evonshiressolicitors

Construct ion & Property Serv ices Br iefSummer 2013

In this issueWelcome 2

Concurrent Delay Update 3

Basements: unearthing legal issues 6

Two-stage tendering and JCT pre-construction services agreement 8

Health & Safety: Clarification of “so far as reasonably practicable” 10

Rights to light: a new dawn 17

Due diligence v all reasonable endeavours - to suspend or not to suspend? 20

Lessons learnt: adjudication 22

Welcome to the Summer 2013 edition of the Construction & Property Services Brief.

We take this opportunity to welcome Matthew Cocklin to the Construction & Property Services Department at Devonshires. Matthew spent a number of years working for a global engineering consultancy and recently won First Prize in the Hudson Prize competition of the Society of Construction Law (UK) for a paper on international approaches to concurrent delay. In this edition, Matthew shares his novel thinking on this complex subject.

You may be interested to know that we are planning to deliver a seminar on extensions of time and concurrent delay in Manchester in September 2013. Further details will follow in due course.

If you have any questions arising out of the topics considered in this edition of Construction & Property Services Brief then do not hesitate to contact the author of the relevant article.

Contributors

Welcome

Matthew Cocklin Solicitor020 7065 1813matthew.cocklin@devonshires.co.uk

Tom PhillipsSolicitor020 7880 4328tom.phillips@devonshires.co.uk

Tom KeyaSolicitor020 7065 1848tom.keya@devonshires.co.uk

Mark London Partner020 7880 4271mark.london@devonshires.co.uk

Asif Patel Trainee Solicitor020 7880 4381asif.patel@devonshires.co.uk

Kathryn ParkesSolicitor020 7065 1842kathryn.parkes@devonshires.co.uk

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Article Title

Introduction

Concurrent delay is one of the most complex and controversial aspects of construction dispute resolution. This article summarises the existing position in English law, challenges current thinking and questions what this means for parties to construction contracts.

The English courts have considered the “but for” test, the burden of proof approach and the dominant cause approach for the assessment of causation and damage in cases of concurrent delay. However, the preferred approach is derived from Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32 (TCC). This is confirmed by a number of English cases with the most recent being Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC).

The facts of Malmaison are straightforward

Malmaison Hotel pleaded contractor culpable delay in defence of Henry Boot’s extension of time (EOT) claim. Henry Boot asked the court to determine whether an arbitrator had jurisdiction under the EOT provision to take account of the facts and matters cited by Malmaison Hotel to establish that the causes of delay were the fault of Henry Boot.

The court decided that the arbitrator did have jurisdiction. Mr Justice Dyson (as he then was) held that the architect, when determining the delaying effect of a relevant event under clause 25 of the JCT Standard Form of Building Contract (1980 Edition – Private with Quantities), is not precluded from considering the effect of contractor culpable events, notwithstanding the existence of an “admitted delay” on the part of the employer:

“In my view, the respondent is entitled to advance

these other matters by way of defence to the EOT/I claim. It is entitled to say (a) the alleged relevant event was not likely to or did not cause delay eg because the items of work affected were not on the critical path, and (b) the true cause of the admitted delay in respect of which the claim for an extension of time is advanced was something else. The positive case in (b) supports and fortifies the denial in (a). The respondent could limit its defence to the claim by relying on (a), but in my view there is nothing in clause 25 which obliges it to do so.”

The English courts, however, have side-stepped the full effect of this judgment in favour of a restrictive interpretation. This is premised on an “agreement”, or common ground, between the parties to the case:

“… it is agreed that if there are two concurrent causes of delay, one of which is a relevant event, and the other is not, then the contractor is entitled

to an extension of time for the period of delay caused by the relevant event notwithstanding the concurrent effect of the other event.”

This agreement, however, was one between the parties and not part of the judgment of Mr Justice Dyson. Nonetheless, it is widely represented as a general principle of English law on concurrent delay, known as the ‘Malmaison approach’. It is deemed to support the proposition that the architect, when determining the delaying effect of a relevant event under clause 25, is not permitted to consider the effects of other events, being contractor culpable events.

The Malmaison approach is enshrined in Core Principle 9 of the Society of Construction Law Delay and Disruption Protocol (the Protocol):

“Where Contractor Delay to Completion occurs or has effect concurrently with Employer Delay to Completion, the Contractor’s concurrent delay

Concurrent delay update

“Concurrent delay is one of the most complex and controversial aspects of construction dispute resolution”

3

should not reduce any EOT due.”

The Malmaison approach has also been applied in subsequent judgments. In Steria Ltd v Sigma Wireless Communications Ltd [2008] BLR 79 (TCC), His Honour Judge Davies observed that Mr Justice Dyson, “… as a judge with such wide experience in the field, noted the agreement without adverse comment.’

In Walter Lilly, Mr Justice Akenhead considered that Mr Justice Dyson “endorsed that common ground” and had “run with the ball”. He explained:

“... the English approach [is] that the Contractor is entitled to a full extension of time for the delay caused by the two or more events (provided that one of them is a Relevant Event) ...’

After reviewing the main English authorities, he confirmed:

“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 … the whole period of delay caused by the Relevant Events in question.”

The question must, therefore, be asked: why have the English courts favoured this restrictive interpretation, contrary to the full judgment of Mr Justice Dyson? The editors of Keating offer the rationale that, if the parties have agreed a series of relevant events in their contract entitling a contractor to an EOT, then they must have contemplated the possibility of more than one effective cause of delay.

This reason was approved in both Steria and (more recently) in Walter Lilly:

“There is nothing in the wording of clause 25 which expressly suggests that there is any sort of proviso to the effect that an extension should be reduced if the causation criterion is established.”

However, it is respectfully submitted that such rationale does not justify the resistance to Mr Justice Dyson’s full judgment. Silence within the contract cannot by itself preclude an architect from considering contractor culpable delay. As Mr Justice Dyson acknowledged: “the respondent is entitled to advance these other matters by way of defence”.

