London | Bristol | Dublin | Dubai

Sheena Sood

16 November 2017

Legal Update

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Agenda

Introduction

New Standard Form Professional Services Contracts

Update on Recent Case Law

Update on Recent Legislation

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New Standard Form Professional Service Contracts

FORM PUBLICATION DATE

ACE Professional Services Contract 2017 January 2017

ACE Sub-consultancy Agreement 2017 January 2017

FIDIC Clients/Consultants Model Services

Agreement (5th Edition) (“White Book”)

February 2017

FIDIC Sub-Consultancy Agreement (2nd

Edition)

February 2017

IChemE Professional Services Contract

Silver Book 2017 (First Edition)

February 2017

NEC4 Suite of Contracts 22 June 2017

New RIBA Forms Later in 2017/ Early 2018

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NEC4 Professional Services Contract – Significant Changes

• New role of Service Manager: Required to act in spirit of mutual trust and confidence, gives notices and

instructions under the contract.

• Use of Defined Cost: No time based Option G. Payment under Options C and E now on a “Defined

Costs” basis. Consultant has to demonstrate cost build up and Disallowed Cost deducted.

• The Payment Regime: Consultant is required to submit an application for payment before the

assessment date. Invoice then required following certification, which will delay payment if not provided.

• The approach to Liability: Scope of Consultant’s liability much more complex and wider.

• BIM: Includes a new option X10 (BIM) – first attempt in a standard contract suite to properly address BIM

other than referring to any “BIM Protocol”. It refers to two main documents:

1.The BIM Execution Plan; and

2.Employer’s Information Requirements.

Note BIM information is owned by the Client.

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In a unanimous decision the Supreme Court overruled the Court of Appeal on fitness for purpose.

Contract contained potentially conflicting dual obligations of:

– Reasonable skill and care: to exercise “due care and professional skill”.

– Fitness for purpose: was determined by reference to a “technical requirements” schedule.

Defendant held in breach of contract despite using “due care and professional skill” and adhering to

Good Industry Practice - due to liability for the fitness for purpose obligation.

Decision highlights:

– Obligations such as fitness for purpose warranties, which are “tucked away” in technical

specifications or schedules to a contract can still impose additional duties on contractors;

– Contracts can impose dual obligations;

– “Subject to reasonable skill and care” wording does little to water down a fitness for purpose

warranty;

– The importance to review technical schedules and documents referred to or appended to

contracts to ensure duties , obligations and scope are no wider than intended;

– Parties may wish to consider express wording to address how technical specifications or

appendices affect contractual obligations i.e. by using a no greater liability clause.

MT Højgaard A/S v E.ON Climate and Renewables [2017]

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The parties entered into an amended JCT contract with the following provision:

“any delay caused by a Relevant Event which is concurrent with another delay for which the

Contractor is responsible shall not be taken into account”.

• Relevant Event was defined as “any impediment, prevention or default”.

• Works were substantially delayed by (i) Bad weather; (ii) Lighting to the main house; and (iii) Asphalt

roofing.

• The Employer argued delays (ii) & (iii) were concurrent, which the Contractor was responsible for and

therefore, the Contractor was not entitled to an EoT in respect of these events.

• The Contractor relied on the “prevention principle” and argued where there was a concurrent delay, it

should be entitled to EoT notwithstanding its own culpable delay.

• Held, prevention principle did not apply in circumstances of concurrent delay. The concurrent delays

were of “equal causative potency”.

• The court held that the clause clearly demonstrated how the parties intended EoT to be dealt with in

relation to an act of prevention.

North Midland Building Ltd v Cyden Homes Ltd [2017]

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Trant Engineering Limited v Mott Macdonald Ltd [2017]

• Trant engaged MML to carry out design services and act as BIM coordinator including, coordinating

access to a software called ProjectWise, where all design services shared through BIM was to be

stored (Services).

• The Contract granted Trant a licence to use MML’s designs upon full payment of MML’s fees.

However, the Contract was never signed by Trant but MML proceeded to provide Services and

issued invoices for interim payments.

• MML suspended Services and denied access to ProjectWise due to non payment claiming there

was no contract and in any event, Trant had no right to the design data.

• Trant issued declaratory proceedings that there was a contract and applied for an interim injunction

that MML provide access to the design data.

