Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
When contractors carry out works or services in a defective manner; the dilemma is how to recover remedial costs without throwing good money after bad? Unfortunately, addressing serious defects in construction projects is something that many social housing providers have to face. Whilst the priority when defects become known will be to remedy the defects and to mitigate the impact on residents, it is also important to explore recovery of any losses arising as a consequence of the defects.
But how do you avoid getting into protracted legal disputes that take up valuable management time and are very costly? The good news is that there are now more options available than ever to manage costs and time and to achieve a successful recovery where that is possible, at an early stage. This involves formulating a clear strategy for pursuing recovery. That strategy could include some or all of the following steps:
This is a quick broad brush process for resolving construction related disputes that can sometimes be very effective. Things move quickly with adjudication and so it is essential to have all your ducks in a row before starting the process or, if possible, before being on the receiving end of such a process!
Before litigation commences, the courts require parties to follow a pre-action protocol process which involves setting out the issues in dispute in writing and then meeting to see if differences can be narrowed and matters can be settled before legal proceedings take place. The process was recently streamlined to make it easier to follow and in our experience, it often leads to a settlement before the courts become involved.
If settlement is not achieved as a result of adjudication or following the pre-action protocol process, it may be necessary to issue proceedings at court. This is something that should never be done lightly but if the merits of the case point to this being necessary, we have recently found a way to speed up the process and gain a strategic advantage in some circumstances. In the reported case of Triuva Kapitalverwaltungsgesellschaft v Galliford Try Construction (UK) Limited  EWHC 275 (TCC) we advised Triuva in respect of a claim arising out of systemic defects in cladding and curtain walling systems, including the ingress of water, failures of fire safety, and structural issues. Shortly after issuing proceedings we made an application at court for an interim payment, which is an unusual step in construction disputes. It did however prove to be very successful. The court agreed that the claimant would recover “a substantial amount of money (other than costs)” at trial, and awarded a payment on account of £300,000 plus costs in respect of a number of the defects. The claim subsequently settled before trial.
Mediation can be undertaken at any time before or during legal proceedings, and takes the form of a confidential process facilitated by an independent third party mediator. Mediation is flexible and encourages free and frank discussion to analyse the issues in dispute and explore a settlement that both parties can live with and is better than the uncertainty of the courts imposing a solution that may be more unpalatable! We have extensive experience in guiding clients through mediation, and of using the process to secure positive outcomes for defect claims.
In summary, there is no denying that legal disputes can be an expensive and time consuming process for recovering losses arising from serious building defects. However, it is a mistake to overlook the options for effective recovery of losses for your organisation. There are many strategies which can be employed to bring valid claims to a successful conclusion sooner rather than later.
Our construction disputes team is experienced in using creative approaches to resolve defect claims for our clients. If you have concerns regarding construction defects please contact Andrew Lancaster or call us on 0121 212 7412.
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