Construction & Engineering London Legal Update

Transcription

1 Costructio & Egieerig Lodo Legal Update Isurace - ad risk allocatio p.1 Project isurace p.1 The scope of public liability isurace p.5 Evirometal isurace - the pollutio reisurer pays p.7 Idemities ad joit ames isurace p.8 Notificatio, otificatio, otificatio p.11 Dow with liability - ad how to fix the ceilig p.12 The meaig of cosequetial loss p.14 Liability for costs uder a collateral warraty p.16 What s bee happeig at Mayer Brow? p.17 Costructio judge rules that parties have o cotract p.19 ICC Turkey ulockig the potetial? p.20 Withholdig of liquidated damages - Reiwood v Brow p.24 Procuremet roud-up p.26 The price of ocompliace p.26 Regeeratio Complicatios at Roae p.28 Teder Cotracts - Duties of Fairess ad Good Faith p.29 Miig what goes o beeath the surface? p.30 Morals but o moral rights? Architects ad the RIBA Stadard Coditios of Appoitmet. p.32 A Guide to the Site Waste Maagemet Plas Regulatios 2008 p.34

2 Costructio & Egieerig Legal Update Isurace - ad risk allocatio Welcome to this latest editio of the Costructio & Egieerig Legal Update. The key theme for this issue is isurace. The courts have very helpfully provided a umber of recet decisios that we feature i the first part of this Update, together with a leadig article by Tom Duca o project isurace. The remaider of the costructio ladscape has ot bee eglected ad elsewhere i the Update the reports ad articles rage from a review of the ICC Model Turkey Cotract for Major Projects to a roud-up of EU (ad other) procuremet decisios, ot to metio a guide to the UK Site Waste Maagemet Plas (for those who are ot already fully up to speed with the ew regime). We hope you ejoy the cotets. Project Isurace All sorts of projects have all sorts of isurace for all sorts of participats i the works. But ca it all be made much simpler, ad cheaper, by gettig people covered by the same policy? It already happes, to some extet; costructio cotracts ofte cotai clauses requirig oe party to take out joit ames isurace for its beefit ad that of other parties o the project. The isurace is iteded to allocate risk to the policy, rather tha the parties, for the circumstaces isured agaist, but does it really work? Joit isurace the problems Eve that deceptively simple step, however, of joit isurace is a legal miefield. There is a substatial body of law o the meaig ad effect of joit isurace, which might mea that the parties itetios at the start of a project are ot ecessarily reflected i the cotractual ad isurace arragemets betwee them. The recet Court of Appeal decisio i Tyco Fire v Rolls-Royce (cosidered i detail o page 8 below) is a good example of the problem ad is also a remider of the importace of havig i place cotractual ad isurace regimes that are co-ordiated ad clear ad which achieve the stated aims of the parties. Oe of the issues cosidered i Tyco was the iter-relatioship betwee the provisios for joit isurace ad the idemities provided i the cotract ad how this affected the right of oe joit isured to sue aother i respect of damage for which they were joitly isured. It has previously bee said that there is a rule of law that prevets a actio betwee two or more persos who are isured uder the same policy agaist the same risk. Perhaps the best kow cases i this area are Petrofia (UK) Limited v Magaload ad Mark Rowlads Limited v Beri Is. The basis for this rule has bee the subject of much academic debate but the purpose of this article is ot to revisit this area, except to ote that i recet times (most otably i the House of Lords decisio of Co-operative Retail Services v Taylor Youg) the courts have suggested that the basis of the rule is to be foud i the cotract betwee the parties. I Tyco the cotract provided for the cotractor s liability to the employer for egligece but also cotaied provisios cocerig joit ames isurace. Lord Justice Rix stated 1

3 that the existece of isurace i the ames of both the cotractor ad the employer did ot, i itself, prevet a subrogated actio beig pursued by the isurer i the ame of the employer agaist the cotractor. Such a actio would oly be preveted by a express term i the policy prohibitig subrogatio. If that is correct the it must also be correct that, uless there is a express term to the cotrary, the employer may sue the cotractor uder the idemities provided i the cotract rather tha claim uder the policy (eve though the cotractor is a joit isured). The employer would certaily choose to do so if the isurace compay were to fail or if the isurace compay were to dey cover. I either case, this may leave the co-isured cotractor facig a liability for losses which it evisaged would be covered uder the joit ames policy. This sceario ca be avoided by careful cotract draftig to make the idemities provided by the cotractor subject to the joit isurace provisios. This uderlies the importace of givig the isurace regime careful thought prior to the start of a project ad esurig the cotracts reflect what is iteded. What joit isurace is available for costructio projects? The traditioal approach Most stadard form cotracts provide for joit ames isurace for the works with a requiremet for the cotractor to have i place its ow public liability ad professioal idemity isurace as appropriate. The joit isurace i questio is ormally a Cotractor s All Risks (or CAR) policy,. A CAR policy provides a idemity agaist the costs of repairig damage to the works caused by all risks. Usually the employer, cotractor ad sub-cotractors are amed as joit isureds i the policy. CAR policies differ but the trigger for cover is damage to the isured property. For the purposes of CAR isurace, it is importat to distiguish betwee what is damage ad what is a defect, damage beig covered by the policy ad defects (ad the effect of defects) beig excluded to varyig degrees. Geerally, damage will exist if there has bee a physical alteratio which impairs the usefuless of the property isured. I Pilkigto v CGU Isurace, the Court of Appeal decided that damage does ot exted to the icorporatio of a defective product i property where the defective product does ot physically harm the property ad the harmful effect of ay later defect is cotaied withi the product. If there is damage, whether the CAR policy will respod depeds upo the exclusios i the policy. The most importat exclusios relate to damage caused by defective desig or workmaship. There are five defect exclusios widely used i the Lodo isurace market, DE1 to DE5. These provide as follows: DE1 is a outright defects exclusio which excludes all loss or damage to the property isured due to a defect i desig, pla, specificatio, materials or workmaship. DE2 excludes all loss or damage to the property isured which is: (a) i a defective coditio due to a defect i desig, pla, specificatio, materials or workmaship; (b) relies for its support o (a); or (c) which is icurred i order to assess ad repair (a) or (b). 2

4 Costructio & Egieerig Legal Update However, DE2 does cover loss or damage to property isured which is ot i a defective coditio but which is damaged by isured property i a defective coditio. DE3 gives the same cover as DE2 save that (b) above is also covered provided it is ot i a defective coditio ad is ot damaged durig the repairs of (a). DE4 excludes oly loss or damage to the compoet part or item of the property isured which is defective i desig, pla, specificatio, materials ad workmaship as well as damage icurred to isured property to access ad repair the defective part. However, DE4 writes back i cover to all other parts of the isured property which is ot defective but is damaged as a cosequece of the defect. DE5 gives the widest cover because it oly excludes the cost of redesigig the defective isured property. The defective compoet part, the damage caused by that part ad the access costs are all covered. The most commoly used desig exclusio is DE3 but the parties ca choose how wide the cover should be uder the CAR policy by optig for oe of these five optios. The premium obviously icreases as the scope of cover wides. Issues to cosider whe selectig a isurace regime As highlighted i Tyco, whe choosig the scope of cover the parties should cosider how that will affect the cotractual obligatios. If the parties ited to trasfer the risk to the policy this should be made clear i the cotract. The easiest way of doig this is by expressly makig clear that the relevat cotractual obligatios are subject to the requiremet to take out the joit ames policy. Aother issue to watch for is that may stadard cotracts cotai obligatios to take out a certai level of cover, for example JCT cotracts require existig structures isurace to be take out i respect of specified perils. Wider cover is available ad if it is obtaied the cotract obligatios should be reviewed to esure they are compatible. CAR isurace plays a importat role durig the life of the costructio project but the cover it provides is oly for the costs of rectifyig damage to the works. It is therefore still ecessary for all the parties to have liability isurace i place durig the life of the works to cover claims agaist or by oe or more of the parties relatig to losses other tha damage to the works. Project isurace For may projects, particularly for more complex high value works, CAR isurace is ot sufficiet because of its limited scope. O such projects it is commo to put i place joit ames project isurace coverig damage to the works, third party liabilities ad delays. The works cover is the same as a CAR policy ad relates to damage to the works. The third party public liability cover is for damage to third party property or physical ijury to third parties arisig durig the course of the works. The trigger for cover uder this sectio is a legal liability to a third party but the scope of cover teds to be limited to damage or ijury to the public (although fiacial loss extesios are available at a icreased premium). The works ad third party sectios will have all the parties to the project amed as joit isureds. Delay i start up cover is ormally oly available for the employer ad ay fuders or future ower/operators of the works. The cover is for loss of cash flows geerated by the 3

5 completed project i the evet of delay to the completio of the works but oly where the delay is the result of damage to the works. Delay isurace is ofte required by fuders o large projects to protect the icome stream, as those cash flows are required to service (ad repay) the debt. Project isurace is ormally take out by the employer at its cost o behalf of the other joit isureds. This arragemet usually places the risk that the scope ad amout of cover is sufficiet for the eeds of the project o the employer ad gives the employer cotrol over the admiistrative tasks, particularly otificatio. If the project policy is paid for by the employer there may be a reductio i the cotractor s bid price but that is by o meas certai as a desig ad build cotractor will still have to bear the cost of its ow professioal idemity isurace. Project policies for high value works may also have large deductibles, ad cosideratio eeds to be give to how the deductible will be allocated as betwee the parties. Oe optio is to limit the parties cotractual liabilities to the level of the deductible, so that the party resposible for the damage pays the deductible ad thereafter the policy respods. The same fault-based approach ca be take to losses withi the scope of the policy but which exceed the limit of idemity. I both cases, however, disputes ca still arise as to resposibility for the damage, ad therefore the deductible ad/or the uisured losses, despite the existece of joit isurace. It has bee estimated that two-thirds of costructio professioal idemity claims are made prior to completio, which suggests that the joit ames isurace curretly used i the idustry ca, at best, have oly a limited effect i prevetig sigificat disputes arisig betwee the parties durig the life of the project. The future? Collaboratio ad parterig have log bee idetified as the way to overcome the blame culture that ca arise o costructio projects. Much has bee writte about these cocepts ad how they lack cotractual teeth whe relatioships break dow but may cotracts are cast i this mould ad cliets, particularly i the UK public sector, are ow lookig for a isurace regime to help facilitate the parterig ethos. I respose, the Strategic Forum for Costructio has proposed itegrated project isurace, which is joit ames isurace that isures agaist the fiacial effects rather tha occurreces (such as damage) or liabilities. It is implemeted uder a cotractual regime where the parties agree to waive their rights to claim agaist each other ad istead look to the policy to recover their losses, however those arise. The itetio is that itegrated project isurace would replace the parties ow policies (icludig professioal idemity ad public liability policies) ad put a ed to the ofte competig ad cotradictory isurace arragemets coverig particular projects. It is proposed that isurers would be brought ito discussios at the start to agree the target cost pla for the project. Each member of the project team is the icetivised uder its cotract to meet the target cost usig a pai/gai-share formula ad the deductible uder the policy, if applicable, would become part of the pai elemet. Over ad above this pai share isurers would bear ay fiacial losses up to the limit of idemity. 4

