myriad
bodies that are involved.
Construction, and the law that governs
it, is a marvellous arena to work in. Heres
to the next 20...
David Loosemore FCInstCES

President, Chartered Institution of Civil
Engineering Surveyors
President@cices.org
www.cices.org
@CharteredICES
2016
Foreword
Does construction law matter?

Julian Bailey, Partner, White & Case, and Chair, Society of Construction Law
OES construction law matter?

Anyone who reads the articles
in this Construction Law
Review would unhesitatingly answer yes.
Construction and engineering projects,
whether they be small or large in scale,
are important enterprises in all countries.
They are important because they are
fundamental to a countrys needs and
ultimately to its prosperity.
Concomitantly, the law provides an
essential framework for the delivery of
projects. Construction and engineering
contracts dene what work is to be done,
how much is to be paid for it, and what is
to happen if the project does not proceed
according to plan. Completing the picture
is a vast body of statute and case law
which determines, in varying degrees of
detail, the rights and obligations of parties
to construction and engineering contracts.
Construction law is therefore important.
It is also vast and highly nuanced. There is
much to learn about it, and therefore much
to discuss.
SCL
The Society of Construction Law was
founded in 1983 in the kitchen of John
Tackaberry QC. The germ of Johns idea, to
create a forum for promoting the education
and discussion of construction law issues,
quickly took hold. More than three decades
later the UK SCL now has more than 2,500
members, and worldwide there are SCLs on
every continent.
There are two matters at the core of

SCLs activities. First, SCL holds lectures
around the UK (and even abroad) on
current construction law issues. Since its
foundation, SCL has provided a continuous
programme of seminars and conferences
where leaders in the eld lecture on and
debate the latest issues.
Secondly, to complement these lectures
and conferences SCL publishes papers
that are distributed to all members. The
societys papers offer the latest thinking on
the most important construction law issues
of the day. Additionally, SCLs website
provides a vast repository of published
papers that can be accessed and searched
by the societys members.
Perhaps the unique and most
important feature of SCL is that it is open
to all comers who have an interest in
construction law. So, our members are
not just lawyers, but include architects,
engineers, surveyors, property developers,
claims consultants, adjudicators, expert
witnesses and many others. The
environment of SCL is therefore an
interdisciplinary one.
Happily, the environment of SCL is also
a very sociable one, and the society holds a
great number of regular and ad hoc events
which allow our members to network
and to meet up with friends and contacts.
SCL has much to offer and, if you are not
already a member, I warmly encourage you
to join the society.
Our world
Construction law matters, and if you are
interested in construction law then the
Society of Construction Law is for you.
With that introduction, may I encourage
you to start turning the pages of this
Construction Law Review, and to explore
the richness of issues that exist in our
construction law world.
Julian Bailey, Partner, White & Case, and
Chair, Society of Construction Law (UK)
julian.bailey@whitecase.com
www.whitecase.com
www.scl.org.uk
@SCL_UK
Specialist Advocates
to the Industry
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Keating Chambers, 15 Essex Street, London, WC2R 3AA, United Kingdom
Follow us: @keatingchambers
2016
20 Years
Civil litigation: 20 years on

Alexander Nissen QC, Barrister, Keating Chambers
RITING in the very rst volume of this journal,

published in autumn 1996, I addressed the nal
report on the civil justice system produced by Lord
Woolf and its likely impact on litigation generally and ofcial
referees business specically. The intervening 20 years have seen
signicant changes to the landscape of construction litigation,
much of which related to the introduction of the Civil Procedure
Rules 1998 as a result of Lord Woolfs report.
Delivering a paper to the Society of Construction Law in March
2007, Mr Justice Jackson (now Lord Justice Jackson) commented
on the impact of the 1998 Woolf reforms:
Although it is fashionable to carp about detailed glitches
and infelicities in the Civil Procedure Rules 1998, it is worth
pausing for a moment to note the huge benets which they have
brought to court users. The scandal of civil litigation dragging
on inefciently for many years and then being struck out for
want of prosecution has come to an end. An increasing number
of disputes are now resolved without any formal legal process
at all. Pre-action protocols (one of Lord Woolfs innovations)
lead to many cases settling before they start. Mediation is now
encouraged by the courts and often leads to earlier settlements. 1
While the impact of the reforms was undeniably dramatic, whether
they have all beneted the process of litigation is a matter of
perennial debate amongst practitioners and court users. This article
will review some of the key changes to construction litigation that
have occurred in the last 20 years and looks to its future prospects.
TCC guide and pre-action protocol
A look at two decades

of construction law
Since the introduction of the Civil Procedure Rules in 1998,

litigation in England and Wales has been radically transformed.
While many of the measures implemented by the CPR had been
pioneered in the Technology and Construction Court, construction
litigation has not been immune to change. The court now has a
much greater role in the management of litigation, with the aim of
enabling the court to deal with cases justly and at proportionate
cost. 2 The CPR is supplemented by the TCC guide, which is
currently in its second edition with a new edition expected shortly.
One of the most signicant new measures introduced by
the Woolf Reforms was the use of pre-action protocols. These
require the parties to a dispute to engage in reasonably extensive
correspondence, setting out the basis for the claim and the
rejection of it, before they are allowed to issue court proceedings.
The aim of this has been to crystallise the matters in dispute at
the earliest stage, so that parties can attempt to settle, or at least
understand, the case which they have to meet.
A unique feature of the TCC pre-action protocol was the
provision for at least one pre-action meeting between the parties.
1
Mr Justice Jackson, The Tower of Babel: What Happens when a Building Contract
Goes Wrong SCL Paper 136, March 2007
2
CPR, r1.1(1)
20 Years
One consequence of the protocol has been the front-loading of

costs. This has been particularly acute in construction litigation,
where a great deal of time and costs can be spent in attempting
to set out the nature of the dispute. Parties have often got bogged
down in protocol requirements and it has sometimes felt as
though the process wastes time and cost rather than saves it. As a
result, the two organisations which represent construction lawyers
Technology and Construction Bar Association (TECBAR) and
Technology and Construction Solicitors Association (TeCSA) are
working with the TCC to develop a new, streamlined and more
cost effective version. This is likely to be published before the end
of the year. Whilst it is expected to retain the meeting, the process
will be shorter and more focused. Parties will be able to opt out of
it by agreement.
The effect of the pre-action protocol can be seen in the number
of claims issued in the TCC. In 1996, 1,778 writs were issued.3 In
2014-2015 there were a total of 948 claim forms issued in London
and the various regional TCCs.4 In all likelihood, a substantial
proportion of the claims issued back in 1996 would have never
made it to trial, and it may be that the same amount of cases are
making it to trial now. The difference could be accounted for by
the fact that, prior to the requirements of the pre-action protocol,
parties would often issue a writ simply as part of the negotiation
process. Now, because of the increased costs which must be
incurred before issue, parties are incentivised to negotiate before
resorting to issuing proceedings.
Expert evidence
Another area where substantial change has been felt is the use of
expert evidence; a regular feature of construction litigation. Both
the CPR and the TCC guide give the court far more control over
the use and presentation of expert evidence. For instance, the
court has the power to order the instruction of a single joint
expert on any given issue. Where there are separate experts, the
court will usually require them to meet prior to the trial to discuss
their respective evidence and produce a joint statement setting
out the areas in which they agree, the issues upon which they
disagree and the reasons for this disagreement. This is intended to
clarify the matters actually in dispute and narrow the issues before
the court.
The court also has control over the manner in which expert
evidence is presented. It is possible for experts to give concurrent
evidence (colloquially known as hot-tubbing) so that in disputes
involving multiple technical issues, the court can more easily
identify what the opposing expert evidence is on a given issue.
The use of hot-tubbing varies widely across the various TCC
courts, with some judges expressing enthusiasm,5 and others rarely
using it. The judiciary is now undertaking an enquiry into the
varied uptake of hot-tubbing to see if it could be more frequently
used to further the efcient conduct of litigation.
Costs management
The other signicant procedural reform which has been
introduced since 1998 is costs management. After completing
a review of costs in civil litigation in 2013, Lord Justice Jackson
introduced reforms to the manner in which costs are dealt with
in civil litigation. There has been a complete change in emphasis,
away from retrospective review of costs, towards prospective
costs budgeting.
The mainstay of these reforms is the obligation to le costs
budgets in almost all cases which are worth less than 10m. The
parties are bound to attempt to agree their budgets between
themselves and if this is not possible the court will approve the
budgets. The court is given a hands-on role in the management
3
Dr R Gaitskell QC, Trends in Construction Dispute Resolution, SCL Paper 129,

December 2005, p3
4
TCC Annual Report 2014-2015, p8
5
Her Honour Judge Frances Kirkham CBE, Reections on Life as A Judge of the
Technology and Construction Court, SCL Paper D134, April 2012
Failure to le a costs budget on time results in

the rather draconian position whereby the party is
deemed to have led a budget which claims court
fees only.
of costs budgets and, when assessing costs at the conclusion of
the litigation, it will not depart from the budgeted gures unless
there is good reason to do so. Failure to le a costs budget on
time results in the rather draconian position whereby the party is
deemed to have led a budget which claims court fees only.6
This regime does not automatically apply to claims which are
valued at more than 10m. However, the court has the power to
make costs management orders which can require the ling and
exchange of costs budgets. In at least one recent decision, the
TCC has emphasised that the courts power to make such orders
is unfettered, that there is no presumption that costs management
will not be ordered and that it should be considered in all cases.7
The obligation to prepare accurate costs budgets has
undoubtedly added to the administrative burden of litigation and
has received a mixed response from the legal professions. Lord
Justice Jacksons conclusion at the time of the introduction of
his reforms was that there was little appetite amongst lawyers
for engaging with costs in a detailed way; many regarding such
matters as the exclusive preserve of specialist costs lawyers and
accountants. That said, the pilot schemes for costs management
which were run in the Birmingham and London TCCs, were
considered a success. Despite initial scepticism about the value
of budgets and the provision of unrealistic estimates, many
solicitors acknowledged that budgets made them focus on the
future conduct of the litigation, the tactics which they adopted and
whether settlement should be considered.8
The next development in this area may be xed recoverable
costs. In a recent speech dramatically entitled Fixed costs the
time has come,9 Lord Justice Jackson called for the introduction of
a xed costs regime which would apply to all civil claims worth
less than 250,000. Prescribed total fees rather than hourly rates
would be set for each stage of litigation, increasing in a series of
bands linked to the value of the case.
The supposed benet of this approach, apart from aiming
to ensure that only costs proportionate to the sums at stake are
incurred, is that it will alleviate the burden of costs management
for lower value claims. This recognises that for cases worth less
than 250,000, attempting to control costs by means of costs
management orders and costs budgets can be counterproductive.
Under the xed costs regime there would be no need to engage in
budgeting, as a relatively simple assessment could be conducted
at the conclusion of the litigation. It seems that the principle of
xed recoverable costs for low value claims has the backing of
the senior judiciary.10 On the other hand, given the welter of
objections from the legal profession, it remains to be seen whether
its time has truly come.
6
CPR PD 3E
CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd (2014) EWHC 2546 (TCC)
8
F Sinclair QC et al, The Pioneering TCC: Pushing the Boundaries on Litigation Costs
SCL Paper D185, December 2015
9
Jackson LJ, Fixed Costs The Time Has Come IPA Annual Lecture, 26th January
2016
10
Senior judges oppose singling out clinical negligence for xed costs as consultation
nears, Litigation Futures, 23rd May 2016
7
2016
20 Years
for the users of the Rolls Building (which

the TCC shares with the Commercial Court
and Chancery Division) so as to create a
new Business Court with ticketed judges
for particular types of case.
Adjudication
Despite the passage of time, the TCC seems to be

in no immediate danger of losing its reputation
as a pre-eminent venue for the resolution of
construction disputes.
:OVY[LYHUKL_PISL[YPHSZZJhemes
The TCC, along with other courts in the Rolls Building, is piloting
two new schemes; the shorter trials scheme and the exible
trials scheme.
Shorter trials scheme
The shorter trials scheme is intended to allow speedy resolution
of cases that do not involve allegations of fraud or dishonesty,
multiple issues or parties, intellectual property claims or public
procurement claims. Its goal is to have the trial within eight
months of the case management conference.
The trial itself is restricted to four days, all applications are
dealt with on the papers and the pre-action protocol does not
apply (though parties do have to send the equivalent of a letter of
claim). All of this is overseen by a docketed judge who is assigned
at the case management conference and remains with the case
throughout the process. There are shortened timescales for the
service of pleadings (which can be no longer than 20 pages).
Parties only have to disclose documents upon which they are
relying and/or those ordered after a request for specic disclosure.
Evidence is by witness statements which can be no longer than
25 pages and expert evidence is by written report. After trial the
judge will endeavour to give judgment within six weeks.
The other signicant feature, apart from the lack of a pre-action
protocol, is that the costs management provisions of the CPR do
not apply. Costs will usually be summarily assessed on the basis of
exchanged costs schedules.
It is too early to determine how this scheme will function, but
it has the potential to provide great reductions in both costs and
time for those with straightforward cases.
Flexible trials scheme
The exible trials scheme is more focused on the manner in which
evidence is gathered and presented. The scheme itself is largely
facilitative; it prescribes few rules, but allows parties to agree on a
variety of issues relating to the evidence.
Parties must disclose evidence upon which they rely and which
they know to meet the normal disclosure test; though there is no
obligation to conduct searches for evidence which may meet the
test. Witness and expert evidence is given in written form and oral
evidence is limited to issues identied at the case management
conference. Oral submissions and cross-examination are subject
to time limits, which are either agreed or directed. Where oral
evidence is necessary, it is limited to the principal parts of a
partys case.
The Briggs Review

At the present time there is an additional review of the civil
courts structure being undertaken by Lord Justice Briggs. Matters
within his review include the creation of an online court, which
is unlikely to affect users of the TCC; a possible weakening of the
division lines between the Queens Bench and Chancery Division;
and the question of whether there ought to be a unied structure
The eld of construction litigation has

also been affected by the creation of the
adjudication regime recommended by Sir
Michael Lathams report Constructing the
Team. The resulting adjudication system
implemented by the Housing Grants,
Construction and Regeneration Act 1996
(as amended by the Local Democracy,
Economic Development and Construction
Act 2009) gives parties to a construction
contract the option of referring disputes
to adjudication, rather than waiting for
arbitration or litigation. This is a speedy
process, where the adjudicator is usually
required to deliver a decision within 28
days of being appointed. In most cases the
dispute is resolved entirely on the papers,
without any oral hearings.
The scheme has been an enormous
success. While it has generated a eld of
litigation all of its own, it has reduced the
number of construction claims led in the
TCC. Domestic construction arbitrations
are virtually extinct. While the decision
of an adjudicator is only temporarily
binding with parties retaining the option
of re-ghting the dispute in arbitration or
litigation anecdotal evidence suggests
that in 80% of adjudications, the parties
content themselves with the decision of
the adjudicator.11
Conclusion
A great deal has changed in the world of
construction litigation since 1996. Many
of the reforms which have been applied
to civil litigation generally have been
pioneered in the TCC. This is part of a long
tradition of construction litigation being at
the forefront of procedural reform.
It was in the old Ofcial Referees
Courts that the use of written witness
statements as evidence, the early exchange
of expert reports, and the use of Scott
schedules were pioneered all of which
still form key parts of construction litigation
today. Despite the passage of time, the
TCC seems to be in no immediate danger
of losing its reputation as a pre-eminent
venue for the resolution of construction
disputes. I look forward to writing about
developments in 2036!
Alexander Nissen QC, Barrister,
Keating Chambers
anissen@keatingchambers.com
www.keatingchambers.com
@keatingchambers
11
Dr R Gaitskell QC, Trends in Construction Dispute
Resolution, SCL Paper 129, December 2005
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2016
AI
(Y[PJPHSPU[LSSPNLUJLHUKSH^
Simon Tolson, Senior Partner, Fenwick Elliott LLP
OMPUTER use and digital databases of any real practical

use started in the legal profession coincidentally from
about the time when I was an undergraduate law student
in 1979. Back in those days one had an operator and paid line
time by the minute. It was hit and miss even in a university
faculty. It was slow progress. It was all code input-based and one
marvelled if anything useful came out, more often it didnt.
I recall that Lexis started providing its services to the Law
Society and university libraries in about 1983. Then Windows
3.1 came on the scene in about 1993. Windows 95 arrived on
the world stage the year before its name suggests. By 1995,
some lawyers like me became mobile with their legal data. I
was using a Psion Organiser with a QWERTY keyboard, with
a comprehensive self-typed construction law database; no cut
and paste then! Corporate systems started to become available
in the late 1990s as the World Wide Web developed and steadily
accelerated exponentially over the past 18 years or so.
I would say that in or about 1996 (the year I sent my rst
email), Fenwick Elliott was one of the rst law rms to use it in
London and boy was it slow (no fast broadband then). But we
had the big bang when the legal profession, and how it accessed
material, began to change forever. It changed law in a way
nothing else had for c.300 years.
Simple memory typewriters were with us in 1983 and word
processors in 1990, but processing power, the commercial
emergence of email and personal computers and the internet have
been the facilitators for what we see today. Everything is digital
and many of us work virtually paperless. Our desk is a dynamic
creature that moves up and down, our ultra-at twin screens and
tablets are where we scribe our real craft or to some sophistry!
AI today
Finding the legal

profession of this
millennium
Believe it or not law rms are really investing in articial

intelligence (AI); the capability of a machine(s) to imitate
intelligent human behaviour. There has even been speculation
that law is ripe for uberisation,1 becoming the next target of
technological transformation. The millennials generation is
pushing the changes hardest and law rms are making a dash
to harness the power of cognitive computing and the natural
language processing capabilities of computers; investing heavily
in AI to automate the mundane tasks that are part and parcel of
the law and legal services. Professional services generally rely on
a lot of data and information, and a relatively small amount of
judgment, which means tasks can be speeded up considerably.
However, robots are unlikely to replace lawyers in court, but they
can prepare papers for hearings and do other clever things with
massive data.
The recent media fever about AI has been inevitable. This
vision has conceivably come a step closer with the arrival of IBM
1
A recent study by Jomati, Civilisation 2030: The Near Future for Law Firms, points
out that after long incubation and experimentation, technology can suddenly race
ahead at astonishing speed.
11
12
AI
We had the big bang when the legal profession, and how it accessed
material, began to change forever. It changed law in a way nothing
else had for c.300 years.
Watson2 and Richard and Daniel Susskinds latest book, The Future of the Professions,
which predict an internet society with greater virtual interaction with professional services
such as doctors, teachers, accountants, architects and lawyers.
Linklaters and Pinsent Masons are the latest law rms to announce publicly their
investment in AI, as the legal profession tries to automate the most mundane tasks
that traditionally have been the preserve of more junior lawyers. Pinsent Masons has
developed a program that reads and analyses clauses in loan agreements. Its TermFrame
system also helps guide lawyers through transactions and point them towards the correct
precedents at each stage of a process.
Another law rm, Dentons, has set up NextLaw Labs,3 a virtual company which looks
at the application of technology within the law. It has invested in ROSS,4 an IBM Watson
powered legal adviser app, that streamlines legal research, saving lawyers time and
clients money. BLP and Linklaters have signed on with developer RAVN5 and developed
a computer program to sift through various UK and European regulatory registers to
check client names for banks. In transactional work, LONald can, for example, send
an enquiry to Companies House to check if the address in a document matches the
company number. If the address is out of date, the computer will ag it for review. The
team will then consider all agged documents in one go at the review stage. It thus
converts unstructured data (for example, contracts) into structured output (for example, a
spreadsheet) in a fraction of the time (a few seconds) it takes a human and with a higher
degree of accuracy! The lawyers then do the higher-level strategic review to make sure
nothing is missed.
Professor Richard Susskind, who is also IT adviser to the Lord Chief Justice, has
predicted radical change in the legal sector, pointing out that intelligent search systems
could now outperform junior lawyers and paralegals in reviewing large sets of documents
and selecting the most relevant. Prof Susskind said at a conference recently6 that he
believes the legal profession had ve years to reinvent itself from being legal advisers to
legal technologists and criticised law schools for churning out 20th-century lawyers.
Prof Susskind stated that over the course of the next decade, AI would move forward
so quickly that systems themselves would be able to assess, diagnose and respond to
the legal problems posed by clients. But instead of suggesting that this was a threat to
the profession, he instead claimed that it was an opportunity to become engineers of
knowledge, and to shape the future of the profession in a positive way. He stated:
For the next ve years, the legal profession will work on using better human-resource
models, delegate to paralegals, move to better locations and give lawyers far better
systems... It is not that there are no jobs in the future, but the 2020s will be a decade
of redeployment not unemployment. It is not an emergency but over the next ve years
we have to prepare. More and more legal services will be enabled by the support of new
technology. You can say that is for the technology industry to sort out, or you can be
part of the technology industry.
Where next?
So where is all this headed? Well, for sure, away from where we are now. Much the same
applies with how building information modelling can expedite design improvement and
2
It is amazing that Watson analyses unstructured data, understands complex questions, and presents answers and
solutions. www.ibm.com/smarterplanet/us/en/ibmwatson/
3
A global collaborative innovation platform set up in May 2015 focused on developing, deploying and investing in
new technologies and processes to transform the practice of law around the world. www.nextlawlabs.com/
4
ROSS is an articially intelligent attorney to help power through legal research. www.rossintelligence.com/lawyers/
5
RAVN helps you make sense of the explosion of big data in your organisation through state-of-the-art software
solutions. www.ravn.co.uk/
6
Law Societys Law Management Annual Conference: http://communities.lawsociety.org.uk/law-management/events/
law-management-section-events/law-management-section-annual-conference-27-april-2016-london/5052637.fullarticle
2016
AI
Robots are unlikely to replace lawyers in court, but they can prepare
papers for hearings and do other clever things with massive data.
aid the best selection of materials and/or provide the opportunity of testing and assessing
different design alternatives that may impact say on the energy performance of buildings.
I know for a fact computer modelling techniques and stochastic analysis7 in hydrogeology
are now helping developers address run-off and drainage issues in the UK8 and provide
real-time ood forecasting from catchment to national scales. In the law, text analytics and
machine learning can be incredibly helpful in enabling the data to tell its story, and what
we are nding is that computers are learning in large data cases they can be better
than human lawyers, particularly tired human lawyers.
Predictive coding enables users to sample data such as on a large project and identify
what is relevant. Through sampling, the program is able to learn which documents are
relevant. This process greatly reduces the time needed for e-discovery and document
review because the program is searching for concepts as opposed to simple keywords.
Indeed our own Law Society president, Jonathan Smithers, is bang on the money on
this issue. He acknowledges we live in complicated times. Complicated times require
the knowledge and advice of the global legal community, practical experts who can
develop long-lasting solutions to help us mitigate the crisis micro-economically, macroeconomically and geopolitically. The legal community, however, is often called too late.
We are involved when our clients have reached crisis. We are called to re ght, we are
the A&E department. At this point, the role of the legal professional may be rather limited.
Bright lawyers and astute law rms need to ask themselves, what are the common
developing legal issues coming over the skyline? The impact of technology on the law
is one such issue. We live in a globalised world. The exponential growth of technology
has created a new world order. It affects how we talk, how we learn, how we trade. The
world is, quite simply, more interconnected than ever and using big data is key.
The future is not desolate. The globalised world has also brought hope and
opportunity. Technology has already restructured the way we do business and
signicantly impacted the practice of law. We are already using technology to
communicate with our clients more quickly, to manage their data and to make our
businesses more efcient. Skype, instant messaging, WebEx online meetings and email are
part of our everyday working lives.
AI will become more embedded in our lives. In many ways, it is already part of the
way we interact with each other and with the world. When ebay suggests products you
may like, that is AI. Siri on your iPhone, thats also AI. Anti-lock braking systems on cars
and systems that wake you up as you nod off; AI. It is already everywhere. But, what
does this mean for lawyers?
Many of our business clients Google their legal problems before they come to see us.
Pro bono portals are available, helping people to access legal advice early. Of course,
self-diagnosis can never be a replacement for legal professionals any more than it can for
physicians. The functions we carry out as lawyers extend far beyond dispensing blackletter legal advice. Lawyers will, however, need to consider the ethical and legal dilemmas
brought by AI in much the same way that architects and engineers are doing with
building information modelling and intellectual property.
Ethical duties
Lord Neuberger, president of the Supreme Court, only last week called for a debate on
the ethical implications of AI and for greater prominence for ethics in legal training.9
Law schools will therefore need to pull up a sock or two. Lord Neuberger made his plea
for greater prominence for ethics training both on university law courses and professional
legal training courses.
7
Having a random probability distribution or pattern that may be analysed statistically but may not be predicted
precisely
8
The Groundwater Foundation, a non-prot organisation that educates people and inspires action to ensure
sustainable, clean groundwater for future generations
9
Lord Slynn memorial lecture, 15 June 2016: www.supremecourt.uk/docs/speech-160615.pdf
13
14
AI
Lord Neuberger said that the earlier and more effectively potential professional lawyers
and advocates could be trained to appreciate and understand the importance and nature
of their ethical duties, the stronger a legal profession we will have, and the stronger the rule
of law will be.
Back in 2013, the judge urged the legal profession not to lose sight of its fundamental
principles in the rush for modernisation, warning about the risks of pressure from
hard-nosed businessmen who may invest in law rms. The legal profession should be
preparing for the problems and opportunities that may arise from such an enormous
potential area of development, and one of the most difcult challenges will be to consider
the potential ethical implications and challenges.
Whilst Lord Neuberger does not fully embrace the Susskind view of future legal life, he
does say that the Susskinds point out that this potential development has ethical, as well
as employment, implications and they rightly call for a public debate on the issue. Lord
Neuberger likewise warned of increased potential for ethical conicts where alternative
business structures (ABS) were owned by non-lawyer investors who are ultimately
only concerned with the bottom line. The investors will often have no experience of, or
interest in, the lawyers ethical duties.
When it goes wrong

As computers take on more and more responsibility, one also has to ask the question of
where the liability lies when things go wrong. Volkswagen expects the rst self-driving
cars on the market by 2019.10 These self-driving systems may need to make split-second
decisions that raise real legal questions. Driverless vehicles can legally be tested on public
roads in the UK today. The UK is uniquely positioned to become a premium global
location for the development of these technologies.11
10
In April 2016 six convoys of semi-automated smart trucks arrived in Rotterdams harbour after an experiment its
organisers (DAF, Daimler, Iveco, MAN, Scania and Volvo) say will revolutionise future road transport on Europes
busy highways. Watch out for truck platooning
11
The Department for Transport review of existing legislation found that our legal and regulatory framework is
not a barrier to the testing of automated vehicles on public roads. Real-world testing of automated technologies is
possible in the UK provided a test driver is present and takes responsibility for the safe operation of the vehicle; and
that the vehicle can be used compatibly with road trafc law. North America has been the rst country to introduce
legislation to permit testing of automated vehicles, but only four states have done this. 15 states have rejected bills
related to automated driving. In Europe, only Germany and Sweden are known to have completed a review of their
legislation in this area
Pace. Agility. Focus.