Therefore, the only plausible explanation can be the prevention principle. Indeed, Mr Justice Akenhead described the prevention principle as “part of the logic” in Walter Lilly. Similarly, the Protocol offers the prevention principle justification. This is logical and (more) persuasive when considered alongside an entitlement to loss and expense and the fact that a contractor

who receives an EOT for concurrent delay will not receive loss and expense for his difficulty in fulfilling the “but for” test of causation. Hence the position under English law is often described as “time but no money”. This explanation was favoured by Mr Justice Edwards Stuart in De Beers UK Ltd v Atos Origin IT Services UK Ltd [2010] EWHC 3276 (TCC).

However, the application of the prevention principle to cases of concurrent delay has been doubted. Mr Justice Hamblen emphasised in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 that it runs contrary to the House of Lords decision in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 (HL) because the act of prevention must “render it impossible or impractical for the other party to do his work within the stipulated time”. Such an outcome cannot occur when the

“The Malmaison approach has been applied in subsequent judgments”

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contractor is already in culpable delay because the contractor would have suffered delay in any event. This approach was approved by Mr Justice Coulson in Jerram Falkus Construction Ltd v Fenice Investments Inc (No 4) [2011] EWHC 1935 (TCC). However, John Marrin QC has recently suggested in Society of Construction Law Paper (No.179) that “there are some difficulties” with this approach and that the prevention principle is assumed to apply unless the contract expressly states a contrary intention.

Consequently, the parameters of the English law benchmark are blurred, as a restrictive interpretation of Malmaison has become enshrined as a general principle of English law.

Conclusions

The full Malmaison judgment is authority for the proposition that the decision-maker under a contract, subject to any prohibitions in the contract conditions, may take full account of contractor

culpable events when assessing an entitlement to an EOT. This means that the contractor is not automatically entitled to full EOT for the period of critical delay caused by a relevant event. Rather, the contractor must discharge the burden of proof.

The method of assessment is then a matter for the decision-maker in accordance with the contract. The point emphasised by Mr Justice Dyson in Malmaison, is that the decision maker is not precluded from considering contractor culpable events. This author submits that this is a sound basis for the proposition that apportionment, as a method of assessment, is not precluded as an approach to concurrent delay under English law. Notwithstanding this, however, the preference under English law is to provide the contractor with a full EOT. This leaves open the possibility for a debate between contractors and employers in concurrent delay scenarios. Contractors will undoubtedly rely upon the “winner takes all” judgment of Mr Justice Akenhead in Walter Lilly

whereas employers will naturally rely upon the full judgment in Malmaison in order to take account of contractor culpable delay.

The benefit of the “winner takes all” approach in English law is that the parties know where they stand: the doctrine of “time no money” prevails. However, it sits in stark contrast to the alternative approach of apportionment. This is the preferred approach of the courts of Scotland, the United States of America, Canada and Hong Kong and is arguably aligned with the full Malmaison judgment. Apportionment may be considered to be a more equitable outcome because, if concurrent delays are apportioned correctly, then each party bears its share of the damage caused. Moreover, the apportionment may be extended to damages so that the contractor may be awarded “some time and some money” instead of “time no money”.The parties to construction contracts underEnglish law can, of course, take the matter of concurrency into their own hands. In so doing,

they may avoid the consequences of a strict “winner takes all” approach by using their contracts to expressly address the complexities of this subject in their construction projects. They may then deal with concurrency in whatever way they agree.

At Devonshires, we have prepared some standard amendments so that our clients can expressly address the subject of concurrent delay within their contracts. Please contact us if you would us to help you to avoid the occurrence of the legal ambiguities surrounding this issue within your construction contracts.

For more information, please contact Matthew Cocklin on 020 7065 1813 or matthew.cocklin@devonshires.co.uk. Matthew’s paper, ‘International approaches to the legal analysis of concurrent delay. Is there a solution for English law?’ is published by the Society of Construction Law (Paper 182) and is available at www.scl.org.uk.

“The contractor is not automatically entitled to full EOT for the period of critical delay”

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During contractual negotiations between a purchaser and developer, there is constant toing and froing between the party building and the party buying which involves each party seeking to shift away as far as possible from any form of liability or responsibility.

This legal aspect of liability appears to be, and of course justly is, at the forefront of both parties’ minds; but more so the party purchasing as they would wish to have an added benefit and assurance, apart from NHBC, that the property they have purchased is dependable and secure. In most instances the buyer will have the higher negotiating position.

The case of Harrison and others v Shepherd Homes Ltd and others [2011] EWHC 1811 (TCC) (Harrison) tilted the balance slightly in favour of the purchaser. There is now a growing trend, however, in the luxury building and high-end properties (HEPs) market that, if continued unchecked, could potentially create a bigger problem for purchasers than liability. This problem is basements.

Basements, a traditionally American concept, are now heavily on the increase as competition for space intensifies in the UK and in particular, London. The idea of having not just extra space (rear extension) or room (loft or garage conversation) but rather an extra floor (or more) has become attractive to buyers and developers alike. The rise in basements, in areas with higher concentration of HEPs is staggering: The Royal Borough of Kensington & Chelsea alone in the past four years granted applications for 800 basement extensions, refusing 90 with a further 20 outstanding. The reason for this is simple: if one cannot build upwards, the only other solution for expansion is downwards.

In some instances, the above solution has been taken rather ironically to new heights – including a property in Knightsbridge for former TV Mogul David Graham – where plans were made for a four storey basement beneath a 19th Century School

house. This would mean this property would be deeper below than its neighbours are above ground.

Planning permission in the UK is amongst the strictest in the world. This has obviously affected one of the most cherished elements of property law, enshrined in the common law with Accursius’ famous statement: Cuius est solum, eius est usque ad coelum meaning “whoever owns the soil, it is theirs all the way up to Heaven”. Those with a keener eye will point out that the sentence, as commonly quoted above, is in fact incomplete. The remainder of the statement explains best what has faced those seeking to go not just above, but also below the soil: et ad inferos – “and down to hell”.

One the strongest arguments for basements in older HEPs was that the underpinning involved in the basement process would actually strengthen the foundation of the building. From a theoretical perspective, this is of course correct. Practically, however, cases have arisen where

this process itself has damaged the stability of neighbouring properties causing them to subside and in extreme examples partially collapse. One example of this is a townhouse in Chelsea which caused subsidence to such a level that a neighbour could not open her own front door. In another example, a basement collapsed on a builder whilst carrying out works, sadly resulting in fatality.

