Advanced Construction Law - Essay Example

Advanced Construction Law – BSM 576 Section A Question A1 The term “designer ‘has broad meaning and pertains to the functions carried out insteadof the job title or profession. Designers are one who are involved in the preparation of design drawings, bills of quantities, specifications and detailing out the specification of substances and articles. The term designer includes engineers, architects and quantity surveyors. Health & Safety issues of a construction project are dealt by “the Construction Design and Management (CDM) Regulations, 1994”. Under this law, an architect can be held accountable if he has failed to forewarn the client about his accountabilities. This law imposes more responsibilities on architects’ and it buttresses the significance why an architect should familiarise himself with and adherence with the Health and Safety law1. A designer can be held liable for professional negligence in his duty if the design is considered to be poor quality, if he failed to manage the project properly, certifying for defective or unsuitable materials, indulging in the mismanagement of both contractors and the project costs, indulging in health and safety infringement, non-adherence of building regulations, and failing to get the appropriate permission for the project2. One another law which deals with health & safety is the Control, of “Asbestos at Work (CAW) Regulations (2002)”. Some other regulation which is related to Health & Safety are as follows; a) “noise (Noise at Work Regulations 1989) , eyes (Protection of Eyes Regulation 1974), the use of asbestos (Control of Asbestos at Work Regulations 1987) , the use of Lead (Control of Lead at Work Regulations 1987) , the control of substances hazardous to health ( Control of Substances Hazardous to Health Regulations 1988) , the control of industrial major hazards (the Control of Industrial Major Accident Hazard Regulations 1984) “3. A designer of a construction project will have multifarious responsibilities and roles. He has the duty follow the Code of Professional Conduct as prescribed by ARB and RIBA. He has the duty to offer the client with concise and clear advice about the design potential, estimated building cost, the necessity to get various statutory consents, likely time scale of project, project programming, and the necessity to appoint the services of the other professional specialists and consultants4. Though a professional contractual commitment to his client only applicable to carry out his services with reasonable care and skill but in Gloucestershire case5, it was held that standard of care to be anticipated from specialist engineers will be more burdensome as not that of from general practice engineers. In Henderson case6, it was held that professionals are expected to demonstrate their contractual clients a co-extensive and a simultaneous duty of care in tort as regards to the offering of their services. In Tai case7, it was held in some scenario, the extent and nature of the tortious duty may be controlled by the terms of the contract8. In Mirant case9, the court viewed that an engineer owed a concurrent duty of care to his client as regards to economic losses due to design errors. In Dutton case,10 it was held the architect owed an onus of care to the plaintiff as a professional consultant or advisor despite the fact that the plaintiff had not shown or relied on the demeanour of the architect as a professional who tendered an advice on the safety of buildings, machines or materials as he is liable to all those whom he is aware, or ought to have known, might face damage if his advice is not sound11. Baxall12 case was pertaining to a designing defect which was carried over by a sub-contractor who neglected the run-off to a valley gutter that was not able to cope with the heavy rainfall. The defendant architect claimed that they had not favoured the calculation made by subcontractors. In this case, it was held by the Court of Appeals that any rational examination by the plaintiff would have exposed the defect. This refuted the duty of care or however, it interrupted the “chain of causation” and hence, the architect was not found accountable13. As Archie being the lead architect in a project of considerable size like the BDB HQ, he should be aware of above facts and case laws as he has to observe the health and safety responsibilities under the above -mentioned regulations. Sir William/BDB should be aware that there exists numerous provisions about the conditions of windows, doors, floors, gates, skylights’ sanitary conveniences, escalators and washing facilities. Where the construction project is a building, then rule now demand that workplace to be a property of solid and stable for use, for which it is being constructed. In Parker case14, the Court of Appeal viewed that the employer was found to have infringed regulations of 13(4) of the Workplace (Health, Safety and Welfare) Regulations 1992, which demands an employer to obviously inform any area where there a peril for an individual falling from high elevation, which is probable to cause personal injury. In this case, the employer failed to warn the employee that he should not access to the roof where it was necessary and reasonable to have issued such a warning. The above case buttresses how careful an employer (Sir William/BDB) should be in adhering with Health and Safety Regulations15. In Fytche case16, it was held by the court that regulation 7(1) of the Personal Protective Equipment at Work Regulations 1992 inflicted