Our specialist construction and energy lawyers
have the experience and insight to act quickly,
think creatively and advise commercially,
whatever the scope of your project, both in the
UK and overseas.
Acute legal analysis with

practical commercial advice
www.fenwickelliott.com
2016
AI
15
Responding to the technological realities of the 21st century is an imperative. A child

suddenly runs into the road and the car has to choose; hit the child or swerve into an
oncoming truck. How does the vehicle decide? Who decides what the car decides? Ditto
the JCB on a construction site; does it avoid the trench with a man in it or does it strike
the building if it cannot avoid both? And who is liable if it chooses the wrong one, the
plant owner or the programmer? These are questions for lawyers. It is for us, the legal
experts, to answer these questions now. Lawyers should not be re-ghting.
What about now?

We must identify and solve the legal issues of tomorrow, now. And if we want to achieve
this we must be:
Explorers, not mere voyagers.

Architects, not plain builders.
On the front line, not in the pursers ofce.
We live in exciting times. The legal community must clinch this:
We dont have to repeat the past.

We dont have to relive the present.
We can shape the future.
If we dont others will.
Shepherd or sheep, its your choice.
The world will always be complicated. But if lawyers take the time to put their
minds together, to learn from one another, they can x pervasive problems like new
technological solutions. If we are successful, we will make the legal profession worthy of
this millennium, all the more so with regard to the construction industry.
Simon Tolson, Senior Partner, Fenwick Elliott
stolson@fenwickelliott.com
www.fenwickelliott.com
@fenwickelliott
The Journal of the Chartered Institution of Civil Engineering Surveyors
CIVIL ENGINEERING SURVEYOR
Subscribe Today
Includes the annual supplements
CONSTRUCTION LAW REVIEW
GEOSPATIAL ENGINEERING
Call +44 (0)161 972 3110

ces@cices.org
or subscribe online at www.cices.org/journalsubs
45.60 (UK)
50.75 (Europe)
55.85 (Rest of the World)
16
Expert Witness
Expert errors
John Mullen
FRICS FCInstCES FCIArb,
Quantum Expert and Principal, Diales
T can be of some frustration, to those of us whose main

market is international arbitration, that arbitral awards are
private and that some experts do not receive the censure
that they deserve. It appears that, in any event, many international
arbitrators are reluctant to comment on the expert evidence
provided to them, with awards just focusing on which evidence
they prefer and adopt. Perhaps it is considered that, in the privacy
of an arbitration, there is no wider purpose to recording such
criticisms. Alternatively, perhaps the tribunals are concerned
that criticisms of a partys expert may be construed, in some
jurisdictions, as evidencing bias against that party.
Pitfalls in picking the

wrong expert witness
The frustration this causes is exacerbated by the poor quality and

hired gun nature of much of the expert evidence presented in
international arbitrations. Contrary to the impression one might
gain from reading certain Technology and Construction Court
judgments, the UK can be proud of the quality of much of the
expert evidence that its practitioners provide around the world.
When reading some of the TCC judges more damning comments
on the experts appearing before them, it is often tempting to
recall examples of similar, or worse, testimony in international
arbitrations that passed without published critical comment.
Under English law, the role and duties of experts were set
out 20 years ago by Justice Cresswell in the Court of Appeal in
National Justice Compania Naviera SA v Prudential Assurance
Company [Ikarian Reefer] (1995) 1 Lloyds Rep.455. In the courts of
England and Wales, and in Scotland, their Civil Procedure Rules
(CPR) set out the procedural requirements of expert evidence.
Those CPRs followed Lord Woolfs reports of the mid-1990s,1
which criticised the unnecessary costs and lack of neutrality
of much expert evidence. Thus, in the domestic markets the
requirements of experts are well developed and the courts
criticisms are made against that background.
Internationally, few jurisdictions have developed, through
their legislature or precedents, such a detailed framework for
experts to work in. However, this is not to say that experts will
not be suitably chastised where appropriate. As with the England
and Wales judgments, some overseas judgments can be similarly
informative as to the potential pitfalls for experts and those
instructing them. They also might offer some light relief for those
suffering published criticism in the UK, or frustrated at the lack of
it in international arbitration.
The world took an understandable interest in last years South
African proceedings in the Oscar Pistorius trial. Whilst there is
disappointment in some quarters at his sentence, he appears to
have achieved that outcome notwithstanding the quality of the
expert evidence adduced by his team.
Oscar Pistorius chief witness was a former police ofcer, Roger
Dixon,2 who gave expert evidence on ballistics, gunshot wounds,
pathology and blood splatter. He was also involved in both audio
and visual tests. However, he admitted to not being an expert in
1
2
Access to Justice, Interim Report, June 1995; Access to Justice, Final Report, July 1996
Who unfortunately did not gain his early training in Londons Dock Green area
2016
any of these elds, but was actually a

forensic geologist. On the detail of his
investigations, he admitted to the
following failings:
He had not done his testing with any

light meters or equipment other than
his own vision.
He testied on a recording of gun
shots and a cricket bat striking a door,
although he was not there when
the tests were conducted and knew
nothing about the sound equipment
used.
He overlooked and omitted Oscar
Pistorius height when conducting the
test, which meant that his assistant,
while kneeling, was a good 20cm
shorter than Pistorius on his stumps.
Regarding bres he claimed to have
found in a door that matched Pistorius
socks, he admitted that he had only
seen photographs of the socks but had
never examined them or looked at the
bres concerned under a microscope.
Furthermore, he never drafted a formal

report on his evidence, but made notes
on his computer, which he had given to
the defence.
A second expert relied upon by Oscar
Pistorius, Tom Wolmarans, gave evidence
on the noises made by gunshots and
cricket bats, but admitted that:
He was not an expert in any of

these elds.
In particular, he was not a sound
expert.
He had a hearing defect.
His gun jammed on rst test.
He was unable to record rapid
gun re.
The quality of his recordings was
affected by frog sounds in the
background.
He could not repeat the recordings,
as the door he had used had been
broken.
A third expert appeared for Oscar Pistorius

in relation to sentencing. Miss Annette
Vergeer was a social worker and registered
probation ofcer at the Department of
Correctional Services. She gave testimony
on the suitability of South African jails,
warning that Pistorius would be at risk
from slippery oors; toilets and showers
with no hand rails; and having his
prosthetic leg taken away. However, she
admitted that her evidence was based on
statistics published nine years previously.
Her evidence was contrasted with
the evidence provided in the Shrien
Dewani case.3 There the UK courts were
so convinced that South African prisons
3
The British businessman acquitted last year of

murdering his wife on their honeymoon in South Africa
Expert Witness
17
adhered to international standards that they extradited Shrien

Dewani to South Africa for trial. The Oscar Pistorius judge
described Miss Vergeers evidence as: Slapdash, disappointing
and had a negative effect on her credibility as a witness.
Whilst the high prole nature of the Oscar Pistorius case drew
international media attention to the poor nature of some of its
expert testimony, a judgment of rather more signicance locally
is that of the Supreme Court of Appeal of South Africa in the
recent case PriceWaterhouseCoopers Inc & others v National Potato
Co-operative Ltd & another (451/12) (2015) ZASCA 2 (4 March 2015).
This involved a claim against PriceWaterhouseCoopers (PwC) for
alleged negligent audit services, in which the rst respondent
relied for its entire case on the expert testimony of David Collett.
Before assessing the experts evidence, the court set out the
standards to be expected of expert testimony. The judge started
by quoting from Justice Cresswell in the Ikarian Reefer case and
noting how the principles therein echoed those set out in a South
African case Stock v Stock (1981) (3) SA 1280 (A). The Canadian
judgment of Justice Marie St-Pierre in Wightman v Widdrington
(Succession de) (2013) QCCA 1187 (CanLII), was then quoted from as
being helpful to the judge. The South African court found that
Mr Colletts evidence did not measure up to those standards.
Mr Colletts only practical audit experience was when he was
training, 22 years earlier. The detailed criticisms of his performance
are lengthy, but include describing some of his opinions as
risible and his approach as pedantic, rigid and dogmatic. The
criticisms cover most of the potential errors that an expert witness
might make, but included:
Contradicting himself.
Seeking to avoid answering hypothetical questions.
Only reluctantly making concessions.
Mostly basing opinions on hearsay evidence.
Acting as an advocate advancing his clients case.
Not giving evidence objectively, but to justify the conclusions
he had formed.
Disregarding or discounting facts inconsistent with his own
theories or conclusions.
Lacking independence from his client in that he:
-Undertook the original investigation leading to the claim.
-Was involved in the gathering of evidence and pleaded
formulation of the claim.
-Giving evidence in areas where he lacked expertise.
The judge concluded that, when tested against the standards

enunciated by Justice Cresswell and Justice St-Pierre, Mr Colletts
evidence did not satisfy the tests for admissibility as expert
evidence and was of little or no value in this case.
In conclusion, while experts practising in the UK courts may
feel aggrieved at their vulnerability to public reproach for their
efforts, particularly where they also observe what happens in other
jurisdictions, they might take some comfort from those criticisms
that are published in other jurisdictions. Those judgments provide
a useful resource for those acting as experts to understand the
pitfalls of the role.
Similarly, those instructing experts might consider how it came
to be that Messrs Dixon and Collett were instructed in the rst
place to roles for which they were wholly unsuited. In the end,
the real victim of expert evidence that is held to be of little or no
value is the party whose case suffers as a result.
John Mullen FRICS FCInstCES FCIArb, Quantum Expert and Principal,
Diales
john.mullen@diales.com
www.diales.com
18
Ground Conditions
Foreseeing the unforeseeable

David Carrick
FCInstCES FICE FCIArb MRICS MCIPS MBAE,
Senior Vice President, Hill International
HERE I was, sitting in my ofce, trying to get my head around a particularly difcult point in an
adjudication when Alan Lees from the Chartered Institution of Civil Engineering Surveyors phoned me. I
was grateful for the call, not only because it is always good to talk to Alan, but also it meant a break from
the mind warping adjudication. Alan reminded me that the rst publication of the Construction Law Review was
20 years ago and that I had featured in it. Kindly, if somewhat embarrassingly, Alan sent me a copy of the article.
It included a photograph. I have searched the attic in vain but sadly the original appears to have been lost.
On the topic of photographs, one of my colleagues mentioned the photograph I had shown her of my
endeavours to do some setting out at the beginning of my career and that in turn led to a discussion about my
rst overseas trip and a war story. It seems that as ones career matures, so war stories become more or less
mandatory. However, this one is relevant to the subject matter of this article so please bear with me.
The case of Obrascon

Huarte Lain SA v Gibraltar
Some personal history

I was involved in a project that involved
additional runway lighting and drainage on
an existing runway, and also the removal
of some particularly leaky disused fuel and
de-icing uid tanks that had once been
used by the RAF. These were on the south
side of the runway at the eastern end and
had been leaking for years.
One day when I was on site we
attended the usual morning brieng
with the RAF air trafc control. On that
particular morning we were joined by a
small band of army reservists. They would
be making use of a rie range quite close
to the runway. My foreman was well
versed in the protocol for clearing the
runway for incoming aircraft and was in
constant radio contact with the control
tower. However, the tower envisaged
some problems with the rie practice. The
arrangement was that when aircraft were
coming into land we would get the usual
warning by radio from the tower and clear
out of the way of the approaching aircraft.
The army reservists were unlikely to hear
the radio on account of their gunre, so
accordingly the arrangement was that the
tower would re a are over the rie range
and the ring would cease. The range
ofcer was handed a large red ag. He
looked bemused. The rather harassed ATC
ofcer explained to him: Plane comes in.
I re red are over your position. You wave
red ag. Everyone stops shooting. Ok?
Off we went and on schedule the
lunchtime aircraft arrived from London. As
ever the ATC told us when it was about
20 minutes away and we started clearing
up. The red are duly went up over the
rie range but nothing else happened.
After a few minutes we were on the radio

to ATC to tell them that gunre was still
continuing. They said they would send
the RAF out to tell them to stop. We
cleared off to the dispersal area somewhat
concerned at the ongoing sound of gunre.
We saw the landing lights of the plane in
the distance as the RAF Land Rover went
belting down the road on the other side
of the runway. As the aircraft got closer
eventually the gunre stopped. However,
then the fun began. The range ofcer
clutching a large red ag ran into the
middle of the runway and started waving
it at the aircraft. The very unhappy pilot
had to spool up his engines and abort the
landing much to the angst of the crew and
passengers alike.
The next morning we were summoned
to see a very senior RAF ofcer. He
thanked us for our collaboration and for
our safety record but said the time had
come when the rie range really had to
be disposed of. This was at the north
side of the runway at the eastern end. He
would organise a variation order for us
to atten the rie range with a dozer. We
duly did and were somewhat surprised at
the amount of lead and copper that this
produced (but the range had been in use
for many years). End of war story.
FIDIC
A lot of my work nowadays is international
work and I nd myself quite often
working with the International Federation
of Consulting Engineers (FIDIC) forms
of contract. For those of you of a similar
vintage to myself who have not used
the FIDIC form, you would immediately
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20
Ground Conditions
Gibraltar contended the conditions were entirely

foreseeable, OHL had brought a lot of the
difculties on its own head by the way it dealt with
the ground conditions.
Figure 1: Gibraltar International Airport taken from the Rock of Gibraltar, looking north with the east
end of the runway on the right.
recognise it as having some very close resemblance to the old

Institution of Civil Engineers (ICE) or the current Infrastructure
Conditions of Contract (ICC) forms.
Most of the FIDIC forms have got provisions for unforeseeable
physical conditions, just like the old ICE clause 12. They also
have fairly draconian notice provisions where failure to comply
with these provisions seems to result in a loss of entitlement.
Because the standard dispute resolution procedure is the dispute
adjudication board followed by arbitration, the FIDIC forms are
rarely considered by courts. Suddenly one appeared and it covers
these rather difcult issues and also the matter of termination.
Obrascon Huarte Lain SA v HM Attorney General for Gibraltar

I was particularly interested in the unforeseen physical conditions
aspect of Obrascon Huarte Lain SA v HM Attorney General for
Gibraltar. It is a frequent problem in other civil engineering forms
of contract, where there is relief available to the contractor should
such circumstances arise. Obviously the facts and circumstances
and the particular wording of the contract have paramount
importance when considering if a particular judgment is relevant
to another dispute. We will get back to the matter of applicability
of this judgment in a more general sense later. However, some
background to the dispute is pretty important to understand what
happened not only in the rst instance case but also in the
appeal court case.
The defendant party was the government of Gibraltar
represented by Her Majestys Attorney General for Gibraltar. The
works giving rise to the dispute unsurprisingly took place in
Gibraltar. The appeal case succinctly sets out some background.
Spain ceded Gibraltar to the United Kingdom by the Treaty of
Utrecht in 1713 and the local population has occupied Gibraltar
under UK rule since that date. The territory has played an
important role in many wars, with the last of these being the rst
and second world wars. The long military history of the territory
has an impact on the issues in dispute.
Gibraltar is connected to the south of Spain by a relatively
narrow isthmus that runs north/south. The airport is located on
the isthmus close to the border with Spain and its runway crosses
the isthmus running east/west and protruding into the sea. That
means that all the vehicle trafc going to and from Spain has to
cross the runway.
Figure 1 is taken from the Rock of Gibraltar and is looking
north with the east end of the runway on the right. The road has
to be closed when the runway is in use by aircraft (always a good
idea) so the government of Gibraltar decided to build a tunnel
under the runway. To avoid prolonged closure of the runway
this was to be built at the eastern end of the runway. Doubtless
a certain amount of ducking was anticipated by the labour force
when aircraft were landing.
The main areas of dispute

Gibraltar entered into contract with Obrascon Huarte Lain SA
(OHL) under a FIDIC Yellow Book design and construct contract.
It all went horribly wrong. Eventually Gibraltar terminated the
contract on the basis of poor progress, amongst other things.
OHL contended that progress had been impeded by unforeseen
physical conditions (contaminated ground) and the termination
was wrongful. Conversely Gibraltar contended the conditions were
entirely foreseeable, OHL had brought a lot of the difculties on
its own head by the way it dealt with the ground conditions, and
in any event had not given notice in accordance with the contract
and so had forfeited its rights to make a claim. The contention that
OHL had to redesign the tunnel because of the contamination and
that the engineer had issued what OHL contended were variations
were also contested by Gibraltar.
The dispute came before Mr Justice Akenhead in the
Technology and Construction Court in the rst instance1 and then
went on to the Court of Appeal.2 The main issue was termination
but that is not the issue that I address in this article but rather the
underlying matters. The ground condition issue was subject to
appeal and it is convenient to consider that matter before looking
at the issue of notice.
Unforeseen adverse physical conditions
The OHL proposition was that the amount of contaminated
matter excavated exceeded the quantity that could have been
expected. That meant not only greater expense but redesign and
lengthy delays that explained the poor progress and made the
termination unlawful.
The means of construction was to construct the walls of the
tunnel as diaphragm walls below original ground level using
bentonite, then cast the roof slab. The ground under the slab
would be excavated once the roof was strong enough to support
itself and restrain the outer diaphragm walls. OHL considered
that the amount of contaminated ground meant it was unsafe to
excavate in the conned space, work had to be suspended and
the works redesigned. The contract had the following provisions:
1.1.6.8 Unforeseeable means not reasonably foreseeable by an
experienced contractor by the date for submission of the tender...
4.10 Site data: The employer shall have made available to
the contractor for his information, prior to the base date, all
relevant data in the employers possession on sub-surface and
hydrological conditions at the site, including environmental
aspects. The employer shall similarly make available to the
1
2
(2014) EWHC 1028 (TCC)

(2015) EWCA Civ 712
2016
Ground Conditions
21
This notice shall describe the physical conditions, so that they

can be inspected by the engineer, and shall set out the reasons
why the contractor considers them to be unforeseeable. The
contractor shall continue executing the works, using such proper
and reasonable measures as are appropriate for the physical
conditions, and shall comply with any instructions which the
engineer may give. If an instruction constitutes a variation,
clause 13 (variations and adjustment) shall apply.
There was a recognition that there was

contaminated land, including elevated copper
levels, fuel contamination and potentially
unexploded ordnance.
contractor all such data which come into the employers

possession after the base date. The contractor shall be
responsible for interpreting all such data.
To the extent which was practicable (taking account
of cost and time), the contractor shall be deemed to
have obtained all necessary information as to risks,
contingencies and other circumstances which may
inuence or affect the tender or works. To the same extent,
the contractor shall be deemed to have inspected and examined
the site, its surroundings, the above data and other available
information, and to have been satised before submitting the
tender as to all relevant matters, including (without limitation):
(a) the form and nature of the site, including sub-surface
conditions,
(b) the hydrological and climatic conditions,
(c) the extent and nature of the work and goods necessary for
the execution and completion of the works and the remedying of
any defects,
(d) the laws, procedures and labour practices of the country,
and
(e) the contractors requirements for access, accommodation,
facilities, personnel, power, transport, water and other services.
4.11 Sufciency of the accepted contract amount: The contractor
shall be deemed to:
(a) have satised himself as to the correctness and sufciency of
the accepted contract amount, and
(b) have based the accepted contract amount on the
data, interpretations, necessary information, inspections,
examinations and satisfaction as to all relevant matters referred
to in sub-clause 4.10 (site data) and any further data
relevant to the contractors design.
Unless otherwise stated in the contract, the accepted contract
amount covers all the contractors obligations under the contract
(including those under provisional sums, if any) and all things
necessary for the proper design, execution and completion of the
works and the remedying of any defects.
4.12 Unforeseeable physical conditions: In this sub-clause,
physical conditions means natural physical conditions
and manmade other physical obstructions and pollutants,
which the contractor encounters at the site when executing the
works, including sub-surface and hydrological conditions but
excluding climatic conditions.
If the contractor encounters adverse physical conditions which
he considers to have been unforeseeable, the contractor shall
give notice to the engineer as soon as practicable.
If any to the extent that the contractor encounters physical

conditions which are unforeseeable, gives such a notice, and
suffers delay and/or incurs cost due to these conditions,
the contractor shall be entitled subject to sub-clause 20.1
(contractors claims) to:
(a) an extension of the time for such delay, if completion is
or will be delayed, under sub-clause 8.4 (extension of time for
completion), and
(b) payment of any such cost, which shall be included in the
contract price.
After receiving such notice and inspecting and/or investigating
these physical conditions, the engineer shall proceed in
accordance with sub-clause 3.5 (determinations) to agree or
determine (i) whether and (if so) to what extent these physical
conditions were unforeseeable, and (ii) the matters described in
sub-paragraphs (a) and (b) above related to this extent.
However, before additional cost is nally agreed or determined
under sub-paragraph (ii), the engineer may also review whether
other physical conditions in similar parts of the works (if any)
were more favourable than could reasonably have been foreseen
when the contractor submitted the tender. If and to the extent
that these more favourable conditions were encountered, the
engineer may proceed in accordance with sub-clause 3.5
(determinations) to agree or determine the reductions in cost
which were due to these conditions, which may be included
(as deductions) in the contract price and payment certicates.
However, the net effect of all adjustments under sub-paragraph
(b) and all these reductions, for all the physical conditions
encountered in similar parts of the works, shall not result in a
net reduction in the contract price.
The engineer may take account of any evidence of the physical
conditions foreseen by the contractor when submitting the
tender, which may be made available by the contractor, but
shall not be bound by any such evidence.
My emphasis added.
The facts
The initial pre-contract consideration required a desktop study
and that led to an environmental statement being produced and
subsequently included in the contract. That statement suggested
that approximately 200,000m3 of excavation would be required,
of which 10,000m3 would be contaminated. There was a site
investigation that was also incorporated into the contract. There
were extensive references to past military use including a rie
range and aircraft fuel leakage. The contract contained an
obligation to conduct post contract site investigation to determine
the actual ground conditions and to ensure that the waste
materials were disposed of in an appropriate manner. There was a
recognition that there was contaminated land, including elevated
copper levels, fuel contamination and potentially unexploded
ordnance. A pre-tender bulletin informed tenderers that no on-site
storage for excavated material was available and that consequently
all or most excavated material would have to go into landll sites
in Spain.
The contract was entered into with a commencement date of
1 December 2008 and completion two years later. In November
22
Ground Conditions
2009 OHL drilled further boreholes and

these showed elevated lead levels. The
initial design was not approved until
21 December 2009.
When excavation started in the
tunnel area, similar elevated lead levels
were found together with other nasty
contaminates. By May 2010, as well as
the main excavations for the diaphragm
walls, the oversite strip of about 2m
depth had been carried out but OHL had
not segregated contaminated and noncontaminated soil. By autumn 2010 the
levels of contamination were becoming a
real concern and OHL nally served notice
under clause 4.12 of a claim for extension
of time and for extra payment in respect of
unforeseeable physical conditions
Much discussion and little construction
work took place and, on 28 July 2011,
Gibraltar terminated the contract.
The appeal court decision
In the context of unforeseen physical
conditions the rst instance decision was
upheld in that the amount of contamination
was foreseeable. Why?
The initial consideration was that the
history of the site was clearly set out in
the desktop study. The previous presence
of a rie range that had been in use since
the 19th century and aviation fuel storage
tanks was shown. There was evidence
of contamination from lead waste from
bullets, aviation fuel and de-icing uids.
OHL had not segregated the
contaminated materials, so the entire
excavation had to be disposed of in
suitable landll sites in Spain. As an aside
it also meant that it was impossible to
quantify the actual amount of contaminated
soil that had been excavated.
The key nding was that the tendering
contractor cannot rely on someone elses
interpretation of the data (in this case a
gure of 10,000m3 of contaminated ground
was shown in the tender enquiry) but the
contractor must make its own appraisal of
the quantity using all the available data. It
is ne to take the given data into account
but that is insufcient and the tendering
contractor must consider the data in its
entirety and use its own investigation
and experience to determine what is
foreseeable. However the Court of Appeal
judgment went even further:3
Furthermore the historical material
provided to the contractor made it clear
that very extensive contamination was
foreseeable across the site. The contractor
needed to make provision for a possible
worst case scenario; the contractor
should have made allowance for a
proper investigation and removal of all
contaminated material: see paragraph
223 of the judgment.
3
Paragraph 94
Much discussion and little construction work took

place and, on 28 July 2011, Gibraltar terminated
the contract.
And the relevant part of the rst instance judgment:4
The problem here for tendering contractors is and was the
foreseeable uncertainty of precisely what and where (and at
what depths within the made ground) in terms of quantity and
location the contaminated soil would be. That there was a
very real prospect of encountering contaminated material
in substantial quantities anywhere within the made
ground was eminently foreseeable by an experienced
contractor at tender stage. How (may it be asked)
could an experienced contractor in OHLs position have
addressed this foreseeable risk? There is no help within the
evidence as to how OHL did address it pre-contract, if it did at
all. However, what on the evidence could reasonably have been
done is all or some of the following: (a) Make a substantial
nancial allowance within the tendered price for actually
encountering and dealing with a large quantity of such
material...
My emphasis added.
The impact of Gibraltar on Yellow Book contracts