The legal complications following such instances are astounding: a criminal investigation by the HSE is usually concurrent with claims against the contractor, the architect, the structural engineer and so on. When such levels of defects during construction works occur, they are capable of stalling the entire project for months based on legal issues alone, putting to one side the adjudication process.

The legal issues, however, do not end there. Take for example instances where the basement

“‘Whoever owns the soil, it is theirs all the way up to Heaven... and down to hell’”

Basements: unearthing legal issues

6

“The most important factor to note is the concept of caveat emptor – buyer beware”

is built in an area with a high water table. In such examples, cases have arisen where the problem has not been immediately noted during construction, but has arisen either months or at times years after the completion and sale of the property – by this time the contractor alone could have gone insolvent. In such instances, the monitoring of the basement is also essential.

The above examples have themselves given rise to another legal complication in relation to basements: planning law. It is important to note that the problems with basements have not gone unnoticed in planning circles and local authorities are stepping up their regulations to deal with this rise.

Arup recently published a draft report for Kensington & Chelsea Council dealing with such matters and the implementation of the same is now monitored in the specialist circles. It follows that where in the past designs which were ambitious at best and outrageous at worst could go through various Councils’ loopholes – such

cases are increasingly subject to scrutiny and planning challenges.

This is hardly surprising – residents in HEP neighbourhoods are becoming agitated with the constant flow of construction works and digging that has plagued such areas and have themselves given rise to the number of nuisance claims. It follows that as a result, even freeholders are now beginning to refuse permission for basement extensions (as was in the case of Constance Long Holdings Limited v Gerald Cavendish and others [2012] EWHC 3434 (TCC)).

In spite of the above, the legal solution, provided it is sought from specialists, could be rather straightforward. The most important factor to note is the concept of caveat emptor – buyer beware. If a property is being purchased during the development phase, naturally, warranties and other such forms of protection must be provided in deed form.

Warranties are obviously subject to insurers’ agreements and some wrangling will be involved – but they are essential in cases where one party in the development team could go insolvent. The warranty should come from the Developer, Contractor, Architect, Structural Engineer and other professionals who play a key role in the design and building or converting of the project. Should defects or other problems arise, the Developer or Contractor will of course be the first held accountable.

The builders and those involved in the project would probably therefore wish to insert an express caveat in the contract to relieve them of their obligations. Whilst this is a natural step, the Harrison case referred to above however, does throw some form of confusion into this matter as it allows consumer regulation amongst other legislation to step in if the basement is not fit for purpose. It is essential to point out, however, that an express waiver in the convenyancing process will still alleviate the problem for the seller but not

others who have provided warranties or liability under the building contract.

With specialist legal advice, it is rather straightforward to present a strong legal argument. From a practical perspective, however, this comfort should not taken lightly. It is all good and well to rest assured that you are able to sue if something goes wrong, however, taking into account that the basement forms part of the foundation of building, if something does go wrong, regardless of one’s ability to sue, the impending pandemonium of litigation and remedial works will cause a significant hassle to the end user and their neighbouring properties.

The property will be rendered at least borderline useless whilst the basement works are carried out – let alone the damage to materials; for example home cinema equipment in a flooded basement. As basements are also rather personal, and involve the construction of swimming pools and tennis courts in extreme circumstances, they

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A pre-construction services agreement (PCSA) is used to appoint a design and build contractor to carry out services before entering into a formal building contract. It is used in two-stage tendering on larger more complex projects to obtain further design input, technical advice and detailed costs information from a prospective contractor.

In the first part, the employer will tender on the basis of incomplete design, programme and price. contractors are invited to put forward quotes based on these preliminary issues. A preferred bidder is then chosen to work on the preliminary issues (pre-construction) for the second stage of the tender. The preferred bidder will work closely with the employer’s professional team and the role of the contractor at this stage is similar to that of a professional consultant. The advantage is that the design will be more developed for the construction phase giving more price certainty.

The second part of the tender deals with the construction stage where a contractor will be chosen to build out the works, which will be governed by the main building contract. The preferred bidder should carry out the works under stage one under a PCSA. A PCSA is a contract in its own right.

The contractor that enters into the PSCA will be at an advantage in winning the construction phase work, but the employer does not have to enter into the main contract with this contractor.

The Joint Contracts Tribunal (JCT) has produced a standard form of PSCA (JCT PSCA). When using this there are a number of key amendments that should be considered from the employer’s perspective.

Design Liability

If the contractor is carrying out design under the PSCA, changes are required to place full design liability on them. Bearing in mind the nature of the

also affect and limit the saleability of the same to buyers without very similar, if not identical taste.

It is unlikely that the building of basements will slow down significantly. However, it is essential for all parties to adequately consider their legal liabilities alongside practical problems that arise. Specialist legal advice and professionals must be involved. It follows that in some instances, the same team involved in the design and build of the Channel Tunnel were involved in the design and construction of a basement.

Whilst this area of law, from a specialists’ perspective at least, is rather straightforward to deal with – it is the practical problems that arise going forward that cause more worry and these will not be dealt with by case law but rather practical regulations. Arup’s report, which calls for the consideration of, amongst other matters, the Geology, the Hydrology and nuisance prior to the granting of planning permission is cautiously welcomed – but it is in how it is applied that one

could seek to find out if regulation can make matters better, or far worse.

For more information, please contact Tom Keya on 0207 065 1848 or tom.keya@devonshires.co.uk.

Two-stage tendering and JCT pre-construction services

agreement: do employers have enough protection?8

PSCA the contractor is likely to be getting involved with design. There is also a chance that the PCSA contractor will be different to the contractor undertaking the main contract, so it is important that any design carried out under the PSCA is carried out with the usual design warranty.

Collateral warranties

Changes should also be made so that the contractor is obliged to provide collateral warranties in favour of the employer and any further parties that may require them in respect of sub-contractors undertaking design at the pre-construction stage.

Copyright licence

The copyright licence under the JCT PSCA is conditional upon payment. This must be changed so that it is unconditional. This avoids any contractors arguing that their design cannot be used if there is a payment dispute – holding the project to ransom.