6 Costructio & Egieerig Legal Update At this stage the idea is i its ifacy but pilot projects are beig iitiated to test the idea i practice ad a project team comprisig isurers, brokers ad advisers will moitor the projects to develop the practicalities of the proposals. While it remais to be see whether it ca achieve its stated aim of elimiatig disputes durig the life of the project, some have estimated that itegrated project isurace could save the idustry 1% of its total costs. If this is correct (which remais to be see) it is likely that those ultimately resposible for procurig projects will be kee to do their best to make it work. Tom Duca The scope of public liability isurace What a public liability policy covers may ot be as obvious as you thik. I April this year, i Tesco Stores Limited v Costable & Others, the Court of Appeal looked at coverage uder a public liability policy ad had to decide how far that cover exteded. Did it exted to liability i cotract for pure ecoomic loss? I 2003 Tesco embarked o a project to build a supermarket over a railway cuttig ear Gerrards Cross statio. The railway lie was to be eclosed i a tuel with the supermarket beig built o the ifill site above it. Part of the tuel collapsed i 2005 while the work was beig carried out ad the railway lie was closed for 51 days. The trai operator that used the lie had etered ito a Deed of Coveat with Tesco which required Tesco to pay the trai operator:- o demad such sums as shall from time to time fairly compesate them for all ad ay costs, losses or expeses arisig out of or resultig (directly or idirectly) from the carryig out of the Works ad its existig ad/or future railway passeger busiess Tesco had to take out public liability isurace of 155,000,000:- i respect of legal liability which may be icurred by [the isured] i respect of death or bodily ijury to ay perso ad loss or damage to property arisig from the activities authorised by each licece holder. The descriptio of cover i the public liability policy take out by Tesco said that:- The isurers will idemify the Isured agaist all sums for which The Isured shall be liable at law for damages i respect of: a) death of or bodily ijury to or illess or disease of ay perso b) loss or damage to material property c) obstructio, loss of ameities, trespass, uisace or ay like cause happeig or cosequet upo a cause occurrig durig the Costructio Period or ay extesio thereof ad arisig out of ad i coectio with The Project There was a cotractual extesio to the cover which provided that: [1] Cotractual Liability 5

7 Other tha as may be stated or implied i The Cotract, liability assumed by The Isured uder cotract or agreemet ad which would ot have attached i the absece of such cotract or agreemet shall be the subject of idemity uder this sectio oly if the coduct ad cotrol of ay claim so relatig is vested i The Isurers ad subject to the Exceptios ad Extesios of this sectio. Lord Justice Tuckey said that a public liability policy provides cover agaist liability to the public at large whereas private liability arises from cotracts betwee idividuals. Public liability i this sese arises i tort ad does ot ad caot arise oly i cotract ad, as a geeral rule, a claim i tort caot be based o pure ecoomic loss. This was, he said, a strog, but ot coclusive, poiter to the meaig of the words used. Lord Justice Tuckey looked at the classes of liability set out i a) to c) of the descriptio of cover ad oted that each class of liability correspoded with a familiar class of liability arisig i the law of tort, or its effect, from physical iterferece with a third party s perso, property or property rights ad was typical of harm associated with a project of this kid. There was othig i the wordig to idicate that liability i cotract uder a cotract of idemity was iteded to be icluded. Nor did the cotractual liability extesio assist Tesco. This did ot apply, said Lord Justice Tuckey, because ay loss which the trai operator suffered was ot i respect of (meaig for) physical impact o its property or property rights. Its loss was oly the cosequece of such impact o the property ad property rights of others. The trai operator s claim uder the cotract extesio ra ito precisely the same difficulty as its claim i tort. It was ot a typical public liability claim but simply a cotractual claim for ecoomic loss. Tesco had ot damaged the trai operator s property or property iterests, ad the trai operator could ot base its liability to the trai operator o the groud that it had damaged the property or property iterests of Network Rail. Thigs might have bee differet, of course, if the trai operator had suffered the ecessary damage. However, o the facts i this case, the trai operator had ot suffered damage, because it oly had a limited iterest i the railway. Iterestigly, Lord Justice Tuckey oted that if Tesco had wished to provide isurace cover for this liability:- It would have bee a simple matter to provide a copy of the deed of coveat to isurers ad agree a simple clause to cover that liability, if isurers had bee prepared to do so at a premium acceptable to Tesco. Outside its isurace cotext, this case is a useful remider to those draftig cotracts of the limitig effect of the phrase i respect of. If less limitig laguage is required, phrases such as i coectio with or arisig from are to be preferred. Michael Rega 6

8 Costructio & Egieerig Legal Update Evirometal isurace - the pollutio reisurer pays A key evirometal theme is that the polluter pays. With a growig evirometal isurace market the obligatio to pay rests with isurers ad reisurers, if the relevat specialist policies cover the pollutio i questio. Cases o evirometal isurace are geerally few ad far betwee but a recet rulig by the Court of Appeal may prompt pause for thought by the evirometal isurace market ad isureds. I Wasa Iteratioal Isurace Compay Limited v Lexigto Isurace Compay ad Others the Court of Appeal had to cosider whether back to back reisurace covered the clea-up costs of maufacturig sites i the Uited States. I the early 1990s the US Evirometal Protectio Agecy ad various state evirometal agecies had required Alcoa (the Alumiium Compay of America) to clea up pollutio ad cotamiatio of groud water, surface water ad soil at various maufacturig sites i the US used by Alcoa. Alcoa issued proceedigs i the courts of the State of Washigto agaist various of its isurers that had provided cover over a period of approximately 30 years, seekig a declaratio of etitlemet to isurace cover i respect of the clea-up costs at 35 maufacturig sites i the USA. The courts of Washigto State applied the law of Pesylvaia ad the Supreme Court of Washigto State foud that Alcoa could recover the full costs of remediatio at ay particular site provided oly that some damage had occurred at the relevat site durig the years whe Lexigto was at risk. Lexigto were Alcoa s property damage isurers for the period betwee 1 July 1977 ad 1 July 1980 but the cosequeces of the Supreme Court s decisio were that Lexigto was the faced with a hefty claim of the order of US$ 180 millio, which they evetually settled for a figure of US$ 103 millio. Lexigto had, however, reisured their risk o the Lodo reisurace market o the same terms ad coditios as origial icludig, specifically, the isured period of 1 July 1977 to 1 July The reisurers, Wasa ad AGF, declied to pay o the basis that the reisurace policy was govered by Eglish law ad that, as a matter of Eglish law, reisurers could oly be liable for the costs of remedyig damage to property which actually occurred betwee 1 July 1977 ad 1 July They said they could ot therefore be liable for the cost of remedyig damage occurrig before or after that period. Those argumets failed. The Court of Appeal held that the reisurers were boud by the decisio of the Supreme Court of Washigto State. Lord Justice Logmore said: I the preset case oe has to determie whether as a matter of costructio of the cotract the parties iteded the period clause to have the same meaig, whatever that meaig may be. It seems to me that they did Ad Lord Justice Sedley added that: Save to the limited extet that the terms of reisurace pushed them apart, the two cotracts were back to back, because that is what reisurace prima facie is. 7

9 Lord Justice Logmore referred to the evolutio of the Bermuda Form i which the parties agree to Eglish or Bermuda arbitratio but agree also that the substative law of the isurace (or reisurace) is to be that of New York, otig that this sesible arragemet might avoid some, at least, of the problems throw up by this difficult case Cate Sharp, head of our Eviromet Group, commets: This case highlights the relevace of evirometal isurace as a optio for busiesses i their maagemet of evirometal risks. Although it has bee said may times before, the case also demostrates how importat it is for all parties to check the risks that are beig covered. Evirometal isurace premiums ca certaily be costly ad busiesses will wat to esure that their cover is activated i the iteded circumstaces ad protracted litigatio is avoided. Evirometal isurace ievitably presets its ow particular issues. A particular issue with respect to specific policies coverig cotamiatio by gradual migratio or seepage is esurig adequate disclosure to the isurer of all kow issues at the site. It is also importat to ote that a typical exclusio i evirometal isurace policies is where there is ay volutary reportig to a regulator. This ca limit coverage i circumstaces where, as a matter of iteral policy, a compay is proactive i its evirometal maagemet or where a third party (such as a ladlord or former ower) makes such a report. If you have ay questios about evirometal isurace, please cotact: Cate Sharp [email protected] Eviromet Group Idemities ad joit ames isurace As the latest adveture of Idiaa Joes goes to show, some themes just keep comig back. Take joit ames isurace ad idemities. A burst pipe, a flood ad the old familiar argumet about who should pay for the damage may ot be i the same league as Harriso Ford s exploits but the twists ad turs of the Court of Appeal decisio i Tyco Fire & Itegrated Solutios Limited v Rolls-Royce Motor Cars Limited surely provided a edig to talk about ad eough ammuitio for a sequel i the House of Lords. I priciple it s all very simple. A cotractor gives a idemity to the employer agaist its egligece but elsewhere i the cotract the cotractor or the employer is required to isure the works, ad perhaps the existig structures, i their joit ames. The questio is, does the joit ames isurace arragemet cut dow the applicatio of the idemity, to the extet of the isurace obligatio? Did the parties ited a isurace fuded solutio? Sometimes the parties say so but sometimes they do ot, which is where the problem begis, as it did i Tyco. 8