Making nancial provision for the worst possible scenario in a
competitive tendering situation is not an easy call. Does that mean
that OHL should have allowed for the entire excavation being
contaminated? I dont think that is what was meant at all.
What was meant was that if there was any doubt about
contamination the tenderer had to err on the pessimistic side.
Nevertheless a high threshold for foreseeability has been set by
this judgment.
The impact on other contracts

If ever a judgment had to be considered against its facts this is
it. To apply the ratio of this case disregarding the facts is in my
opinion asking for trouble.
However, assuming that the same facts pertained in the other
commonly used FIDIC forms (Red and Silver) would the outcome
have been the same?
Red Book
The Red Book uses a bill of quantities but no method of
measurement is specied; the choice is down to the drafter of
the contract. Most methods would require contaminated material
to be measured separately so the direct cost would be covered
in re-measurement. With this form of contract the employer is
responsible for design so the hotly disputed redesign issue in this
case would not arise.
Silver Book
This FIDIC form has no relief for adverse conditions, so the issue
doesnt arise.
4
Paragraph 223
2016
Ground Conditions
time for completion and/or any additional payment under

any clause of these conditions or otherwise in connection with
the contract, the contractor shall give notice to the engineer,
describing the event or circumstance giving rise to the claim. The
notice shall be given as soon as practicable, and not later than
28 days after the contractor became aware, or should
have become aware, of the event or circumstance.
If the contractor fails to give notice of a claim within such period
of 28 days, the time for completion shall not be extended, the
contractor shall not be entitled to additional payment, and the
employer shall be discharged from all liability in connection
with the claim. Otherwise, the following provisions of this subclause shall apply...
What emerges from the case is a

need for the tendering contractor
to make its own investigations.
NEC
The application of this case to NEC is, in
my humble opinion, difcult. The recovery
of direct cost via a re-measured bill of
quantities depends on the main option
choice within the contract.
In terms of relief from adverse physical
conditions the main option choice is
irrelevant; the same procedure applies
to all options. What emerges from the
Gibraltar case is a need for the tendering
contractor to make its own investigations as
well as taking into account the information
supplied with the tender.
In the NEC contracts there is relief for
unforeseen physical conditions and there
is also a need for the employer to provide
known information in the site information.
However the compensation event for the
adverse physical conditions relief5 has to
be read with the provisions of clauses
60.2 and 60.3. In particular clause 60.3 in
the following terms seemingly causes a
problem to applying the Gibraltar case:
If there is an ambiguity or inconsistency
within the site information (including
the information referred to in it), the
contractor is assumed to have taken into
account the physical conditions more
favourable to doing the work.
Had the Gibraltar case contract included
the desktop study concluding that
10,000m3 of excavation was likely to
be contaminated, and the wealth of
information indicating a greater quantity,
could OHL have relied on the more
optimistic 10,000m3? It certainly seems to
be a reasonable potential argument.
Notices for extensions of time under FIDIC

Having possibly depressed contractors, an
aspect of the rst instance judgment that
was not appealed showed a bit of leniency.
Clause 20.1 is a standard feature of FIDIC
contracts and the relevant part is the
following terms:
20.1 If the contractor considers himself
to be entitled to any extension of the
5
Clause 60.1 (12)
Clause 8.4 deals with extensions of time in FIDIC contracts and the
relevant part is the following terms:
The contractor shall be entitled subject to sub-clause 20.1...
to an extension of the time for completion if and to the extent
that the completion for the purposes of sub-clause 10.1... is or
will be delayed by any of the following causes...
My emphasis added.
In the rst instance judgment6 deals with the matter of notices.
Two issues emerged; the form of the notice and its timing. In
general terms, the judge took a fairly pragmatic view of these
provisions saying that they should be construed reasonably
broadly given the serious effect that they would have if strictly
construed. There is no need for the notice to be any particular
form, but it must be identiable as notifying a claim and given
in writing.
The timing of notices was also dealt with on a non-prescriptive
basis. The provisions of clause 8.4 are said to allow two dates that
affect the notice. These are when completion (i) is being delayed
or (ii) will be delayed. The rst is termed a retrospective delay
because the delay has started, and the second a prospective future
delay. Either date can trigger the claim and apparently can be the
start of the 28-day period within which the notice must be issued
as required by clause 20.1.
I am reluctant to comment too much on this issue but I will say
that it is not an approach that I have seen in practice. Stretched
to its limit, could it mean that a whole raft of extension of time
claims could be notied on the scheduled completion date, i.e.
when completion is absolutely known to be delayed?
Does the same ethos apply to any additional payment because
clause 20.1 deals with both? This may not be so clean cut because
clause 8.4 only refers to extensions of time and not additional
payment. OHL was only awarded a one day extension on account
of encountering rock the extension of time claim for weather
delays was rejected for lack of notice.
Would I advise a contractor not to notify the very instant
it became aware of a potential delay? The answer to that is a
resounding no! Would I advise a contractor that had not notied
until it became aware of an actual delay to completion to use this
case? Yes.
Just to close... Yes, the runway I recollected in my personal history
was Gibraltar. But you probably guessed that anyway.
David Carrick FCInstCES FICE FCIArb MRICS MCIPS MBAE,
Senior Vice President, Hill International
davidcarrick@hillintl.com
www.hillintl.com
@hillintl
6
Paragraphs 312 and 313 in particular
23
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2016
FIDIC
Employers claims under FIDIC

Jonathan Hosie, Partner, Construction & Engineering Group, Mayer Brown International
HE International Federation of Consulting Engineers

(FIDIC) forms of construction contract are amongst the
most widely used internationally.1 FIDIC contracts started
out life with a focus on the European market, initially with a
focus on civil engineering projects. Nowadays, they are promoted
globally and encountered in many jurisdictions beyond Europe,
including South America, China, the Far East and Africa, and in
sectors from civil engineering infrastructure to process engineering
and power generation.
Much has been written about claims made by contractors
under the FIDIC forms, but until recently, not much attention has
been focused on the administration of employers claims. This
brief article seeks to redress that balance and to do so in light of
two recent and important court decisions. The rst is a decision
of the judicial committee of the Privy Council, NI International
(Caribbean) Limited v National Insurance Property Development
Company Limited (No. 2) (2015) UK PC 37. The second is a decision
of Mrs Justice Carr in the Technology and Construction Court,
J Murphy & Sons Ltd v Beckton Energy Ltd (2016) EWHC 607 (TCC).
:PNUPJHUJLVM[OL507+,*KLJPZPVU
Two recent decisions

on the administration of
employers claims
The judicial committee of the Privy Council originated as the

highest court of appeal for the British Empire. It now fulls the
same purpose for many current and former Commonwealth
countries. It is binding in the jurisdiction to which it relates and
has persuasive authority in all other common law jurisdictions,
including England, Wales and Northern Ireland.
The contract in NIPDEC was based upon the FIDIC general
conditions of contract for construction, rst edition 1999,
also known as the Red Book. The terms of the Red Book, as
considered by the court in the NIPDEC case, are identical to
those found in the FIDIC Yellow and Silver Books.2 This decision
is therefore of widespread application for international projects
which use FIDIC Red, Yellow or Silver Book terms as the basis of
the construction contract and which are subject to common law.
Furthermore, given that one third of the worlds population live
in jurisdictions subject to common law and the geographically
widespread use of FIDIC forms, the NIPDEC decision has a
potentially far reaching signicance for projects globally.
The NIPDEC case

The NIPDEC decision is a judgment of the Privy Council, on
appeal from a decision of the Court of Appeal of the Republic of
Trinidad and Tobago. The case concerns disputes between the
employer (NIPDEC) and the contractor (NHIC) arising out of a
contract for the construction of the new Scarborough Hospital
in Tobago. Following disagreements between the parties, NHIC
1
There are other standard form contracts used internationally including those prepared
by the Engineering Advancement Association of Japan (ENNA); the Institution
of Chemical Engineers (IChemE); the Institutions of Mechanical Engineers and
Engineering & Technology (IMechE); and the New Engineering Contract (NEC)
2
Yellow Book, Conditions of Contract for Plant and Design-Build and Silver Book,
Conditions of Contract for EPC/Turnkey Projects, both rst editions, 1999
25
26
FIDIC
The interesting point to note here is the contrast with the

requirements for the giving of notice required from the contractor
when giving notice of its claims against the employer, under subclause 20.1. In the case of the contractor:
There is no long-stop date for notication of

employers claims. This might appear to suggest a
less strict regime for the employer, but there is a
sting in the tail of sub-clause 2.5.
suspended works and purported to
exercise its right to determine the contract.
The parties then referred a number of
differences to arbitration under the terms
of the contract. The arbitrator issued a
number of awards, two of which were
then challenged. These two issues were
connected. The rst was the arbitrators
decision that the contractor, NHIC, was
entitled to terminate the contract. This
arose from a question as to whether
the employer, NIPDEC, had met the
threshold for giving nancial security for
performance of its payment obligations
under the contract (issue no. 1). The
second aspect related to certain nancial
claims. This concerned the requirements
for NIPDEC to commence and maintain its
claims against the contractor (issue no. 2).
This article considers issue no. 2 only.
Employers claims under FIDIC

In particular, issue no.2 concerns subclause 2.5 of the FIDIC form and notices
of claim by the employer. In common with
the drafting style of FIDIC, a number of
separate points are located within a single
sub-clause. It may be helpful to break the
clause down into its constituent parts. Subclause 2.5 commences with the following:
If the employer considers himself to
be entitled to any payment under any
clause of these conditions or otherwise
in connection with the contract... he
shall give notice and particulars to the
contractor.
This opening provision requires the
employer to take the initiative and give a
notice to the contractor. It is a mandatory
requirement, and if the employer fails to
give notice, it will be in breach of contract.
However, any such breach has other
serious consequences, as we shall see.
Another important provision within subclause 2.5 deals with the time for giving
notice, and provides:
The notice shall be given as soon as
practicable after the employer became
aware of the event or circumstances
giving rise to the claim.
...notice shall be given as soon as practicable, and not later

than 28 days after the contractor became aware, or should have
become aware, of the event or circumstance.
In contrast, there is no long-stop date for notication of employers
claims. This might appear to suggest a less strict regime for the
employer in the provision of such notices, but there is a sting in
the tail of sub-clause 2.5, as we shall see below. As to details of
the claim to be given, sub-clause 2.5 provides:
The particulars shall specify the clause or other basis of the
claim, and shall include substantiation of the amount and/or
extension to which the employer considers himself to be entitled
in connection with the contract.
Clearly, the intention here is that the contractor is given sufcient
details to be able to assess and respond to the employers claim.
Immediately after the provision of such particulars, the linkage
with the determination process is found:
The engineer shall then proceed in accordance with sub-clause
3.5 (determinations) to agree or determine (i) the amount (if
any) which the employer is entitled to be paid...
The determination machinery is a unique feature of the FIDIC
forms. This involves the engineer (under the Red and Yellow
Books) making a determination of whether and if so how much is
due to the employer.3 It is necessary for the employer to provide
details of its claims, not just to the contractor but also to the
engineer, so that the engineer can perform the function required
of it under sub-clause 3.5.
The Privy Council looked at the purpose of the provision and
identied that under FIDIC, the claims machinery applicable to
employers claims leads directly into the determination process
under sub-clause 3.5. Thus, in NIPDEC, the court observed:
If an employers claim is allowed to be made late, there would
not appear to be any method by which it could be determined
as the engineers function is linked to the particulars, which in
turn has to be served as soon as practicable. 4
NIPDEC is therefore persuasive authority in common law
jurisdictions for the proposition that if there is no valid employers
claim under sub-clause 2.5, there can be no determination under
sub-clause 3.5.
Notice requirements for employers claims as a condition

precedent to entitlement
The sting in the tail of sub-clause 2.5, as identied by the Privy
Council in NIPDEC, states:
The employer shall only be entitled to set off against or
make any deduction from an amount certied in a payment
certicate, or to otherwise claim against the contractor, in
accordance with this sub-clause.
This also provides a point of contrast with the regime for
contractors claims under sub-clause 20.1, which includes express
3
Under the Silver Book, where there is no independent engineer engaged to
administer the contract, the employer determines the validity and quantum of its own
claims, albeit the contractor may give notice of dissatisfaction within 14 days and
thereby avoid having to give effect to the determination
4
Paragraph 38 of Privy Council judgment
2016
FIDIC
27
language which spells out the consequences of non-compliance

with the notice provisions:
If the contractor fails to give notice of a claim within such
period of 28 days, the time for completion shall not be extended,
the contractor shall not be entitled to additional payment, and
the employer shall be discharged from all liability in connection
with the claim.
In common law jurisdictions, most commentators would regard
the drafting of sub-clause 20.1 of the FIDIC form as making due
notice from the contractor a condition precedent to its entitlement
to pursue recovery of its claims.
The ingredients for an effective condition precedent are
often said to be that a precise period of time is stated within
which notice must be given and the consequences of any noncompliance with that time period are spelled out expressly. The
language of sub-clause 20.1 satises these requirements, with
the effect that if the contractor fails to give notice within the
prescribed period, it forfeits its claim.
This gives rise to the question as to whether the requirements
of sub-clause 2.5 for employers claims contain the necessary
ingredients for an effective condition precedent, even though
the notice provision lacks the precision in terms of its permitted
timing. Thanks to the Privy Council in NIPDEC, we now have an
answer and it is not good news for employers. Lord Neuberger of
the Privy Council said this of sub-clause 2.5:
Its purpose is to ensure that claims which an employer wishes
to raise, whether or not they are intended to be relied on as
set-offs or cross-claims, should not be allowed unless they have
been subject of a notice, which must have been given as soon as
practicable. 5
...the natural effect of the closing part of clause 2.5 is that in
order to be valid, any claim by an employer must comply with
the rst two parts of the clause, and that this extends to, but,
in the light of the word otherwise is not limited to, set-offs and
cross claims. 6
This leads to the surprising conclusion that the absence of a
28-day longstop (and any other) in sub-clause 2.4, means that
the requirement for an employers claim notice has the potential
to be more demanding than that for a contractors; as soon
as practicable may well expire sooner than 28 days after the
employer considers itself to be entitled to any payment.
So, even with what may otherwise be a valid claim by an
employer, if it is notied later than as soon as practicable, it
cannot proceed under sub-clause 2.5. This could affect employers
claims to deduct liquidated damages or to recover costs incurred
itself in rectifying defective works.
Not all employer claims and complaints are time barred

The decision in NIPDEC is also persuasive authority in common
law jurisdictions for the proposition that where the employer fails
to notify a claim in accordance with sub-clause 2.5:
...the back door of set off or cross- claims is as rmly shut to it
as the front door of an originating claim. 7
However and importantly, it will be noted that sub-clause 2.5 is
concerned with entitlement to payment and the giving of notices
to this effect. Sub-clause 2.5 does not preclude the employer from
raising an abatement argument, namely that the work for which
the contractor is seeking payment was poorly carried out, such
5

7
6
The decision in Beckton Energy illustrates the

importance of bespoke amendments to the FIDIC
forms of contract. The court commented that the
amendments had not been fully thought through.
that it does not justify any payment or is
worth materially less than the unit rate or
lump sum price in the contract.
The case was remitted to the arbitrator
to disallow sums which (i) were not
subject of notication in accordance
with sub-clause 2.5 and (ii) could not be
characterised as abatement claims. Not
good news for the employer.
The Beckton Energy case

The decision in the Beckton Energy
case is also important here. The contract
which gave rise to the dispute in that
case was based on the FIDIC Yellow
Book. Murphy was seeking a declaration
that the employer rst had to obtain a
determination of the engineer in its favour
under sub-clause 3.5 before it could
lawfully deduct liquidated damages for
delay. The liquidated damages claim of the
employer was substantial, amounting to
8.274m.
Sub-clauses 2.5 and 3.5 of the contract
in the Beckton Energy case were
unamended from the FIDIC standard form.
Following NIPDEC, one might therefore
have expected the declaration to be
granted in favour of Murphy. However,
the court found that the obligation to pay
liquidated damages under sub-clause 8.7
arose independently of sub-clauses 2.5
and 3.5, and was not contingent upon
an engineers determination. Importantly,
the contract in Beckton Energy had been
amended. In sub-clause 8.7, the words
subject to sub-clause 2.5 qualifying
Murphys obligation to pay liquidated
damages had been deleted. Rather, the
bespoke drafting of sub-clause 8.7 meant
that the obligation to pay liquidated
damages for delay was contingent only
in the contractor failing to achieve the
required milestone date for completion.
Similarly, in the Beckton Energy case
the standard form of FIDIC bond wording
had been rejected. That FIDIC wording
expressly limited the employers right to
calling the bond only when the engineer
had made a determination.
Interestingly, the court found that
the deletion of words from a standard
28
FIDIC/Adverse Weather
form was only context and by no means

determinative but it was nevertheless
relevant background which the court was
entitled to take into account in determining
the objective intention of the parties
and interpreting the true meaning of the
particular provisions in issue.
Concluding remarks
The decision in Beckton Energy illustrates
the importance of bespoke amendments
to the FIDIC forms of contract. The court
commented that the amendments had not
been fully thought through (noting the
NIPDEC decision and the tension between
sub-clause 2.5 and the liquidated damages
deduction provision in sub-clause 8.7,
even with the deleted words). However
and on balance, the court in Beckton
Energy found that the right to deduct
damages in sub-clause 8.7 (as amended)
created a self-contained and separate
right of the employer to make deductions
against, or require payment from, the
contractor, independent of the employers
claim machinery in sub-clause 2.5 or the
determination machinery in sub-clause 3.5.
Where the governing law of the FIDIC contract is

based on other legal systems, such as civil law or
Sharia law, the same result may not prevail.
One nal comment. The Privy Council decision in NIPDEC
applies common law principles to two important provisions found
in some of the main forms of FIDIC contract used on projects
internationally. Where the governing law of the FIDIC contract is
based on other legal systems, such as civil law or Sharia law, the
same result may not prevail.
With the worlds population in 2016 approaching 7.5 billion,
common law still applies to about 2.5 billion people. Not all of
them will be involved in the construction sector, but many will be
affected by assets built under FIDIC forms.
Jonathan Hosie, Partner,
Construction and Engineering Group, Mayer Brown International
jhosie@mayerbrown.com
www.mayerbrown.com
@Mayer_Brown_UK
Jonathan Hosie is the ICES advisory solicitor.
Adverse weather
What are the differences?
Emily Monastiriotis, Partner, with Susanne Hose, Solicitor, and Simos Schizas, Paralegal, Bond Dickinson
IVEN that often in the UK we

dont quite know whether to
carry umbrellas, snow boots
or sunglasses (or indeed all three), its
worthwhile to set out how standard form
building contracts deal with adverse
weather. The table across shows the key
clauses to consider in relation to claims
relating to adverse weather under forms of
contract from the Joint Contracts Tribunal
(JCT), Institution of Civil Engineers (ICE),
New Engineering Contract (NEC3) and
the International Federation of Consulting
Engineers (FIDIC).
Checking the provisions of the contract
should be the number one priority all
parties to the contract should be aware
of how the risks are apportioned before
signing it. Some key tips to remember:
If the contract is JCT, ICE or FIDIC,

then amendments are often made to
the agreement to refer to normal
adverse weather, rather than

exceptional. Alternatively, a more
detailed guide is incorporated into
the agreement so as to achieve the
objectivity of NEC3 contracts.
If the contract form is either JCT,
ICE or FIDIC, then records of
weather changes must be regularly
kept (if possible on a daily basis).
Parties bringing a claim under
JCT, ICE or FIDIC contracts should
prove not only that the weather
was exceptionally adverse, but also
that the delay caused was of an
adverse nature.
Emily Monastiriotis, Partner, Susanne Hose,

Solicitor, and Simos Schizas, Paralegal,
Bond Dickinson
emily.monastiriotis@bonddickinson.com
www.bonddickinson.com
@Bond_Dickinson
@EMonastiriotis
2016
Adverse Weather
29
Contract
Extension of Time Clause
Wording / Denition
Notice
Comments
JCT
Yes (relevant event)

Standard: 2.29.9
Design & Build: 2.26.8
Intermediate: 2.20.8
Major Project Construction: N/A
Exceptionally adverse weather

conditions.
1. The contractor has to notify the

contract manager as soon as it realises
that completion will be delayed the
notice should incorporate all material
events (clause 2.27.1).
2. The contractor has to notify the
contract manager of the result of the
delay (clause 2.27.2).
3. The contractor should continue to give
notices with updates as matters progress
(clause 2.27.3).
This is quite a broad (vague) denition.

Exceptionally adverse conditions are
considered to be greater than usual
adverse conditions. Exceptional means
having much more than average...
(Collins English Dictionary, 1999).
There is no accepted prescriptive
denition for adverse weather
conditions.
JCT also contains a force majeure
clause but given the existence of a clause
regarding weather conditions, the force
majeure clause is unlikely to apply.
Whether or not the weather is as
adverse as it needs to be will be up to the
contract administrator to decide.
NEC3
Yes (compensation event)

60.1 (13)
A weather measurement is recorded:

Within a calendar month
Before the completion date for the
whole of the works and
At the place stated in the contract data.
The value of which, by comparison with
the weather data, is shown to occur on
average less frequently than once in
ten years. Only the difference between
the physical conditions encountered
and those for which it would have been
reasonable to have allowed is taken into
account in assessing a compensation
event.
1. Notice must be given to the project

manager within eight weeks of the
contractor becoming aware of the event
(clause 61.3).
2. If notice is not given, the contractor
loses its right to any additional money
or time.
The contract data includes very clear

and objective measurement details,
which are often negotiated between the
parties to the contract. It provides a more
prescriptive denition, one that parties
often rely on for its clarity.
Only deals with cold, snow, and rain
nothing relating to extreme heat, wind
(think of cranes) or worse.
If the weather in question occurs less
frequently than once in ten years then it
can qualify as a compensation event.
There are four ways of measuring the
weather cumulative rainfall (mm);
number of days with rainfall more than
5mm; number of days with minimum air
temperature less than 0C (32F); number
of days with snow lying at a stated time
GMT.
The intention of weather measurements
is to report the weather over one month
not hourly/daily.
Weather measurements and data
should be taken on site or as close as
possible to the site in question.
ICE

44 (1)
Exceptionally adverse weather.
1. Notice must be given by the contractor

to the engineer within 28 days after the
cause of the delay.
2. The engineer must then make
an assessment upon receipt of the
particulars of the delay and notify the
contractor (clause 44 (2)).
3. The engineer must then make an
interim extension of time award if found
that the contractor needs more time
towards completion (clause 44 (3)).
4. The engineer must, within 14 days of
the completion date decide whether an
extension of time is appropriate or not
(clause 44 (4)).
5. The engineer must review and make
a nal determination as to the extension
of time within 28 days of the issue of
the certicate of substantial completion
(clause 44 (5)).
A similar explanation to that of JCT

very broad and vague. The engineer will
usually assess whether the weather is
sufciently adverse.
Having historical records would be
very helpful in determining whether the
weather conditions were exceptionally
adverse not clear how far back these
records should go (some say 10 years,
others more).