Ability to break the PSCA

The JCT PSCA allows for suspension. However, a further provision should be added so that the employer can terminate immediately. The more work the contractor carries out under the PSCA the increased likelihood that it will win the main contract. Having the ability to break assists in retaining the employer’s negotiating position on the main contract.

Agreed maximum price

To the extent it is possible, it is a good idea for employers to insert wording so that in the event the contractor wins the main contract, the contract sum must not go above an agreed maximum price. Again, this retains the employer’s negotiating position.

The main contract

Details of the main contract are inserted into the JCT PSCA. The employer should include their

preferred form of contract in the description. This ensures that in the event the contractor under the PSCA wins the main contract, it is in a suitably strong form and the employer does not lose any negotiating power on the form of main contract.

12 year liability period

The JCT PSCA should be signed as a deed rather than underhand. Also, the professional indemnity insurance provisions need changing so that it’s maintained for a period of 12 years following the services. This ensures that there is a 12 year liability period for any services carried out under the PSCA and is particularly important if the contractor has carried out any design.

Conclusion

PSCAs are becoming more common on larger projects. From the employer’s perspective when using the JCT PSCA, consideration must give to making the above changes to ensure adequate protection is given.

For more information, please contact Tom Phillips on 020 7880 4328 or tom.phillips@devonshires.co.uk.

It’s all in the contract

“Consideration must be given to making the changes to ensure adequate protection is given”

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Introduction

The Health and Safety at Work Act 1974 (HSWA) is the principle legislation that sets out the rules governing health and safety in the UK. However, nearly 40 years after its enactment, health and safety law is perceived to be confusing and riddled with overregulation. Last year, even our own Prime Minister has described it as a “monster”.

The existing direction of health and safety

The “so far as is reasonably practicable” qualification is “the key principle at the heart of Great Britain’s health and safety legislation”. It is designed to allow a balance between risk and the cost of compliance. However, this qualification has caused widespread difficulty. Consequently, the words “reasonably practicable” appear to have been stripped of practical application.

This is demonstrated by the behaviours of

unqualified health and safety consultants. They have demonstrated a perverse incentive to take an overzealous attempt to eliminate all risk. The media headlines speak for themselves and examples include children who have been made to wear goggles by their headteacher to play conkers, trainee hairdressers who are not allowed scissors in the classroom and village fetes which have been cancelled due to bureaucratic challenges. This has contributed to its wrongful implementation and application of health and safety law. We live in a “culture of fear”.

Over-reactive behaviours have contributed to the creation of uncertainty in the law. This has negatively impacted on the direction of health and safety law causing disproportionate and inefficient cautious steps to achieve compliance. According to the Loftstead Review, a study in 2003 found that, on average, a large firm spent £420,000 a

year or more on health and safety whilst small and medium-sized companies in total face an annual bill of over £2 million in time and money spent on health and safety guidelines, the second-largest of seven different types of regulation businesses must comply with.

A return to the basics

Faced with this state of affairs, the higher courts have returned to the basic principals of health and safety law. In Baker v Quantum Clothing Group Ltd and Others [2011] UKSC 17 and Tangerine Confectionery Ltd and Veolia ES (UK) Ltd v R [2011] EWCA Crim 2015, the courts provided much needed clarification as to the interpretation and practical application of health and safety legislation. Hughes LJ explained in Tangerine and Veolia:

“It is apparent from the history of these cases, and of others which have been cited to us, that

the deceptively concise terms of these sections [of the HSWA] may have given rise to a number of unresolved conceptual debates which are troubling Crown Courts.”

Impact of the decisions

The Supreme Court in Baker and the Court of Appeal in Tangerine and Veolia, mutually considered the underlying features of health and safety law: safety, risk, foreseeability and the words “reasonably practicable”.

Tangerine Confectionery Ltd and Veolia ES (UK) Ltd v R

In these joined cases, the Court of Appeal provided a useful analysis of the offences under the HSWA, what must be proved on the part of the Crown and the defences that are available to the Defence.

Health & Safety: clarification of “so far as reasonably practicable”

“Health and safety law is perceived to be confusing and riddled with overregulation”

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Legal updates and seminars

Tangerine involved a sweet manufacturer that was convicted under section 2 of the HSWA after an employee was killed when a machine restarted as the employee attempted to unblock it. Veolia involved a waste and recycling firm that was convicted under sections 2 and 3 of the HSWA when contract worker was killed whilst collecting litter at the side of a dual carriageway.

Understanding the offences

The Court of Appeal closely reviewed the words of sections 2(1) and 3(1) of the HSWA. The sections read as follows:

“2 General duties of employers to their employees

(1) It shall be the duty of every employer to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees.”

“3 General duties of employers and self-employed to persons other than their employees

(1) It shall be the duty of every employer to conduct his undertaking in such a way as to ensure, so far as reasonably practicable, that persons not in his employment who may be affected thereby are not thereby exposed to risks to their health and safety.”

Hughes LJ explained their difference as being the persons to whom the obligation is owed. Whilst the obligation under section 2(1) was deemed to be wider than section 3(1), the sections were considered to create similar obligations and offences, in so far as health and safety are concerned. An offence would be deemed to be committed if there was a relevant risk to safety and the defendant failed to take such steps as are

reasonably practicable to avoid it.

It is submitted that this simple but extremely helpful overview of the core words of the legislation will assist employers (the people who must comply with the legislation) and lawyers (the people who must interpret and advise on the legislation) alike. It may, therefore, impact the direction of health and safety law by reminding employers to be driven by what the legislation actually requires of them.

Causation

The Court of Appeal explained that the root of the offences under the HSWA lies in a failure to ensure safety “so far as reasonably practicable”. The key is exposure to the risk of injury and not the doing of actual injury. Therefore, causation of the injury is not an ingredient of either offence. This clarification may impact the direction of health and safety law by ensuring that future

prosecutions are commenced on the correct basis.

The Court rightly recognised the practical impact of an injury. That is to say, the fact that an offence did cause injury or death had the potential to wrongly divert the attention of the jury onto the mechanics of the accident. This was an extremely useful steer for the direction of health and safety law. Our “culture of fear” seems predicated on the occurrence of an injury and compensation claims are commenced based on the existence of an injury. However, the Court clarified that this is not what the HSWA is about. Liability under the HSWA is predicated on the existence of a risk.

