COVID-19: potential claims against construction professionals and its impact on ongoing and future disputes
The government has confirmed that construction sites across the UK should continue to operate. However, firms across the supply chain are being faced with difficult decisions about whether to temporarily close sites and, where sites remain open, the restrictions that need to be put into place.
The decision to keep a construction site open
COVID-19 has given rise to two principal problems which have affected many construction sites that remain open:
- The difficulty for workers to continue without breaching government advice about social distancing on site.
- Staff shortages, caused by illness or self-isolation , making it difficult or impossible to progress the works safely.
The decision to close a site or implement restrictions will normally be led by the contractor who has a statutory duty to manage health and safety during the works. However, the contractor will often liaise with the client’s health and safety adviser – the principal designer.
Hence, professionals (e.g. architects and engineers) who have taken on the principal designer role will become directly involved in the decision as to whether to close a site. Where sites are subsequently shut down by the HSE for being unsafe, the principal designer could be criticised for the immediate and unplanned disruption and delay. Conversely, if an overly cautious approach is adopted, then the principal designer could later be criticised for advising on an unnecessary shutdown.
We may also see claims where consultants are unable to carry out their contractual obligations to meet design milestones or to comply with a programme. This could be as a result of staff shortages, site problems, delays with the planning process or other designers providing late information.
Consultants should review their appointments to establish whether they have an entitlement to an extension of time and whether or not there are strict obligations in the contract to comply with the programme.
So, for example, COVID-19 would likely be deemed ‘outside the consultant’s control’ for the purposes of the RIBA and ACE Professional Services Contracts. But it is also not unusual for bespoke appointments to include strict obligations to comply with a programme with no right to an extension of time.
There is likely to be arguments in the future therefore as to which project team member was the cause of a delay. That being said, claims relating to the late delivery of design information are perhaps less of a threat now given that a lot of construction works have been halted and claimants may struggle to prove that any project delay was caused by the designer.
Duty to warn
Subject to the terms of appointment, we are also likely to see claims arising from a failure to warn clients of delays, and cost overruns as a result of COVID-19 and to advise on steps which could be taken to mitigate or avoid those issues.
Further, there may be contractual requirements to provide regular progress reports and the consultant will need to clearly set out all the impacts that COVID-19 has and will have on the project e.g. shortages of goods, materials and personnel.
There are likely to be claims arising from a failure by consultants to keep their clients informed of the impact COVID-19 may have on their services and the project generally and failing to consider whether an early warning notice should be given.
We may see a rise in claims against contract administrators who are often architects and quantity surveyors.
Many contractors are claiming entitlement to an extension of time because COVID-19 (and the government’s response to it) constitutes a force majeure or specified events under the contract. This will depend on how the pandemic has affected the project in question. If successful in demonstrating force majeure or a specified event, the contractor will often be entitled to an extension of time to the completion date.
Contract administrators will be faced with an increased number of extensions of time and/or additional payment applications on ongoing projects, and they are likely to be placed under considerable and increased pressure in already difficult circumstances. This could result in errors being made in their assessment of extension of time claims and their application of the contractual mechanics generally.
Suspension or termination
Suspension and/or termination may be an attractive way out of an appointment if the impacts of COVID-19 are significant. Whether suspension or termination are an option will depend on whether the appointment entitles the consultant to exercise these rights.
There may be potential claims against professionals for halting their services without agreement by the client or wrongful termination or suspension where consultants have failed to carefully review existing appointments before terminating.
The impact of COVID-19 on ongoing and future disputes
The current crisis unquestionably presents a variety of challenges to the effective and fair resolution of ongoing and future disputes.
As cash flow is now paramount to contractors and developers, we are likely to see a rise in the number of disputes referred to adjudication. Facing an adjudication (with its already tight timescales and ‘rough and ready’ justice) in the current circumstances (e.g. working remotely, and without direct access to documents and witnesses) may create even more ‘injustice’ to professionals.
The question as to whether a party can prevent an adjudication from proceeding, or do anything about the tight timetable, in view of COVID-19, was recently considered in the case of MillChris Developments Ltd (MillChris) v Waters [07.04.20] where the TCC (Technology and Construction Court) rejected an injunction application. The Court did not regard MillChris’s grounds for an injunction as entirely meritorious and held that the adjudication would not necessarily be conducted in breach of natural justice.
However, Adjudicators will be alive to the difficulties currently faced by parties and are likely to be sympathetic to the adjudication timetable, as reflected in the MillChris adjudication where the adjudicator offered a two week extension of time.
In accordance with Practice Direction 51Y, the court may exercise the power to hold hearings privately or remotely. In our experience to date, remote hearings in the Business and Property Courts have run smoothly although complex trials will present greater challenges.
Practice Direction 51ZA extends the period by which parties can agree extensions of time, without the court’s permission, to 56 days. This is helpful particularly to defendants at the early stages of litigation and it would take a brave Claimant to refuse an extension request in the current climate.
Courts are also adopting a sensible approach where parties are unable to agree an extension of time and/or permission is required. In Muncipo De Mariana & Others v BHP Group PLC [20.04.20] the TCC granted an extension of time of five to six weeks because, even with the proper use of technology and extra efforts by the Defendants, the reply expert evidence would have taken significantly longer to prepare and produce as a result of working remotely and with restricted access to materials and IT support.
In terms of resolution of disputes, where cash flow is absolutely paramount to contractors and developers in the current climate, we are seeing an increased number of settlements with some very good deals being struck by professionals. That is likely to continue and will hopefully offset, to some extent, the potential for an increase in claims.
This article was co-authored by Lewis St John, Litigation Assistant.