Red Book: 8.4 (c)
Silver Book: N/A
Exceptionally adverse climatic

conditions.
1. Notice must be given to the contract

administrator with a full description of
the events as soon as practicable, and
not later than 28 days after the contractor
became aware or should have been
aware of the delay (clause 20.1).
2. Provide all particulars of the claim
within 42 days of becoming aware of
the claim or within 42 days of when the
contractor should have become aware, of
the event or circumstance.
3. On receipt of the notice, the
administrator must respond within 42
days of receipt of the claim approving or
disapproving the claim.
Again, similar wording to that of JCT

and ICE vague and no guidance and
more subjective than NEC3.
Claimants must not confuse
exceptional with unforeseeable
(employers risks clause 17.3/17.4).
FIDIC
30
Payment
*SVZPUN[OLVVKNH[LZ
The effect of the payment provisions under LDEDCA 2009
Peter Barnes
FCIArb FCIOB MCInstCES MICE MRICS,
Director, Blue Sky ADR
12 months on, another

look at default payment
notice claims
OR the 2015 Construction Law Review, I wrote an article

entitled Be careful what you wish for lest it becomes
true. It focused on the ISG Construction Ltd v Seevic College
(2014) EWHC 4007 (TCC) and Galliford Try Building Ltd v Estura Ltd
(2015) EWHC 412 (TCC) cases, and how the judicial interpretation
of the payment provisions of the Local Democracy, Economic
Development and Construction Act (2009) from those cases, in
effect, opened the oodgates for default payment notice claims.
My feeling at that time was that when the courts realised just how
wide the oodgates had been opened, they may try to close the
oodgates somewhat; and this is something that they have clearly
been trying to do doing over the past year.
First, it seems clear to me that the courts did not intend for
the oodgates to be opened quite so wide in the rst place. This
became apparent from the comments of Mr Justice Edwards-Stuart
in the Galliford Try case. He emphasised again the binding effect
of a notied sum in respect of a default payment notice that
had not been challenged by a valid pay less notice. He made it
clear that the amount due arising from a default payment notice
only related to that particular interim payment cycle, and there
was nothing to stop a party from rectifying the position (if it was
indeed incorrect) in a subsequent interim payment cycle.
However, both the ISG and Galliford Try cases were decided
upon Joint Contracts Tribunal (JCT) contracts. Unless amended,
JCT contracts do not allow for negative valuations and do not
allow for payments being repaid by a contractor on an interim
valuation basis. The only reconciliation of this kind is carried out
at the nal certicate stage. Therefore, even though a contractor
could have a revaluation of the works conrmed at a later
valuation date under a JCT contract, in practice this would have
no contractual effect as, rstly, the initial adjudicators decision
would still be enforced and, secondly, there is not an option for a
negative valuation in respect of interim valuations.
In reality the above factors (amongst several other exceptional
circumstances particular to the case) were part of the reason
why Mr Justice Edwards-Stuart came to the judgment he did
in the Galliford Try case to defer part of the enforcement of
the adjudicators decision. (Although it must be noted that the
principles owing from the ISG case were still followed.)
Matthew Harding v Paice and Springhall

About this same time, another signicant case was going through
the courts (eventually being heard by the Court of Appeal in
November 2015). Matthew Harding v Paice and Springhall (2015)
EWCA Civ 1231 related specically to a termination account. In
that case, the Court of Appeal reached the conclusion that nal
account type applications (which they considered a termination
account to be) are bound by different rules from interim payment
account type applications. Therefore, this case had no impact in
respect of interim payments under unamended JCT contracts.
The general perception after the ISG and Galliford Try cases
was that all you needed to do was put a document in at about the
2016
Payment
right time, with an amount due being shown (without being overly concerned with its
content), and one that could be construed as being a default payment notice. If no pay
less notice was issued, the amount requested in the default payment notice would be the
amount that would need to be paid. However, the courts had other ideas.
Leeds v Waco
The rst matter that the courts dealt with was in the Leeds City Council v Waco UK Ltd
(2015) EWHC 1400 (TCC) case. It was in respect of what default payment notices needed to
be submitted at the right time to be valid.
After practical completion, Waco submitted its September 2014 payment application six
days before the contractual date specied. The employers agent refused to recognise the
payment application as it had been served prematurely. The contractor referred the matter
to adjudication and obtained a decision in its favour.
However, in subsequent part 8 proceedings, the court found that the contractors
September 2014 post-practical completion payment application was not valid. It had been
served too early, even though a previous post-practical completion payment application
was issued early and was accepted by the employers agent. Therefore, the contractor
could not rely on the September 2014 payment application as being a default payment
notice as it had not been served at the correct time.
Caledonian v Mar City

Soon after this, another case, Caledonian Modular Ltd v Mar City Developments Ltd (2015)
EWHC 1855 (TCC), considered a further related matter. Caledonian sought payment in respect
of a payment application that it said had been made on 13 February 2015.
Mar City said the claim for payment had not been made until 19 March 2015, and that
Mar City had issued a pay less notice to nullify any effect that the payment application
may have had. Caledonian sent an email on 13 February 2015 (with attachments) and this
was sent to Mar by registered post and was received by Mar on 16 February 2015. On
19 March 2015, Caledonian submitted its invoice, and attached the breakdown attached
to the email dated 13 February 2015. Upon receipt of that invoice, Mar issued a pay less
notice which nullied the effect of the invoice.
However, Caledonian said that its invoice was a default payment notice, and its original
payment claim had been by way of the email dated 13 February 2015, which had not
been countered by a pay less notice from Mar. The adjudicator agreed with Caledonian,
but in the ensuing enforcement proceedings, the court did not agree.
The court had no hesitation in concluding that the documents sent by email on
13 February 2015 did not constitute an application for payment or a default payment
notice, because none of the documents said that they were a new application for interim
payment, and the invoice dated 19 March 2015 did not say it was a default payment
notice. Therefore, there had been a lack of transparency in respect of the purpose of
Caledonians email dated 13 February 2015, and the court did not accept that it could be
accepted as being a payment application or a default payment notice.
Henia v Beck
Following on from this, the case of Henia Investments Inc v Beck Interiors Ltd (2015) EWHC
came along. In this case, Beck submitted an application for payment on 28 April
2015, six days later than it should have been submitted.
The contract administrator issued its own payment certicate in respect of the April
2015 valuation period, on 6 May 2015, but the payment certicate was one day late. Beck
did not submit a payment application for the end of May 2015 valuation period, but the
contract administrator issued a payment certicate in any event, although that certicate
was again issued one day late. The employer issued a pay less notice against this latter
payment certicate, reducing the amount due to the contractor to nil.
At this point, Beck said that if its application for payment dated 28 April 2015 had been
served too late for the end of the April 2015 valuation date, it should be carried over as
the payment application for the end of May 2015 valuation. Also because the contract
administrators payment certicate at the beginning of June 2015 had been issued one
day late and was therefore in-valid (and as the pay less notice related to that said in-valid
payment certicate was also by default in-valid), Becks application for payment dated
28 April 2015 became the default payment notice which set out the notied sum that
needed to be paid. The adjudicator agreed with this position, but the court did not.
The court found that there was nothing in the 28 April 2015 payment application that
indicated that it was a payment application for 29 May 2015 (in fact the document said
that the works had been valued up to 30 April 2015). Also, the said document was not
in the substance or form of all previous payment applications. Therefore, Becks
payment application dated 28 April 2015 could not be relied upon as being a default
payment notice.
2433 (TCC)
31
32
Payment
And others...
Following on from the above, the Severeld (UK) Ltd v Duro Felguera UK Ltd (2015)
EWHC 3352 (TCC) case made it clear that a default payment notice needed to clearly set
out the basis on which the sum claimed had been calculated. The Grove Developments
Ltd v Balfour Beatty Regional Construction Ltd (2016) EWHC 168 (TCC) case found that
the payment provisions of the scheme were not imported to provide for further interim
payments after the last date on an agreed schedule of dates had expired.
Other similar cases followed in respect of the need to comply precisely with the
required timing of applications and/or the need for there to be complete transparency
of submissions. These include Manor Asset Ltd v Demolition Services Ltd (2016) EWHC
222 (TCC); RMC Building & Civil Engineering Ltd v UK Construction Ltd (2016) EWHC 241
(TCC); and Jawaby Property Investment Limited v The Interiors Group Limited (2016) EWHC
557(TCC).
Whats the position?

In summary of the above, the courts position is that there is little scope for latitude. If a
contractor wishes to have the benet of the interim payment regime pursuant to LDEDCA
2009, then its application for interim payment must be submitted at the right time, it must
be in substance, form and intent an interim application/default payment notice stating
the sum considered by the contractor as due at the relevant due date, and it must be
transparent and free from ambiguity.
Despite all of the above, one aspect that the courts have not yet decided upon is
in respect of the substance of a default payment notice. It is therefore not clear what
the courts will say about a default payment notice that does not comply with the
requirements of the contract in terms of its content, but this may be something that is
claried through judicial guidance during the coming year.
Therefore, at the moment the oodgates referred to at the beginning of this article have
been drawn much closer together than they were a year ago. It is possible that they will
be drawn together even closer during the course of the coming year, thereby reducing the
full ow of default payment notice claims to a mere trickle.
Peter Barnes FCIArb FCIOB MCInstCES MICE MRICS, Director, Blue Sky ADR
www.blueskyadr.com pbarnes@blueskyadr.com
2016
Extensions of Time
Proving extension of time claims

Manoj Bahl
CEng MICE,
Senior Director, FTI Consulting
XTENSIONS of time are again hitting the headlines following the recent
Technology and Construction Court decision in Carillion Construction Ltd v Woods
Bagot Europe Ltd and others (2016) EWHC 905 (TCC). It was a dispute in relation
to the proper interpretation of a standard form of construction subcontract provision.
Carillion contended that the nature of the particular subcontract clause warranted a
departure from the method by which extensions of time are usually applied. However,
the court rejected this argument, and found in Emcors favour that an extension of time
was to be treated in the usual manner. With this in mind, what are the key parameters for
determining extensions of time and what is the level of proof required?
Background
Uncertainty is endemic within the construction industry and, through a combination of
many factors, construction projects do not proceed as planned with the risk that the
contractual completion date will not be met. For contractors, this results in a delay to the
completion of the works, with a corresponding liability to the employer for liquidated
damages and the potential of cost overruns due to the increased costs of performance
arising from prolongation. For employers, delays result in a loss of prot, loss of revenue
and potential liability to the design team and other members of the professional team.
The construction team at FTI Consulting is regularly engaged
to provide expert delay services in relation to formal dispute
procedures but also, as a precursor, to prepare or rebut extension
of time claims. In these instances a contractor will seek assistance
in identifying and setting out its entitlement to an extension of
time or an employer may seek assistance in assessing the
criticality of alleged delays and the appropriate award of an
extension of time. In doing so, the key principles relating to
the preparation and award of extensions of time are often
misinterpreted or over simplied.
What are the key

parameters for
determining extensions of
time and what is the level
of proof required?
The need for extension of time provisions

The prevention principle is derived from Holme v Guppy (1838)
150 ER1195 where an employer withheld payment following delay,
even though it had failed to give possession of the site for four
weeks following the execution of the contract. It states that
where a contractor is prevented by the act of the employer, it is
not in default.
This position was conrmed in Peak Construction (Liverpool)
v McKinney Foundations (1971) 1 BLR 111 CA where it was added
that if, for reasons within the employers control, the contractor is
prevented from completing the works by the completion date, and
there is no mechanism to extend time for performance (or it has
not been properly extended), the employer can no longer hold the
contractor to the original completion date. Instead there is no rm
date from which liquidated damages may be calculated from and,
as a result, time is then said to be at large.1 In such instances the
contractor is granted a reasonable time to complete the works.
Therefore the provision to award an extension of time acts
as a mechanism to extend the contract completion date, thus
preventing the contract period becoming at large and relieving the
1
Per Wells v Army & Navy Cooperative Society (1902) 86 LT 764 where it was held that
if time has become at large because of some act or default of the employer, there
will be no date from which the liquidated damages can run and therefore the right to
claim them will have gone
33
34
Addressing the issue of

concurrent delay is one of
the most important factors to
consider when demonstrating an
extension of time claim.
Extensions of Time
likely to cause, or indeed has caused, a delay to progress of the

works, and consequently has impacted upon the completion date.
The burden of proof in relation to demonstrating the effect of
delay requires consideration of two key principles:
contractor from a liability to pay liquidated

damages up to the extended contract
completion date.
What needs to be proved?

In order to determine whether an
entitlement to an extension of time exists,
it is necessary to establish that: (i) the
cause of the delay was excusable, under
the terms of the contract; and also (ii) as a
consequence, there was a delay to the date
for completion.
Identifying an excusable event
In light of the judicial decision in Peak
Construction v McKinney Foundations,
express provision is now included within
standard forms of construction contracts to
grant time relief for delays caused by the
employer (or its representatives). Moreover,
todays standard forms go further and allow
for the granting of an extension of time for
a range of specied events.
Each standard form of construction
contract deals with this risk allocation/
sharing differently, but these excusable
events (referred to as relevant events
under the Joint Contracts Tribunal (JCT)
and compensation events under the New
Engineering Contract (NEC)) provide the
contractor with an entitlement to extension
of time to complete its works. A list of
excusable events is set out at clause 2.29 of
the JCT standard building contract; clause
60 of NEC3; clause 8.4 of the International
Federation of Consulting Engineers (FIDIC)
Red Book; and clause 18.3 of the Project
Partnering Contracts (PPC2000).
Demonstrating a delay to the date for completion
In the absence of express terms to the
contrary, the occurrence of an excusable
event alone is insufcient to give rise
to an entitlement to an extension of
time. Instead, in order to successfully
demonstrate such entitlement, the standard
forms of construction contract (for example
clause 2.28.2 of the JCT standard form
2011 edition; 63.3 of NEC3; clause 8.4 of
FIDIC Red Book 1999 edition; and clause
18.3 of PPC2000) require the contractor to
demonstrate that the excusable event is
Critical delay-differentiating between a delay to progress and

a delay to completion
For an entitlement to an extension of time to arise a delay
must be critical to completion. One accepted and approved
denition2 as to what constitutes the critical path is that it is
the longest logic-linked path through a programme to the
completion date. Accordingly, a delay to any of the activities
on the critical path would lead to a delay to the completion
date. Where (total) oat3 exists within the overall programme
against the completion date this would need to be eliminated
before any critical delay is experienced. Further, where an
excusable event affects non-critical activities the delay will
have to be sufcient to eliminate all oat before a critical
delay is experienced.
Concurrent delay-often claimed, seldom properly identied
Addressing the issue of concurrent delay is one of the
most important factors to consider when demonstrating an
extension of time claim. As a result of this it is becoming
increasingly common for concurrent delay clauses to be
included within construction contracts. The absence of such
provision frequently gives rise to disputes.
The commonly accepted and approved denition4 of concurrent

delay is when there are two or more delay events occurring at
the same time which are approximately equal in terms of causing
delay to the completion date. This narrow denition results in
the occurrence of true concurrency being rare. Frequently, this
principle is falsely alleged in instances where one of the events
can properly be said to be only a minor cause of the delay, and
so can be disregarded altogether resulting in there being no
concurrency.
There are broadly three different situations in which concurrent
delay could occur. Firstly, and most simply, when both an
employer and a contractor delay each simultaneously affect an
activity on the critical path and thus delay the overall project.
The second is where there is an employer and contractor delay
each affecting different critical paths of activities within the
programme at the same time, but where the delays to each of
these paths equally affect the overall completion of the project.
The third scenario is where during a period of either (contractor
or employer) delay there is a further delay attributable to the other
party which equally causes a delay to the completion date during
the period of time over which it occurs.
Following the decision in Walter Lilly & Company Ltd v Mackay
and another (2012) EWHC 1773 (TCC), the preferred position5 states
that in each of these scenarios, where a contractors delay runs
truly concurrent with an employers delay, the contractors delay
should not reduce any extension of time due.
2
Burr A. (2016), Delay and Disruption in Construction Contracts, Fifth Edition:
London, Sweet & Maxwell at 1-029
3
Float, with regards to critical path analysis, is a term used to dene the period of time
in which no dened work is shown to take place. Furthermore total oat is used to
describe the maximum amount of time an activity within a programme can be delayed
before the date for completion is impacted by virtue of the logic links present
4
John Marrin QC, Concurrent Delay, SCL paper 100 (February 2002) - as approved in
Adyard Abu Dhabi v SD Marine Services (2011) EWHC 848
5
Which follows the principles set out within Henry Boot Construction (UK) Limited v
Malmaison Hotel (Manhattan) Limited (1999) All ER 118
2016
Extensions of Time
Critical path analysis

Whilst case law suggests that there is no requirement for an
extension of time application to contain a critical path analysis6,
and that instead it is possible to leave it to the employer to form
an opinion as to the effect of an alleged delay with or without
employing its own analysis, it would naturally be preferable
for the contractor to demonstrate its claim for delay. Often
a contractors allegation that an excusable event delayed the
completion date is unfounded and upon the implementation of a
proper critical path delay analysis, it becomes apparent that the
critical progress of the works remained unaffected by the event
being claimed by the contractor.
There are various methods of critical path analysis which
exist for analysing and demonstrating the effects of delay events.
The methodology selected to objectively illustrate cause and
effect within an extension of time claim is normally dictated
by the timing of the analysis together with the availability of
contemporaneous records and time/resource. The timing is of
relevance as the use of a prospective analysis (based upon the
likely effects of a delay) or a retrospective analysis (based upon
actual fact) will provide different results.
The Society of Construction Laws Delay and Disruption
Protocol provides guidance as to appropriate methods of delay
analysis. In doing so it is noted that different methods of critical
path analysis have the ability to produce very different results. The
selection of a suitable technique requires careful consideration
with regards to achieving the goal of demonstrating and illustrating
the critical effects of the delay events complained about.
A further obstacle
As a precursor to being granted relief for an excusable delay, most
standard forms of construction contracts require the contractor to
provide notication when the progress of the works is affected by
a delay, excusable or otherwise, as close as possible to when the
delay arises. For example, clause 2.27 of the JCT standard form,
61.3 of NEC3, clause 20.1 of FIDIC Red Book and clause 18.4 of
PPC2000 all expressly state a requirement for such notice.
The common law position raises doubts as to whether a
condition precedent, as set out within the JCT suite, is effective
in dismissing the prevention principle in relation to an excusable
critical delay,7 although the NEC3 and FIDIC forms expressly
state that a failure to provide a timely notication dismisses any
subsequent claim for an extension of time.8
The basis for an award

If a contractor demonstrates that an excusable delay event was
critical, then there is an obligation upon the employer (or its
representatives) to make a fair and reasonable assessment of
what the excusable delay to the completion date is/was and the
entitlement to an extension of time which is due.
The judgment in John Barker Construction Limited v London
Portman Hotel Limited (1996) 83 BLR 31 sought to clarify the
6
John Barker Construction Limited v London Portman Hotel Limited (1996) 83 BLR 31
In line with the Scottish case of City Inn Ltd v Shepherd Construction Ltd (2007) Scot
CSOH 190 and Multiplex Construction (UK) Ltd v Honeywell Control Systems Ltd (2007)
EWHC 236 (TCC) which have cast doubts on whether Gaymark Investments Pty Ltd v
Walter Construction Group (1999), which stated that failure by a contractor to comply
with a condition precedent notifying the employer of a delay rendered the extension
of time provision ineffective and set time at large, is the position in English law
8
These clauses are drafted in line with Bremer Handelsgesellschaft MBH v Vanden
Avenne Izegem (1978) 2 Lloyds Rep. 109 which stated that precise/clear timetables
must be identiable and the result of missing this timetable must be clearly spelt out
7
35
It is becoming increasingly
common for concurrent delay
clauses to be included within
construction contracts.
subjectivity of this process and set out
the following criteria to be adopted in
calculating a fair and reasonable award:
Application of the rules of the contract.

Recognition of the effects of change.
A logical analysis, in a methodical
way, of the effect of relevant events on
the contractors programme.
An objective calculation, rather than an
impressionist assessment, of the delay
caused by the excusable event(s).
Therefore, it would follow that any

extension of time application prepared
by a contractor should assist the employer
in carrying out the above steps. In doing
so the importance of a proper critical
path analysis, to illustrate the delay to
the completion date experienced, cannot
be overlooked.
Conclusion
The majority of standard forms of
construction contract enable the contract
administrator to grant an extension of time
where a delay occurs due to its own act
of prevention or for certain other specied
causes. However, before the employer can
grant an extension of time, it needs to be
satised that not only has an excusable
event, as dened under the contract,
occurred, but also that it is likely to cause,
or has caused, the completion of the works
to be delayed.
Herein lies the opportunity for the
contractor to assist in this evaluation
process by way of including a robust
delay analysis demonstrating the causative
effect of the excusable delay. The proper
application of a critical path analysis,
although not compulsory, can accordingly
be used to effectively demonstrate the
criticality of delays, either as a driving
delay or concurrent delay, and the
entitlement to an extension of time which
is due as a result.
Manoj Bahl CEng MICE, Senior Director
FTI Consulting
www.fticonsulting.com
@FTIConsulting
36
Payment
Fixed payment schedules:

Alan Williamson
FCInstCES,
Principal Consultant, Schoeld Lothian
T rst blush, the judgment in

this case seems somewhat odd.
It appears to y in the face of
the contractors statutory right to receive
regular interim payments during the course
of a construction contract of over 45 days
duration. However, when the courts
judgment is considered in full, it can be
understood how the contract specic facts
led to this conclusion.
The dispute
(SVVRH[JVU[YHJ[ZWLJPJ
payment mechanisms
The brief details of this dispute leading

up to the decision in the Technology and
Construction Court earlier this year can be
summarised as such. Grove Developments
Limited and Balfour Beatty Construction
Limited entered into a Joint Contracts
Tribunal (JCT) design and build contract,
with a contract sum of 121,059,632,
a commencement date of July 2013
and a completion date of 22 July 2015.
Subsequently, the parties agreed to a
payment schedule running from September
2013 to July 2015, consisting of 23 interim
applications.
The works were not completed on
time and Balfour Beatty issued application
number 24 on 21 August 2015 for 23.17m.
In response to this, Groves agent issued
a payment certicate on 28 August 2015
in the sum of 2,349,504, with the caveat
that the employer may withhold or deduct
liquidated damages. Grove did indeed
subsequently issue a pay less notice on
15 September 2015, showing a much lesser
sum to now be paid to Balfour Beatty of
439,503.
Probably in the realisation that
the project was not now going to be
completed on time, the parties engaged in
considerable correspondence between May
and September 2015 endeavouring to agree
further valuation dates after application 23.
However, no agreement was concluded
due to disagreement as to whether the due
date should be considered as the date of
Balfour Beattys application or the date of
Groves payment certicate. Clearly, this
would impact upon what the nal date for
payment should be, which fell to be 28
days after the due date and, consequently,
when any pay less notice should be served

prior to this.
Balfour Beatty served a notice of
adjudication on 19 November, followed by
its referral notice on 26 November 2015,
seeking an award of circa 23.20m, as
applied for in its application number 24 of
21 August 2015. The adjudicator awarded
Balfour Beatty an amount of circa 2m, but
Grove paid no further monies and during
the adjudication proceedings issued part
8 proceedings seeking clarication of its
rights under the contract.
The TCC decision

In court, Balfour Beatty raised two
principal arguments in its defence,
both relying upon certain aspects of
the statutory payment mechanism of
the Housing Grants, Construction and
Regeneration Act (1996), as enacted by
the Scheme for Construction Contracts
(England and Wales) Regulations of 1998,
as amended by the Local Democracy,
Economic Development and Construction
Act (2009):
Balfour Beattys right to instalment

payments under a construction
contract exceeding 45 days duration,
which it contended that commercial
common sense dictated should be
made in relation to all work carried
out under the said contract.
As the parties had been unable to
agree a payment mechanism for
further payments after application 23,
the entire payment mechanism of the
scheme should be imported instead.
This would have the result of Groves
pay less notice served in relation to
application 24 being late, with the
consequence that the full amount
claimed should be paid to Balfour
Beatty.
It is worth briey summarising here what

precise statutory payment mechanisms
the legislation requires to be incorporated
into all construction contracts. The act
and scheme give the entitlement to stage
payments if the contract is longer than 45
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CONSTRUCTION & INFRASTRUCTURE CONSULTANTS
38
Payment
Probably in the realisation that the project was not

now going to be completed on time, the parties
engaged in considerable correspondence.
days duration, but the parties are free to agree the amounts and
intervals of the said stage payments. If no such provisions are
included, then those of the scheme are to apply. Furthermore,
the contract should provide an adequate mechanism to determine
when payments become due and a nal date for payment
again, the parties are free to agree the period between the due
date and the nal date for payment, with the provisions of the
scheme to apply if no such provisions are included within the
construction contract.
However, Mr Justice Edwards-Stuart was not swayed by either
of these propositions, stating that the court should not strain
to nd ambiguity where none exists. He considered that the
requirements of the act and scheme had been met and that it was
not automatic for instalment payments to continue to be made for
all work under a construction contract.
Indeed, he went so far as to say that the employers ability to
refuse further interim payments could be used to exert commercial
pressure upon the contractor to complete on time. If further
periodic payments owed, in addition to those already agreed,
this would restrict the parties commercial freedom to agree to any
amounts being paid at any intervals, for example the front loading
or end loading of payments.
The court further recorded that just because interim payments
did not cover all of the works duration, this did not mean that the
whole of the schemes payment mechanism should be imported
into the contract. The contract already provided due dates and
nal dates for payment which, when read together with the
applications schedule, demonstrated that the parties had agreed
the intervals and circumstances in which payments became due.
The parties had entered into an agreement for stage payments for
23 interim payments upon the agreed dates within the schedule
and no more.
Mr Justice Edwards-Stuart went on to assert that it was not
possible to construe implied terms into the contract in such
circumstances, as the contractor would have been aware of the
consequences of not nishing on time and running out of interim
payments. It had the opportunity to negotiate protective measures
at the outset but did not, so terms could not be implied due to
commercial common sense.
Although it was admitted that further interim payments after
application 23 were discussed between the parties, the terms
under which they were to be made were not agreed. This would
be a pre-condition to a legally binding agreement.
Drawing all of these threads together, clearly the courts
decision was that Balfour Beatty was not entitled to any further
interim payments after application 23.
Although it was not necessary for the judge to decide upon
the issue of whether Grove had served a valid pay less notice
in respect of application 24, due to the above conclusions, Mr
Justice Edwards-Stuart did pass comment upon this second
point. He concluded that whatever way the contract payment
mechanism was looked at, Groves pay less notice given on
15 September 2015 was on time. Thus

the payment mechanism of the scheme
did not need to be imported, as the
contract already had compliant payment
provisions. Furthermore, the contractor
was estopped from changing its argument
to the schemes payment mechanism in
any event, due to earlier representations
made in correspondence as to its view
upon the applicable nal dates for payment
based upon the original contract payment
schedule.
Summing up
As already commented in the introduction,
the ndings in this case initially appear
to be somewhat surprising. It is a very
common occurrence for projects to overrun
and the employer to continue to make
interim payments to the contractor, even if
the dates upon an incorporated payment
schedule have in fact expired. Although
the ndings here will not be of general
application, due to certain case specic
circumstances, contractors will nonetheless
need to be wary when xed payment
schedules are incorporated into their
conditions of contract.
Whilst most conditions provide for a
further nal account payment at the end
of the project, this could be many months
away in the event of signicant programme
overruns often at the end of the defects
correction period that would be of at least
12 months duration, with consequential
adverse effects upon the contractors
cashow with subcontractors, suppliers
and the like still requiring payment in
this period of overrun. Contractors would
therefore be well advised, if in doubt,
to seek the incorporation of an express
provision, at the contract negotiation stage,
setting out what would happen should
the applications provided for within any
incorporated payment schedule expire
prior to the works being complete.
Alan Williamson FCInstCES,
Principal Consultant,
Schoeld Lothian
alanwilliamson@schoeldlothian.com
www.schoeldlothian.com
2016
Penalties
39
Knocked out on penalties