10 Costructio & Egieerig Legal Update Tyco cotracted with Rolls-Royce to provide fire protectio services, icludig a sprikler system, at a ew Rolls-Royce maufacturig plat ear Goodwood i West Sussex. Oe of the mai supply pipes burst ad caused a flood, damagig ot oly the works but other parts of the plat. Tyco repaired the damage to the Works, but the Court of Appeal had to decide whether Tyco was liable to Rolls-Royce for damage to existig structures (i.e. other parts of the developmet). For the purposes of the proceedigs, Tyco accepted that the flood was caused by its egligece i failig properly to coect or faste a joit i the mai supply pipe, which had caused the burst ad cosequetly the flood. Clause 13.5 of the cotract, which was ot a idustry stadard form, bega with this critical wordig: The Employer shall maitai, i the joit ames of the Employer, the Costructio Maager ad others icludig, but ot limited to, cotractors, isurace of existig structures.. agaist the risks covered by the Employer s isurace policy referred to i Schedule 2 (ie the Specified Perils) subject to the terms, coditios, exclusios ad excesses (uisured amouts) of the said policy. Rolls-Royce had apparetly ot take out this isurace i joit ames but the parties agreed that the court should resolve the case as if it had. The first key issue was whether the first setece of clause 13.5 made Tyco a joit isured i respect of the existig structures. The first istace judge looked at the phrase.. others icludig, but ot limited to, cotractors.. ad commeted: It is difficult to thik of a wider scope of persos iteded to be covered. The Court of Appeal did ot agree. They foud a umber of thigs strikig about the isurace of the existig structures: The "Cotractor was ot amed, although the Cotractor was amed i coectio with isurace of the Works ad it would have bee so easy to iclude the cotractor i the first part of the clause. The rest of clause 13.5 was about isurace of the Works ad othig further was said about how a joit ames policy i respect of the existig structures was iteded to work. "others, icludig but ot limited to, cotractors was a odd phrase; cotractors were at least idetified by descriptio but others were wholly udefied. What was the isurable iterest i respect of which "others were to be isured? Schedule 2 (referred to i 13.5) cotaied a "Notice To Cotractors O Isurace Provisios which suggested that cover i respect of the Specified Perils was limited, where cotractors were cocered, to their Works. Lord Justice Rix also oted that there was o obligatio o Tyco to take out professioal idemity isurace (which he thought, had it bee take out, would have applied to Tyco s assumed faulty pipe tighteig) but commeted that it would be a brave cotractor who udertook work without puttig such isurace i place. The opeig part of clause 13.5, said the Court, was ot iteded to give Tyco or ay idividual cotractor separate liability isurace i respect of the existig structures outside the area of its ow Works. 9

11 All that this phrase is iteded to do is to state that the Employer s Policy isurig its ow property o the Site embraces a series of joit amed policies which protects others icludig but ot limited to cotractors. Cotractors are told this so that they may have the cofidece that, if disaster strikes the developmet, the employer will have the resources to reistate it icludig the resources to prepare ad see to completio the performace of cotractor s Works. It seems to me that others is ot a atural way to refer, eve iclusively, to the Cotractor uder a idividual package cotract, ad that the positio is ot improved by sayig that others icludes cotractors, a phrase which does ot i terms embrace the Cotractor. There was o special regime i relatio to the existig structures (or eve, it seems, i relatio to the Works) which excluded Tyco s other cotractual obligatios, i particular its idemity to Rolls Royce agaist egligece. Lord Justice Rix cosidered the challegig case law ad foud the Court of Appeal s decisio i Lodo Borough of Barkig & Dageham v Stamford Asphalt Compay Limited the closest case, i terms of the facts (although the issue i Tyco was, of course, oe of costructio of the particular cotract that Tyco made with Rolls-Royce). Barkig was apparetly ot cited (ad was therefore uaffected) by the key House of Lords decisio i Co-operative Retail Services Limited v Taylor Youg Partership Limited. The Barkig aalysis that, i this situatio, a obligatio to isure i joit ames oly exteds to specified perils so far as loss by such perils has ot bee caused by egligece, was, i Lord Justice Rix s view, bidig o the Court of Appeal i the absece of the distiguishig wordig i, for example, the Co-operative case. The Court of Appeal did ot have to decide the secod mai issue, whether, as a matter of isurace law, the provisio for joit ames isurace by itself provided a overridig reaso to costrue the cotract so as to override Tyco s cotractual liability for egligece. Lord Justice Rix did cosider the issue but cautiously, as the House of Lords had explored the issue i the Co-operative case. Differet doctries had, he oted, bee put forward to explai why a isurer caot sue by subrogatio i the ame of oe co-assured to recover, from aother co-assured, moies paid out o the basis of the latter s egligece or default. Oe doctrie is circuity of actio ad aother is a implied term i the isurace cotract, the latter ow apparetly replaced by the doctrie of the true costructio of the uderlyig cotract for the provisio of joit ames isurace. A provisio for joit ames isurace might, he said, as a matter of costructio, lead to the carvig out of a exceptio from the uderlyig regime so far as specified perils were cocered. A implied term could ot, however, withstad express laguage to the cotrary ad if the uderlyig cotract evisaged that oe co-assured might be liable to aother for egligece eve withi the sphere of the policy s cover, i the absece of ay express exclusio of subrogatio, there was othig i the doctrie of subrogatio to prevet the isurer suig i the employer s ame to recover the proceeds paid out by the isurer. The latest thikig, said Lord Justice Rix, is to the effect that it is all ultimately a matter of the parties itetios as foud i their cotracts. ad ot, therefore, a rule of law. Nothig i cosiderig the secod issue, therefore, caused him to chage his mid o the first. 10

12 Costructio & Egieerig Legal Update Oe clear message that does emerge from the judgmet is just how importat it is for parties to agree what risks are to be covered by isurace ad how far (if at all) to make express referece to the sesitive issue of egligece. Despite that clear message, however, ad despite the growig emphasis o risk allocatio, do ot bet agaist a sequel or two. Some themes just do t seem to go away. Richard Crave Notificatio, otificatio, otificatio Although ot quite as excitig as the UK TV home-hutig series Locatio, locatio, locatio, followig the otificatio provisios of your isurace policy ca be just as crucial as takig the pluge ad pluggig your life-savigs ito purchasig a swaky ew flat. The recet decisio i Kajima UK Egieerig Ltd v The Uderwriter Isurace Compay Limited serves as a key remider of the importace of sufficiet otificatio. Kajima was the mai cotractor for the costructio of a block of apartmets, which were i the form of pre-fabricated, stacked accommodatio pods. Kajima took out professioal idemity isurace with the defedat uderwriters for a two year period. The policy stated: The Isured shall give writte otice to the Uderwriters as soo as possible after becomig aware of circumstaces which might reasoably be expected to produce a claim... The effect of the policy wordig was that, if circumstaces were otified uder the policy which later led to a claim, the policy would respod as log as the circumstaces (ad ot ecessarily the claim) were otified withi the policy period. Durig the policy period, Kajima duly made a otificatio that the pods were settlig, which was causig adjoiig roofig, balcoies ad walkways to distort. The otificatio also referred to other potetial damage ad risk ad that a ivestigatio was uderway. Shortly afterwards, the policy expired ad the ivestigatios were completed. The ivestigatios revealed a umber of serious ad extesive problems, oly some of which were i the same area of the defects origially otified. Further, some of the problems ucovered were ot the same as those origially otified. The questio arose, whether the problems that occurred after the policy expired formed part of the circumstaces origially otified i the policy period, or whether the additioal problems were ew circumstaces which would ot be covered by the policy. The isured, Kajima, argued that the ivestigatio had led to further discovery of additioal defects ad so there was a cotiuum of evets which were related, begiig with the iitial ivestigatio. The court disagreed. There had to be some relatioship betwee the defects ad damage that occurred after the policy had expired ad the previously otified circumstaces. O the facts of the case there was o such relatioship ad therefore the isured had o claim eve though the ivestigatio (which was otified) ucovered the additioal defects ad problems. 11

13 Ad the message? The case is a sharp remider that if a policy is to respod, every isured must be careful to otify the specific circumstaces or claim. If there has already bee a otificatio, ew circumstaces that arise may eed to be otified, eve if the isured believes there to be some lik to the origial otificatio. Takig a precautioary approach to otificatio is the safe course. Takig a more relaxed approach might mea that isurers are etitled to reject a claim uder the policy, ad that could be seriously bad ews. Gemma Houghto Dow with liability - ad how to fix the ceilig You always eed a pla B. Especially with cotracts, ad the costructio idustry is well versed i risk allocatio betwee employers, cotractors, subcotractors ad the other idustry players. With potetial liabilities o costructio, oil ad gas projects ruig ito the millios, effectively drafted exclusios, idemities ad limitatio of liability clauses ca be vital; as ca be the choice of law which ultimately govers them. Such clauses should ideally be drafted usig clear wordig which accurately captures the itetios of the parties. What happes, however, whe a exclusio clause or idemity is silet, for example, as to damages or loss which flows from a party s ow egliget or itetioal act? What is the approach of the Eglish courts i such circumstaces? Amog the various questios of fact ad law explored i the recet decisio of Mr Justice Ramsey i Biffa Waste Services Ltd ad Biffa Leicester Ltd v Maschiefabrik Erst Hese Gmbh ad aother was the scope ad extet of limitig wordig cotaied i a clause of a agreemet betwee Biffa Waste ad MEH. Biffa Leicester ad Leicester City Coucil etered ito a PFI cotract for the collectio, recyclig ad disposal of Leicester s domestic waste. The PFI cotract required the costructio of a recyclig plat, a key part of which was a Ball Mill. Biffa Leicester the etered ito a back to back agreemet with Biffa Waste who i tur cotracted with MEH uder a Desig ad Build Deed for MEH to desig ad build the relevat plat. MEH also provided a warraty i favour of Biffa Leicester (the Direct Agreemet). MEH subcotracted the supply of the Ball Mill. While post completio modificatio works were beig carried out i the Ball Mill by a third party a fire broke out. Biffa Leicester ad Biffa Waste brought proceedigs i the Techology ad Costructio Court agaist MEH ad a subsubcotractor of MEH to recover losses resultig from the delay caused by the fire to the operatio of the recyclig plat. (Two of the parties to the proceedigs were apparetly isolvet.) I determiig whether MEH was liable to Biffa Leicester ad if so, to what extet, Mr Justice Ramsey had to cosider the effect of clause 2.2 of the Direct Agreemet ad to decide if the wordig was sufficiet to exclude or limit liability i tort. The clause read: The Cotractor shall subject to the terms of this agreemet owe o liability, duty or obligatio to Biffa Leicester which is greater tha would have existed if Biffa Leicester had bee amed Provider uder the Supply Cotract 12

