Construction Industry Update December 2009
HSE inspections to be privatised?
Shadow business minister John Penrose recently set out Tory plans to privatise HSE inspections which, it is claimed, would allow contractors to be “masters of their own destiny” by permitting external safety audits. He also indicated that this would work by way of contractors employing their own internal health & safety team to prepare the appropriate safety reports which would then be assessed by the external auditor (the scheme is based upon “Earned Autonomy” schemes in the US which have replaced government regulators by industry audits).
If the external auditor approved those reports and passed the contractor then that contractor would be entitled to refuse entry to official health & safety inspectors.
Mr Penrose tempered this by emphasising that contractors would have to demonstrate “very, very strong-run internal controls” in order to pass the external audit.
There has been a mixed reaction to the proposals. The UK Contractors Group (as you may expect) broadly welcomed the idea and insisted that major firms with well established and strict safety procedures in place should be spared the issues that random safety inspections can cause. The British Aggregates Association is also in support.
Conversely the construction union (Ucatt) labelled the proposals as potentially disastrous for health & safety in the UK’s construction industry with General Secretary Alan Ritchie commenting:
“These are the politics of a madhouse. There is no way this will lead to anything other than a cut in safety standards, which are already too low in construction. The Conservatives need to remember that self-regulation in safety kills workers.”
Whilst the plans may seem sweeping, it should not be forgotten that HSE inspectors will retain powers in respect of “all emergencies”, the definition of which has yet to be resolved but will likely include fatal accidents and reports from whistleblowers.
The Conservatives have been accepting comments on the plans throughout October and November, the results of which have yet to be disclosed.
Supreme Court – open all hours
October saw the opening of the Supreme Court of the United Kingdom, replacing the House of Lords as the highest court in the land. The new court will hear civil appeal cases from throughout the UK as well as criminal appeals from England, Wales and Northern Ireland. Twelve new Law Lords were also appointed as the first justices of the new Supreme Court.
One main area of change is that proceedings in the new court will, for the first time, be filmed and made available to broadcasters routinely. In addition the court will be open to members of the public during working hours.
President of the new court, Lord Philip’s view is that transparency of the judicial process is a fundamental principle which should underpin the new court system. He stated that:
“As justices of the Supreme Court, we will be more visible to the public than we ever were when sitting as member of the House of Lords… justice at the highest level should be transparent and the new court will have a crucial role in letting the public see how justice is done.”
Whilst many are hailing the new policy for openness, this approach will seem less attractive to many, especially those involved in proceedings which are to be broadcast. Many companies will be loathed to have their dirty laundry aired to the masses in such a way.
It is however hard to imagine the general public tuning in to watch judicial proceedings at the new court and I would suggest that it isn’t exactly main stream viewing (albeit the media interest generated by the courts recent ruling on overdraft charges).
However we may see an increase in the use of alternative methods of dispute resolution procedures which offer a more private solution, such as Arbitration (for example the new Arbitration (Scotland) Bill, which is discussed elsewhere in this e-bulletin, contains a default rule that parties are not to disclose any confidential information).
Consultants beware
As you will be aware, when a building contract is entered into it is done so between the employer and the contractor. The employer will usually have appointed various consultants be this an architect, civil engineer etc.
It had previously been thought that the consultant could not become liable to the contractor for negligent statements made directly to the contractor, however the recent case of J Jarvis & Sons Ltd v (1) Castle Wharf Developments Ltd (2) Gleeds Management Services Ltd and (3) Franklin Architects Ltd suggests otherwise.
To briefly summarise the position, Jarvis are a contractor. During a tendering process Jarvis relied on certain statements made by Gleeds in respect of planning issues (more particularly that the development had the full benefit of planning permission). This wasn’t the case.
Jarvis claimed that they had been induced into tendering for the contract as a result of Gleeds misrepresentations. In the initial action, the court agreed with Jarvis. The case thereafter went on appeal.
The initial decision in favour of Jarvis was overturned owing mainly to the court’s perception that Jarvis were aware of the actual planning position. Several other factors which were taken into consideration were that Jarvis were an experienced contractor and should have been aware of the situation. In addition they could have obtained the planning drawings for themselves as they are public documents. Accordingly the Court held that in this case Jarvis had placed no reliance on Gleeds statements when submitting the tender.