Kate Corby, Partner, and William Jones, Associate, Baker & McKenzie
Liquidated damages
clauses and the rule
against penalties
ITH Euro 2016 in full swing

at the time of writing, the rule
against penalties may sound
like a dream come true for any die hard
England fan. Indeed, the Supreme Courts
handing down of its decision in the case
of Cavendish Square Holding BV v Talal
El Makdessi (2015) UKSC 67 on 4 November
2015 was awaited with almost as much
anticipation as this years main event in the
footballing calendar.
El Makdessi was the rst time in a
century that the UKs most senior court
had considered the rule against penalties,
and some commentators had speculated
that the Supreme Court might use the
opportunity to abolish this principle. The
rule against penalties operates to prevent
enforcement of a contractual clause that
imposes a penalty on a party who has
breached the contract. The logic is that a
party should be free to breach a contract,
provided it pays damages to its contractual
counterparty, which should compensate
the innocent party for the loss it suffers
arising from the breach, rather than act so
as to punish the defaulting party.
The penalty rule most commonly comes
into play in construction contracts in
relation to the enforceability of liquidated
damages provisions. Liquidated damages
provisions are used to agree in advance
the level of damages one party will pay
to the other if it breaches the contract.
Such clauses are attractive as they provide
a contractor with certainty about the
maximum liability it could face in relation
to the relevant breaches, thereby offering
a means of controlling the level of risk
taken on in relation to a particular contract.
In addition they, in theory at least, allow
for disputes to be resolved quickly and
without recourse to the courts (or an
arbitral tribunal). In practice, however, the
question of whether liquidated damages
are unenforceable due to the penalty rule
may itself lead to a time-consuming and
bitterly contested satellite dispute.
Ultimately, the Supreme Court did
not use El Makdessi to kick the penalty
rule out of English contract law. It did,
however, reformulate the legal test as to
Some commentators had

speculated that the Supreme
Court might use the opportunity
to abolish this principle.
whether a clause should be classed as an
unenforceable penalty. In this article, we
examine how El Makdessi has re-shaped
the penalty rule in the context of liquidated
damages clauses, and look forward to what
impact this may have on businesses in the
construction industry in the future.
Previous law
Prior to the judgment in El Makdessi, the
leading case was Dunlop Pneumatic Tyre
Co Ltd v New Garage and Motor Co Ltd
(1915) AC 79. The speech of Lord Dunedin
in this case contains the guidance that was
most commonly referred to by practitioners
on the distinction between a penalty and
a liquidated damages clause. This can be
summarised as follows:
1. Although the words the parties use
to describe a particular provision are
not irrelevant, the court must decide
in substance whether a provision is a
penalty or a liquidated damages clause.
2. The essence of a penalty is that it
seeks to deter a party from committing a
breach by requiring them to pay money
on occurrence of that breach. The
essence of a liquidated damages clause
is that it is a genuine pre-estimate of
loss agreed by the parties.
3. Whether a provision is a penalty or
liquidated damages clause depends on
the terms and circumstances of each
particular contract, assessed from the
perspective of when the contract was
created, rather than when the breach
occurred.
4. A number of tests may be used,
which if applicable to a particular case,
may assist with assessing the nature of a
particular provision:
40
Penalties
The El Makdessi decision
Indeed, the risk of being liable to pay damages

itself functions as a deterrent against breach.
a. A provision will be a penalty if the sum payable is
extravagant and unconscionable when compared with
the greatest loss that conceivably could have followed
from a breach.
b. A provision will be a penalty if the breach in question is
a party failing to pay a sum of money, and the sum payable
is larger than the amount that ought to have been paid in
the rst place.
c. There is a presumption that a clause will be a penalty if
the same amount is required to be paid when one, or more,
of several different breaches occur, and some of these
events cause serious, and others insignicant, loss to the
innocent party.
d. Nevertheless, a provision should not be prevented from
being enforced simply because the consequences of the
breach were almost impossible to predict when the contract
was entered into.
Looking at this guidance more closely, points 1 and 3 can be
said to be restatements of general principles of contractual
interpretation. As such, point 2, taken in light of the four tests
set out in point 4 (as applicable), was previously taken to be
the classic test of whether a liquidated damages clause was
enforceable or not. Simply put, under the old law, a liquidated
damages clause would be enforceable if the amount to be paid
on a particular breach of a contract represented a genuine attempt
by the parties to estimate what the likely loss owing from
that breach would be. On the contrary, a clause would be an
unenforceable penalty where its core intention was to deter the
potential payer of damages from breaching the contract, or where
the amount of damages to be paid was clearly disproportionate
compared to the amount of loss that could have been envisaged to
ow from the breach.
Prior to the decision in El Makdessi, commentators and
practitioners had expressed widespread frustration with this
formulation of the law for numerous reasons. For example, the
rule against penalties seemed to represent a agrant contradiction
of the principle that contracting parties should have the freedom
to decide between themselves the terms of agreements that bind
them, which is at the heart of English contract law. Further, there
did not appear to be any good reason why including a term in a
contract designed to deter one party from breaching the contract
should be unenforceable. Indeed, the risk of being liable to pay
damages itself functions as a deterrent against breach.
Another frustration lay in the fact that the task of attempting to
estimate in advance the likely loss owing from a breach felt very
much like arbitrary crystal-ball gazing. Finally, this formulation
of the law prevented a number of contractual mechanisms put in
place for sensible and practical commercial reasons. One example
would be a consideration clause that offered bonus payments
where a party delivered a project early by a set time period,
tied with a clause that reduced the level of consideration by an
equivalent amount if a project were delayed by that same amount
of time. This carrot and stick approach to encourage a contracting
party to complete work on time makes good commercial sense.
Nonetheless, under the old law against penalties, unless the clause
reducing the consideration could be said to represent a genuine
pre-estimate of loss, it could fall to be unenforceable.
The decision in El Makdessi has

reformulated the law against penalties,
and arguably allows more exibility for
contracting parties when it comes to
devising liquidated damages, or similar,
clauses. In the leading joint judgment,
Lords Neuberger and Sumption explained
as follows:
The true test is whether the impugned
provision is a secondary obligation
which imposes a detriment on the
contract-breaker out of all proportion to
any legitimate interest of the innocent
party in the enforcement of the primary
obligation. 1
It is also useful to look at the language
used to set out the legal test in the
judgments of the other lords. Lord Mance
explained the test as follows:
What is necessary in each case is to
consider, rst, whether any (and if
so what) legitimate business interest
is served and protected by the clause,
and, second, whether assuming such
an interest to exist, the provision made
for the interest is nevertheless in the
circumstances, extravagant, exorbitant
or unconscionable.
Lord Hodges formulation was:
the correct test for a penalty is
whether the sum or remedy stipulated
as a consequence of a breach of
contract is exorbitant or unconscionable
when regard is had to the innocent
partys interest in the performance of
the contract.
On rst reading, one may be forgiven for
thinking that their Lordships language does
more to cloud rather than clarify matters.
Nonetheless, our view is that the El
Makdessi judgment can be unpacked into a
three-step test, as follows:
Step 1: Does the clause in question
only come into play once a breach has
occurred (i.e. is it a secondary, rather
than a primary, obligation)?
Step 2: Does the innocent party have
a legitimate business interest that the
clause serves to protect?
Step 3: Are the consequences of the
clause for the party in breach out of all
proportion to the legitimate business
interest of the innocent party?
Aside from the re-formulation of the legal
test for the penalty rule itself, El Makdessi
1
The distinction between primary and secondary
obligations is that the former is a contractual obligation
to be performed in the normal course of the contract,
and the latter is one that only comes into play if the
contract is breached
2016
Penalties
41
contains some other guidance as to how the rule against penalties

operates and when it will come into play. Specically, the court
made clear that in a commercial context, the principle of freedom
of contract should be upheld as far as possible:
In a negotiated contract between properly advised parties
of comparable bargaining power, the strong initial presumption
must be that the parties themselves are the best judges of what
is legitimate in a provision dealing with the consequences
of breach.
Their Lordships also appeared to remove (or at least lessen)
consideration of the concepts of genuine pre-estimate of loss and
whether a clause acts as a deterrent to breach, from the legal test.
Distancing their analysis from that of Lord Dunedin in Dunlop,
Lords Neuberger and Sumption explained:
The real question when a contractual provision is challenged
as a penalty is whether it is penal, not whether it is a preestimate of loss The fact that the clause is not a pre-estimate
of loss does not therefore, at any rate without more, mean that
it is penal. To describe it as a deterrent does not add anything.
A deterrent provision in a contract is simply one species of
provision designed to inuence the conduct of the party
potentially affected.
Nonetheless, the court refrained from abandoning the concept of
genuine pre-estimate of loss altogether, and seemed to suggest
that this test may still have some use in the liquidated damages
context. Lords Neuberger and Sumption said that:
In the case of a straightforward damages clause, [the innocent
partys] interest will rarely extend beyond compensation for the
breach, and we therefore expect that Lord Dunedins four tests
would usually be perfectly adequate to determine its validity.
Does the clause in question only come into

play once a breach has occurred?
N
Not a penalty
Does the innocent party have a

legitimate business interest that the
clause serves to protect?
N
Penalty
Are the consequences of the clause for

the party in breach out of all proportion
to the legitimate business interest of
the innocent party?
N
Lord Hodge echoed this and went further still, stating that:
The focus on the disproportion between the specied sum and
damage capable of pre-estimation makes sense in the context of
a damages clause
He continued:
Where the test [for a penalty] is to be applied to a clause xing
the level of damages to be paid on breach, an extravagant
disproportion between the stipulated sum and the highest level
of damages that could possibly arise from the breach would
amount to a penalty and thus be unenforceable.
This element of the Supreme Court judgment seems somewhat
self-contradictory, and may ultimately lead to some confusion
when considering the enforceability of a liquidated damages
clause. Nonetheless, our view is that their Lordships were
unequivocal that the genuine legal test for assessing whether a
clause is penal is the three-step test we set out earlier.
Comment
At the time of writing, there have not yet been any reported
cases that apply the El Makdessi decision to a liquidated damages
scenario. As such, it remains to be seen how the courts will
interpret the Supreme Courts reframing of the penalty rule, and
whether they will allow contracting parties more leeway to agree
in advance the amounts of damages to be paid on breach.
Since liquidated damages provisions are a useful and practical
tool for parties to avoid disputes arising from construction
projects, it is hoped that the Supreme Courts comments about
parties being themselves the best judges of what is legitimate in a
Not a penalty
Penalty
The penalty owchart.
provision dealing with the consequences

of breach are honoured by the lower
courts. For those in the process of drafting,
or analysing the enforceability of, a
liquidated damages clause, our guidance
would be to refer rst to the three-stage
test set out above.
If the clause can also be shown to pass
the genuine pre-estimate of loss test,
this should provide additional comfort
that it will be enforceable. This approach
should allow players to enforce liquidated
damages clauses in the course of a project,
without wasting extra time debating
whether or not something falls foul of the
penalty rule.
Kate Corby, Partner, and William Jones,
Associate, Baker & McKenzie
Kate.Corby@bakermckenzie.com
William.Jones@bakermckenzie.com
www.bakermckenzie.com
@bakermckenzie
Kate Corby is the ICES advisory solicitor.
42
Collateral Warranties
Collateral warranties:
I know I said I would give you them, but...
Fenella Mason, Head of Construction and Projects, Burness Paull
OLLATERAL warranties are a fact of life in construction

projects. Whether you view them as a necessary evil or an
essential protection depends on which side of the fence
you sit on. Each side would probably agree that giving/chasing
collateral warranties, particularly on a big project, can be difcult
and costly from an administrative point of view. However, a recent
decision of the Scottish courts has curtailed the scope to resist
production of a warranty once a commitment to produce the
warranty has been given.
The story begins
The Scottish courts sink

a consultants armada
of arguments about
why it should not deliver
outstanding collateral
warranties
The story starts 10 years ago in 2006 when a council appointed

a contractor to build a swimming pool and leisure complex. The
contractor undertook to produce a collateral warranty in favour of
the council from all the design consultants and subcontractors it
employed on the project.
The contractor appointed a consultant to provide the services
of architect, civil engineer and structural engineer. In that
appointment, the consultant undertook to provide a signed
collateral warranty in favour of the council within 14 days of a
formal request from the contractor. A style warranty was annexed
to the appointment. It mirrored the style in the main contract. It
contained a net contribution clause which apportioned liability
among the relevant parties in the event of a claim by the council.
No names were listed in the style warranty. Instead a footnote 10
said insert full designation of consultants/building contractor who
are sharing in the net contribution clause.
The leisure centre was duly built. Some years later, court
proceedings were started by the council against the contractor in
respect of alleged defects in the centre. The contractor formally
joined the consultant to the action as a third party. In order
to widen the scope of its argument against the consultant, the
contractor sought to rely on the collateral warranty that the
consultant had undertaken, but failed, to produce.
2015: The contractor asks for the collateral warranty

In 2015 the contractor sent a collateral warranty to the consultant
and asked them to sign and return it. The style warrantys blank
spaces in the net contribution clause and in the professional
insurance clause had been lled in.
2015: The consultant agrees, but then changes tack and refuses
The consultant was initially reluctant to sign the collateral warranty
but its solicitor eventually agreed to deliver it on payment of
certain outstanding fees (known as the 2015 bargain). The
contractors solicitors sent a cheque in payment of the fees and
asked for delivery of the collateral warranty. The consultant then
changed tack, presumably appreciating that signing the collateral
warranty would create a contractual link which would increase
its exposure in respect of the alleged defects claim raised by
the council. The consultant refused to deliver it. The contractor
asked the court to grant an order for what is known in Scotland
2016
Collateral Warranties
43
The simple, if somewhat dramatic, reason is that

in Scotland the remedy for failure to comply with
an order for specic implement is imprisonment.
as specic implement, ie. an order compelling a party to do a
specic act.
An armada of arguments is launched... and sunk
The consultant defended the court proceedings with what the
judge described as an armada of arguments including:
The parties had not actually concluded a separate 2015

bargain to deliver the collateral warranty on payment of their
outstanding fees.
>Judge: No. The exchange of emails between the parties
solicitors had created a separate binding agreement. It was
technically therefore unnecessary for the judge to address the
remaining arguments (fortunately for the readers, he did...)
The consultant had no obligation to sign until the blank terms
in the style warranty had been agreed further negotiations
would have been required.
>Judge: No. The appointment set out a simple procedure
for completion of the style collateral warranty. The net
contribution clause and insurance blanks could be completed
by the contractors solicitors. The judge said: The parties
had to complete the blank in the NCC to reect the roster
of consultants and subcontractors that [the contractor]
assembled. Necessarily that could only be done after the date
of the appointment. The blank in the insurance clause was to
be completed by inserting the gure agreed by the parties in
respect of the professional indemnity cover to be maintained
by the consultant. The use of the word shall in the
appointment had made it clear that the consultant was under
an obligation to provide the collateral warranty.
The contractor was allegedly in breach of the appointment
itself (by failing, for example, to provide reasonable
instructions) and therefore the consultant did not need to
perform its side of the bargain.
>Judge: No. The obligation to provide a warranty is a stand
alone requirement.
2016: Result, signed collateral warranty produced by consultant

Various options may be available in the event of a failure to
produce a collateral warranty. The appointment may specically
address the consequences of any such failure by imposing
nancial sanctions. Another option might be to claim damages for
breach of contract. However, sometimes what is required is the
actual document itself. This judgment reminds us that there may
be a third option; asking the court to ordain/order a consultant
to produce the collateral warranty. Although it should be
remembered that this may not be as easy as it sounds:
There has to be a very clear undertaking in the appointment

(or by virtue of a subsequent document or agreement) to
produce a collateral warranty.
The terms of the collateral warranty to be signed must

be clear.
There are subtle differences between the law of specic
implement in Scotland and the law of specic performance
in England.
There are restrictions on the granting of such court orders.
A consultant will not be ordered to produce the collateral
warranty if it cannot actually do so. The simple, if somewhat
dramatic, reason for this is that in Scotland the remedy for
failure to comply with an order for specic implement is
imprisonment.
Most disputes tend to turn on their own facts. In this case
the judge was of the view that the obligation to provide the
warranty was a standalone requirement. This may not
always be the situation. Obligations to pay fees may be
regarded as counterpart obligations whereas obligations
in relation to physical performance, for example timely
instructions, may not.
To conclude, while resorting to court proceedings to get an

outstanding collateral warranty might seem like a using sledge
hammer to crack a nut, it could be a useful option. However,
perhaps the true value of this court judgment lies in reminding
us of the enduring, and potentially very serious, consequences
for a consultant in agreeing to produce collateral warranties in the
rst place.
Fenella Mason, Head of Construction and Projects, Burness Paull
Fenella.Mason@burnesspaull.com
www.burnesspaull.com
Judgment: Kier Construction Ltd v WM Saunders Partnership LLP (2016) CSOH 17
44
Bonds
Being demanding
Recent cases on performance bond calls
Stephanie Barwise QC and Omar Eljadi, Barrister, Atkin Chambers
ERFORMANCE bonds occupy a vital role in modern

infrastructure projects. They are a form of indemnity
protecting employers and contractors against the
potentially serious nancial consequences of a counter-partys
breach of contract (or other event) by providing a quickly
realisable monetary security from a solvent third party, usually
a bank or other reputable nancial institution (the issuer). The
conditions that must be satised in order to effect a valid claim
under a performance bond (termed a call or demand) can vary
substantially, but are rarely more closely construed than in the
most stringent variety of performance bond, namely the ondemand bond.
Under the terms of an on-demand bond, the issuers obligation
to pay is triggered solely by the presentation of a written demand
which complies with the agreed requirements of substance and
form. In determining whether to pay, the issuers sole concern is
whether the demand conforms, on its face, to those requirements.
If a conforming demand is made, then, save in the case of
established or obvious fraud, immediate payment is required; no
investigation into the veracity of what is stated in the documents,
or underlying the state of affairs between the contracting parties, is
necessary or justied.
Demand requirements: Some background
Where are we now when it

comes to making demands
on bonds?
The relative ease with which an issuers obligation to pay

substantial sums can be triggered, coupled with the dependence
the issuer places upon statements in documents rather than any
proof of facts, is sometimes said to justify the application by
analogy of the doctrine of strict compliance; a principle developed
in the context of letters of credit, under which documents
presented as part of a call are required to conform very strictly to
the agreed requirements if the issuers obligation is to be triggered.
Under that doctrine, there is no room for documents which are
almost the same, or will do just as well.
In IE Contractors v Lloyds Bank (1990) 2 Lloyds Rep 496, the
Court of Appeal expressed the view that there was less need
for that doctrine in the case of performance bonds because they
were used less frequently, and attracted attention at a higher
level in banks, than letters of credit (which formed part of the
ordinary day-to-day mechanism of trade). That distinction
between letters of credit and performance bonds has not met
with universal approval.1 Indeed, 26 years on, it may not have
quite the same force.
Nevertheless, the position2 is that: The degree of compliance
required by a performance bond may be strict, or not so strict. It
is a question of construction of the bond. 3 This ostensibly more
exible stance should not give too much comfort to beneciaries.
Any cursory examination of the decisions on this subject reveals
the need to ensure that the terms of the bond governing notice
1
Sea-Cargo Skips v State Bank of India (2013) EWHC 177 (Comm) at [27]
Established in IE Contractors at p.501
3
See also Sea-Cargo Skips at [29] - [30]
2
2016
Bonds
are scrutinised extremely carefully, and

that demands are drafted with the utmost
caution. The slightest non-conformity may
justify a refusal to pay.
In Frans Maas v Habib Bank (2001)
Lloyds Rep. Bank. 14, the bond required the
party making a claim thereunder to state
that its counter-party in the underlying
contract had failed to pay you under
their contractual obligation. The demand
stated we claim the sum of 500,000,
[the other party] having failed to meet their
contractual obligation to us. The bank
refused to pay and the court held that its
refusal was justied. The key statement
was a failure to pay. A failure to meet
obligations did not necessarily equate to
a failure to pay. It was ambiguous and the
bank was not obliged to accept it.
In Sea-Cargo Skips, a bond procured in
relation to a shipbuilding contract required
a demand thereunder to state:
to determine whether the delay alleged

was of the type referred to in article IV1(E),
and therefore whether its obligation to pay
was triggered.
Determining the stipulations which
must be included in a demand is a matter
of interpretation. The requirements are
often stated clearly and expressly, causing
little difculty for the prudent beneciary.
Occasionally, however, the precise
statements to be contained in a demand
are less obvious. On its true construction
a bond may require a particular statement
or assertion to be made in a demand, even
though that requirement is not expressly
stipulated, on the basis that the statement
was necessary to enable the bank to
determine on the face of the document
whether its obligation is engaged.
In Esal (Commodities) Ltd v Oriental
Credit (1985) 2 Lloyds Rep. 546, for example,
the Court of Appeal decided that an
undertaking to pay on your written
demand in the event that the supplier
fails to execute the contract in perfect
performance required the demand to state
that it was made because the supplier had
failed to execute the contract. Similarly,
in IE Contractors, an undertaking to pay
you the said amount on demand, being
your claim in damages brought about by
the above named principal required the
demand to state that it was a claim for
damages brought about by the principal.
That the vessel or the construction

thereof is delayed with more than 270
days as set out in the contract article
IV1(E) which entitles the buyer to cancel
the contract and to receive repayment of
the advance payments.
The buyers demand under the bond
failed to refer to the relevant article of the
contract, such that the bank was not able
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45
Although nothing new, the prospect of

invoking requirements not explicitly stated
in the bond, coupled with the apparently
fairly strict approach to requiring
compliance, seems recently to have proven
grist to the mill of issuers. Two instances of
rejected calls have been reported already
this year. The decisions illustrate well the
courts present approach to interpretation
in this context, and explore the limits of
issuers ability to rely on alleged nonconformities within the demand in an effort
to resist payment.
Lukoil v Barclays Bank