14 Costructio & Egieerig Legal Update Biffa relied o the priciples of iterpretatio set out by Lord Morto, i 1952, i Caada Steamship Lies v The Kig. Those guidelies provided that, i cases where there is o express referece to egligece, the court must cosider if the words used are wide eough, i their ordiary meaig, to cover egligece ad if they are, the the court must cosider whether the head of damage may be based o some groud other tha that of egligece. If this is foud to be the case (ad that head is ot so faciful or remote) the Caada Steamship provided that liability for a party s ow egligece would ot be excluded. Mr Justice Ramsey aalysed the authorities, icludig the relatively recet case of HIH Casualty ad Geeral Isurace Ltd v. Chase Mahatta Bak, ad helpfully summarised the positio: (1) Limitatio of liability clauses are costrued with less rigour tha exclusio of liability clauses or idemity clauses. (2) The guidelies i Caada Steamship provide helpful guidace o the proper approach to iterpretatio but do ot lay dow a code which prescribes rigid rules to be applied mechaically to iterpret a particular clause. (3) The relevat clause must be costrued i the cotext of the whole istrumet ad agaist the admissible backgroud, to ascertai whether the wordig, although literally wide eough to cover egligece, did ot do so. (4) I the case of exclusio clauses or idemity clauses it is iheretly improbable that oe party iteded the clause to release the other party from liability for egligece or impose a idemity for the other party s egligece. But, i the case of a limitatio of liability clause there is o such high degree of improbability. O the basis of these priciples, Mr Justice Ramsey foud that clause 2.2 of the Direct Agreemet was sufficiet to limit MEH s liability i tort for delay caused by egligece as: clause 2.2 was a limitatio of liability clause ad as such was to be costrued less rigorously tha a exclusio clause, although there was o express referece to "egligece" i clause 2.2, the referece to "liability" ad "duty" was sufficiet to cover liability i tort for egligece, ad there was othig improbable about MEH wishig to exclude liability i tort for egligece. The judgmet i Biffa v MEH therefore idicates that the courts have distaced themselves from iflexible applicatio of the rules set out i Caada Steamship, especially i circumstaces where to do so would, as Lord Scott of Foscote said i HIH v Chase Mahatta: produce a result icosistet with the commercial purpose of the cotract i questio. As with all matters of draftig, the questio could be avoided altogether if the relevat cotract clause cotais wordig that makes clear whether or ot the particular exclusio or idemity applies to a party s ow egligece or itetioal acts. How easy or difficult it may be i practice, however, to egotiate what may be a sesitive issue, is, of course, aother matter. Moica Chapli 13

15 The meaig of cosequetial loss Just like the Eglish moarchy, Eglish cases o the iterpretatio of cosequetial losses ru i a relatively log ad established lie. Cosequetial losses, cocluded the Court of Appeal i British Sugar v NEI Power Projects, are losses that fall withi the secod limb of Hadley v Baxedale, which are losses that may reasoably be supposed to have bee i the cotemplatio of both parties, at the time they made the cotract, as the probable result of the breach of it. While clear i priciple, like so may thigs, the difficulties start to surface whe the test is applied i practice. Take, for example, the 1997 case of Deepak Fertilisers ad Petrochemical Corporatio v Davy McKee (Lodo) Ltd ad ICI Chemicals & Polymers Ltd where the Court of Appeal had to cosider the followig clause: ad i o evet shall DAVY by reaso of its performace or obligatio uder this CONTRACT be liable for loss [of] aticipated profits, catalysts, raw material ad products for idirect or cosequetial damages. Deepak had made a claim agaist Davy which icluded a claim for fixed costs ad overheads, arisig from a explosio at a methaol plat which was rebuilt, together with loss arisig due to the fact that the ew plat used more catalyst per charge tha the origial plat. I this istace, the Court came to the coclusio that the fixed costs ad overheads together with the losses relatig to the higher catalyst charges were ot idirect or cosequetial ad therefore Davy could ot rely o the exclusio clause. Some sixty years previously, i Sait Lie v Richardsos, Westgarth & Co, where marie egies to be fitted i a ship were rejected as usuitable, loss of profit claimed by the owers of the ship was also held ot to be a idirect or cosequetial loss. More recetly, i Hotel Services Ltd v Hilto Iteratioal Hotels (UK) Ltd the Court of Appeal foud the cost of removal ad storage of defective chiller uits ad loss of profits ot to be idirect or cosequetial losses. A umber of stadard form cotracts have similar exclusio clauses. For example: Clause 17.6 of the FIDIC Silver Book: "Neither Party shall be liable to the other Party for loss of use of ay Works, loss of profit, loss of ay cotract or for ay idirect or cosequetial loss or damage which may be suffered by the other Party i coectio with the Cotract Clause 44.2 of MF/1: " either the Cotractor or the Purchaser shall be liable to the other for ay loss of profit, loss of use, loss of productio, loss of cotracts or for ay fiacial or ecoomic loss or for ay idirect or cosequetial damage whatsover that may be suffered by the other. Clause 44.2 was cosidered i The Lodo Fire ad Emergecy Plaig Authority v Halcrow Gilbert Associates ad Others, where a state of the art fire-fighter traiig facility i Southwark itself caught fire ad burt dow due to a leak i the ductwork. The claimat sued its cosultig egieers ad its buildig services egieers, Lore Stewart, who had istalled the ductwork. 14

16 Costructio & Egieerig Legal Update Lore Stewart had bee appoited pursuat to a MF/1 form of cotract ad oe issue the court had to cosider was whether the cost icurred by the claimat i payig for alterative traiig facilities, while the firehouse was shut dow followig the fire, was excluded by clause 44.2 of MF/1. The claimat argued that the alterative fire traiig costs could ot be excluded by the clause as the wordig was ot sufficiet to exclude costs that fell withi the first limb of Hadley v Baxedale. The judge disagreed. He said that Clause 44.2 must be costrued disjuctively, ot cojuctively. It is ot iteded to iclude loss of profit etc as examples of idirect or cosequetial loss. It is iteded to specify categories of loss which are to be excluded. This reasoig might arguably apply to clause 17.6 of the FIDIC Silver Book as the wordig is similar. What about this clause, however? either the tugower or the hirer shall be liable to the other party for loss of profit, loss of use, loss of productio or ay other idirect or cosequetial damage for ay reaso whatsoever. Eagle eyed readers will o doubt have oticed the word other i this clause but does this make a differece? This wordig was cosidered i Ease Faith v Leoie Marie Maagemet where the court cocluded that this clause oly excluded liability for idirect loss of profit, because of the referece to or ay other. Similar wordig was cosidered i BHP Petroleum v British Steel but there Mr Justice Rix came to the view that the word other should just be disregarded, so there is o clear authority o the poit. This could be sigificat whe oe cosiders the phrase: the Cotractor s liability for loss of use, loss of profit or other cosequetial loss which appears i the JCT 2005 Desig ad Build Cotract (as it did i the equivalet 1998 stadard form) ad which also has that magic word other i it. But, just like the moarchy, glitches i the lie ca occur ad the Australia Court of Appeal of Victoria has very recetly challeged the established thikig. I Evirometal Systems Pty Ld v Peerless Holdigs Pty Ltd the Court thought that, i priciple the British Sugar test appeared to be flawed. It is ot correct, it said, to cofie cosequetial losses to the secod limb of Hadley v Baxedale. The real distictio was betwee: 1. ormal loss which is a loss that every claimat i a like situatio will suffer; ad 2. cosequetial losses which are all losses other tha ormal loss. Accordig to the Court: i my view, ordiary reasoable busiess persos would aturally coceive of cosequetial loss i cotract as everythig beyod the ormal measure of damages, such as profits lost or expeses icurred through breach. The Court agreed with the approach take by McGregor o Damages which oted that: It is illogical ad fails to make practical sese to cofie cosequetial loss i cotract to loss fallig withi the secod rule i Hadley v Baxedale, beig cotradictory for oe cotractig party to commuicate special circumstaces to the other so as to fix him with 15

17 the liability for loss to which he would ot otherwise be subject ad at the same time to accept a exclusio of liability i respect of the selfsame loss. It is a iterestig argumet, although it failed to covice the Eglish Court of Appeal i the Hotel Services case. Whether the Victoria approach revives the debate ad ultimately derails the British Sugar lie of authority remais to be see, ideally i the House of Lords. I the meatime, however, if you wat to be cotractually exclusive, say exactly what you mea ad agreed ad do t metio you kow what. Emily Moastiriotis Liability for costs uder a collateral warraty The Scottish Court of Sessio recetly cosidered the meaig of the phrase Sub Cosultat s liability for costs i a collateral warraty. The case of Glasgow City Airport Limited v Messrs Kirkma & Bradford provides us with a classic example as to why, whe attemptig to limit liability for cosequetial losses, the laguage used must be clear ad uambiguous. The claimat, Glasgow Airport Limited sought to recover 2 millio with iterest for breach of a collateral warraty provided by the defedat (Kirkma & Bradford) who had istalled a floor slab at the claimat s property. The claimat s teat brought a actio agaist the claimat seekig to recover the cost of havig the floor slab replaced ad also sought to recover their losses due to disruptio to busiess ad loss of profit. The claimat subsequetly claimed agaist the defedat. I defedig the claim, Kirkma & Bradford sought to rely o a term of the collateral warraty that stated: 1. The Sub-Cosultat warrats that it has exercised ad will cotiue to exercise all reasoable skill, care ad diligece i the performace of the services uder the appoitmet. I the evet of ay breach of this warraty: (a) The Sub-Cosultat s liability for costs uder this Agreemet shall be limited to that proportio of such costs which it would be just ad equitable to require the Sub-Cosultat to pay havig regard to the extet of the Sub-Cosultat s resposibility for the same The defedat submitted that the opeig words of the clause limited their liability. They relied o the word costs, claimig that the term was cofied to the costs of repair or reistatemet of the floor slab ad did ot exted to cosequetial losses. This would mea they were oly liable to pay 775,000, the cost of replacig the floor slab. The claimat said that the collateral warraty should ot be iterpreted so restrictively, that the first full paragraph of the warraty i clause 1 (above) was urestricted ad so, uless restricted from doig so elsewhere, they were etitled to recover all losses caused by breach of that warraty, subject to satisfyig the ordiary commo law test of remoteess. 16