an absolute duty on the employers (Sir William/BDB) to ensure protective apparatus or equipment is supplied to the employees in good condition. In this case, the employee alleged that employer was accountable for his injury as the tiny hold in the steel toe-capped boots given to him caused frostbite injury in his leg, but the court held that employer was not accountable for this injury as the boots which were supplied were not meant to safeguard the employee from that type of injuries17. The Manual Handling Operations Regulations 1992 stipulate that an employer should circumvent a manual handling equipment where there is a peril of injury from using that manual handling machine. In Swain case18, it was held that the under the Regulation 4(1) (b) of the above regulations , if an employer infringes any one of the three conditions laid down , then , he would be held liable under the above regulation19. In Koonjul case,20 it was held that in evaluating whether the task involved a peril of injury and in evaluating whether it was ‘practicably feasible’ for an employer to circumvent his employees being exposed to that peril, and it was necessary to the specific activity in context21. Answer A2 (1) Archie can ask the BDB to issue a “pay less Notice” but this should be delivered to the contractor not later than five days before the final date for payment due as per CL 4.12.5 of JCT Standard Building Contract 2011. The pay notice should mention the amount which the BDB wants to pay to the contractor and the basis on which the amount was so arrived at. Under JCT contractor, the employer (Sir William/BDB) has the choice to pay less after deduction for the defective supply under clause 2.30. He may specifically instruct the contractor not to rectify the defect and may engage another contractor to rectify the same. In Mul v Hutton Constructions Limited, the court concurred with the employer where he made appropriate deduction for the defects found in the work. It is to be observed that employers (Sir William/BDB) must be borne in mind that an order not to remedy the flaws must be given rationally. If not, the deduction from the contract sum will be minimised to mirror the Employer’s failure to avoid or lessen the loss22. A2 (ii) On receipt of interim payment notice from the contractor, the employer has to study the contractor’s application and should issue a Payment Notice well within five days after the due date. This could be considered as the employer’s first chance to object the notice of payment issued by the contractor. Within five days after the due date, if the employer fails to serve the Payment Notice, the contractor application for payment will be regarded as the Payment Notice. The employer should pay the sum specified in the Payment Notice well before the final date for payment provided he has served a Pay Less Notice on the contractor. Payment should be made to the contractor within 14 days after the due date by the employer on receipt of Interim Notice. A second chance for the employer to demonstrate his objection is the pay less notice which should be served within five days of the final payment date. The contractor has the right to cancel all or any part of the work if the employer fails to pay the contractor the amount specified in the Payment Notice as changed by any Pay Less notice. For delayed payment, the Contractor has the right to charge interest 5% well over the interest rate of Bank of England23. This will have serious financial implication to the employer (Sir William/BDB) as the abnormal rate of interest is punitive in nature. A2 (iii) To mirror the amendments which came into force during October 2011 to the payment commitments in the Housing Grants, Construction and Regeneration Act, 1996, the payment provisions in the JCT 2011 has been redesigned, and it is somewhat different from JCT 2005 version. For instance, the “withholding notice “under 2005 version have been replaced by the new form “Pay Less Notice” under JCT 2011. Thus, an employer must now demonstrate how he arrived at the figure of what he is paying instead what he anticipates not to pay. Hence, the explaining the “basis” for a decision may need a higher level of detail than that of the “grounds” earlier required under JCT 2005. Thus, the employer (Sir William/BDB) should seek to adhere to the letter with the information needed for the Pay Less Notice as detailed in their contract and where the contract is silent about this, the employer should adhere with the language of the Act. It is suggested that BDB, and the contractor should make some fine tunings in the wordings of the JCT 2011 standard form. As the new payment process is now more intricate, and as the employer (Sir William/BDB) requires more time to process the payment, as a two weeks’ time in the contract for making payment process may not be adequate. Hence, it is advised that BDB should in consultation with the contractor to extend the period between the due date and the application, by another two weeks or by one month. Further, another area of concern for BDB (Sir William/BDB) is the application for payment becoming the Payment Notice under JCT 2011. Hence, it is advised that contract can be amended to circumvent this by needing the contractor to issue a separate notice namely a Default Payment Notice in lieu of banking upon its application for payment. This would send an alert signal to BDB that there has been a failure to serve the Payment Notice and hence, there is a need to serve a “Pay Less Notice24.” Hence, to avoid any penal interest, Archie