Often a failed call will be no grave matter.
The beneciary will usually be able to
make a revised demand that complies with
the bonds requirements. That was not so
in Lukoil Mid-East Ltd v Barclays Bank plc
(2016) EWHC 166 (TCC), (2016) BLR 162, where,
by the time Lukoil received Barclays +
letter rejecting its US$7m demand, the
bond had expired, preventing a further call.
Whether Barclays was right to reject the
call therefore bore enormous importance.
The bond served as security for
the contractors performance of oil
drilling works that Lukoil had engaged
it to execute in southeast Iraq. Barclays
contended that Lukoils demand was
defective because it failed to state that
no amendment had been made to the
46
Bonds
underlying drilling contract which impacted

upon the timely performance of those
works. It relied on the following words
from the fourth paragraph of the bond:
[Barclays] shall be responsible for the
payment of the total above mentioned
amount in full at [Lukoils] rst written
request submitted to [Barclays] before
the expiry date if [Barclayss client] fails
to full the contract provisions, on the
condition that no amendment has been
made to the contract concluded between
[Lukoil] and [Barclayss client] impacting
the timely performance of the works
under the contract.
Stuart-Smith J held that the demand was
valid. He acknowledged that, in light
of IE Contractors and Esal, stipulations
as to the required content of a demand
might, on a proper interpretation of the
bond, be implied rather than express,
but held that the principal justication
underpinning the interpretation of the
bonds in those cases was that the bank
needed to know, based on the contents of
the demand alone, whether its obligation
to pay was triggered.4 That justication did
not avail Barclays. The statement alleged
to be necessary could have no bearing
on the obligation to pay because the
fth paragraph of the bond very clearly
acknowledged that no amendments or
addenda to the underlying contract would
relieve Barclays of its obligations and that
Barclays waived the right to be notied
of the same. Although that provision
conicted with the closing words of the
fourth paragraph, Barclays accepted
(correctly, the judge said) that the bond
was not invalidated by amendment.5
This acceptance effectively brought
an end to the matter. Barclays was
unable to point to any justication for
the statement which satised the judge.
Barclays suggestion that it had an interest
in knowing of any amendment, because it
increased the risk of a call, was dismissed
as ignoring contractual realities.6 The judge
also found that it was commercially absurd
to expect Lukoil to be able to make the
required statement. Given the size of the
project, extensive changes were inevitable.7
South Lanarkshire Council v Coface

A similarly purposive approach to
interpretation was applied by the Scottish
Court of Session (Inner House) in South
Lanarkshire Council v Coface SA (2016)
CSIH 15, [2016] BLR 237, where the council
was the beneciary of a bond issued
by Coface to secure the contractors
completion of certain restoration works
4
See
See
6
See
7
See
5
[19]
[26]
[28]
[30]
following cessation of mining at an

opencast coal mine near Douglas. The
amount recoverable from Coface varied
over time in accordance with a schedule to
the bond and certain indexing provisions,
but was subject to a maximum liability of
4,499,411.
Before completing the restoration
works, the contractor became insolvent.
It ceased work and was wound up. The
council made a call on the bond by a
single notice, which stated both that the
contractor was insolvent and in breach of
its requirement to carry out the restoration
works, and that the cost of completing
the restoration works was some 9m. Not
long after the councils call, the amount
recoverable under the bond decreased
substantially. Accordingly, as in Lukoil, the
validity or otherwise of the councils call
was important.
Coface rejected the councils call,
arguing that the bond required a twostage notice procedure to be followed;
a written notice of breach and the cost
of the restoration works, followed by a
separate demand for payment of a specic
sum. It also contended, as a secondary
ground, that the council had failed to state
the contractors breach with adequate
specicity. Neither ground for rejection
found favour at rst instance, or on appeal
to the Court of Session, which held that
only one notice was required and that
the breach was sufciently stated. The
councils demand was valid; Coface was
obliged to pay. The existence of a two
stage procedure was not expressly stated
in the bond. Cofaces contention was
instead based on a detailed and, it must
be said, fairly strained interpretation of
the language used in the bond, predicated
upon minor differences in expression.
The court disagreed with this approach.
It stated that the provisions of the bond
had to be construed in a practical manner,
in accordance with commercial common
sense and having regard to the essential
purpose of a performance bond. An unduly
technical construction was to be avoided.8
Paramount in the courts reasoning
was that the second notice in the alleged
two-stage notice procedure (one making
a demand for a specic sum) served no
commercial purpose. That the council was
demanding payment would be clear from
the rst notice they served. There was no
need for a second notice demanding a
8
See [22]
specic sum because once Coface knew

the councils costs, the sum to be paid was
determined by a relatively straightforward
process of calculation, applying the
schedule and index linking provisions in
the bond. Coface was able to carry this out
just as easily as the council.
Cofaces second argument fared no
better. The bond required notice in
writing of any breach. The councils
demand had stated that the contractor was
in breach of its obligation to carry out
the restoration works. Coface argued that
greater specication of the precise breach
that had occurred was required. However,
in circumstances where the contractor had
entered insolvency and could not carry
out the works, the court noted that it was
impossible to specify the breach beyond
stating that the restoration works would not
be carried out.
Where are we now?

Although requirements as to the content or
form of a demand may be expressly
framed as such, further requirements may
not be explicit, and only apparent from a
careful interpretation of the words of the
bond. This is most frequently so where a
certain fact (usually a breach by the issuers
client) is framed as a prerequisite to the
issuers obligation to pay.9 It also occurs
where the nature of the sums to which
the beneciary of the bond is entitled is
described in the bond.10
Parties making calls under bonds which
describe or condition the issuers liability
to pay, should be astute to make clear
in their demand that those conditions
or descriptions are met. Moreover, it is
a counsel of prudence that the demand
should provide a reasonable level of
detail on those matters such that there
can be no challenge to the demand on
this front either. The objective is always to
make it clear to the issuer on the face of
the demand that its obligation to pay has
been triggered.
These recent cases make clear, however,
that there is a limit to the scope for
interpreting the bond as imposing demand
requirements that are not expressly stated.
Where the content of the statements
allegedly required can have no bearing on
the issuers obligation to pay, and serve
no real commercial purpose (other than
posing a further technical hurdle to the
issuers liability), issuers are likely to face
an uphill struggle in persuading the courts
of the merits of that interpretation.
Stephanie Barwise QC and
Omar Eljadi, Barrister, Atkin Chambers
sbarwise@atkinchambers.com
oeljadi@atkinchambers.com
http://www.atkinchambers.com
9
See Esal
See IE Contractors
10
2016
FIDIC
FIDIC Red Book, sub-clause 2.4 revisited

Simon F Fegen
MRICS FAArb,
Director, Leach Consultancy
Has another year brought

any more clarity on
sub-clause 2.4?
HORTLY after the publication of the article FIDIC Red

Book sub-clause 2.4: A useful tool or a paper sword?
in the 2015 Construction Law Review, the Privy Council
gave judgment on a matter in respect of a dispute that involved
a contractors request under sub-clause 2.4 (employers nancial
arrangements). The judgment may throw some light on questions
raised in that article.
The matter before the Privy Council was NH International
Company Limited (Trinidad & Tobago), and NH International
Company Limited (no. 2) (Trinidad & Tobago) (2015) UKPC 37. NH
International (NHIC), the contractor, entered into a contract to
construct the new Scarborough Hospital in Tobago for the Ministry
of Health, on behalf of National Insurance Property Development
Company (NIPDEC), the employer. The contract was the
International Federation of Consulting Engineers (FIDIC) general
conditions of contract, rst edition 1999 (Red Book).
During the course of the works, various disputes arose between
the parties which were referred to arbitration. Challenges arose
thereafter to some of the arbitrators decisions in the award, and
these issues eventually found their way to the Court of Appeal,
and ultimately to the Privy Council.
The 2015 article explored as to what might be considered
reasonable evidence as provided for under sub-clause 2.4, and
whether or not sufcient clarity could be made of such a term
so that a contractor might have condence when exercising its
entitlement under the contract.
It is not so much what the Privy Council judgment directs,
but the record therein of the arbitrators award that is of interest.
Rarely does a dispute arising under a FIDIC contract reach the
light of day the majority are satisfactorily resolved by dispute
boards. Alternatively, for those that do seep through to arbitration,
the details are protected by condentiality.
The Privy Council sought not amend those aspects of the
arbitrators award that were deemed to be conclusions of fact
rather than of law, asserting that the parties had chosen their
arbitrator and it was not open to the courts to interfere.
So, although the devil is as always in the detail, the arbitrators
award might offer a clearer view of what may be acceptable as
reasonable evidence under sub-clause 2.4.
The facts
Chronologically, the brief facts of the case are:
On 3 September 2004, NHIC issued a request to NIPDEC

under sub-clause 2.4 for reasonable evidence of the
employers nancial arrangements.
On 29 December 2004, NIPDEC responded, enclosing a letter
from the Ministry of Health which advised that (government)
cabinet had approved additional funding for the project.
On 28 April 2005, NHIC made another request under subclause 2.4.
47
48
FIDIC
On 23 June 2005, NHIC gave notice to reduce the rate of work.

On 5 July 2005, the Ministry of Health wrote to NHIC stating without prejudice that
funds were available.
On 8 July 2005, NHIC wrote express concern at the use of the phrase without
prejudice in the ministrys letter and sought conrmation from NIPDEC that cabinet
had approved the sums due under the contract. NHIC did not receive a response
from NIPDEC to this last request.
On 23 September 2005, NHIC gave notice to suspend work.
On 19 October 2006 (a year later), NHIC received a letter from the Ministry of Health,
dated 6 October 2006, conrming that funds were available for the project.
On 27 October 2006, NHIC requested from NIPDEC conrmation that the funding
had cabinet approval. No response was received from NIPDEC.
On 3 November 2006, NHIC gave notice to terminate the contract.
Sub-clause 2.4 provides:

The employer shall submit, within 28 days after receiving any request from the
contractor, reasonable evidence that nancial arrangements have been made and
are being maintained which will enable the employer to pay the contract price (as
estimated at that time) in accordance with clause 14 (contract price and payment). If
the employer intends to make any material change to his nancial arrangements, the
employer shall give notice to the contractor with detailed particulars.
The contract does not dene reasonable evidence. The arbitrator considered that the
letters sent on behalf of NIPDEC, in reply to NHICs requests for reasonable evidence,
were insufcient to satisfy the requirements of sub-clause 2.4; this was founded on there
being no evidence of cabinet approval for the funding.
On 3 September 2004, NHIC issued a request for reasonable evidence of the
employers nancial arrangements under sub-clause 2.4. NIPDECs response, on
29 December 2004, referred to there being cabinet approval for the additional funding.
On 28 April 2005, NHIC made its second request for reasonable evidence of the
employers nancial arrangements. On 23 June 2005, having not received a response,
NHIC gave notice under sub-clause 16.1 to reduce the rate of work.
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2016
FIDIC
The permanent secretary at the Ministry of Health wrote on

5 July 2005 that the ministry advise without prejudice that
funds are available in [this] sum to meet the estimated nal cost
to completion. Three days later, NHIC requested from NIPDEC
conrmation that cabinet approval had been given for the funding.
On 23 September 2005, having not received a response, NHIC
gave notice under sub-clause 16.1 to suspend work.
On 19 October 2006, NHIC received a letter from the
permanent secretary at the Ministry of Heath, dated 6 October
2006, conrming that the government considered that the
completion of the hospital project was of the highest priority and
that moneys certied or found due to NHIC... will be paid by the
government, and further the government stands fully behind the
project... and will meet the contractual nancial requirements for
completion of the project.
On 27 October 2006, NHIC responded to NIPDEC seeking
conrmation that the cabinet had approved the funding. There
was no response and on 3 November 2006 NHIC gave notice of
termination under sub-clause 16.2. Sub-clause 16.2 (termination by
contractor) provides, inter alia:
The contractor shall be entitled to terminate the contract if: (a)
the contractor does not receive the reasonable evidence within
42 days after giving notice under sub-clause 16.1 (contractors
entitlement to suspend work) in respect of a failure to comply
sub-clause 2.4 (employers nancial arrangement).
The validity of the termination was the subject of dispute between
the parties and was referred, as required under the contract, to
arbitration. The parties accepted that this matter in arbitration
turned on whether or not NIPDEC had responded to NHICs
request with reasonable evidence, as obliged under sub-clause 2.4.
The decisions
The arbitrator gave two reasons in support of his decision to
uphold the contractors entitlement to terminate the contract
on 3 November 2006. The arbitrators primary reason was that
reasonable evidence was not given by NIPDEC. The other reason
relates to whether the sums referred to in the responses were
adequate under sub-clause 2.4; this aspect is not dealt with here
merely due to shortage of editorial space another time perhaps?
The Privy Council judgment does not make any mention of the
fact that on two occasions the Ministry of Health responded to
NHIC, instead of NIPDEC as required under the contract.
The arbitrator decided that NIPDECs letter of 29 December
2004, and the Ministry of Healths of 5 July 2005 and 6 October
2006, did not amount to such reasonable evidence that nancial
arrangements have been made and are being maintained which
will enable the employer to pay the contract price as required
under sub-clause 2.4.
The arbitrator referred to evidence given by the permanent
secretary, who explained that she had sought cabinet approval
on receipt of NHICs letter of 27 October 2006, as demonstrating
that cabinet approval was necessary for the payment of funds.
Further evidence was that the need for cabinet approval prior to
expenditure on construction contracts was rarely, if ever,
departed from.
Referring to sub-clause 2.4, the arbitrator concluded that
providing reasonable evidence that nancial arrangements have
been made by the employer requires more than just showing
that the employer was able to pay, and that more positive steps
were required; i.e. NIPDEC had to produce evidence that
cabinet approval for payment of sums due under the contract had
been obtained.
The arbitrators award supported NHICs entitlement to suspend
the work under sub-clause 16.1 on 23 September 2005 on the
basis of the words without prejudice and the absence of any
conrmation of cabinet approval in the letter of 5 July 2005,
49
Rarely does a dispute arising under a FIDIC

contract reach the light of day the majority
are satisfactorily resolved by dispute boards...
for those that do seep through to arbitration, the
details are protected by condentiality.
together with NIPDECs failure to respond
to NHICs letter of 8 July 2005 in which it
expressed concern at the use of the words
without prejudice.
Further, the arbitrators award supported
NHICs entitlement to terminate the
contract, under sub-clause 16.2, on
3 November 2006, for similar reasons to
the above. Notwithstanding that, evidence
in arbitration showed that as at 3 October
2006 the cabinet gave its approval for the
required funding; however, this information
had not been transmitted to NHIC.
Although the ministry had expressed,
in the letter dated 6 October 2006, its
conrmation that the project was of the
highest priority, that the government
stands fully behind the project and that
the government will meet the contractual
nancial requirements for completion of
the project, the letter failed to mention
anything regarding whether cabinet
approval was being sought or had been
sanctioned.
This may give some assistance as to
what response should satisfy a contractors
request under sub-clause 2.4, bearing
in mind that what one arbitrator may
consider is reasonable evidence, another
may not. Perhaps it may also give a clearer
idea of what might not be considered as
reasonable evidence.
The difculty will always remain to
evaluate reasonable evidence, and to
consider whether or not it is sufcient to
uphold the requirements of sub-clause 2.4,
or if it will give the contractual grounds
to proceed under sub-clause 16.1 to
reduce the rate of work and/or to suspend
work, or under sub-clause 16.2 to terminate
the work.
As always, each case will have to be
judged on its own merits, but hopefully
what is reasonable evidence is a little
clearer. One thing that is clear is that
professional advice should be sought
before acting under clause 16.
Simon F Fegen MRICS FAArb, Director,
Leach Consultancy
s.fegen@leachgroup.com
www.leachgroup.com
50
Letters of Intent
Could the payment provisions of the

construction act displace capped payment
sums set out in letters of intent?
Edwina Acland, Solicitor, Sharpe Pritchard
HERE has been much written about (and cautioned against) the use of letters
of intent over the years. It is perhaps a testament to the attention letters of intent
have been given that the courts have seen very few cases recently where the
parties are governed, or said to be governed, by them.
It is not my intention to repeat what are perhaps now trite warnings over the use of
letters of intent in place of entering into formal contractual arrangements although,
there is no harm in repeating it, if just once. There is, however, one aspect in respect of
them which has had less practitioner attention than perhaps it ought; the impact of the
payment provisions of the amended construction act on the payment arrangements under
letters of intent.
Edwina Acland on an
aspect of letters of intent
that isnt widely debated
Given the recent prolicacy of paymentrelated construction cases reaching the

courts, it may be only a matter of time
before the applicability or otherwise of the
payment provisions of the act, intertwined
with the complications of letters of intent,
comes before the courts.1
It is not my intention to repeat
It is not uncommon for letters of intent
what are perhaps now trite
to include a cap on the amount payable
to the contractor for the duration of time
warnings over the use of letters
the letter is intended to cover. This should
be relatively straightforward, particularly
of intent in place of entering into
where there is an agreed schedule of
formal contractual arrangements
rates or priced activities list, along with a
clear scope of works and programme for
although, there is no harm in
the contractor to adhere to. In an ideal
world (where the use of letters of intent
repeating it, if just once.
is unavoidable), the scope of works, time
period and cap are reasonably well aligned
and the fully executed contract is entered into before either party
has the opportunity to start raising concerns.
However, as is too often the case, the parties do not agree on
the terms of the nal contract and letters of intent continue to be
issued and re-issued, or worse elapse, leaving a void as to how
the relationship is governed. As time goes on, the likelihood of
disagreements increases. And the chances are they will relate in
some way or form to payment.
Assuming that the work authorised under a binding letter of
intent is for a period of at least 45 days, it seems to me that the
letter of intent could be construed as a construction contract for the
purpose of the act, entitling the contractor to periodic payments.
The implications of this could be quite signicant for both
parties. If and to the extent the payment terms of the letters of
intent do not comply with the amended act, then the relevant
provisions of the act (and scheme) would apply. As such, a
contractor under a lump sum/capped letter of intent could be
1
In Allen Wilson Shoptters v Mr Anthony Buckingham (2005) EWHC 1165, HHJ

Peter Coulson QC (as he was then) commented upon this issue, but this was before
the amendments made to the 1996 act by part 8 of the Local Democracy, Economic
Development and Construction Act 2009 and was an adjudication enforcement case
and so the judge declined to review the correctness or otherwise of the adjudicators
decision on the matter
2016
Letters of Intent
51
If the employer has not been administering the applications as

closely as the act requires, then the sum total of the periodic notied
sums may exceed the cap in the letters of intent.
entitled to periodic payments for the work
done, even if the letter of intent did not
anticipate this and the total payable
in respect of such payments would not
necessarily equate to the cap.
This not only places an administrative
burden on the parties by needing to
be alert to the importance of preparing
compliant and timely payment (and pay
less) notices at regular intervals, but it also
opens up the question as to how much the
contractor is entitled to. As it is unlikely the
parties would have agreed the amounts of
the periodic payments (as these were not
anticipated), such amounts are implied by
the provisions of the act and scheme. The
key phrase in the scheme in analysing this
is the contract price, as it is this which sets
the upper limit of the amount payable. It is
dened as:
The entire sum payable under the
construction contract in respect of
the work.
An employer may argue that this means the
agreed capped gure set out in the letter
of intent a position which, arguably,
accords with common sense. However, as
the construction contract is subject to all of
the payment provisions of the act (to the
extent that the letters of intent payment
terms are non-compliant), section 111(1)
cannot be overlooked. This requires the
employer to pay the notied sum. In the
absence of any valid payment or pay less
notice from the employer, such sum is
the amount notied by the contractor (by
means, usually, of payment applications).
If the employer has not been administering
the applications as closely as the act
requires, then the sum total of the periodic
notied sums may exceed the cap in the
letters of intent. The contractor may have
some force in arguing that these become
the entire sum payable by the employer.
The obvious way to avoid this risk is to
ensure that, if a letter of intent is absolutely
necessary, its payment terms are compliant
with the amended act, and administered
as such. Failing that, the employer (or
its contract administrator) must not take
undue comfort from any capped gure

in the letter and be alert to any interim/
periodic payment applications made by the
contractor. Failure to respond timely and
comprehensively with payment and/or pay
less notices runs the risk of the letters of
intent cap being dislodged by the sum total
of the notied sums.
Edwina Acland, Solicitor,
Sharpe Pritchard
eacland@sharpepritchard.co.uk
www.sharpepritchard.co.uk
@SharpePritchard
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52
Estoppel
An (e)stopped clock is right twice a day

Is your engineers conduct a ticking time bomb?
Sarah McCann, Barrister, Hardwicke
S the deluge of smash and

grab adjudications continues to
percolate through the construction
industry, shrewd contractors are advancing
more and more creative legal submissions
as a way of reviving interim payment
applications that have somewhere
gone awry. Twice in the past year, the
Technology and Construction Court has
been addressed on the issue of whether
a contractor can rely on an estoppel to
resuscitate an interim application; and
in one of those cases, that estoppel was
created solely out of the actions of the
contract administrator. Although the TCC
has yet to fully articulate all of those
situations in which the actions of the
engineer or contract administrator are
capable of giving rise to an estoppel,
construction professionals would be wise
to exercise a degree of caution and be
wary of inadvertently bestowing such rights
upon the contractor, much to the detriment
of the employer.
Leeds v Waco UK
The estoppel argument

in smash and grab
adjudications
In Leeds City Council v Waco UK Ltd (2015)

EWHC 1400 (TCC), Edwards-Stuart J had to
determine whether a common failure to
adhere to the payment timetable outlined
in the contract was capable of giving rise
to an estoppel. Leeds City Council (LCC)
had engaged Waco UK to assemble and
furnish a number of modular classroom
buildings at a primary school, and the
contract specied the 26th of each month
as the required date for Waco to issue
interim applications. Over the course of the
project, the contract administrator (Jacobs)
had routinely certied amounts from
interim applications that were made three
to four days after the contractual valuation
date; it was this conduct that Waco later
alleged formed the basis of the estoppel.
The critical payment application was
issued by Waco on 22 September 2014.
Jacobs did not certify payment because the
application had been made too early. Waco
referred the dispute to adjudication and
quickly secured a smash and grab victory,
which LCC thereafter sought to challenge
by way of part 8 proceedings. The estoppel
argument was raised in front of EdwardsStuart J, and Waco relied on Jacobs failure
to insist upon the contractual valuation
date as a course of conduct that had led
it to believe that an application would be
accepted, even if it had not been made
on the precise contractual valuation date,
from which it would be unconscionable to
permit LCC to resile.
Edwards-Stuart J was persuaded that
there was sufcient evidence of a course
of conduct that gave rise to an estoppel.
However, the estoppel would only apply
to interim applications made after the
specied contractual valuation date, and
not before:
I nd that there was a course of
conduct by which Jacobs, on behalf
of LCC, agreed to accept monthly
applications that were made up to
three to four business days after the
contractual valuation date. Jacobs was
the agent authorised to administer the
contract and in my view LCC would
not have been permitted to reject, in,
say, January 2013, had it been minded
to do so, an application made three to
four business days after the contractual
valuation date. That would be
inconsistent with the course of conduct
that was by then established. [43]
Jacobs conduct had created an estoppel
that, on different facts, would have entitled
Waco to payment. The point may be
crucial in other cases, but it is equally
important to note the limits that EdwardsStuart J identied in relation to Jacobs
authority to bind LCC to the estoppel. The
court had to look to the authority conferred
upon Jacobs and determine whether it was
acting within the ambit of that authority
or whether it was exercising more broad
powers and purporting to vary the terms of
the contract. In the latter case, LCC would
not be bound by the estoppel. However,
because the contract had specied that
the valuation dates would stand unless
otherwise agreed, in this case Jacobs was
merely exercising the contractual power
vested in LCC as its agent.
2016
Estoppel
53

The estoppel argument was ventilated more recently in Grove
Developments v Balfour Beatty Regional Construction Ltd (2016)
EWHC 168 (TCC), again by a contractor in relation to a successful
smash and grab adjudication that was challenged by way of
part 8 proceedings. Balfour Beatty (BB) had been engaged to
build a hotel and serviced apartments adjoining the O2 complex in
Greenwich and the contract had included an agreed schedule of
23 valuation and payment dates, but did not identify any valuation
dates thereafter. The project was delayed and ran past the nal
date identied in the schedule. BB issued an interim application
seeking further interim payment. The issue was whether BB had
any contractual right to further interim payments, either on the
correct construction of the contract or by estoppel.
Stuart-Smith J ultimately found that there was no right for
BB to make further interim applications. The interesting point
to note about the decision is the basis on which Stuart-Smith J
rejected BBs estoppel argument. BB submitted that the parties
were operating on the mistaken assumption that BB was entitled
to receive further interim payments, with GDLs issuing of
payment certicates operating as communications of that mistaken
assumption. That argument failed, in part, because:
It is a classic example of an attempt to set up an estoppel that is
to be used as a sword rather than a shield. [40]
This is an important limit placed on any estoppel, but one
might question why it would bar BBs claim when the point
was apparently never raised in Leeds. In both cases, hadnt the
contractor sought to rely on the estoppel as the basis for its claim
for interim payment? However, although the estoppel might have
appeared to act as a sword in Leeds, the difference was that in
Grove, BB was attempting to use the estoppel to create a right
to obtain further interim payments, rather than just varying the
route through which an already existing contractual right could
be exercised. Waco was therefore able to rely on the estoppel and
there was no question of it being used as a sword.
One might question why it would bar Balfour

Beattys claim when the point was apparently
never raised in Leeds.
Where are we now?
Although the estoppel argument continues to be aired in smash
and grab adjudications and payment disputes, the TCC has yet to
fully tease out the limits of the doctrine as it will apply to building
contracts and, indeed, the authority of the engineer or contract
administrator to bind an employer to the estoppel. The authorities
convey a number of salient points that bear remembering, and
will provide useful guidance to construction professionals until
more substantive authorities emerge which identify the limits to
the doctrine:
There will be no estoppel without a sufcient number of

occurrences to form a course of conduct.
The engineer or contract administrator must have the
authority to alter the contractual valuation dates, or else the
estoppel will fail.
The estoppel cannot be used to create any new rights beyond
those conferred under the contract.
Sarah McCann, Barrister, Hardwicke

sarah.mccann@hardwicke.co.uk
www.hardwicke.co.uk @hardwickelaw
Excellent and very personable counsel