18 Costructio & Egieerig Legal Update The court agreed with the claimat, holdig that the proper iterpretatio of the words liability for costs had to be cosidered i cojuctio with the geeral warraty grated at the outset. The warraty had bee give i geeral ad uqualified terms ad would, uless clearly restricted (ad subject to the remoteess rules), etitle the claimat to recover all losses directly caused by the breach. Louise Barber ad Richard Crave What s bee happeig at Mayer Brow? February 2008 Miig Idaba For the past 13 years, the world of iteratioal miig has coverged o Cape Tow, South Africa for a aual coferece, kow as Idaba, a Zulu word, referrig to a meetig or covetio of tribal leaders. Members of our Costructio & Egieerig Group have bee attedig the Miig Idaba for a umber of years as part of the Mayer Brow Miig Group (see article o page 30). At each Miig Idaba, miisterial paels provide a forum to lear about ew miig opportuities ad allow delegates to iteract with dozes of cabiet-level govermet represetatives eager to secure ew ivestmets i their coutries. This presets somethig of a dilemma, give the issue of political risk. Delegates heard about miig compaies i Zimbabwe who had had their etire assets expropriated by the govermet of Mr Mugabe. At the other ed of the spectrum the presetatio by the Fiace Miister of Botswaa demostrated that Botswaa recogises the eed to cultivate iward ivestmet to brig much eeded foreig capital ad currecy ito the coutry i order to aid its developmet. That said, political risk remais a importat issue for project sposors ad leders o iteratioal miig projects. March 2008 MIPIM I March Chris Fellowes ad Jo Olso-Welsh from our Costructio & Egieerig Group had the tough assigmet of goig to Caes to atted this year s MIPIM, billed as oe of the largest real estate cofereces i the world. The evet is atteded by ivestors, developers ad advisers ad while the atmosphere was slightly subdued because of the credit cruch, Jo reports that there appeared to be o let up i the umber of developmet opportuities beig discussed ad the orgaisers have i fact sice aouced record attedaces at this year s evet. If you are attedig MIPIM ext year be sure to let us kow as Chris ad Jo would be delighted to meet you there. 17

19 May 2008 Housto Eergy Coferece Joatha Hosie was oe of three Lodo-based parters who atteded Mayer Brow s aual Eergy Coferece i Housto. Housto is ofte referred to as the Eergy capital of the world, beig home to major eergy compaies, cotractors ad specialist service compaies. Over 100 delegates from the eergy idustry ad the specialist fiace ad corporate advisory world atteded the coferece. Joatha preseted oe of the workshops Power Plat Developmet: EPC cotractig issues The workshop examied how best to structure completio risks, both through the EPC model ad other forms of procuremet, whe developig power plats. May 2008 Costructio Law 2008 O 22 May, i Lodo, Joatha Hosie, Sally Davies ad James Fielde from the Lodo Costructio ad Egieerig Group were speakers at the Costructio Law 2008 Coferece which was billed as providig a Practical, comprehesive ad tactical aalysis of the latest developmets affectig the costructio idustry. The all day coferece was chaired by Joatha, ad Sally spoke o Isuraces to uderwrite your risks, dealig with:- commo risks for D & B cotractors; the roles ad risks assumed by desig cosultats; how to hedge the risk; ad how to avoid errors ad omissios i your isurace cover. James Fielde spoke o The Commuity Empowermet, Housig ad Ecoomic Regeeratio Act 2009, cosiderig what the recetly aouced legislatio to amed the Costructio Act might cotai. Jue ICC/FIDIC ad a master class Nick Hechie had a busy start to Jue. At the begiig of the moth Nick spoke at the ICC/FIDIC coferece i Housto Iteratioal costructio cotracts ad the resolutio of disputes ad the retured to Lodo to speak at a two day master class Delay ad Disruptio i Costructio Cotracts Welcome to Kevi Owe At the ed of Jauary 2008 we were ot oly delighted to welcome our ew colleagues from JSM (see issue 55) but, i particular, to welcome the JSM Costructio & Egieerig team. I this issue we are very pleased to itroduce Kevi Owe, a parter i our Hog Kog office. Kevi specialises i all aspects of o-cotetious costructio ad project work i Hog Kog ad South East Asia, icludig rail projects, airports, water treatmet ad power-related trasactios i Idoesia, Vietam, Thailad ad the PRC. Kevi is ivolved i advisig o:- procuremet methods for large scale ifrastructure projects ad draftig costructio, cosultacy ad equipmet supply cotracts ad project documetatio for ifrastructure ad project fiace trasactios; 18

20 Costructio & Egieerig Legal Update dispute resolutio mechaisms i costructio projects ad evirometal law aspects of projects i Hog Kog. Kevi acts for Govermet-fuded statutory corporatios, real estate developers, project sposors, cosultats, cotractors ad sub-cotractors, isurers, fiacial istitutios ad all participats i the costructio process. Notable amog the projects with which Kevi has bee ivolved are the West Rail, Tsimshatsui Extesio, Kowloo Souther Lik ad Bagkok rail projects, Hog Kog Cotaier Termial CT9, the PPP Asia World Expo project, a Bagkok waste water treatmet project, the Hog Kog Covetio ad Exhibitio Cetre Atrium Lik Extesio ad a ew cargo termial at Hog Kog Iteratioal Airport. Kevi's efforts have ot goe uoticed. Asia Pacific Legal 500 have raked Kevi as a Leadig Costructio Lawyer for a umber of years, as did Chambers Asia i 2008, ad Asia Pacific Legal 500 described Kevi i 2007/08 as very impressive o-cotetious specialist. Costructio judge rules that parties have o cotract Is there a cotract? is a regular theme i costructio cases but the judgmet i Hade Youg Limited v Laig O Rourke Midlads Limited is a powerful (ad perhaps, to some, surprisig) remider of just how far parties ca go without actually cocludig the cotract. Mr Justice Ramsey, i the Techology ad Costructio Court (TCC), ruled that the parties had o cotract some two years after their project had reached practical completio. Hade Youg Limited (HYL) carried out the desig ad istallatio of mechaical ad electrical works at the Ricoh Area i Covetry. There were legthy ad detailed discussios betwee HYL ad the mai cotractor, Laig O Rourke Midlads Limited (LOR), cocerig the terms of a sub-cotract betwee them but oe was ever siged. HYL proceeded with the work, for which LOR paid HYL i accordace with its terms. The project reached practical completio ad evetually the parties arrived at the TCC watig to kow if there was a cotract. Mr Justice Ramsey foud that the parties had ot agreed o all the essetial terms, i particular because the parties had ot agreed the limit of liability uder warraties or the sub-cotract ad had ot etered ito a siged ad executed agreemet. He ruled that the proforma warraties had bee regarded as beig vital to the parties. He also held that the test of whether a cotract had bee cocluded was a objective oe. LOR argued that HYL were estopped from cotedig that o sub-cotract had bee cocluded because applicatios for paymet ad cotractual claims had bee made by HYL without ay qualificatio or suggestio that HYL were ot etitled to the paymets i accordace with the agreed price ad terms of the sub-cotract. 19

21 This argumet also failed. Mr Justice Ramsey said:- There are may cases where cotractors or sub-cotractors start o site without havig a cocluded cotract. Whilst those i a maagerial capacity are egotiatig the terms of the cotract, those ivolved i carryig out the work ecessarily coduct the day to day operatios by referece to the draft cotract documetatio so that, whe the expected cotract is cocluded ad applied retrospectively, the ecessary procedures have bee i place for the obligatios subsequetly agreed. That coduct is ot a represetatio that a cotract exists I ay evet, for there to be a sub-cotract based o estoppel, there would have to be a sub-cotract icorporatig all terms, icludig the limitatio of liability uder the warraties ad sub-cotract. I the absece of agreemet o these essetial terms, how could the parties be estopped to particular limits? The parties did ot resolve this essetial term ad the Court caot fill the gap by a estoppel. The difficulty is that the estoppel would have to resolve the very questio of the essetial term o which the parties themselves could ot agree. Accordigly, HYL were etitled to be paid o a quatum meruit basis for the works they had carried out. Whilst parties may ofte carry out (ad eve complete) works o the assumptio that a cotract will be agreed it is dagerous, as this case demostrates, to assume that a cotract has bee cocluded. Makig a cotract ca, i its way, be just as challegig as carryig out the works. Richard Crave ICC Turkey ulockig the potetial? It s ew ad it s differet but will it be popular? The ew ICC Model Turkey Cotract for Major Projects, produced by the ICC Commissio o Commercial Law ad Practice, is iteded for use o the desig, procuremet, supply ad costructio of works o a lump sum turkey basis. The Cotract is said to be suitable for use i both public ad private cotracts, whether tedered or idividually egotiated, as part of build, operate ad trasfer projects ad i exterally fiaced projects. The Commissio maitais that it is i busiess for busiess, ad therefore represets all parties i iteratioal trasactios. Accordigly, the ICC Cotract seeks to distiguish itself from other lump sum cotracts already i the market (such as the FIDIC Silver Book ad the IChemE Red Book) o the basis that it is a more balaced cotract which is fair to all parties whilst still maitaiig certaity of both price ad scope. The ICC Cotract uses a umber of draftig devices i a attempt to achieve this aim, icludig: i several cases, settig out the purpose of a Article at its begiig, i a attempt to make the purpose clear ad avoid it beig iterpreted out of cotext; 20

22 Costructio & Egieerig Legal Update seekig to maitai reciprocity i the parties obligatios wherever possible (eg, mirrored idemity provisios); ad the icorporatio of obligatios of good faith ad fair dealigs, alog with descriptios of what these ivolve for both parties. But is the ICC Cotract actually more balaced ad how differet is it i reality? Key Features Evidece that the cotract price ca be paid The ICC Cotract adopts a key feature of the FIDIC Silver Book by eablig the cotractor to request evidece of the employer s ability to pay. The ICC Cotract takes this a step further by makig the cotractor s commecemet of work coditioal upo productio of such evidece. Resposibility for documets Resposibility for the accuracy of documets ad iformatio uder the ICC Cotract is very similar to the positio uder the IChemE Red Book, with each party retaiig the resposibility for documets ad iformatio provided by it or o its behalf. The FIDIC Silver Book, o the other had, places sole resposibility for ay iaccurate data o the cotractor. Despite this, uder the ICC Cotract each party is required to review the other s documets prior to the commecemet of work ad subsequetly as circumstaces require. Sice either party will be liable for the documets ad desigs prepared by the other ad there is o sactio for failure to udertake such a review, is there ay real icetive for either party to carry it out? Desig Resposibility The cotractor is resposible for developig the desig, except to the extet otherwise agreed or as is reasoable i the circumstaces. No guidace is provided as to whe it would be reasoable for the employer to be resposible for desig developmet; the employer has a right to be iformed of desig developmet, but o right to determie methods of workig. This is differet to the IChemE Red Book ad the FIDIC Silver Book which place desig resposibility solely o the cotractor. More importatly, the ICC Cotract states that the fial desig resposibility may be shared betwee the parties. This may apply where, for example, the employer specifies a performace requiremet ad the cotractor proposes a method of meetig that requiremet, or where the employer specifies a material or proprietary substace or method ad the cotractor agrees it is suitable for its iteded purpose. Just how ay defect i a shared desig would be dealt with, however, is ot explaied. Desig developmet The desig submissio procedures are very similar to those i the IChemE Red Book ad the FIDIC Silver Book. Notably, the review period uder the ICC Cotract is 21 days, a week loger tha that of the IChemE Red Book. 21