As to the existence of a duty of care between an employer’s consultant and a contractor, the Court commented that there is no reason why the professional agent of the employer could not become liable to a contractor for negligent misstatements made by the consultant to the contractor if the contractor relies on those misstatements. This is always however tempered by the specific facts and circumstances of any given situation.
The case highlights the need for all parties to be careful about what they say, when they say it and to whom, as it is clear that should someone acting in good faith seek to rely on statements made to them then they may have a right of recourse, even if there is no contractual link.
Sustainability – we know what we need to do but don’t do it
It was only in October 2009 that Gordon Brown warned that Britain was facing a climate catastrophe and world leaders had 50 days to take action. Sustainability has increasingly become of major significance to the construction industry. Both Government and the industry have tried to tackle this issue in a number of ways in recent times however it is unclear if these changes are having any meaningful effect.
An example of this is the Scottish Government’s target for CO2 reduction is 80% by 2050.
By any set of standards this is an ambitious target. One scheme which has attempted to contribute towards the reduction was the introduction of the Energy Performance Certificate (EPC) which by now you are likely to be well acquainted with (i.e. that parties selling, leasing or constructing most properties require to obtain an EPC which rates a building’s efficiency and incorporates recommendations for improvement).
Further change is to come in the shape of the Energy Performance Buildings Directive 2 (to be brought into law by December 2010) which will mean that all public buildings over 250 sqm will need a Display Energy Certificate (DEC) in Scotland.
In Glasgow it has been calculated that compliance with the rules regarding EPCs is running at about 20% – not enough to affect global warming and climate change. The new Climate Change (Scotland) Act 2009 (which received Royal Assent on 4th August 2009) does however make provision for Scottish Ministers to introduce regulations to ensure the enforcement and compliance of EPCs. The Act states that these regulations should be brought into force no later than 12 months following the date that the Act came into force and should state, for example, the persons who may be required to have assessments carried out and how the duties imposed by the regulations should be enforced.
It is clear that it is the implementation and more importantly, the enforcement of energy efficiency initiatives which can make a meaningful contribution towards CO2 reduction however it would appear that we are a long way off these initiatives making any real impact.
Arbitration – a view to a Bill
A Bill to improve arbitration law has now been passed by Parliament and is expected to come into force in February 2010.
Arbitration is a process of dispute resolution whereby parties agree to submit a dispute between themselves to a third party (the arbitrator) who will act as a private “judge” to produce a binding determination on the dispute. It is not currently regarded as an attractive form of dispute resolution in Scotland because it is generally considered to be slow, complex and expensive. The services of the arbitrator, unlike those of a judge, have to be paid for by the parties concerned and, depending on the complexities of the case, legal representation is generally required.
Under the new Bill, Arbitrators will now have clear powers to grant remedies to parties, to make awards of interest and to deal efficiently with questions of law.
The main changes are as follows:
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A mixture of mandatory and default rules that will apply to all arbitrations in Scotland. Previously the law of arbitration was contained in the common law (as laid down by the courts). This will now mean that the law of arbitration will be contained in a single, codified source.
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The ‘stated case’ procedure that presently allows a party to seek an opinion from the Court of Session on points of law before an award is issued will be abolished. This makes way for a shorter procedure which can only be undertaken with both parties consent if the court is satisfied that such a determination will produce savings in respect of expenses, the application is made without delay and good reason is shown why the question should be determined.
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A default rule which provides that the arbitrator(s) and the parties must not disclose confidential information relating to the dispute, the arbitral proceedings or the award (this reflects current arbitration practice).
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There is provision that the default rules will apply unless they are varied by the parties. Therefore, arbitration clauses in standard form building contracts will need to be re-written to reflect the Bill.
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The arbitrator now has the power to award damages for breach of contract. There has previously been no power for the arbitrator to do this, unless granted by the parties.
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The arbitrator’s decision or ‘award’ is final and binding and may be enforced like a court decree. There are only limited rights of appeal to the courts. This reflects current practice.
It is hoped that the Arbitration (Scotland) Bill will provide a statutory framework for arbitration to encourage greater use of arbitration domestically and, in time, attract more international arbitration to Scotland.
The matters covered in this ebulletin are intended as a general overview and discussion of the subjects dealt with. They are not intended, and should not be used, as a substitute for taking legal advice in any specific situation. Semple Fraser LLP will accept no responsibility for any actions taken or not taken on the basis of this publication.
FOR FURTHER INFORMATION CONTACT: KIRSTEEN MILNE