(Chambers UK)
Hardwicke is a leading barristers chambers for domestic and

international adjudication, arbitration and litigation claims in:
Construction and Engineering

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2016
Payment
55
Harding v Paice
Rhyming slang for hard cases do not make good law?
HERE has been a number of cases

recently concerning what have
become known, perhaps unfairly,
as smash and grab adjudications. So called
because the bad guy (otherwise known as
the contractor) throws a brick (otherwise
known as a payment application) through
the window to see if the good guy
(otherwise known as the employer) will
do anything about it (i.e. serve a pay less
notice). The employer does nothing and
the contractor immediately sets off to its
fence (also known as the adjudicator) to
obtain a decision requiring the employer
to pay the full amount claimed solely
on the basis of the employers failure to
serve a pay less notice and without any
assessment of the amount which might
actually be due.
Harding v Paice (2014) EWHC 3824; 157
ConLR 98 was one of three cases in which
the question arose what (if anything) an
employer can do in such circumstances
to prevent a contractor from obtaining
payment of the full amount claimed or,
perhaps more accurately, to obtain a
decision as to the true amount payable. All
three cases were decided at rst instance
by Mr Justice Edwards-Stuart between
December 2014 and February 2015.
([YZ[PUZ[HUJL
Who decided what,

when and what are
the implications?
Harding v Paice was the rst of the

three cases. The contractor, Mr Harding,
served a termination account following
the termination of his contract with the
employers, Mr Paice and Ms Springall.
The account showed that the value of
the works was 797,859 and that, after
taking into account previous payments, the
amount due and payable was 397,912.
The employers failed to serve a pay less
notice in time and the contractor started an
adjudication (the third between the parties)
seeking a declaration that the amount
properly due was 397,912 (or such other
sum as the adjudicator might decide).
The adjudicator decided that if the
employers wished to pay less than the sum
stated in the termination account, they had
to issue a pay less notice and, because
they had not done so, they had to pay the
sum stated in the account. However, the

employers did not accept that any sum
was due to the contractor and therefore
determined not to pay. Instead, they
commenced a fourth adjudication in which
they sought a decision that the value of the
contract works was 340,032.60 or such
other sum as the adjudicator may decide.
A decision in their favour would result in a
net payment to them from the contractor.
The contractor sought an injunction
restraining the fourth adjudication on
the basis that the third adjudicator had
already determined the amount properly
due in respect of the account and that it
was therefore not open to the employers
to reopen the issue in fresh adjudication
proceedings.
Edwards-Stuart J refused to grant an
injunction. He said that what was due
under clause 8.12.5 of the Joint Contracts
Tribunal (JCT) contract was the amount
properly due in respect of the termination
account and that the adjudicator had not
decided what was properly due. All the
adjudicator had decided was that, in the
absence of a valid pay less notice, the
employer had to pay the amount stated in
the account. Although the employers had
to pay the amount awarded, there was no
reason why they could not commence a
fresh adjudication to determine the amount
properly due.
The decision in that case is to be
compared and contrasted with the
decisions by the same judge in ISG v
Seevic (2015) BLR 233 and Galliford Try v
Estura (2015) BLR 321. The ISG case was
decided only days after Harding and the
Galliford Try case was decided only a
few weeks later. Both were cases where
the employer failed to serve a pay less
notice in respect of an interim payment
application. Both were cases where the
employer nevertheless disputed the amount
claimed by the contractor and, to that end,
either started or attempted to commence a
second adjudication to determine the true
value of the works as at the date of the
relevant payment application.
In both cases, Edwards-Stuart J decided
that it was not open to the employer to
56
Payment
The failure to serve a pay less notice should either have a deeming
effect in relation to all payment applications or in relation to none.
dispute the decision of the adjudicator in a subsequent adjudication because, or so he
held, by failing to serve a valid pay less notice, the employer was to be taken to be
agreeing the value stated in the application and, moreover, the adjudicator must be
taken to have decided the question of the value of the work carried out by the contractor for
the purposes of the interim application in question.
However, the judge stressed that the deemed agreement could not constitute any
agreement as to the value of the work at some later date. There was nothing to prevent
the employer challenging the value of the work on the next application, even if it
was contending for a sum which was lower than the amount stated in the previous
application. Of course, that may be all very well if the contract between the parties allows
for negative valuations but it offers little comfort to an employer whose contract does not.
The appeal
Both the contractor in Harding and the employer in ISG launched appeals, but the ISG
appeal settled before it was due to be heard. However, amongst the points raised by the
contractor in the Harding appeal1 was an argument that the fourth adjudicator did not
have jurisdiction to decide the dispute as to the proper value of the termination account
because the third adjudicator had already decided the amount properly due in respect of
the account. In making that argument, the contractor relied upon the decision in ISG,
contending that, by failing to serve a pay less notice, the employer must be deemed to
have agreed the value of the account and the adjudicator had to be taken to have decided
the value of the work carried out.
The contractor also argued in the alternative that, even if the third adjudicator had not
decided the amount properly due (i.e. because it had decided the dispute only on the
basis of the lack of a pay less notice), it had nevertheless been asked to decide that issue
and had made a decision in that adjudication, thereby engaging paragraph 9(2) of the
scheme which provides that:
An adjudicator must resign when the dispute is the same or substantially the same as
one which has previously been referred to adjudication, and a decision has been taken
in that adjudication.
In giving the leading judgment, Jackson LJ took the latter point rst. He held that the
word decision in paragraph 9(2) means decision in relation to that dispute and that
ultimately it is what the rst adjudicator actually decided which determines how much
or how little remains available for the second adjudicator. He said that Parliament could
not have intended that if a claimant refers 20 disputes to adjudication but the adjudicator
decided only one, future adjudications about the other 19 were to be prohibited. In the
present case, the third adjudicator had made no decision in relation to the value of the
account and the judge was therefore correct to interpret paragraph 9(2) in the way he did.
So far as the other ground of appeal was concerned, Jackson LJ disagreed with the
contractor that the fourth adjudicator did not have jurisdiction to decide the dispute
because it was the same, or substantially the same, as the dispute already decided by
the third adjudicator, namely the amount properly due in respect of the account. He said
that, on a proper analysis, the contractor had referred a dispute involving two alternative
issues to the third adjudicator, one relating to the failure to serve the pay less notice
(the contractual issue) and one relating to the amount properly due on the account (the
valuation issue). It was clear that the third adjudicator had only dealt with the former.
Jackson LJ said it was unnecessary to embark on an analysis of ISG. He therefore did
not think it necessary to consider what the judge had said about deemed agreement was
correct. The important point so far as he was concerned was that the passage in the ISG
1
(2015) EWCA Civ 1231; (2016) BLR 85; 163 ConLR 299
2016
Payment
judgment upon which the contractor relied

did not apply to nal accounts.
Jackson LJ therefore held that although
the employers failure to serve a pay
less notice meant that the employer had
to pay the full amount shown on the
contractors account, it did not mean that
the employer was precluded from starting a
new adjudication in order to determine the
correct value of the contractors account.
57
not there is an opportunity for subsequent adjustment should

make no difference. The failure to serve a pay less notice should
either have a deeming effect in relation to all payment applications
or in relation to none.
The Court of Appeal could (and probably should) have said
that, whilst the judge was right to decide that, as a matter of
contract, interim applications had to be paid in full in the absence
of a pay less notice, he was wrong to say that an employer was
to be deemed to have agreed the value of the interim valuation
put forward by the contractor. There was no need for any deemed
agreement, still less for the adjudicator to have been deemed to
have decided the question of the proper value of the account.
However, as things stand, there must remain some uncertainty as
to whether what the judge said about that was right.
Another aspect of the decision which may give rise to more
questions than it answers is the nding that this was one dispute
with two alternative issues, only one of which was decided by the
third adjudicator. Not only was that true of the dispute in Harding
but it was also true of the disputes in ISG and Galliford Try. Were
it not for their deemed agreement, the employers in both those
other cases would have wished to argue the same, namely that
the adjudicator had only decided the contractual issue and not the
valuation issue.
More generally, it seems likely that the decision will spawn any
number of cases where the scope of a dispute and its constituent
issues will give rise to argument as to what has already been
decided and what therefore remains for subsequent adjudication.
Harding v Paice was a hard case. The result was almost certainly
right but, for all the above reasons, it is doubtful whether it makes
good law.
Comment
It is regrettable that the Court of Appeal did
not take the opportunity to decide whether
the judge was right in both ISG and
Galliford Try to say that an employer, by
failing to serve a pay less notice, was to be
deemed to have agreed the amount stated
by the contractor to be due. Instead, the
Court of Appeal seems to have accepted
as the judge himself had tried to explain
in Galliford Try that a different regime
should apply in relation to nal accounts.
In contrast with interim payments where an
adjustment for overpayment could always
be made on the next interim valuation, an
employer would otherwise have no means
of challenging and adjusting the amount
subsequently.
There is no logical basis for the
distinction. There is no reason why any
deeming effect should depend upon the
type of payment application. Whether or

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58
Contracts
The making of IChemEs new professional

services agreement
John Challenger
CEng FIChemE FIMechE,
Chair, Contracts Committee, Institution of Chemical Engineers
HE Contracts Committee of the Institution of Chemical

Engineers (IChemE) has recognised that there are a
number of missing elements in its well-established suite
of contracts. In particular, there has been a longstanding need for
a professional services contract that can be used for consultancy,
design and certain types of management services.
The scope of professional services required by the process and
related industries can vary from relatively small and uncomplicated
activities to large-scale and complex projects. In order to cover this
range, we have decided to create two forms of contract; the rst to
be published is the short form of professional services agreement.
This will be followed by a full or long form of agreement for
larger scale professional services.
The need for a short form of contract was recognised many
years ago and up to 2004, IChemE included a consultancy
agreement in a short publication entitled Consultancy An
Engineers Guide to Getting Started by Henry Rowson and David
Wright. The form of contract included within the publication is no
longer capable of meeting the full range of applications currently
required, so we completely redrafted the short form of contract
within the IChemE suite.
Whats new?
John Challenger on the

latest form from IChemE
Previous users of IChemE contracts will nd many aspects of this

new short form familiar. However, it varies from previous contracts
in that it is for the provision of services only and does not include
within its scope the procurement of materials or the installation
or construction of plant. The obligations and liabilities of the
parties are thus quite different. Nevertheless, the general sequence
of clauses and schedules and their titles follow the previously
published forms of contract.
This short form is suitable for pure consultancy services, such
as feasibility and concept studies, the development of business
cases or research and development activities, which are likely to
have a relatively low contract price and are generally of a short
duration. It is equally suitable for other industries and types of
work unconnected with the process sector, where professional
services for concept/feasibility studies, business or product
development, or cost estimating and management are required.
This short form has not been developed to act as an
employment contract for agency staff, secondments or sole traders
working essentially as employees of the purchasing company. It
contains a typical form of agreement, a set of general conditions of
contract and recommended schedules.
Guidance is provided on how to compile the agreement
and the schedules to which reference is made in the general
conditions. The guide notes have been included that will aid
interpretation of some of the general conditions and to explain the
need for certain special conditions. As with all previous IChemE
published forms, users are strongly encouraged to read the
relevant guide notes before completing the agreement, preparing
any special conditions (if required) and completing the schedules
IChemE Forms of Contract

For over 45 years IChemE have partnered with experienced
industry professionals to publish their acclaimed UK and
international Forms of Contract.
The Red Book Lump Sum Contract
The Green Book Reimbursable Contract
The Burgundy Book Target Cost Contract
The Yellow Book Subcontract
The Brown Book Subcontract for Civil Engineering Works
The Orange Book Minor Works
The Silver Book Professional Services Agreement
The contracts are available to purchase in hard copy, printable PDF,
view only PDF and editable word document formats.
For more information or to make a purchase please contact our sales team on:
+44 (0)1788 534470 or sales@icheme.org
www.icheme.org/foc
60
Contracts
We took the view that disputes are likely to be a rare occurrence

under the short form. As a result, the approach to dispute resolution
has been deliberately simplied.
(some of which are optional), all of which
will have to be written individually.
Location
Since 2007, IChemE has published contracts
specically for use either in the UK or
for international application; however,
this short form is structured so that it
may be used in any location. As with the
previously published international forms
of contract, the short form will require the
general conditions to be supplemented by
the drafting of special conditions to deal
with those matters arising out of specic
governing law/jurisdiction and/or location
of any intended project.
The general conditions have been
drafted on the basis that the contract is
in compliance with the laws of England.
In view of the wide variations in law
and practices in different countries,
advice should always be sought as to the
appropriateness of any terms, or the need
for additional matters, having regard to
the law of the contract and the law of the
country where the services are performed
or the project is situated.
Dispute resolution
We took the view that disputes are likely
to be a rare occurrence under the short
form. As a result, the approach to dispute
resolution has been deliberately simplied
and does not include clauses in the general
conditions for arbitration, adjudication or
expert determination.
The primary approach to resolving
disputes is to escalate the matter to more
senior management of the contracted
parties rather than to an external body.
If this fails then the default approach is
to refer the dispute to the relevant court.

Clearly in some locations this may not be
a cost effective approach and therefore the
parties are encouraged to include a special
condition that will dene the preferred
method of dispute resolution.
General conditions
The general conditions in particular have
been formulated to reect best practice
and relationships within the process plant
sector, which is generally recognised as
being far less adversarial than other parts
of the construction industry. IChemE has
always adopted the basic philosophy that
the parties should co-operate to achieve
the mutual objective of a successful project.
It is in the best interests of the parties to
deal fairly with each other and with their
sub-consultants, specialists and advisors
in an atmosphere of co-operation in order
to achieve successful solutions to the
problems that will inevitably arise during
the course of any project.
Given the relatively low cost and limited
liabilities associated with the application
of the short form, it is anticipated that the
contract can be used without change to the
general conditions. As with all contracts
published by IChemE, the institution
advises against modications to the general
conditions in order to avoid introducing
provisions that may conict with these
well-established practices and relationships.
Users should particularly be aware of the
risk of introducing inconsistencies within
the contract conditions, or provisions that
may be unenforceable. The consultants
liabilities are also considerably different to
those of a contractor and the short form
reects this by deliberately limiting the
The process plant sector is generally recognised as being far less

adversarial than other parts of the construction industry.
2016
Contracts
61
containing the purchasers information and requirements. The

better the denition in the tender invitation, the shorter will be the
time needed for clarication and evaluation of the tenders.
Agreement
The consultants liabilities are considerably

different to those of a contractor and the short
form reects this.
nancial obligations of the consultant in
the event that it fails to satisfactorily carry
out the services.
Pricing and payment

As the range and variety of professional
or consultancy services covered by this
contract could differ widely, then the
payment mechanisms to be applied may
be equally wide. If, for example, the
services are for a dened project with a
predetermined timescale, the contract price
is likely to be based on a xed lump sum.
Conversely, pure consultancy services, for
which the outcome is unknown and the
terms of reference and timescales are not
capable of being fully dened, are likely
to be undertaken on a reimbursable rates
basis. The parties must carefully select and
agree the pricing mechanisms adopted if
disputes are to be avoided.
No purchaser will wish to commit
to an unlimited expenditure so it is
imperative, even where it is not possible
to fully dene the scope of work initially,
that some means of nancial and/or
time control should be applied to avoid
misunderstandings emerging in the latter
stages of the services. Based on this
approach to pricing and payment, the
contract price is not to be stated in the
agreement at the time of making the
contract, but rather is dened as the total
amount payable to the consultant.
It is strongly recommended that the agreement be used in the

form provided. The agreement denes those documents which
comprise the contract. This will include incorporating into the
special conditions or the schedules all those documents in the
consultants tender which have been agreed by the parties to form
part of the contract.
When there have been changes in concept during pre-contract
negotiations, any relevant special conditions or schedules should
be amended before the agreement is signed. The contract can be
modied by agreement between the parties at any time after it
has been signed, but it is important that any modication should
be expressed in unambiguous terms in a document signed by
both parties.
The short form is available in digital format, which is
consistent with forms of consultancy contract available from other
institutions. A printed version will be made available as part of the
long form of professional services contract when it is published in
the near future.
John Challenger CEng FIChemE FIMechE, Chair, Contracts Committee,
Institution of Chemical Engineers
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As with all other IChemE forms of contract,
it is emphasised that the purchaser should
satisfy itself of the qualication and
competence of any potential consultants
or other service providers under
consideration. In this regard it is also wise
to seek references from clients for which
the consultant has undertaken relevant
services in the recent past.
The purchaser should also devote
sufcient time to compiling information
that will help to minimise variations in
the consultants tenders. In this regard,
the tender invitation should incorporate
a draft contract document including,
as a minimum, drafts of the schedules
Commercial and Contractual Negotiation Claims Appraisal,

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2016
Delay
Concurrent delay:
Time does not always equal money
Andrew Bayne, Partner, Centra Consult
RIOR to City Inn v Shepherd (2010) CSIH 68, it had been a

fairly well established legal position that where an event
gives rise to an extension of time, the contractor is entitled
to it even if there is concurrent contractor delay. It is worth noting
that the fundamental purpose of the extension of time mechanism
in a contract is to protect the employers right to deduct liquidated
and ascertained damages in the event of the works being
completed late. If the employer has prevented the contractor from
completing its works by the completion date, it would appear
to be iniquitous for liquidated and ascertained damages to be
deducted from the contractor.
City Inn involved a traditional Joint Contracts Tribunal (JCT)
building contract. At paragraph 42 of the decision, Lord Osborne
states that:
In such a situation, which could be described as one of
concurrent causes it will be open to the decision-maker,
whether the architect, or other tribunal, approaching the issue in
a fair and reasonable way, to apportion delay in the completion
of the works occasioned thereby as between the relevant event
and the other event.
In contrast to City Inn, Walter Lilly & Co Ltd v Mackay (2012) EWHC
1773 (TCC) reafrmed what had been the established position. At
paragraph 370 of the judgment, Mr Justice Akenhead states:
In any event, I am clearly of the view that, where there is an
extension of time clause such as that agreed upon in this case
and 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.
Extensions of time, LADs

and concurrent delay
where are we up to?
It is noted that the judge made reference to an article by John

Marrin QC1 and what he described as a useful working denition
of concurrent delay as:
A period of project overrun which is caused by two or more
effective causes of delay which are of approximately equal
causative potency.
For an event to give rise to an extension of time, it is established
ground that it would need to affect the works critical path an
effective cause of delay. However, with many extension of time
matters being the subject of retrospective analysis, it is possible
that a number of matters may have caused, or had the potential
to cause, critical path delay. It could be viewed that the matter
of equal causative potency introduces a level of subjective
assessment.
A relevant event (to use the JCT term) may appear on the face
of it to be de minimis in nature perhaps to undertake some
1
(2002) 18 Const LJ No.6 436
63
64
additional works but it may still result

in critical path delay. The contractor may
be experiencing delay which is its own
responsibility (shortage of labour is an
example used in the above judgments) but
where does this result with regards to an
extension of time being due? Perhaps to
an employer or contract administrator, the
shortage of labour may be the effective
cause of critical delay. However, if the
impact of the relevant event results in
a chain of causation upon the critical
path which delays completion, then a
contractor would feel somewhat aggrieved
if the employer is still entitled to deduct
liquidated and ascertained damages.
Time v money
It is important to emphasise the distinction
between time and money. It is entirely
possible that an extension of time may
be due, but that no loss and expense
is payable and vice-versa. The chain
of causation should apply to loss and
expense as well. However, perhaps the
apportionment approach described in the
City Inn case is more appropriate with
regards to loss and expense?
In general, time related costs such as
preliminaries would not be payable to the
contractor during a period of concurrent
delay. The contractor would still need
to be on site for the period where its
Delay
concurrent delay was operative and where

costs were being incurred pursuant to the
failings of the contractor. However, where
two concurrent issues exist, it should be
possible for the chain of causation to be
established whereby costs arising from the
effect of relevant events can be recovered
by the contractor. An example would be
where the relevant event has prolonged
the period that a tower crane was needed
on site. Site staff costs are perhaps less
easily disentangled for the purpose of
attributing to a relevant event so a
degree of apportionment would perhaps
be understandable. If an extension of time
is granted, it does not necessarily result
in a situation whereby the contractor can
recover all of its time-related costs. But
in relation to time, if a chain of causation
can be established where a relevant event
has delayed completion, albeit during a
period of concurrent delay, should the
employer be entitled to deduct damages
for contractor delay during this period?
Under a traditional standard form
contract, where assessment of extension of
time is undertaken retrospectively, the full
effect of a relevant event may already be
known at the point in time an extension
of time is granted. It may be that, in
retrospect, the contract administrator takes
the view that the effective cause of critical
delay during the period the relevant event
2016
Delay
Whilst the traditional forms of contract apply

an ostensibly retrospective approach, the NEC
contracts envisage a prospective means of
calculating critical delay.
was ongoing is the lack of progress on the part of the contractor.
But this is a subjective assessment and, if the above chain of
causation can be established arising from the relevant event, the
English position reafrmed in Walter Lilly would suggest that the
contractor should be granted an extension of time.
NEC mechanism
Obviously, parties are at liberty to agree to contractual provisions
as they wish. However, it is perhaps worthwhile to reect on the
mechanism in the New Engineering Contract (NEC) with regards
to extension of time. Whilst the traditional forms of contract apply
an ostensibly retrospective approach, the NEC contracts envisage a
prospective means of calculating critical delay.
NEC envisages that the contractor will submit an electronic
programme to the project manager for acceptance and that,
pursuant to this process, the parties have an agreed baseline
programme for measuring progress and the effect that any
compensation event may have upon the planned programme. Key
to this mechanism operating correctly is that the programme is
regularly updated with progress and rescheduled to ascertain the
projected completion date as the works progress.
An example
For example, after week six of the works, the progress reschedule
indicates that the completion date has slipped by one week
due to lack of contractor progress say in relation to drainage
installation. On week seven, a compensation event arises. The
contractor undertakes an assessment of the compensation event
and submits a quotation describing the time and cost implications.
The assessed effect of the delay is inserted into the programme,
which has been rescheduled up to and including week six. This
involves the creation of new activity bar(s) within the programme
and logically linking the new bar(s) to the existing activities
as appropriate and then rescheduling the programme. If the
critical path is affected, and the completion date is delayed, NEC
envisages that an extension of time should be granted. However,
when progress is rescheduled at the end of week ten, the drainage
emerges once again as a critical driving activity. Throughout the
period of the compensation event, the drainage delay has been
ongoing and was an effective cause of concurrent critical delay.
Here, a situation exists where there is concurrent delay but the
contract provides that an extension of time should be granted
with costs.
Measuring time
Clearly one of the key objectives of delay analysis is to identify
criticality and concurrency of delay events. The process envisaged
by NEC is ostensibly a time impact analysis approach as the works
proceed. This was also the methodology that was recommended
in the rst publication of the Society of Construction Laws Delay
and Disruption Protocol. One signicant drawback of this is that
it can be a very expensive way of managing time and delay on a
65
construction project. Under the JCT and

the old Institution of Civil Engineers (ICE)
forms of contract there was no obligation
upon the contract administrator or
engineer to undertake any specic form
of delay analysis.
In City Inn, Lord Drummond Young
concluded that a complex retrospective
critical path delay analysis, in this case
where an electronic baseline programme
was unavailable, is not essential for a
partys extension of time claim to succeed.
An approach which applies the principles
of experience and common sense is to be
preferred over one that relies on a more
theoretical critical path approach. In City
Inn the parties had agreed an as-built
programme, so there was a factual basis
available for undertaking an assessment of
the effect of relevant events and contractor
progress delays. It is noted that the City
Inn judgment does not reject complex
electronic delay analysis, but it has to be
reliable with logic links being correct.
:VTLUHSX\LZ[PVUZ
It is understandable that in a situation
where concurrent delay exists that one
cause of delay may prima facie appear
to be more signicant than another.
However, if a concurrent employer liability
event has caused critical delay, an effective
cause of critical delay, then should the
principle that the employer has prevented
the contractor from completing its works in
the period of concurrent delay apply?
City Inn considers the JCT terminology
in relation to the architect undertaking a
fair and reasonable assessment. Perhaps
such an approach may have some merit in
resolving quantum where concurrent delay
exists, but should the employer retain the
right to deduct liquidated and ascertained
damages in a period it has caused critical,
albeit concurrent, delay to the works? In
such circumstances is the employer not
in fact beneting from its own failing in
being able to deduct damages and delay
the works?
Andrew Bayne, Partner, Centra Consult
andrewbayne@centra-consult.com
www.centra-consult.com
Should the employer retain the right to deduct

LADs in a period it has caused critical, albeit
concurrent, delay to the works?
66
Risk
With great risk comes...?

Gordon Lees
FCInstCES,
JGL Consulting
Risk comes from not knowing

what we are doing.
Warren Edward Buffett
The management of risk in

construction projects
HE construction industry is inherently a high risk industry.