23 Variatios The process for issuig variatios, whilst apparetly similar to that uder the FIDIC Silver Book, is actually quite differet i overall effect. Both cotracts require the cotractor to provide a variatio proposal i respose to a variatio requested by the employer, cotaiig such iformatio as: 1. a descriptio of the proposed desig ad the work to be executed; 2. a programme for the executio of the variatio; 3. the effect that the variatio will have o the programme ad the date for completio (or Time to Takig Over ); 4. a lump sum or price estimate for the variatio; ad 5. ay other elemets of the cotract likely to be effected by the variatio. Sigificatly, uder the ICC Cotract the cotractor has the right to object to ay variatio, is etitled to be paid for the cost of preparig such a variatio proposal (irrespective of whether the employer decides to proceed), ad a variatio may ot omit a part of the work from the cotract. Site iformatio As i the FIDIC Silver Book, the ICC Cotract requires the employer, at the time of callig for teders, to udertake a survey of the site ad its surroudigs ad to make this available to the cotractor. The cotractor will subsequetly be deemed to have cosidered this iformatio whe determiig the cotract price. The ICC Cotract also provides that the cotractor is etitled to a extesio of time ad/or additioal costs if it experieces site coditios which could ot reasoably have bee foresee or which vary from ay assumptios it has expressed i writig to the employer prior to sigig the cotract. Extesios of time ad additioal costs The cotractor is etitled to both a extesio of time ad additioal costs (where applicable), where there has bee a delay givig a etitlemet to a extesio of time (icludig a evet of force majeure). Sigificatly the ICC Cotract does ot clarify what will costitute a delay givig rise to a etitlemet to a extesio of time, but does cotai a very wide defiitio of force majeure. The ICC Cotract also distiguishes itself from the IChemE Red Book ad the FIDIC Silver Book by providig for a madatory reassessmet of all evets ad circumstaces of the works 90 days prior to the Time to Takig Over, to determie whether the cotractor is etitled to ay further extesios of time. Delay Damages Ulike the IChemE Red Book ad the FIDIC Silver Book, the ICC Cotract cotais a fall-back rate of liquidated damages for circumstaces where oe is ot stipulated by the parties. This is 0.5% of the cotract price (or if there is a delay to a sectio, the 0.5% of the value of that sectio i proportio to the value of the whole of the works) for each complete week of delay up to a maximum of 10% of the cotract price. 22

24 Costructio & Egieerig Legal Update Bous The ICC Cotract further distiguishes itself by providig for a bous i additio to the cotract price if the cotractor achieves practical completio before the Time to Takig Over. If the parties do ot state a rate for the bous, the the default is 0.5% of the cotract price for each complete week that the works were completed prior to the Time for Takig-Over, up to a maximum of 10% of the cotract price. Limitatios of liability The ICC Cotract cotais cosiderable limitatios of liability. Neither party is liable for: 1. ay loss of profit, loss of icome, loss of productio, idirect or cosequetial damage; or 2. losses which are difficult to estimate or provide for or are out of proportio with respect to the value of the Cotract obligatios, whatever they may be; or 3. treble, exemplary, moral or puitive damages or ay other o-compesatory damages. I additio, ad ulike the IChemE Red Book ad the FIDIC Silver Book, the ICC Cotract caps both parties liability at 7.5% of the iitial cotract price i respect of each ad every claim (except for those related to itellectual property rights or defect rectificatio), ad caps the parties total liability at 30% of the iitial cotract price i the aggregate. Termiatio Either party may termiate the ICC Cotract o the occurrece of a material breach or ay force majeure evet which impedes a party s progress for more tha 180 days. Importatly, the ICC Cotract sets out idicative circumstaces of what will costitute a material breach o the part of either the employer or the cotractor. Dispute resolutio The dispute resolutio process is very similar to the FIDIC Silver Book with all disputes beig resolved by a dispute board i accordace with the ICC Dispute Board Rules. Is it a wier? Parties will eed to thik carefully about usig the ICC Cotract, as its chage i emphasis ad uusual provisios are sure to surprise may. It shifts the risk profile established by other cotracts; persuadig employers used to adoptig FIDIC Silver or IChemE Red Book-type cotracts (with their pro-employer risk allocatio systems) to adopt the ew ICC Model Turkey Cotract will perhaps be the greatest challege. Stephe Natoli 23

25 Withholdig of liquidated damages - Reiwood v Brow Havig broke its duck with Melville Dudas v George Wimpey (see issue 54), the House of Lords soo had a secod challegig Costructio Act case to resolve i Reiwood Ltd v L. Brow & Sos Ltd. Oce agai a withholdig otice was ivolved. The withholdig otice had bee issued by the developer employer, Reiwood, to eable deductio of liquidated damages uder the JCT 98 based buildig cotract but, after it had bee issued, the cotractor, Brow, was awarded a extesio of time. Did this extesio of time ad the cacellatio of the certificate of o-completio retrospectively ivalidate the withholdig otice? If it did, the cotractor would be able to rely o its default otice, i respect of o paymet, which had bee a essetial igrediet of its later determiatio of its employmet uder the buildig cotract. The Court of Appeal, reversig the first istace decisio (also see issue 54), said the withholdig otice remaied valid, which was ot good ews for Brow. There was a appeal to the House of Lords. These were the key evets: Timelie 7 December 2005 Brow makes applicatio for extesio of time; 14 December Architect issues certificate of o-completio; 11 Jauary 2006 Architect issues iterim certificate 29 showig a et amout payable of 187,988 (fial date for paymet 25 Jauary); 17 Jauary Reiwood issues a otice of its itetio to deduct liquidated damages (uder clause 24) i respect of the period of delay from 14 December 2005 ad a withholdig otice for the liquidated damages (total 61,629) to be deducted from the sum specified i Certificate 29; 20 Jauary Reiwood pays Brow 126,359 ( 187,988 less 61,629); 23 Jauary Architect awards Brow extesio of time to 10 Jauary 2006; 24 Jauary Brow iforms Reiwood that the effect of the extesio of time is to reduce the liquidated damages to 12,236 ad icrease the amout to be paid uder Certificate 29 to 175,662; 26 Jauary o further paymet; Brow says that Reiwood has failed to pay the amout owed by the fial date (25 Jauary) ad serves otice of default uder the cotract; 27 Jauary - Reiwood tells Brow that it will pay 49,503 ( 61,629 less 12,236); ad 1 February - Reiwood pays Brow 49,

26 Costructio & Egieerig Legal Update The House of Lords decided that the extesio of time awarded o 23 Jauary did ot retrospectively cacel the o-completio certificate ad dey Reiwood the right to rely o that certificate to justify the sums it had withheld i respect of Certificate 29. (Both the issue of Certificate 29 ad paymet, it should be remembered, were made prior to the extesio of time award). I givig the leadig judgmet, Lord Neuburger cosidered that to fid that the extesio of time did cacel the o-completio certificate retrospectively would be to give the word "cacel" a "absurd" meaig. It would mea that if a extesio of time was grated after the fial date of 25 Jauary, the employer would have uderpaid. The policy reflected i the Costructio Act was that the parties should kow i advace exactly where they stood. The Law Lords agreed with the Court of Appeal that the extesio of time award oly cacelled the certificate of o-completio goig forward. This meat, i these circumstaces, that s110(1) of the Act "is egaged" ad Brow could have applied for ay sums to which it had become etitled due to the extesio of time. As o time for paymet was specified, i default the Scheme would apply ad paymet would be due 7 days from a applicatio made for the further amout, the fial date for paymet fallig 17 days from that date. Aother difficult issue for the House of Lords to resolve but the that is, of course, what they are there for. Catri Rees 25

27 Procuremet roud-up O breathig apparatus, project maagemet ad measured term cotracts Tederig is difficult eough without facig the obstacle course of the EU procuremet rules. It s all i a good cause, of course, i the iterests of fairess ad equality but sometimes, ad perhaps ievitably, public authorities trip up over a obstacle i the admiistratio or iterpretatio of the relevat rules. I this roud-up of procuremet decisios, we go first to Scotlad to look at the cosequeces of failig to follow the EU public procuremet rules ad the to the Europea Court of Justice to see how it iterpreted the (ow replaced) Works Directive s applicatio to the procuremet of the project maagemet aspect of a public authority developmet. To complete the trilogy, we are pleased to reproduce a article by Kevi Owe o terms of fairess ad good faith that were implied i the teder process for a public works cotract, quite idepedetly of the procuremet rules. The price of o-compliace It goes without sayig that it is importat to follow the EU public procuremet rules whe a cotractig authority is seekig offers for the supply of goods, works or services. I Aquatro Marie t/a Aquatro Breathig Air Systems v Strathclyde Fire Board the Court of Sessio i Scotlad highlighted just how importat. Strathclyde sought teders for a three year cotract to service, maitai ad repair breathig apparatus. Strathclyde had opted for the ope procedure ad advertised the iteded procuremet i the Official Joural. Bids were submitted by three parties icludig Aquatro. The teders of Aquatro ad oe other were rejected o the grouds they were ocompliat. The reasos give for rejectig Aquatro s teder were: that Aquatro had ot supplied evidece of quality stadards achieved by its workforce, that its workforce failed to meet quality stadards; ad that its ISO 9001 quality accreditatio was uacceptable because of doubts over the body that had awarded the accreditatio. (It was udertake by a private body rather tha a govermet body). The Court did ot accept either groud for rejectio of the bids. I relatio to the first groud, the specificatio did ot set ay miimum requiremet to be met i order to proceed to the full evaluatio of the teder. I additio, Aquatro had set out the quality of the workforce i a coverig letter which had ot made its way to those persos evaluatig the teder. 26