In line with this, the Court of Appeal provided a clear practice direction to ensure that future cases in the Crown Court do not deviate from the

“Liability under the HSWA is predicated on the existence of a risk”

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underlying principles of the offences. That is to say, the Judge should make it plain to the jury that injury is a side-issue:

“If the Crown does allege that the offence caused the injury, the jury should be directed that the injury is relevant only insofar as it goes to an issue in the case…because it might go towards showing either (i) that there was a risk…and/or (ii) that the defence of reasonably practicable precautions taken is not made out.”

Hughes LJ was keen to distinguish between the Court providing a correct direction to the jury and the Judge applying the right approach to sentencing practice. Under the HSWA, the harm done by the offence only becomes relevant at the time of sentence. This is by virtue of section 143 of the Criminal Justice Act 2003. It follows, that harm is only a consideration for the Judge. Harm, therefore, is not relevant to the jury question of whether an offence had been committed under

the HSWA.

This was an extremely practical guide to jury direction and sentencing practice. The danger in any health and safety trial is that the tragedy of an outcome, such as the occurrence of an injury or worse still a death, has the potential to strongly influence emotions in juries. It is this, which can give rise to blame. However, the clarification of the Court of Appeal, confirms that this should only be a consideration for the Judge.

This may help ensure that defendants receive fair trials and may greatly assist future defendants facing offences under the HSWA. It will help ensure that justice is done for the defence and that the Crown properly shoulders the burden of proof. However, the Court said little else about sentencing practice, presumably because the existing Sentencing Council Guidelines and the Court of Appeal guidance in R v Howe and

Son Engineers Ltd [1999] 2 All ER 249, were considered adequate.

Extent of risk / foreseeability

In clarifying that the offences under the HSWA are concerned with exposure to risk, the Court of Appeal relied upon the speech of Lord Hope in R v Chargot Ltd (t/a Contract Services) [2008] UKHL 73:

“….when the legislation refers to risk it is not contemplating risks that are trivial or fanciful. It is not its purpose to impose burdens on employers that are wholly unreasonable. Its aim is to spell out the basic duty of the employer to create a safe working environment…The law does not aim to create an environment that is entirely risk free. It concerns itself with risks that are material. That, in effect, is what the word ‘risk’ in the statute means. It is directed at situations where there is a material risk to health and safety, which any reasonable

person would appreciate and take steps to guard against.”

The speech of Lord Hope was already very powerful, particularly when placed in the context of the overzealous advice of health and safety consultants. Whilst it was not a new statement of health and safety law’s approach to risk, it nevertheless clearly emphasised the principles which go to the heart of health and safety law including an apparent failure by employers to only do what the law requires. To this extent, it is hoped that this may re-educate those who endeavour to constantly procure a risk free environment. In so doing, it may have a positive impact on perceptions of health and safety law.

Hughes LJ translated Lord Hope’s speech to mean that “risk” must involve a foreseeable danger. This means that when subsequently placed in the context of the statutory defence

“Harm...is not relevant to the jury question of whether an offence had been committed under the HSWA.”12

Legal updates and seminarsof “reasonable practicability”, a danger must be foreseeable for it to be practicable, in any sense of the word, for the defendant to take steps to avoid it. However this was subject to a caveat:

“Foreseeability of risk (strictly foreseeability of danger) is indeed relevant to the question whether a risk to safety exists…The sections [of the HSWA] command an enquiry into the possibility of injury. They are not limited, in the risks to which they apply, to risks which are obvious. They impose, in effect, a duty on employers to think deliberately about things which are not obvious.”

In reaching this conclusion, the Court of Appeal considered Baker and other lines of authority as to whether a risk was foreseeable and therefore reasonably practicable to avoid.

Baker v Quantum Clothing Group Ltd and Others

In Baker, the Supreme Court considered an

employer’s liability under section 29(1) of the Factories Act 1961 in respect of a civil claim for compensation against an employer for noise-induced hearing loss. Section 29(1) provides:

“There shall, so far as is reasonably practicable, be provided and maintained safe means of access to every place at which any person has at any time to work, and every such place shall, so far as is reasonably practicable, be made and kept safe for any person working there.”

Whilst the case did not concern liability under the HSWA, it nevertheless addressed the duty to keep the workplace safe “so far as reasonably practicable”. To that extent, the two systems underlying each of the cases were linked:

“The terms of the majority judgments apply equally to the HSWA and to the Factories Act…an alleged breach of section 29(1) as to unsafe workplace could equally have been prosecuted under

section 2 HSWA… The conclusion which we draw is that Baker does apply to sections 2 and 3 of the HSWA.”

In 1972, the Government issued a code of practice which stated that noise levels of 90dB(a)lepd should not be exceeded (the measure “db(A)lepd” indicates exposure at a given sound level over a period of eight hours). In 1983, an EU Directive proposed that employers provide ear protection to all workers exposed to noise levels above 85dB(a)lepd. The Directive was eventually enacted (Directive No. 86/188) and the Noise at Work Regulations 1989 took effect in 1990. Baker’s claim related to noise exposure prior to 1990. The question arose, whether in the period before the change in understanding, there was a risk to safety for the purpose of section 29 of the Factories Act, if the noise level was in the region of 85-89dB(a)lepd.

“A workplace may be unsafe on account of the activities carried on within it and not only due to its physical fabric” 13

Understanding the legislation

The Supreme Court held that a workplace may be unsafe on account of the activities carried on within it and not only due to its physical fabric. It also considered that the section was “always speaking”. This meant that it was wide enough to accommodate risks which may not have featured as part of attitudes to safety when the legislation was first enacted. This included risks created by noise. As with the Court of Appeal’s analysis of the underlying provisions of the HSWA in Tangerine and Veolia, this helpfully placed the legislation into context.

Safety requirements – absolute or relative?

The Supreme Court considered whether the requirements regarding health and safety are absolute or relative. The absolute argument, focused on safety being objective, unchanging and independent of any foresight of injury. In the

Court of Appeal, Smith LJ had considered the court to be bound by Larner v British Steel plc [1993] ICR 551. Smith LJ accepted that safety is an absolute. She said “what is objectively safe cannot change with time.” In the Supreme Court, Lord Mance did not accept this approach:

“Whether a place is safe involves a judgment, one which is objectively assessed of course, but by reference to the knowledge and standards of the time. There is no such thing as an unchanging concept of safety.”