The nature of the operations undertaken and the varying
physical and nancial conditions under which each project
is carried out expose each party to a construction contract to risk
for various and differing reasons. While these risks are inherent in
the construction process it is only the severity and occurrence of
those risks that can have an impact on a construction project with
varying degrees of consequence. The construction client is at risk
from the well-known triumvirate of cost, time and quality, and it
is for the client to balance these three in the procurement stage of
the project.
Initially, the construction client must assess the feasibility of
the overall project in current market conditions and whether the
funding requirements can be met, the design responsibility that
could impact on quality depending on the route chosen and the
potential impact on revenue if the project is not delivered on time.
It could be considered tempting for the client to pass all of this
risk onto the contractor via a PFI model or design and build form
of contract, or even by way of drafting mitigation measures into
amendments to the form of contract used for the project.
However, is the relinquishing of any control of the risk good
business practice?
Passing more risk on to the contractor only results in a
higher cost. The uncertainty of the risk will likely be mitigated
by contingencies in the tenders received, as the contractors
commitment to providing cost and time certainty in the tender will
be governed to some extent by the perceived risk in the project
and the contractors share of that risk. The risk to the contractor
is inherent in the execution of the project if the assumptions it
has made in respect of construction methods and materials are
incorrect, and its supply chain does not perform or provide a
suitable standard of workmanship.
Further, the project itself is subject to risks of which unforeseen
conditions, changes in legislation, lack of resources, changes in
commodity prices, currency uctuations and health and safety can
detrimentally affect the time and cost of the works. These risks are
required to be mitigated in order to deliver the project.
The management of risk should therefore be, if not at the
forefront of endeavours, at least on the radar. The identication
and minimisation of risk will reduce or eliminate those adverse
consequences and give a better guarantee of potential outcome.
While the management of risk and uncertainty in a construction
project can be dealt with by an arbitrary contingency sum in the
tender for construction works, is it an effective method for any of
the parties to the project?
Risk management systems

The implementation of an effective risk management system
should therefore be considered in the assessment of a
2016
Risk
The construction client is at risk from the wellknown triumvirate of cost, time and quality, and
it is for the client to balance these three in the
procurement stage of the project.
construction project to reduce, if not
eliminate, the requirement for an
arbitrary risk contingency. To assist with
the implementation of an effective risk
management system, the International
Organisation for Standardisation
has published ISO 31000:2009 (risk
management principles and guidelines)
to provide both guidance on the purpose
and implementation of a risk management
system and an international standard for
risk management. This document provides
a basis for the implementation of effective
project risk management by allowing the
parties to the project to identify where
any risk is best allocated between them;
identifying risk between the parties for
mitigation during the course of the project;
the framework in which risk can be
identied, analysed and evaluated; and
proposals for mitigation to be considered
for implementation as necessary.
An important aspect of risk management
is the concept that the risk is borne by
the project and the allocation of that risk
is best distributed between the parties
on the basis of who is best placed to
carry that risk, i.e. who has the resources
and expertise to best mitigate that risk to
the project.
The accompanying guide to the
ISO denes risk as being the effect of
uncertainty on objectives 1 rather than the
traditional denition a possibility of harm
or damage/nancial loss.2 This different
denition introduces the concept that risk
can be perceived as having a positive effect
as well as a negative effect. To that end,
risk should be considered between the
parties as a risk to the project, as this is
the common objective of the parties, rather
than being passed between the parties
without consideration of who is best
placed to accept that risk and mitigate it for
the benet of the project.
Identify, assess, manage

The process of risk management begins
with the identication of the risk where it
1
ISO/IEC CD2 Guide 73, Risk Management

Vocabulary, 1 April 2008
2
Abstract taken from Oxford English Dictionary
67
is important to not only concentrate on the

known risks, i.e. those that regularly occur
on the type of project under consideration
and can be identied from historic
knowledge or information available in the
public domain, but also the unknown
risks that could impact the objectives no
matter how remote and are likely to be
specic to the project. These unknown
risks can be identied through workshops,
brainstorming or more formal forums
such as hazard identication (HAZID) and
hazard and operability studies (HAZOP).
Once risks are identied, the next stage
in their management is the assessment of
the potential severity of impact and the
probability of them occurring during the
course of the project. This risk assessment
can be difcult where unknown risks
are identied and limited information is
available on the potential occurrence, in
which case the management must make
a judgment on the probability and impact
any such risk may have.
This stage includes qualitative risk
assessment. The impact of the risk on the
project is assessed on the basis of physical
impact and quantitative assessment,
whereby the risk is allocated a numerical
value against which impact is measured.
Both methods of assessment investigate
effect and probability in assessing the risk,
and are to a great extent intertwined. The
assessment of the risk can be identied for
management purposes by way of a risk
formula to provide a comparable method
of risk evaluation.
Qualitative risk assessment is generally
described as subjective and as such is
applicable to matters such as health and
safety, where the outcome of risk analysis
is to reduce the potential health and safety
risk to as low as reasonably practicable
(ALARP), without the encumbrance of
consideration of economic aspects.
On completion of the assessment of
the effect and probability of a risk, there is
then the process of assessing the mitigation
measures that could be implemented to
minimise or eliminate that risk from the
project. These mitigation measures will
be determined by the probability of the
risk having an impact on the time, quality
or cost of the project. These mitigation
measures can include consideration
of insurance against the risk; revised
construction methods to avoid the risk;
or the implementation of procedures and
processes to reduce the risk.
Once the assessment is completed and
the risk is quantied, the risk contingency
for any risks accepted as being inherent in
the project can be included in the tender
on the basis that the risk contingency is
now an empirical determination of the
potential nancial and programme impact
of the identied risks. The cost and time
associated with these risks can be included
in the tender as appropriate.
68
Risk
This different denition introduces the concept that risk can be perceived as having a
positive effect as well as a negative effect.
The management of risk during the course
of the project is an iterative process
to monitor the identied risks and the
implementation of the mitigation measures
and identify, assess and evaluate any
new risks that may arise and were not
considered in the tender process. The
introduction of the early warning system
into contracts, most notably in the New
Engineering Contract (NEC) suite, has
pointed out the requirement for a project
to identify and deal with risks that could
impact the time, quality and cost of a
project in a collaborative manner, and
to allocate risks to the party best able to
mitigate them for the good of the project.
Knowing what we are doing

The implementation of an effective risk management system for
both tendering and project execution, whether in accordance with
ISO:31000 or not, will allow a party to a construction project to
better understand the potential problems that are likely to arise
and how best to mitigate or eliminate them.
The management and mitigation of risk is therefore an
important aspect of the construction process for any size of
project. An effective risk management system will reduce the risk
that comes from not knowing what we are doing and provide
greater certainty to the parties to the project.
Gordon Lees FCInstCES
JGL Consulting
gordon@jglconsulting.co.uk
www.jglconsulting.co.uk
2016
Contract Administration
69
Contract administration for claims and

claims avoidance
Andy Hewitt
FCInstCES FICCP FCIOB FQSi ACIArb,
Executive Ofcer, Institute of Construction Claims Practitioners
What really matters in

contract administration
ONTRACT administration is a farreaching topic and much of it falls

outside the purpose of this article,
but there are many ways in which good
contract administration will help when a
claim situation occurs. Additionally, many
claims arise from conicts or ambiguities in
contract documents or the failure of one of
the parties to comply with its obligations
under the contract. Good contract
administration can also therefore play an
important part in avoiding claims.
The contract documents

The contract documents will usually
form the basis of any claim. If something
has changed, the extent of the change
may only be measured and evaluated by
reference to the drawings and specication
upon which the contract is based. The
claimants entitlement to make a claim will
usually be spelled out in the conditions
of contract, as will the procedure to be
followed in the case of a claim. If there
is a disagreement between the parties as
to design, quality, responsibility, scope of
works or procedures, the contract is the
place to look for guidance and resolution.
There is a great temptation for those
whose job it is to prepare and compile the
contract, to dump all sorts of documents
into it. Typically these may consist of
correspondence between the parties
between the time of tender and the
letter of acceptance, tender queries and
clarications, tender bulletins, minutes of
meetings during the negotiation process
and the like. The potential for conict
between such documents and other
contract documents becomes high in such
a situation and may, according to the
order of precedence stated in the contract,
not reect pre-contract negotiations and
subsequent agreements between the
parties. The possibility for error is also
increased if important points are hidden
away in the main contract documents.
Disputes often arise through the interpretation of the contract and

it is true to say that if the contract documents are poorly drafted
and compiled, the potential for disputes increases tremendously.
For these reasons it is innitely preferable to keep the other
documents section as small as possible and to amend the tender
documents to take into account any changes that have been
negotiated and agreed between the parties within the appropriate
section of the contract. This also applies to tender queries and
their responses, which will arise in the rst instance from lack of
clarity, ambiguity or conict within the documents. Rather than
just including the tender queries and responses as an addendum to
the contract as is often the practice, the relevant documents should
be amended to reect the instructions given in the responses to
such queries.
The best time to complete and sign the contract is as soon as
possible after the agreement has been made. If this is not done,
personnel responsible for the construction and administration of
the project will often replace the people involved in the tender
and subsequent negotiations or memories will grow dim. Whilst
there should be pressure to produce the contract documents for
completion and signature as soon as possible, it should always be
remembered that rushing this very important task and producing a
poor set of contract documents could have serious consequences
later on.
Programmes and planning

Most forms of contract require the contractor to submit a
programme of the works to the engineer for acceptance or
approval. This usually has to be done within a specied time
frame. The contractor should do its utmost to produce the most
detailed and accurate programme possible within the time
stipulated. As a minimum, the programme should include:
A clear intention of the time and sequence of how the work is

intended to progress.
A clear critical path to completion.
Dates when the employers input is required, with links to the
critical path.
If delays occur and the contractor wishes to pursue an extension

of time claim, then the programme will be the yardstick against
which to measure the effect of delays, so it is essential to have this
in place as soon as possible. It is usual for contracts to allow for
revised programmes to be prepared should the previous version
no longer reect the intended sequencing of the project, current
progress or extensions of time awards. A revised programme is
the one in which to make amendments and not in the original
baseline programme.
Contract administration procedures should allow for an updated
programme to be maintained, recorded, submitted, agreed and
kept as a record on a regular basis. The updates should include
for changes such as additional work, omitted work and extensions
of time awards. If logic errors have been discovered within the
70
Contract Administration
baseline programme, then these should be discussed with the

engineer and corrected accordingly. Should it be necessary in a
claim situation to demonstrate whether or not the project was
proceeding as planned or that there were no concurrent delays at
any time, such a record will become an essential tool in doing so.
Many extension of time claims ounder on the method of delay
analysis used to demonstrate the effect of delays. The contractor
often wishes to perform one method of delay analysis and the
engineer considers that another method is more appropriate. Such
disagreements will only serve to prolong the resolution of a claim
and involve the parties in additional expense. It is suggested that
if the employer or engineer prefers a specic method of delay
analysis to be utilised, then this requirement is included within
the contract. This will ensure that the contractor maintains all the
necessary records and produces programmes that will allow an
analysis to be performed in the required manner.
Contract administration systems should establish procedures for
the early identication of potential claims, rstly because notices
or early warning of such will usually have to be submitted in
order to protect entitlement and, secondly, so that the contract
administration system can kick in and appropriate actions be
taken. One of the early things that should be done from a claim
point of view is to consult with the planners to ascertain whether
an event will have any effect on the programme and, if so,
what the likely effect will be. At this stage you are attempting
to discover whether a delay to the completion date is likely and
consequently whether an early warning or notice of an extension
of time should be submitted. An in-depth analysis is not necessary
at this stage, but the planners should at least provide a best
opinion on which to base the decision as to whether to send a
notice or ag the event as a potential claim. It is always better to
send a notice and later advise that having investigated the matter
further no claim will be pursued, than not to send a notice.
The contractor often wishes to perform one

method of delay analysis and the engineer
considers that another method is more
appropriate. Such disagreements will only
serve to prolong the resolution of a claim.
measures may be undertaken, the prudent employer will include
provisions for the forthcoming claim in its budget.
The contract will sometimes state the requirements for a notice;
will often prescribe time frames within which notices must be
submitted; and will usually provide details of how notices should
be sent or delivered. Some contracts provide that the submission
of notices is condition precedent to entitlement, which means that
if the contractor does not comply with the requirements of the
contract in this respect, it will lose the rights for compensation.
It is fairly obvious that the contractors contract administration
systems should place particular importance on the subject of
submitting notices. Remember that good contract administration
will help in both the avoidance and resolution of claims.
Andy Hewitt FCInstCES FICCP FCIOB FQSi ACIArb, Executive Ofcer,
Institute of Construction Claims Practitioners
Andy.hewitt@hewittconsultancy.com
http://instituteccp.com @ICCPMembership
Records, records, records

Many knowledgeable people have said it previously, but the three
most important aspects to a successful claim are good records,
good records and good records. I have found absolutely no reason
to disagree with this statement and have also come across several
situations where a potentially good case has been spoiled for the
absence of adequate records.
The burden of the claimant is to prove its case on the balance
of probabilities. In order to do so, it must substantiate that the
events have actually occurred, possibly substantiate the timing of
the events and substantiate that the provisions of the contract have
been complied with in terms of notices and submissions. The only
way this may be done is by reference to the project records and
if the claimant does not have such records, it will be very difcult
to prove the claim. It is therefore extremely important that, rstly,
a robust contract administration system is created and secondly,
that systems and procedures are put in place to adequately record
the events and the effects on a contemporaneous basis. Good
records will establish events, dates and times, which, particularly
in the case of an extension of time claim, will prove to be of
great benet. Computerised document management systems are
common on construction projects and may be used to great effect
in claim situations.
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Notices
Many forms of contract include requirements for the contractor
to provide notices or early warning of events or circumstances
that it considers may provide entitlement to additional time or
payment within a specied time frame of the event occurring.
The reasoning behind such requirements is that the employer and
its agents need to be made aware of the circumstances as soon
as possible, in order that they may consider corrective action or
mitigation measures which may be implemented to minimise
the effects of the circumstances. Additionally, if no mitigation
Available on an international basis to

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Are you ready to start the path to professional recognition?
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2016
Construction Law Professionals
Blue Sky ADR
of time submissions for construction

disputes. He has over 10 years experience
working for contractors involved in
building and civil engineering works
and has produced expert reports for
the purposes of court action. Andrew
Bayne also has a masters degree in
construction law.
Alexander Dickson BSc MBA LLB MCIOB FCIArb
sandydickson@centra-consult.com
Chairman. Sandy Dickson is a quantity
surveyor with chartered status within the
construction industry. He is experienced in
commercial management; the preparation
and defence of claims; and preparation and
adoption of commercial control systems
for commercial organisations. He has
prepared expert witness reports and also
has extensive experience in representing
parties within adjudication and more
recently in mediation.
Peter McKernan HNC Building MCIOB ACIArb
petermckernan@centra-consult.com
Partner. Peter McKernan is a highly
experienced project manager and planner
who has worked in both the contracting
and consulting sides of the industry. His
experience spans more than 30 years and
he is experienced in the preparation of
delay analysis and production of reports
for adjudication, litigation and mediation
submissions.
30-32 Howard Business Park

Howard Close
Waltham Abbey
Essex
EN9 1XE
UK
+44 (0)845 371 2575
admin@blueskyadr.com
www.blueskyadr.com
Peter Barnes MSc FCIArb FCIOB MRICS MICE MCInstCES
Arbitrator, adjudicator, mediator and
expert witness in respect of both liability
and quantum issues. Represents parties in
arbitration, adjudication and mediation.
Provides seminars and training and author/
co-author of several books including Delay
and Disruption Claims in Construction.
Matthew Davies BSc(Hons) LLB(Hons) LPC MRICS
Specialises in providing legal, commercial
and contractual management, construction
claims and dispute resolution services
to the construction industry. Drafts and
reviews contracts, subcontracts and
collateral warranties and advises on a
variety of contentious and non-contentious
construction matters. Matthew Davies
is on the Royal Institution of Chartered
Surveyors panel of adjudicators.
Centra Consult
17a Spylaw Street
Edinburgh
EH13 0JS
UK
+44 (0)131 441 0800
www.centra-consult.com
Ana Almeida MCE Civil Engineering PMP
anaalmeida@centra-consult.com
Consultant. Ana Almeida is a chartered
engineer with experience in project
management in the UK and overseas. Prior
to joining Centra Consult, her experience
was gained working for contractors on
multimillion pound construction projects.
Ana Almeida is currently completing her
studies to achieve an MBA.
Chris Atkinson BSc(Hons) LLM(Construction Law)
MCInstCES MCIArb
chrisatkinson@centra-consult.com
Partner. Chris Atkinson is a quantity
surveyor with over 20 years experience
within the construction industry and a
masters degree in construction law. He is
experienced in commercial management;
the preparation and defence of claims;
the preparation and adoption of
commercial control systems for contracting
organisations; and a variety of dispute
resolution processes, notably adjudication.
Chris Atkinson is on the Chartered Institute
of Building and Construction Industry
Council lists of adjudicators.
Andrew Bayne BSc MSc LLM(Construction Law) MCIOB
MCIArb ARICS
andrewbayne@centra-consult.com
Partner. Andrew Bayne is a delay analyst
specialising in the preparation of extension
Corbett & Co International Construction

Lawyers
George House
2 Claremont Road
Teddington
TW11 8DG
UK
+44 (0)20 8614 6200
info@corbett.co.uk
www.corbett.co.uk
Edward Corbett
Recognised as a principal construction
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Institute of Construction Claims

Practitioners
Kissack Court, 29 Parliament Street
Ramsey
IM8 1AT
Isle of Man
hello@instituteccp.com
http://instituteccp.com
Andy Hewitt FCInstCES FICCP FCIOB FQSi ACIArb
Andy Hewitt is executive ofcer of
the Institute of Construction Claims
73
Practitioners. The institute offers associate,

member and fellow membership to
professionals working in the specialist
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Corporate membership is also available
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this eld. The ICCP is an international
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practitioners on a worldwide basis.
John Papworth Limited

White Shutters, 47 High Lane
Shapwick
Bridgwater
Somerset
TA7 9NB
UK
+44 (0)7747 778 517
www.johnpapworth.com
John Papworth
johnrobertpapworth@gmail.com
Consultant in international dispute
resolution engineering and construction.
Chartered arbitrator; FIDIC listed dispute
board member; adjudicator, mediator,
conciliator, expert determiner. 46 years
experience in different continents and
jurisdictions on oil and gas, power
generation and transmission, building, civil,
process, electrical, mechanical and nuclear
engineering projects. Gives training and
talks to rms and professional groups.
Keating Chambers
London
WC2R 3AA
UK
+44 (0)20 7544 2600
clerks@keatingchambers.com
Alexander Nissen QC
anissen@keatingchambers.com
Alexander Nissen QC is a highly acclaimed
silk who acts for and against major
players across the construction industry
in a range of domestic and international
claims (via litigation, arbitration,
adjudication and mediation). Alexander
is a member of leading commercial set
Keating Chambers, which has unparalleled
expertise and experience in construction
law. Its outstanding silks and juniors
are specialist advocates, committed
to providing the best legal advice, in
conjunction with a practical strategic
understanding of the commercial pressures
specic to the construction industry.
74
Construction Law Professionals
Leach Group
in arbitration and DAB proceedings. He

has worked extensively in Europe, the
Caribbean, Latin America, USA and the
Middle East.
Unit 10
Forest Gate
Pewsham
Chippenham
SN15 3RS
UK
+44 (0)1249 443 118
www.leachgroup.com
Simon F Fegen MRICS FAArb(Southern Africa) MCIArb
CEDR Accredited Mediator
s.fegen@leachgroup.com
Simon Fegen specialises in the preparation
and negotiation of contractual claims
on major building and civil engineering
projects. He prepares submissions,
represents clients in DAB and arbitration,
and conducts training programmes
on dispute avoidance and contract
administration. He is a CEDR accredited
mediator. He was based in Africa and the
Middle East for 30 years and works in
Africa, Asia, the Middle East and Europe.
Melvyn D Smith FCInstCES FFB
m.smith@leachgroup.com
Leach Group managing director. He has
extensive building, civil engineering
and M&E experience in the preparation
and negotiation of contractual claims.
Melvyn Smith, an experienced quantum
expert, provides advice on dispute
avoidance and contract administration,
prepares submissions, represents clients
in adjudication, and assists legal teams
QUALSURV International
8 Charles Court
Budbrooke Road
Warwick
CV34 5LZ
UK
+44 (0)1926 499750
info@qualsurv.co.uk
www.qualsurv.co.uk
David Fishwick FCInstCES ACIArb MAPM
david.shwick@qualsurv.co.uk
Director QUALSURV group of companies,
providing specialist contract commercial
management/dispute resolution services
both in the UK and internationally. Broad
experience in diverse sectors, particularly
civil engineering; energy; and commercial
building. Recent repeat commissions
include procurement/contract
management of off-shore wind farms
and renewable energy plants; claims
preparation; expert reports for
international arbitration proceedings.
Schoeld Lothian
3-7 Temple Avenue
London
EC4Y 0DT
UK
www.schoeldlothian.com
Dr Glyn Jones BSc MBA FRICS FCInstCES FCIArb
+44 (0)20 7842 0920
glynjones@schoeldlothian.com
Principal consultant experienced in all
aspects of commercial management and in
principal forms of construction contracts,
nationally and internationally. Sector
experience in construction, transport,
infrastructure and energy. Specialisms
include contract preparation, procurement,
risk and contract management, for
employers and contractors. Also
experienced in carrying out dispute
avoidance and management, involving
preparation and negotiation of claims.
Alan Williamson FCInstCES MRICS MBIDP
+44 (0)20 7842 0926
+44 (0)7703 207598
alanwilliamson@schoeldlothian.com
Principal consultant experienced
in preparation and negotiation of
claims under most principal forms of
construction contracts, both nationally
and internationally. Specialises in dispute
resolution through adjudication, arbitration,
mediation and litigation, representing
contractors, subcontractors and employers
as either claimant or respondent. Regular
contributor of construction law articles to
a number of publications. Alan Williamson
also provides bespoke training courses,
particularly upon New Engineering
Contract based contracts. Member of the
Society of Construction Law.
Construction
Solutions
Drawing on decades of experience working on some
of the worlds most complex, high prole construction
projects, FTI Consulting has a proven track record
in providing solutions that help our clients prevent,
manage and resolve construction issues.
PREVENT
MANAGE
We help resolve disputes by establishing a

clear, commercially driven strategy, promoting
early resolution. Our team has in-depth experience
of preparing and evaluating claims, analysing
delays and costs, and giving evidence in court and
arbitral panels on contractual, delay and
quantum matters.
For further information on our service offerings,
or if you are interested in joining our growing team,
please contact:
Tim Haynes
Senior Managing Director
Head of Construction Solutions, EMEA
+44 (0) 20 3727 1237
tim.haynes@fticonsulting.com
RESOLVE
Follow us on LinkedIn:
FTI Consulting Construction Solutions
www.fticonsulting.co.uk
CRITICAL THINKING AT THE CRITICAL TIME

2016 FTI Consulting, Inc. All rights reserved.

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Chartered Institution of Civil Engineering Surveyors

CONSTRUCTION LAW REVIEW

20th Anniversary Issue

OUR TECHNICAL TEAM

Winners of the AI Magazine 2016 Dispute Resolution Awards for

BMW Goodwood Festival of Speed

44. Performance bond calls

David Loosemore, Chartered Institution

Stephanie Barwise QC and Omar Eljadi,

of Civil Engineering Surveyors, and

Julian Bailey, Society of Construction Law

07. Civil litigation: 20 years on

Simon F Fegen, Leach Consultancy

Alexander Nissen QC, Keating Chambers

11. Articial intelligence and law

50. Could the payment provisions of the

16. Expert errors

52. An (e)stopped clock is right twice a

John Mullen, Diales

18. Foreseeing the unforeseeable

Sarah McCann, Hardwicke

25. Employers claims under FIDIC

55. Harding v Paice: Rhyming slang for

28. Adverse weather

David Sears QC, Crown Ofce Chambers

Emily Monastiriotis, Susanne Hose and

47. FIDIC Red Book, sub-clause 2.4

Simos Schizas, Bond Dickinson

58. The making of IChemEs new

30. Payment provisions under LDEDCA 2009

Peter Barnes, Blue Sky ADR

Institution of Chemical Engineers

33. Proving extension of time claims

63. Concurrent delay: Time does not

Manoj Bahl, FTI Consulting

Andrew Bayne, Centra Consult

36. Fixed payment schedules:

66. With great risk comes...?

Chartered Institution of Civil Engineering Surveyors

Alan Williamson, Schoeld Lothian

Gordon Lees, JGL Consulting

39. Knocked out on penalties

69. Contract administration for claims and

Baker & McKenzie

Andy Hewitt, Institute of Construction

42. Collateral warranties

71. Index of Construction Law

Fenella Mason, Burness Paull

Construction Law Review 2017 copy date: 31 May 2017.

Construction Law Review

TS been 20 years since the Chartered

David Loosemore FCInstCES

Does construction law matter?

OES construction law matter?

There are two matters at the core of

Commercial Dispute Resolution | Construction & Engineering

www.keatingchambers.com | +44 (0)20 7544 2600 | clerks@keatingchambers.com

Civil litigation: 20 years on

RITING in the very rst volume of this journal,

TCC guide and pre-action protocol

A look at two decades

Since the introduction of the Civil Procedure Rules in 1998,

One consequence of the protocol has been the front-loading of

Dr R Gaitskell QC, Trends in Construction Dispute Resolution, SCL Paper 129,