28 Costructio & Egieerig Legal Update I relatio to the secod groud, the specificatio stated "accreditatio to ISO 9001:2000 issued by a recogised accreditatio cetre. It did ot specify from which body the accreditatio was to be obtaied. The court therefore foud that the teders had bee evaluated o differet criteria from those which were advertised i the Official Joural ad this was i breach of the EU public procuremet rules. The court awarded Aquatro damages, amoutig to 122,149, represetig the profit it would have eared had it bee awarded the cotract plus iterest. This was o the basis that if Aquatro s teder had ot bee rejected, o the award criteria Aquatro would have bee awarded the cotract (which the court accepted). The case highlights the dagers of a cotractig authority failig to follow the EU public procuremet rules it ca be a very costly mistake. Jo Olso-Welsh ad Lisa Lerborg 27

29 Regeeratio Complicatios at Roae Sometimes, EU procumet rules ca tur up uexpectedly. I Jea Auroux ad Others v Commue de Roae the Europea Court of Justice had to decide whether, where oe cotractig authority egaged aother to carry out the project maagemet aspects of the developmet, the agreemet costituted public works so that the procuremet rules applied. The Muicipal Coucil of Roae, a tow o the edge of the Frech Alps, had plas to regeerate. It etered ito a agreemet with a semi-public regioal developmet compay, SEDL (whose capital icluded private fuds), to project maage the works, icludig the teder process. The agreemet provided that the subsequet procuremet process that would be required for the project was to be i accordace with the Frech Public Procuremet Code (that followed the Works Directive 93/37/EEC, ow superseded by the curret Works, Supplies ad Services Directive). There were three questios for the ECJ:- Was the agreemet betwee Roae ad SEDL a public works cotract? Yes, said the ECJ, it was. The executio of works was ivolved, it was ot ecessary that the perso who etered ito the cotract was capable of direct performace ad SEDL did have a pecuiary iterest i the project. The Directive s requiremets for a Public Works Cotract were therefore satisfied. What is the method of determiig the value of the cotract for the purpose of the threshold i article 6? The Court said that the valuatio of projects should be cosidered from the tederer s poit of view. The overall value of the project was the relevat value ad reveue to be received from third parties therefore had to be take ito accout i calculatig that value. Was the cotract awarded by Roae to SEDL exempt from the public procuremet rules? No. The cotractig authority was ot exempt from the procuremet procedures if it plaed to coclude its cotract with the secod cotractig authority. There is a exemptio where a cotractig authority exercises similar cotrol over the other party as it would over oe of its ow departmets but as SEDL was a semi-public body, that exemptio does ot apply. Not good ews, therefore, for the prospects of public sector co-operatio. Christopher Wright ad Richard Crave 28

30 Costructio & Egieerig Legal Update Teder Cotracts - Duties of Fairess ad Good Faith The decisio of the Norther Irelad High Court i Gerard Marti & Others v Belfast Educatio ad Library Board cofirms that a teder cotract ca be implied betwee a prospective employer ad a tederer for public works cotracts ad that the Employer will have duties to act fairly ad i good faith durig the teder process. Backgroud The plaitiffs were tederig cotractors for a cotract to be placed by the defedat. They sought a iterim ijuctio restraiig the defedat from awardig a cotract o the basis that they could ot prepare a teder o a equal basis due to mistakes ad/or ambiguities cotaied i the teder documets issued by the Employer. The High Court s decisio The court held that a implied cotract with implied terms of fairess ad good faith ca arise from the issue of teder documets for a public works cotract, both from the scheme of the tederig process ad the presumed itetio of the parties. Weatherup J. stated that the duty to act fairly i admiisterig a teder applies i a umber of respects. First, it applies to the ature ad applicatio of the specified teder procedures i a particular cotract; secodly, to the assessmet of teders accordig to the criteria stated i the teder documets, ad thirdly, to the evaluatio of teders i a uiform maer as iteded by the teder documets. Weatherup J. made referece to the decisio i SIAC Costructio Ltd v Mayo Couty Coucil (a case decided by the Europea Court of Justice) ad stated that i order to verify compliace with a duty to treat all tederers equally, a obligatio of trasparecy is implied, meaig that the award criteria must be formulated i the teder documets i such a way as to allow all reasoably well-iformed ad ormally diliget tederers to iterpret them i the same way, ad to eable the adjudicatig authority to iterpret them i a uiform maer. The Judge stated that issues of ufairess ca arise i situatios where teder documets cotai mistakes ad ambiguities. I the case of mistakes, however, the mere misiterpretatio of a teder documet by a tederer would ot result i ufairess. Ufairess could, however, occur whe the mistake of the tederer is occasioed by the Employer. For example, where oe or more tederers adopted a approach to the teder which was differet to that iteded by the teder documets due to a error which adversely affected the uiform evaluatio ad assessmet of teders, the fairess of the teder process as a whole may be affected. Ufairess may also arise i the case of ambiguities cotaied i teder documets. I the preset case, a mistake by the Employer i preparig the teder documets led to a udetected ambiguity which was oly revealed after submissio of teders. Fairess of the teder process may be affected if ambiguities have a impact o the approach of tederers i completig their teders or procedures for the assessmet of teders accordig to the stated criteria, where the uiform evaluatio of teders is adversely affected. 29

31 Weatherup J, however, imposed two importat qualificatios to the duty of fairess arisig uder teder cotracts due to ambiguities. First, the ambiguity causig the ufairess must be material, resultig i tederers proceedig o a mistake basis or o a differet basis to other tederers, ad secodly, the ambiguity must have a sigificat effect o the teder, causig a tederer to submit a teder which is more tha egligibly differet from the teder which would otherwise have bee submitted. Commetary The decisio cofirms that a cotract ca be implied betwee a prospective Employer ad tederers durig the teder process for public works cotracts. Further, a Employer must act fairly ad i good faith uder such implied cotracts ad esure that the teder documets do ot cotai mistakes or ambiguities This is a importat decisio ad will o doubt be used as authority for claims by usuccessful tederers to challege the award of cotracts whe they believe that there has bee a breach of implied duties o the part of the Employer to act fairly ad i good faith. Kevi Owe [email protected] Miig what goes o beeath the surface? I every sese, there is more to miig tha meets the eye. The Mayer Brow Miig Group has bee very busy over recet moths. There are obvious parallels betwee the issues ecoutered o iteratioal miig projects ad projects i the UK costructio market. I particular ad i terms of ecoomic drivers, the iteratioal miig market shows may of the sigs ecoutered (at least up util the credit cruch) i the UK costructio market. Thus, the miig area is typified by a overheated market where demad outstrips supply, drivig up procuremet costs ad drivig dow the supply side s appetite for risk. This has led to the itroductio of two-stage tederig ad log lead procuremet processes. However, despite the credit cruch, strog demad for mied commodities meas that miig (alog with oil ad gas) remais oe of the most robust project fiace sectors i a falterig global ecoomy. Gestatio, i terms of a miig project, begis with a feasibility study to assess the ore qualities ad the overall viability of the project. This is worked up through egieerig ito a series of studies, with the EPCM cotractor egaged to egieer, procure ad evetually costructio maage the project. The project fiacig will eed to be i place before the equity sposor commits its available capital (typically betwee 30%- 40% or sometimes more of the total capital cost). I terms of capital cost, most projects will rage from US$100 millio through to US$400 millio for a ope-cast mie producig various mied commodities from gold to ickel, copper, platium, silver, zic, iro ore or coal. 30

32 Costructio & Egieerig Legal Update The rapacious appetite of growig ecoomies such as Idia ad Chia mea that the demad for these mieral commodities remais high, as do their prices. This i tur drives the exploratio ad developmet of mies i a umber of differet parts of the world. I additio, ew techologies meas that old mies ca be re-mied to produce required reserves. Oe of the challeges for sposors, leders ad cotractors i this market is that these atural resources are ofte located i coutries where there may be little ifrastructure (power supply, road ad rail for goods i ad out, water supplies ad so forth). This meas that there will ofte be a sigificat ifrastructure costructio compoet to the mie, i additio to buildigs for the osite costructio works ad the evetual operatioal facilities. There will eed to be stores ad warehouse facilities, a camp for the workers ad evetual operators of the mie facility, logistics facilities, explosives stores ad so forth. The locatio of may of the mieral deposits also presets problems i terms of political risk. The World Bak produces a idex each year for Ease of Doig Busiess, a 178 coutry survey which reflects the perceptio from ivestors about a coutry s ability to provide a eviromet that is favourable to the survival of foreig capital. Sigapore is raked the best coutry i which to do busiess ad the Democratic Republic of the Cogo is amed the worst. The challege for miig compaies is that may of the world s mieral deposits are foud i places like the Cogo ad these come with a material degree of political risk. The host govermet may decide, whe it sees the risig price of the commodity, that the project sposor is makig rather too much of a good retur o its ivestmet. At that poit the host govermet may seek to expropriate the asset altogether or put pressure o the project sposor i order to achieve a larger slice of the actio. Some protectio ca be obtaied at the ivestor level, as betwee project sposor ad host govermet whe egotiatig terms of the iitial miig cocessio. ICSID arbitratio terms ca be icluded, givig the ivestor the right to refer disputes to arbitratio where the award will be bidig o the host govermet (assumig it to have etered ito a Bi-lateral Ivestmet Treaty with the govermet of the coutry i which the ivestor is icorporated). As part of the Miig Group, the Costructio ad Egieerig Team have to review project documets to esure that they are bakable. This meas lookig at the key completio risks of schedule, capital ad operatig costs ad guarateed performace levels to esure that these are all assured (to the extet possible i the curret market). This is vital i a project fiacig because it is the reveue produced by the completed project that is the pricipal recourse for the leders, providig the meas for servicig ad repayig the debt ad returig the equity ivestmet to the project sposors. Curret miig project keepig the Group busy rage from projects i Easter Europe (Kazakhsta, Turkey ad the Ukraie) ad Africa (Burkia Faso i Fracophoe West Africa, Eritrea i East Africa ad i the Cetral Africa Republic). Both the Eritrea ad Cetral Africa Republic projects will be firsts ; o-oe has completed a project fiaced miig deal i either coutry before. The team are lookig forward to the opportuity. Joatha Hosie 31