Safety was deemed, therefore, to be a relative standard. The onus to this extent was on the employee to show that the workplace was unsafe in this basic sense by the standards of the day. This was comparable to the Supreme Court’s separate analysis of the position in respect of negligence at common law. In that regard the Court held that an employer following generally

accepted practice will not necessarily be liable for common law negligence. However, an employer with a greater than average knowledge might.

The practical impact of ‘standards of the day’ on health and safety law is that, if health and safety cases are to be successful, then they will likely require expert evidence to establish the applicable standards of the day. Otherwise, claimants may find themselves unable to discharge the burden of providing that the workplace was unsafe according to the standards of the day.

Foreseeability and “reasonably practicable”

It followed, with safety being relative, that foreseeability was not irrelevant. Rather, it “must be a part in considering whether a place is or was safe” and the risks that should be guarded against. Lord Dyson agreed:

“…what is ‘safe’ is an objective question in the sense that safety must be judged by reference

to what might reasonably be foreseen by a reasonable and prudent employer.”

In practical terms foreseeability of a risk is distinct from the question of whether it was “reasonably practicable” to avoid it. Lord Dyson commented that it can only become “reasonably practicable” to avoid a risk if the risk itself was reasonably foreseeable in the first place.

Neither the Supreme Court, nor indeed the Court of Appeal in Tangerine and Veolia, went into the detail of what “reasonably practicable” actually means. It is arguable, therefore, that the Courts did not adequately tackle all of the fundamental principles of health and safety law. However, the Court of Appeal in Tangerine and Veolia did clarify that this defence does not impose on an employer the duty to take every feasible precaution or even every practicable one, but a duty to take every

“‘There is no such thing as an unchanging concept of safety’”

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Legal updates and seminarsreasonably practicable precaution. In practical terms this means that all the circumstances of the case are relevant, including principally the degree of foreseeable risk of injury, the gravity of injury if it occurs, and the implications of suggested methods of avoiding it.

Conclusion

The fact that Baker and Tangerine and Veolia came before the higher courts speaks for itself. It spells out the problems and practical difficulties faced by those who have to interpret the legislation. That is not only employers, but lawyers and even judges and law makers.

The Government is well aware of these problems and seeks to make business more straightforward for employers. Indeed, Lord Young’s report entitled “Common Sense, Common Safety” and the Lofstedt Review, published in 2011, represent the Government’s desire to reverse

current behaviours derived from a “culture of fear” to behaviours that accord with fundamental principles of health and safety law.

The Lofstedt Review has made a number of recommendations to simplify health and safety regulations. The Government has committed to completing a review of which of those recommendations to implement by the end of 2014. This, it is submitted, will have the greatest impact on the direction of health and safety law, more so, than Baker and Tangerine and Veolia.

That is not to say that these cases are rendered redundant. It is submitted that quite the opposite will apply as these cases will undoubtedly have a monumental impact on the future of health and safety law. Firstly, they have brought issues which are on the radar of the Government to the fore and will support the ongoing work sponsored by the Government that will inevitably influence future health and safety laws. Secondly, they

have revisited and introduced common sense to the very principles that should be derived only from the requirements of the law and not from a confused misinterpretation of the law.

It has been suggested that the purpose of Baker, in particular, was to avoid a significant emphasis on hindsight and the placing of an undue burden on employers. These cases should, therefore, equip employers to better appreciate the practical requirements of health and safety law and thereby achieve more effective compliance. This should reduce the burden on employers by clarifying what employers need to do (and what they do not need to do) and clarifying the general requirements of health and safety law.

Consequently, compliance with health and safety law should be aligned with what it actually is. That is, one of the most important areas of the law which puts a stop to injury and death and

“These cases should equip employers to better appreciate the practical requirements of health and safety law”

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not the “monster” that gives rise to blame and compensation cultures. Proportionality has been recognised as the way forward which in itself should help rejuvenate respect for health and safety law.

These cases must, however, be considered in the context of the legislation to which they apply. The clarification provided by the Court of Appeal in Tangerine and Veolia about the prosecution not having to prove a connection between the breach and injury will not apply to all cases that fall under the health and safety law banner. For example, certain health and safety regulations, such as Provision and Use of Work Equipment Regulations 1998 and the Lifting Operations and Lifting Equipment Regulations 1998, are predicated on strict liability and do not contain the “reasonably practicable” qualification. However, where “reasonable practicability” does apply, its

clarification should help direct health and safety law to become more manageable for industry without reducing a requirement for the highest levels of safety. That should now be predicated on a foreseeable risk of serious injury which should help extinguish doubts about whether enough has been done.

For more information, please contact Matthew Cocklin on 020 7065 1813 or matthew.cocklin@devonshires.co.uk.

“Proportionality has been recognised as the way forward”16

Rights to light: a new dawn

The Law Commission (LC) has published a consultation paper proposing a number of significant changes to the way in which rights of light are dealt with between developers and adjoining owners. In this article we consider the primary change proposed by the LC which, if enacted, will go a long way to removing the considerable uncertainty and risk created for developers by the recent decision in HKRUK II (CHC) Ltd v Heaney (Heaney).

What is a right to light?

Put simply, a right to light is an adjoining owner’s or occupier’s right to receive light through a window or other aperture located within their property.

In legalese the right is known as an easement, which is simply a right that runs across the land of another in some shape or form (a right of way being the most common example). In the case

of a right to light, the easement consists of the passage of light across the developers land into a window or aperture located within a building upon the adjoining owners land. Provided the adjoining owner can demonstrate that his or her land has acquired a right to light (either through express grant or by prescription over a period time) any interference with that right may be actionable.

If there has been an actionable interference with a right to light then the court has the discretion to award an injunction in lieu of damages. That injunction may have the effect of either stopping construction or, in very rare cases, requiring the demolition of part or all of the offending construction. In determining whether an injunction was justified the court applies a test that considers the following: -

1. Is the interference to the right of light small, or is it significant? If it is not small then the

presumption is in favour of an injunction.

