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Construction and the law grow less smitten with one another

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legal matters

In October last year I wrote about the work of the Forum for Construction Law Reform (aj 22.10.98), convened as a vehicle to turn the proposals of Latham's Working Group 10 into law. WG 10, with representatives from the contractors, the clients and the professionals had identified three particular bugbears:

joint and several liability for professionals, leaving the surviving member of the team to pick up the bill for the whole disaster, however small a part they played in it, if the other members go under;

the problems caused by the many different limitation periods (varying between three and fifteen years) which can apply depending upon the type of claim brought;

and, that ultimate owners of defective buildings have no redress against the designers and builders unless they have signed up to a sheath of collateral warranties.

WG 10 proposed three straightforward solutions:

make liability proportional

have a single limitation period for claims, backed by latent defects insurance

make clients' rights transferable to building owners.

These proposals were (and this is no mean feat) approved by all interested parties.

Good ideas are not always readily snapped up by the legislature. After all, it took seven years for the Arbitration Bill to become the Arbitration Act, and that was privately funded and universally applauded. And anyway, the construction industry has already had one piece of ground-breaking legislation crafted for its particular needs in the form of the new Construction Act.

Undaunted by the enormity of its task, in April of this year the Forum commissioned an Oxford law don to make a stab at drafting the statute. He urged caution, not least because the Law Commission had already considered joint and several liability, and seen no need to alter the law, and was in the process of reporting upon limitation periods. Furthermore, the new Contracts (Rights of Third Parties) Bill is now making its tortuous way to the statute books. Once law, it may make collateral warranties redundant. The legislative climate would be distinctly chilly, he thought, for any more construction-industry specific reforms.

The whole topic was then reviewed in the summer by industry bodies, including the Construction Confederation, the Construction Industry Council and the British Property Federation. The general consensus was that the world had moved on considerably since WG 10 reported five years ago, and that what had seemed like smart snappy solutions to perennial problems now seemed rather outmoded.

The root of all this seems to lie in the end of the romance between the construction industry and the law. For all the positive objectives of the Latham report, its main thrust was the resolution of disputes and the simplification of obtaining legal redress. Since then the Egan report, with its aims of reducing construction time and costs and improving quality, seems to have captured the collective imagination. This may be because the job of putting Egan's recommendations into practice has been retained by the industry itself. With Latham, the proposals were quickly hijacked by the lawyers and the 'hangers on' so derided by Lord Woolf.

The results may not necessarily be detrimental (although the proliferation of Adjudicator Nominating Bodies, many sporting their own rules and procedures is hard to justify) but the process is, inevitably, alienating. In contrast, when considering how best to achieve Egan's objectives of improving service and working towards zero defects, some companies have recognised that nearly half of the on-site construction costs are absorbed by mismatched components and poor supervision. Solutions are being considered by concerns such as baa Lynton, Ove Arup and the Peabody Trust with a view to using factory-ready modular housing, or industrial housing as it was once known. Standardised components can be selected off the shelf and then slotted together on site. The results are a little more expensive than conventional methods but constructed in half the time, with obvious attractions for those receiving rental income and (apparently) defect free. This initiative confirms the thinking behind the industry bodies' decision to drive home the last nail in the coffin of wg10 - that they would rather devote their time and resources to measures aimed at performance improvement rather than clarifying liability when things go wrong.

'Good ideas are not always readily snapped up by the legislature.'

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