33 Morals but o moral rights? Architects ad the RIBA Stadard Coditios of Appoitmet. Oe suy day i the Spaish city of Bilbao, waderig back to my hotel after a quick trip to admire Frak Gehry s Guggeheim Museum, I crossed the River Nervio via the Zubi Zuri footbridge, desiged by the architect Satiago Calatrava. The elegat steel bridge crosses the river i a getle curve ad its gree glass floor tiles merge with the colour of the river below, makig it a rather attractive feature of the city s riverscape. It is perhaps ot surprisig the that whe a rather pedestria (o pu iteded) extesio was added to the bridge to coect it to a eighbourig housig developmet desiged by Arata Isozaki, Satiago Calatrava was ot best pleased. I fact so uhappy was he that Señor Calatrava commeced legal proceedigs i 2007 agaist the city coucil who permitted the additio ad the two costructio firms who built it, claimig that the extesio breaks the symmetry of the bridge, clumsily distorts the desig ad damages the itegrity of his work. Calatrava relied o his moral right uder Spaish Itellectual Property law, as the architect of the bridge, to object to ay derogatory treatmet of it. So offeded were his morals, that he demaded the dismatlig of the extesio, compesatio of up to 250,000 for damage to his reputatio ad the publicatio of the setece by the defedats or, i the alterative, if those demads were ot met, a declaratio that his moral right was ifriged ad damages of 3 millio. The judge did ackowledge that the extesio was a appreciable alteratio of the bridge ad chages its umistakable persoality. However, ufortuately for Calatrava, although the judge wet o to fid that the architect s moral right was ifriged, he held that this had to be weighed agaist the public iterest, which required the additio of the extesio to allow pedestrias to cross easily from the bridge to the housig developmet (the oly alterative beig to use a log series of steps). Public eed wo out over the architect s right to the itegrity of his visio ad the judge decided that the extesio did ot have to be demolished ad Señor Calatrava was ot etitled to ay compesatio or damages. I the UK it is ot ecessary to weigh up the public iterest agaist a architect s moral rights. Architects do have a moral right, uder the Copyright, Desigs ad Patets Act 1988, to be idetified as the author of plas or models for a buildig, icludig where graphic represetatios or photographs of it are issued to the public, ad to have their ame displayed o the buildig as costructed. (Where more tha oe buildig is costructed to a desig, this is limited to the first to be costructed). They also have a right to object to derogatory treatmet of their work. A additio, deletio or alteratio to a work is cosidered derogatory if it amouts to a distortio or mutilatio of the work or is otherwise prejudicial to the hoour or reputatio of the author. However, if a buildig is subjected to derogatory treatmet, the architect s oly remedy i the UK is to have their ame removed. 32

34 Costructio & Egieerig Legal Update The moral right to be idetified is ot a automatic oe: it must be asserted by the architect, i writig. The assertio ca be geeral or i relatio to a specific act or descriptio of acts. RIBA s Stadard Coditios of Appoitmet (CA-S-07-A), itroduced i 2007, iclude such a geeral assertio i Clause 6 (as did RIBA s previous set of stadard coditios). For architects who work aloe this is a perfectly adequate solutio to esure that they are idetified as the author of their desigs ad ay buildig that is costructed as a result. However, uder the CDPA 1988 oly the author of a work possesses moral rights i it ad the author is the idividual or idividuals who create it. Legal etities such as compaies, parterships ad limited liability parterships do ot have moral rights. A firm of architects has o moral right to be idetified as the author with regard to the work it creates. Further, the moral rights of the idividual employee or employees who create such a work to be idetified as the author(s) or to object to derogatory treatmet of it, caot be asserted if their employer permits somethig to be doe with the work, for example by gratig a licece to a developer to use plas, drawigs ad models to costruct a buildig, as evisaged by the Coditios of Appoitmet. So a employee of a firm of architects caot isist that their ame is added to a buildig ad if a firm of architects permits a cliet to make chages to a buildig, the idividual employee caot object to this. As a result of this hole i the RIBA terms, uder UK law may architects fid themselves with morals but o moral rights. However, a compay (or partership) will ormally be the ower of copyright i works created by its employees, therefore a firm of architects could make it a cotractual coditio of ay licece of its work that it is idetified, by the licesee, as the copyright ower. Sice this is ot provided for by the RIBA Coditios of Appoitmet, architects may wish to cosider addig it as a extra term to their cotracts. David Fyfield [email protected] Itellectual Property & IT Group With thaks to Norea Emaldia Echeadia [email protected] Ramó & Cajal 33

35 A Guide to the Site Waste Maagemet Plas Regulatios 2008 Site waste maagemet plas ( SWMPs ) were itroduced o a purely volutary basis i 2004, but they have become compulsory for may costructio projects. 1. The Site Waste Maagemet Plas Regulatios 2008 (the Regulatios ) are ow i force Sice whe? 6 April 2008 Where ca I fid a copy of the ew regulatios? A copy of the ew regulatios is available at: What about guidace? I April 2008, Defra published o-statutory guidace for SWMPs, available at: Where ca I fid a example of a SWMP? The Waste ad Resources Actio Programme has produced a template SWMP, available at: maagemet/swmp_templates.html 2. What is a SWMP? A SWMP is a pla that sets out the amout ad type of waste that will be produced o a costructio site, alog with details of how it will be reused, recycled or otherwise disposed of. As the costructio project progresses, the pla is updated to record how the waste is maaged ad to cofirm the disposal of ay materials which caot be reused or recycled. 3. Who is affected by the Regulatios? Ay perso itedig to carry out a costructio project o a sigle site with a estimated cost of over 300,000 (excludig VAT) must prepare a SWMP before startig costructio work. May kids of costructio work may ow, therefore, require a SWMP, for example ew-build work, alteratios, istallatio/removal of services such as sewerage/water The pricipal cotractor is resposible for preparig the SWMP. If there is o cotractor, the cliet must prepare it. (Both of these terms are defied i the Regulatios.) 34

36 Costructio & Egieerig Legal Update A costructio project which relates to a Part A istallatio (as defied i Schedule 1 to the Pollutio Prevetio ad Cotrol (Eglad ad Wales) Regulatios 2000 for example, a coal-fired power statio) is exempt from the Regulatios. The Regulatios also do ot apply to a costructio project for which a SWMP would otherwise have to be prepared if: the project was plaed before 6 April 2008; ad costructio work bega before 1 July What are the key features of SWMPs? (a) Resposibilities The SWMP must idetify: the cliet; the pricipal cotractor; ad the perso who drafted the SWMP. (b) Details of the costructio work The SWMP must describe the proposed costructio work, icludig the locatio of the site ad the estimated cost of the project. (c) Materials resource efficiecy The SWMP must record ay decisio take before the SWMP was drafted i order to miimise the quatity of waste produced o site. Such decisios may relate, for example, to the materials used, the desig of the project or to the costructio method. (d) Waste maagemet The SWMP must: describe each waste type expected to be produced durig the project; for each waste type, estimate the quatity of waste that will be produced; ad for each waste type, idetify the waste maagemet actio proposed. (e) The declaratio The SWMP must cotai a declaratio statig that all waste produced o the site is dealt with i accordace with the waste duty of care ad that all materials will be hadled efficietly ad waste maaged appropriately. 5. What happes ext? SWMPs have to be updated wheever waste is removed from projects but the way i which they are updated depeds o the projected expediture of the project. For all projects with a estimated cost of less tha 500,000, the pricipal cotractor must record o the SWMP: the perso removig the waste, the types of waste removed ad where the waste is goig; ad 35

37 (withi three moths of the completio of the works), cofirmatio that the SWMP has bee regularly moitored ad updated, alog with reasos for ay deviatios from the terms of the SWMP. For larger projects, with a estimated cost of more tha 500,000, the pricipal cotractor must additioally record: the waste carrier s registratio umber; a copy of, or referece to, the writte descriptio of waste required uder s34 Evirometal Protectio Act 1990; the type(s) ad quatities of waste beig reused, recycled or recovered, set to ladfill or otherwise disposed of; ad (withi three moths of the completio of the works) a compariso of the estimated quatities of each waste type agaist the actual quatities produced, as well as a estimate of the cost savigs that have bee achieved by the SWMP. 6. Ad after the evet? The pricipal cotractor must keep the SWMP for two years after completio of the costructio project, either at the pricipal cotractor s pricipal place of busiess or at the site of the project. 7. Eforcemet The Regulatios may be eforced by the Eviromet Agecy or by a local authority. It is a offece to fail to comply with ay of the mai provisios of the Regulatios. Additioally, however, it is a offece to: kowigly or recklessly make a false or misleadig statemet i a SWMP; or itetioally obstruct or, without reasoable cause, fail to assist, or produce a SWMP for, a regulator. The pealties are potetially severe, ragig from a maximum fie of 50,000 o covictio i a magistrates court, to a ulimited fie o covictio i a Crow Court. Directors may be persoally liable if a compay is foud guilty of a offece ad the offece took place through the coset, coivace or eglect of a director. 8. It is also worth rememberig that Local authorities have recetly begu producig supplemetary plaig guidace requirig details of how costructio waste will be recycled/reduced to be submitted at the plaig stage. The local authority may impose much more oerous requiremets tha those set out i the Regulatios. Joatha Nuget [email protected] Tom Ellis [email protected] Eviromet Group 36

38 Costructio & Egieerig Legal Update If you have ay questios or require specific advice o ay matter discussed i this publicatio, please cotact Michael Rega ([email protected]), Joh Rushto ( [email protected]), Sally Davies (sdavies@mayerbrow. com), Nick Hechie ([email protected]), Joatha Hosie ( jhosie@ mayerbrow.com) or Chris Fellowes ([email protected]), parters i the Lodo Costructio & Egieerig Group or your regular cotact. A umber of readers already receive this Update by . If you would prefer to receive it by , istead of a copy i the post, please cotact us by post or by to [email protected] who will arrage this for you. 37

39 Copyright 2008 Mayer Brow Iteratioal LLP. This Mayer Brow publicatio provides iformatio ad commets o legal issues ad developmets of iterest to our cliets ad cotacts. It is ot a comprehesive treatmet of the subject matter covered ad is ot iteded to provide legal advice. Readers should seek specific legal advice before takig ay actio with respect to the matters discussed i this publicatio. If you would prefer ot to receive future publicatios or mailigs from Mayer Brow Iteratioal LLP, or if your details are icorrect, please cotact us by post or by to [email protected]. Mayer Brow is a global legal services orgaisatio comprisig legal practices that are separate etities ( Mayer Brow Practices ). The Mayer Brow Practices are: Mayer Brow LLP, a limited liability partership established i the Uited States; Mayer Brow Iteratioal LLP, a limited liability partership icorporated i Eglad ad Wales; ad JSM, a Hog Kog partership, ad its associated etities i Asia. The Mayer Brow Practices are kow as Mayer Brow JSM i Asia. 0117co July 2008