• The court granted the injunction as there was a “high degree of assurance” that Trant was entitled

to the design data; design had been carried out under “a” contract and MML had accepted payment

on account for the design.

• Underlines the importance of clearly agreeing responsibilities in relation to BIM.

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Jacobs UK Limited v Skanska Construction UK Limited

[2017]

Skanska referred a dispute to adjudication.

A timetable was agreed and Jacobs incurred substantial costs in responding to the adjudication.

However, Skanska’s counsel became unavailable and Skanska was unable to serve a reply by the

required date. Jacobs refused Skanska’s request for an EoT and the adjudicator refused to grant an

EoT in absence of agreement. Subsequently, Skanska withdrew the referral.

On 21 June 2017, Skanska gave a fresh notice to refer the dispute to adjudication and contained the

same claims but narrower in scope and with revised assessment for damages.

Jacobs claimed this was “unreasonable and oppressive” and sought an injunction to prevent Skanska

from taking further steps and requiring Skanska to pay its wasted costs in the first adjudication.

It was held that whilst Skanska’s withdrawal from the first adjudication was unreasonable, it did not

justify the exercise of the court’s discretion to prevent the adjudication from proceeding.

However, the court held Skanska had failed to comply with and breached the Agreement so Jacobs

was entitled to its wasted or additional costs caused by Skanska’s failure to comply with the agreed

procedure and timetable. In the alternative, a term was implied into the Agreement to this effect.

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Adam Architecture Ltd v Halsbury Homes Ltd [2017]

The parties entered into a design contract.

On 2 December 2015, HH emailed AA indicating that it will be using another architect to prepare the

planning application and develop the layout of the development but would still work with AA on house

styles. AA replied that they had submitted a fee proposal for a full service and stopped work on the

project and submitted an invoice for work to date.

HH failed to pay the invoice or serve a pay less notice.

HH sought declarations that it was not liable to pay the invoice. The matter reached the CA.

The CA found in favour of AA and held:

– s.111 of the Housing Grants, Construction and Regeneration Act 1996 did not only apply to

interim payments but also to payments following completion of works or termination of contract. If

HH wished to resist paying AA’s invoice it was obliged to serve a pay less notice under s.111(3).

– AA had not accepted the breach and treated the email of 2 December 2017 as terminating the

contract without appropriate notice. Therefore, this had been a claim for money due under the

contract rather than a claim for damages for breach of contract.

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Riva Properties Ltd v Foster & Partners Ltd [2017]

Riva appointed Fosters to design a hotel with a max budget of £100m and relied on Fosters stating

the project could be “value engineered” down to that figure from £195m”.

In 2008, the scheme was costed at £195m therefore, could not be built and Riva paid professional

fees of £3.6m to Fosters. Riva claimed Fosters breached their duty to exercise reasonable skill and

care.

Duty: Fosters were obliged to confirm “key requirements and constraints” including, the budget even

if this had not been communicated. There was an obligation to advise that the scheme was not

capable of being value engineered down to £100m. This did not equate to costs advice.

Breach: Failure to identify and confirm constraint in the project/budget and negligent advice given.

Causation and Loss: The financial crisis at the time, which led to lower sums being available for

borrowing with a requirement of greater contribution from borrowers and Fosters design being too

expensive.

It was held that the £100m hypothetical project could not have been built with funding that was

available at the time therefore, the claim for loss of profits failed.

Award: Compensatory damages of £3.6m ordered (i.e. Foster’s fee).

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Update On Recent Legislation

Consultation on 2011 changes to Part 2 of the Housing Grants, Construction and Regeneration

Act 1996

• There is industry wide concern about late payment, despite the 2011 changes to the Construction

Act.

• The government intends to scrutinise the effect of the 2011 changes. The objective of the changes

were:

• To encourage parties to resolve disputes by adjudication;

• Increase transparency in exchange of information relating to payments; and

• Strengthening the right to suspend performance.

• The consultation will consider:

• Effectiveness to address the costs of adjudication;

• Improving clarity and transparency of the payment framework; and

• Improving the right to suspend for non-payment.

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Contact Details:

Sheena Sood

s.sood@beale-law.com

+44 (0) 20 7469 0402