should advise the Sir William to pay in time or to serve Pay Less Notice on the contractor in case if there is any dispute25. (Word Count 2205) Part B Normally, insurance for construction projects will be offered either as a distinct policy or as an annual floater policy or a mixture of both. A single policy offers insurance cover for either the part or whole of a specific construction project. A floater policy will cover all the specific turnover during the coverage of insurance. There are different types of insurance policies for construction contracts, and they include the employer’s liability policy, the public liability policy, consequential loss policies, all risk insurance policy and material damage policies. The contractor is normally is obligated to insure the works to the satisfaction of the employer where the insurance policy will be taken in the joint names of both the employer and the contractor. Moreover, the employer requires to be safeguarded against claims emanating from the contractor either from the third parties or from the contractors’ employees and normally, the contractor will be held accountable to the employer under the contract for such claims made26. A public liability insurance will cover against loss, injury or damage to a third party caused due to negligence on the part of the contractor. A contractor has a duty of care to make sure that he is providing a safe working environment. The major kinds of liability insurance policy are public liability, employer’s liability and professional liability. These policies are devised to cover the insured legal accountability to third parties or those person who is not a party to the insurance contract. The public liability clause offers an insurance cover against personal injury claims made by the public which excludes employees and the damage to the property claim by any third party which includes employee also. Hence, the contractor often organises the public liability and employer’s liability insurance. There are two varieties of insurance is arranged as regards to construction projects namely a) employer’s liability insurance and public liability insurance emanating from claims for damage or loss , b) property insurance , for instance , insurance for the materials used , or machinery connected with it. However, in mega projects, getting insurance cover is totally opposite where the employer will be taking the insurance policy in the joint names both the contractor and the employer. Further, the professional teams like architect, designers who are engaged in design and the construction of the project will have to buy a proper professional indemnity insurance policy to cover up their design accountabilities and to safeguard against any negligence that can be ascribed to their design either under tort, contract, statutory liabilities or common law. It is to be noted that the liability due to damages to property or personal injuries caused from contamination or pollution will be covered by the standard public policy liability provided if it is caused due to unexplained, unintended occurrences. Further, the cost of cleaning or removing up such polluted materials or contamination will only be paid as damages in the same scenario. Further, there will be an exclusion clause that will exclude liability emanating the failure of work products and services provided or work undertaken by the insured party to perform as intended, which will be included in the standard public liability insurance policy. Hence, it is significant to include the insurance cover for death or injury or damage to third party property emanating from a defective material or product. There are two kinds of insurance available to cover the construction projects’ risks. The first one covers damages to any property, which includes damages to structures or buildings being under construction or to the existing building where construction is being perused. The second insurance policy covers indemnity for third party claims for death, injury or damage to third party or to his property. Second insurance policy covers indemnity for third party claims for death, injury or damage to third party or to his property. However, now insurance companies started to provide “all risk policies” which cover all the risks. The fundamental objective lies behind a contractors’ “all risk policy” is that it offers insurance coverage for those damages or losses not covered by an “ excluded peril” clause. For instance, the JCT contracts exempt from insurance covers those risks like defects due to obsolescence, wear and tear, rust, deterioration, and mildew, loss due to faulty workmanship, damage or loss arising out of war, or loss due to faulty design. Under this type of policy, the main advantage is that the onus is transferred to the insurer who, in turn have to contest the claim and is needed to demonstrate that the cause of loss is falling within an exclusion. All risk insurance policy is normally preferred as it has to be taken out in the joint names of the employer and the contractor. In most of the cases, now, funders to the project may also ask their name to be included in the insurance policy so as to cover their interest. The main implication is that if loss or damage happens to the insured property then, in spite of the fault, insurance funds will be made available to permit for reinstatement. The impact of joint names incorporated in the insurance policy is that each party has its own privileges under the policy and can hence make a claim against the insurer. However, in