Legal changes affecting construction businesses from 1 October 2015
1 October 2015 ushers in a number of legal changes which affect construction businesses operating in the UK. We have provided brief highlights of some of the changes below. If you need further information, please contact us using the details on the right.
The recent further dip in oil price has placed even more pressure on the costs paid by Operators to Contractors, and also how much reliance Contractors can place on an Operator's promise to pay.
On 29 April 2015 The Insolvency Service of the UK Government published updated insolvency statistics which include a breakdown of insolvencies that occurred in 2014 across various industry sectors including the construction industry. There are separate tables of statistics for England and Wales and for Scotland.
In this two part guide we will be looking at issues that frequently arise when considering whether a professional indemnity policy responds to a claim against a construction professional.
In Part 1 we consider whether there is cover. In particular:
- Prior claims – when will a “new” claim fall within an existing notification?
- The obligation to notify circumstances
- Aggregation
- Insolvency of the Insured
Prior claims
Project Bank Accounts (PBA) are a payment mechanism based on ring-fenced bank accounts created to increase the security of contractors and sub-contractors in a building project. Their main benefits include security and speed of payment and protection of funds in potential insolvency. Sounds too good to be true? PBAs are becoming increasingly common, and with the Government commitment to use PBAs “unless there are compelling reasons not to do so”, their joint value in public sector contracts is expected to reach £4bn by this year.
Insurers and insureds do not bear the risk of a contractor becoming insolvent when undertaking insured repair work. The insurer’s only obligation is to pay its appointed contractor and not any subcontractors engaged by that party.
Background
The Technology and Construction Court has decided that judgment should not be stayed following a contractor's unsuccessful defence of an adjudication claim brought by its M&E subcontractor.
The case reaffirmed some key principles in assessing whether a stay is justified in adjudication enforcement proceedings:
[2019] EWCA Civ 230
This was an appeal by the supplier of a software system against a TCC judgment dismissing its claim and ordering it to pay substantial damages on the counterclaim. The main issue of principle which arose was how to apply a clause imposing liquidated damages for delay in circumstances where the contractor or supplier never achieves completion.
EY's Hunter Kelly and Alan Hudson have been appointed administrators over UK construction services company Interserve, hours after it failed to secure shareholder approval for a restructuring plan.
Kelly and Hudson were appointed over Interserve Plc, the holding company for the Interserve Group, on 15 March after the plan failed to win approval at a shareholders' general meeting earlier the same day.
Imagine this: a contractor undertakes to perform certain works by a specified date, and agrees to pay liquidated damages (LDs) if it does not complete by that date (subject to any entitlement to an extension of time). The contractor, through its own fault, is late and does not complete by the specified date. In fact, the contractor is very late and, in the end, the employer terminates the contract before the works are completed (as it is entitled to do under the contract).