2. Can the interference be compensated for by a small payment of money? If the injury cannot be adequately compensated for by a small payment of money then the presumption will be in favour of an injunction.

3. Would it be oppressive to grant an injunction? This limb of the test allows the court to look carefully at the facts of each particular case including the conduct of the developer and adjoining owner. Even if the Court is satisfied the test for granting an injunction has been met it may still refuse to grant an injunction if it is oppressive to do so.

Why is the LC looking into rights of light?

Until Heaney the generally accepted view was that unless an interference with a right to light was significant, the risk of an injunction was in reality quite remote. In the vast majority of cases

the risk to the developer was a claim in damages only. Right to light surveyors had developed quite sophisticated tools for measuring the degree of interference and the value of the loss to the adjoining owner. That being the case, developers would routinely commence construction without first having settled an adjoining owner’s claim. That fairly comfortable status quo was given an uncomfortable knock by Heaney.

The court in Heaney did not alter the test set out above. The judge found that the interference was not trivial and could only be compensated for by a significant payment in damages. With the position finely balanced between the rights of the developer and those of the adjoining owner the judge went on to consider the third limb of the test – namely whether the grant of an injunction would be oppressive. In doing so he carefully considered the developer’s overall approach to

“If there has been an actionable interference with a right to light then the court has the discretion to award an injunction”

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Legal updates and seminars“The LC has proposed a solution that balances the legitimate rights of

developers with those who have the benefit of a right to light”

the development and dealing with rights of light. The Court held that the developer knew there would be an interference with rights to light and, notwithstanding that knowledge, went on to erect the building in any event. It did not matter that the adjoining owner had been slow in responding to settlement proposals and had delayed negotiations. The Court also found that the developer undertook the construction that ultimately interfered with the right to light with a view to profit and that it could have changed or altered the design in order to prevent or reduce the interference. Accordingly the court found that because the developer had effectively chanced his arm it would not be oppressive to grant an injunction and it ordered the developer to remove two stories from the building.

Although Heaney was decided on its own particular facts, there are some things that are common to almost all inner city developments. The first is that developers routinely start construction in

the knowledge that it will ultimately interfere with a right to light. It is common for negotiations to start pre-construction and for them to carry on once construction has started. The second is that developers only ever commence a development with a view to a profit. That need to make a profit will have been at the centre of the design and planning process is therefore central to what the developer is constructing. If the court was prepared to find the granting of an injunction was not oppressive on the facts of Heaney, it could do so easily elsewhere. Although Heaney does not provide an easy route to an injunction, what it does do is emphasise the court’s willingness to consider the third limb of the test in a way that might lead to injunctions being granted in cases.

What changes is the LC proposing?

As the LC said itself:

“The Department’s interest stems largely from a

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recent case HKRUK II (CHC) Ltd v Heaney which related to the availability of injunctions for an infringement of a right to light.”

From a practical point of view, the LC also noted the concern amongst right to light practitioners that although a developer may act proactively in order to negotiate a solution to a right to light problem, the affected adjoining owner may sit back and not engage knowing the potential threat they have up their sleeve as a result of Heaney. The current state of the law post Heaney therefore represents a serious constraint to development.

The LC has proposed a solution that balances the legitimate rights of developers with those who have the benefit of a right to light by creating certainty over whether an injunction will or will not be in play. In order to achieve that certainty, the Law Commission has proposed what it calls an “Obstruction Procedure”. This will allow the developer to control the negotiations and bring

matters to a head. It works as follows: -

1. The developer serves the adjoining owner with a Notice of Proposed Obstruction (NPO). The NPO sets out the developer’s view of the extent of the proposed obstruction and asks whether the adjoining owner proposes to seek an injunction.

2. The adjoining owner would then be given time to consider the NPO and take advice. Having done so they will be required to serve a counter notice in the event they wish to obtain an injunction.

3. The parties would then be given a period of time to try and negotiate a solution. If that negotiation proves unsuccessful then the adjoining owner will be compelled to issue proceedings in order to apply for an injunction.

4. If the adjoining owner fails to issue a counter notice then they will be prevented from applying for an injunction.

What will these changes mean for developers?

First and foremost the proposed changes will create certainty. An adjoining owner will have to reveal their hand very early on. If they want an injunction and a settlement cannot be negotiated they will have no option other than to issue proceedings. This will get the matter before the courts quickly. The “use it or lose it” approach can only benefit developers in the long run.

At this stage the LC is still consulting on its proposals. They may alter dramatically or may be discarded. We will keep you informed either way.

For more information, please contact Mark London on 020 7880 4271 or mark.london@devonshires.co.uk

“First and foremost the proposed changes will create certainty”19

Legal updates and seminars

Due diligence v all reasonable endeavours – To suspend or not to suspend?

“The Developer argued that it would have been ‘commercial suicide’ to continue with the project”

In the recent decision of Morris Homes (West Midlands) Ltd v Keay and another [2013] EWHC 932, the Court distinguished an obligation to carry out the works with due diligence from an obligation to use all reasonable endeavours to ensure that works were completed as soon as reasonably practicable. This was determined through the operation of an agreement for lease between Morris (the developer) and Keay (the tenant).

The dispute had arisen as a result of the developer’s decision to suspend construction works at a medical centre from July 2008. As a result, the completion of the medical centre and its subsequent occupation were delayed, causing losses to the tenant. Works re-commenced in January 2010, when the developer received funding from a government scheme, and the medical centre was handed over in August 2011. The matter had originally been heard by an arbitrator in favour of the tenant. The developer subsequently applied for leave to appeal at the TCC against the arbitrator’s award.

In July 2008, the developer suspended the work as it felt the recession had rendered the project impossible, arguing that continuing would be financially nonsensical. The tenant argued that the developer was in breach of the agreement for lease as it had failed to carry out the works diligently (the diligence obligation) and had failed to use all reasonable endeavours to ensure the works were completed as soon as reasonably practicable (the completion obligation).

These obligations were clear in the agreement for lease. In respect of the completion obligation, the developer was only considered to be off the hook if it was prevented or delayed by a cause or circumstance not within its reasonable control. The Judge felt this point was key. The Judge agreed with the Arbitrator’s point that these obligations had to be considered separately.