case of joint policies, each insured should adhere with the obligation of notification and disclosure27. A third party rights schedule has been introduced in JCT contract forms mainly to reap the benefit of section 1 of the Contracts ( Rights of Third Parties ) Act 1999 wherein third parties like funders , tenants can obtain advantages which they can implement directly against the contractor under clause 30. In such scenario, it is always advisable to take all risk insurance policy to cover these risks28. It is advised to cover the non-negligent damage under the JCT 21.2.1 which takes into account the accountability of the employer in tort for injury or damage to third party property where such damage has not arisen due to negligence of the contractor as held in Gold v Patman and Fotheringham29. Lowering of ground water, heave, subsidence, weakening, collapse, vibration, or removal of support are the damages to be covered under the insurance policy will fall under non-negligent damages30. In Pilkington UK Ltd v CGU Insurance Plc31 , it was held that in a strict sense, an insurer is not accountable to pay under a liability policy until the loss has happened and evaluated despite the fact that insurers might have shown an interest earlier than this in demonstrating liability under the policy. Thus, the loss can be determined by a competent court or the loss might have been ascertained by an arbitral tribunal or the loss may be demonstrated due to bona fide settlement with a third party. In Lumberman’s Mutual Casualty Co, v Bovis Lend Lease Ltd32, in case of settlement of third party claims, an extrinsic evidence would be required, which is to be inferred and to demonstrate the liability of insurers under the policy33. It is to be noted that a third-party liability policy cover is against a liability to be satisfied against a claim made by a third party, a liability will not be recognised if the repair or remedial works have been done well before the damage caused to third parties as held in Yorkshire case34. In James Longley and Company Ltd v Forest Giles Ltd35, where the work done by a specialist flooring contractor was found to be defective. In this case, it was held that the defendant insurance company could not be held accountable as the damage is caused due to negligence. Thus, courts interpret the meaning of damage in public liability insurance policies in a strict manner and held that even when there was a probable liability to the main contractor arising under the public liability cover, there was no damage to property. In Tesco Stores Ltd v Constable36, it was held that the insurance cover was taken for “for associated physical damage to the third party claimant’s property which was not applicable to Chiltern’s claim against Tesco which was a pure economic claim37. In view of the above, it is suggested that Insurance is the best way to control a contractor’s liability to third parties in the construction industry. (Word count 1549) Bibliography Books Fumston M, Building Contract Casebook (John Wiley & Sons 2012) Jones N F, The JCT Major Project Form. (John Wiley & Sons 2008) Levine M & Haar QC R t, Construction Insurance and UK Construction Contracts (CRC Press 2014) Lupton S, Cornes and Lupton’s Design Liability in the Construction Projects (Wiley & Sons 2013) Mathews R& Ageros J, Health and Safety Enforcement Law and Practice (OUP 2010) Ramsey V & Telford T. Construction Law Handbook. (Thomas Telford 2013) Speaight A, Architect’s Legal Handbook (Rutledge 2012) Till J, Architecture Depends (The MIT Press 2009) Web Pages Dunning, A. What is Contractors All Risks Insurance? (Nabarro.com December 2008) accessed 31 July 2014 Price, A,’ Payment and Pay less notices” (Practical Completion, 17 June 2014) < http://www.practical-completion.co.uk/payment-and-pay-less-notices/> accessed 29 July 2014 Thompson, S & Price A, JCT Design and Build Contract 2011: Payment (Lexology 21 March 2012) http://www.lexology.com/library/detail.aspx?g=0e2cd9fb-a4dc-41c3-a97d-336c7b099e08 > accessed 29 July 2014 List of Case Laws Baxall Securities Ltd v Sheard Walshaw Partnership EWCA Civ 0922/01/2002 Dutton v Bognor Regis UDC [1972] QB 373, CA Fytche v Wincanton Logistics PLC [2004] 4 All ER 22169 Gloucestershire Health Authority v Torpy (1997) 55 Con LR 124 Gold v Patman and Fotheringham (1958) Henderson v Merrett [1995] 2AC 145 James Longley and Company Ltd v Forest Giles Ltd (2001) 17 const LJ 424 Koonjul v Thameslink Healthcare Services NHS Trust 2000] LTL 28/03/2000 Lumberman’s Mutual Casualty Co v Bovis Lend Lease Ltd, [2004] AER 36 Mirant Asia Pacific Ove Arup [2005] PNLR 10 Parker v PFC Flooring Suppliers Ltd [2001] All ER (D) 168 (Oct) Pilkington UK Ltd v CGU Insurance Plc [2004] EWHC Civ 23 Swain v Denso Marston [2000] I.C.R. 1079 Tai Hing Cotton Mills Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 PC Tesco Stores Ltd v Constable [2008] Lloyd’s Rep IR 302 Yorkshire Water Services Ltd v Sun Alliance & London Insurance Plc [1997] 2 Lloyds Rep 21 List of Legislations Noise at Work Regulations 1989 Protection of Eyes Regulation 1974 The Construction Design and Management (CDM) Regulations, 1994. The Control of Industrial Major Accident Hazard Regulations 1984) The control of industrial major hazards The control of substances hazardous to health (Control of Substances Hazardous to Health Regulations 1988) The Control, of Asbestos at Work (CAW) Regulations (2002) The use of asbestos (Control of Asbestos at Work Regulations 1987) The use of Lead (Control of Lead at Work Regulations 1987) Read More