The developer argued that it had made the decision to stop works, at the time of the financial crisis, as it would have been “commercial suicide”

to continue with the project. As the Arbitrator pointed out, the developer had stopped carrying out works for well over a year. As such, while it could be argued that the developer was using reasonable endeavours to secure its financial security in a bid to continue the project and complete the works as soon as it was able, by stopping works for a period of 18 months, the developer was in clear breach of the diligence obligation.

Having established a breach of these obligations, the Arbitrator considered causation and concluded the tenant’s actual losses were loss of rent, diminution in value of the lease and the additional cost of development incurred by the tenant.

The decision of HHJ Grant QC

The TCC will only give leave to appeal an Arbitrator’s decision if (a) the question is of general public importance, (b) the decision is open to serious doubt or (c) the decision is clearly wrong.

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“Even if stopping of work was not a breach of the completion obligation, it was still deemed to be a breach of the diligence obligation”

While the Judge did not consider the case itself to be of “general public importance”, he did affirm that the Arbitrator’s decision was not open to serious doubt. The Judge considered whether an obligation to carry out works “diligently” in a development or construction contract related simply to the manner in which works were to be carried out or whether this also touched upon the manner and order in which they were to be carried out. The Court agreed with the Arbitrator that the developer had breached the diligence obligation. The Court held that the term “diligence” carried with it notions of “assiduity/expedition” and that the two obligations under the agreement for lease must be treated separately. This meant that even if the stopping of work was not a breach of the completion obligation, it was still deemed to breach of the diligence obligation. The developer arguably exercised reasonable endeavours to secure capital and other management resources, but the delay of approximately 18 months in re-commencing the works translated into a failure to exercise diligence.

This case demonstrates that different considerations arise in connection with an obligation to exercise reasonable endeavours to execute the works to an obligation to carry out works diligently. Both obligations will be considered separately and a party will not be excused if it succeeds in demonstrating it has exercised “reasonable endeavours”, but fails to demonstrate that it has been “diligent”.

For more information, see please contact Asif Patel on 020 7880 4381 or asif.patel@devonshires.co.uk.

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Legal updates and seminars

Lesson No. 1

We acted for a large Registered Provider (RP) in Greater Manchester in connection with a dispute with its former gas servicing contractor. The Parties had entered into a TPC2005 form of contract with a number of bespoke amendments. One of the amendments included a mechanism for increasing the price per unit in the event stock numbers reduced by a certain level. The mechanism was known as the Stock Reduction Model (the SRM).

During the course of the contract, stock levels did indeed reduce and the SRM was activated. The contractor invoiced the RP based on its understanding of how the SRM operated. Although the RP did query the operation of the SRM with the contractor it was ultimately persuaded that the contractor was correct.

Over the course of five years, and due to the

SRM, the RP paid significant additional monies to the contractor. Following the end of the contract term, the RP undertook a review of the monies paid to the Contractor and took the view that it had been overcharged by a figure in excess of £400k.

Devonshires advised that this was correct and despite attempts to resolve the matter amicably the RP commenced an adjudication in early 2013 to recover the monies.

The issues before the adjudicator were two-fold. Firstly, whether the contractor was correct in its operation of the SRM. If the contractor was correct then no monies would be due to the RP. The second issue was whether by its conduct the RP had waived its right to claim that the monies had been paid under a mistake as to the correct operation of the SRM.

The Adjudicator found that the contractor had been operating the SRM incorrectly and that furthermore, the RP had not by its conduct waived any right to recovering the money. Accordingly the RP received a sum in excess of £400k.

This case demonstrates that it is never too late to try to recover monies that have been overpaid under a contract. If you believe you may have been overcharged by a contractor or want to achieve a measure of certainty over what should be paid then do give us a call and we will see what we can do to assist.

Lesson No. 2

We acted for a public private partnership (the “PPP”) that constructs and maintains community based primary health, social care and community premises across the North West of England in connection with a dispute against a local authority.

The local authority, who was a tenant of the PPP,

“This case demonstrates that it is never too late to try to recover monies that have been overpaid under a contract”

Lessons learnt: adjudication

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leased a community centre in Greater Manchester which included a library, swimming pool and other community use facilities. Under the terms of the agreement between the local authority and the PPP the lease payment payable to the PPP could be reduced if an area within the community centre became ‘unavailable’ due to it becoming unsafe for users.

The term ‘unavailable’ was a technical term and did not mean the same thing as ‘cannot be used’. In other words an area within the community centre could be used by members of the public but be unavailable at the same time pursuant to the agreement. In order to trigger the right to a reduced lease payment the local authority had to prove that the area was unavailable due to there being a risk to the health and safety of users.

The issue in this adjudication concerned the swimming pool spectator area which had a leaking roof. The local authority sought to argue

that the leak created a risk to the health and safety of those in the spectator area. It tried to argue through expert evidence that the water created a risk of slips and trips, that it compromised the safety of electrical systems in the roof and that generally the spectator area was unsafe. In contrast the PPP argued through its own expert that there was nothing unsafe about the leak at all and that the steps taken to deal with it created no real risk to pool users.

The adjudicator took a sensible and practical approach to the question of risk and found for the PPP. The adjudicator found that there was a significant difference between a real risk to users of the facility and a theoretical academic one. The monies that the local authority had deducted were repaid in full.

This case is yet another example of how the deduction provisions contained within NHS LIFT

and PFI contracts can be used by local authorities and others to recover substantial sums through deductions for relatively modest defects. In an age where public authorities have to cope with ever more restrictive budgets we can assume that they will naturally seek to reduce the cost of leasing facilities by claiming deductions.

For more information, see please contact Kathryn Parkes on 020 7065 1842 or kathryn.parkes@devonshires.co.uk.

“The term ‘unavailable’ was a technical term and did not mean the same thing as ‘cannot be used’.”

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Legal updates

Edited by: Matthew Cocklin Head Office: 30 Finsbury Circus, London EC2M 7DT Further copies: Marketing Department on t: 020 7628 7576, or email info@devonshires.co.uk or via our website at www.devonshires.com

Devonshires has taken all reasonable precautions to ensure that information contained in this document is materially accurate however this document is not

intended to be legally comprehensive and therefore no action should be taken on matters covered in this document without taking full legal advice.