Knowledge is what you get from reading the contract. Experience is what you get from not reading it

Many disputes arise because one or other of the parties to a written agreement assumed, rather than read, its contents.  Such disputes can be ruinous where the parties delay taking good advice.

In a recent arbitration, almost 12 years after completion of a new-build, low-rise block containing flats, shops and communal facilities, a developer claimed against his builder for water damage.  The developer particularised the claim in terms of design defects with a few sweep-up allegations of poor workmanship.  The remedial scheme commissioned by the developer involved a redesign of that part of the building alleged to be at fault.  The developer sought compensation from the builder for the full cost of the remedial works.

The builder confidently rejected liability for the cost of correcting design flaws as the design was produced by the developer’s chosen architect whose design the builder had been obliged to accept.  

While the builder correctly understood how the design work had been undertaken, insufficient attention had been paid to the peculiar split between design liability and design duty under the building contract.  The builder had entered a modified JCT design and build contract.  This made the builder liable for negligent design while requiring the builder to engage the developer’s architect, to implement the architect’s design and not to alter the architect’s design.  Thus the builder had, under the express terms of the contract, liability for a design over which he had no control.  

The design, as evidenced by the drawings, was completed more than 12 years before the action was brought.  Practical completion was less than 12 years before the action was commenced.  The developer held that, as a builder’s duty continued until practical completion, the action was not statute barred.  The builder disagreed, holding that if the action was statute barred against the architect, insofar as the claim was for deficiencies in the architect’s design, it must also be statute barred against the builder.   The developer also argued that there was an implied continuing duty to review the design during inspections.  However the building contract did not include a requirement for, and the architect was not engaged to carry out, routine periodic architectural inspections during the works.

From the outset, reports by the project insurer’s surveyor, the occupant’s surveyor and the developer’s surveyor informed the legal proceedings and formed the basis for the remedial work, which was completed earlier this year.  It was while the case was approaching a hearing and after the remedial work was complete that I was invited to prepare expert evidence and still later that the developer obtained an expert report. 

I reported that the design was flawed (but not as the developer asserted) and that the developer’s remedial scheme was similarly flawed.   The developer’s expert advised revising the developer’s case and the builder, on receipt of the developer’s expert’s report, stated that it raised issues other than those pleaded and applied to have much of it struck out unless the claim were revised.  Such a late fundamental revision to the Statement of Case may have exposed the developer to a claim for abortive costs and the developer eschewed this advice and resisted the application.   The arbitrator was minded to allow the claimant’s expert evidence on the basis he could properly ignore any part of it which did not go to the pleaded issues.

Both parties, now close to a hearing, were in possession of expert evidence which put into question the validity of the claim as pleaded but which showed there was, subject to the Statute of Limitations, a viable claim.   The developer’s costs already exceeded the sum claimed and the anticipated costs to go to a full hearing would make the parties’ costs greatly exceed the sum in dispute.  The result was a compromise settlement within a couple of weeks of the experts’ meeting.  Regrettably, due to the legal costs incurred, the settlement left both parties out of pocket by more than the sum claimed.  A high price to pay for the experienced gained.  An earlier reading of the contract documents and appointment of experts could have brought the dispute to a cheaper, quicker and more effective resolution.

Ineffective legal remedy for Building Defects

Applying the basic principles of English contract law, if building work is defective due to a breach of contract, the remedy is the cost of correcting the defects. 

Another approach is to retain the defective work as built and make an equitable deduction in payments to the builder.  Deductions might be based on whichever of the following is applicable: the savings made by the builder’s not having to correct the work, the loss of value in the finished building caused by retaining the defects, the lower cost of building poorly, the foreseeable increased cost of building maintenance, loss of longevity, etc.

The courts have in most cases based remedies on the cost of correction or of diminution in value.  There are exceptions where the courts have awarded nominal damages only.  This has occurred where the defects caused loss of amenity for the owner’s personal preferences.  The case of Ruxlev Electronics and Construction Ltd. v. Forsyth is often cited in this connection.

In a more recent case the courts awarded nominal damages for a failure to build a garage to the specified dimensions.  While the logic by which the courts held that nominal damages were an appropriate remedy can be distinguished from Ruxley, the effect is the same in so far as it makes it uncertain that a contract requiring building work to be done precisely as drawn and specified can be enforced effectively.  Where does this leave building professionals who advise on and prepare building contracts?  Do we have to say to our clients, if you enter a building contract based on agreed drawings and specifications, you may have to put up with a deficient building or pay twice?

The incidence of different types of defects

In the most general sense, a satisfactory building is one which is where it is needed, fits appropriately into its surroundings, and provides adequate space and facilities, protected from adverse weather and other undesirable external conditions. Since this protection cannot readily be achieved with short-lived structures, buildings typically outlast many other modern products, and, if built so that they can be adapted to changing requirements and easily repaired, can give satisfactory service for a long time.
Much can be learnt from the condition of the existing building stock about what mostly causes dissatisfaction after completion.
Existing buildings in Britain number about 25 million. Most are dwellings, which in 2000 numbered about 23 million – well over 90 per cent of the total, but it is estimated that in terms of floor area, domestic and non-domestic buildings are roughly equal.
At the beginning of the 20th century there was, in Britain, one dwelling for every 2.6 persons – slightly above the size of today’s dwindling average household. Population growth is now slow overall, and current demand for building arises largely from changes in household composition and inter-regional migration. The annual rate at which new dwellings were being completed in 2000 had fallen to well under 200,000, compared with more than double that figure in the mid 1960s.
Consequently, for English houses as a whole, recent official figures indicate that more than one fifth are over 80 years old, and around half are 50 years old. There are no comparable statistics for non-residential buildings.

In spite of their age, most existing buildings are still fit for continued use. Government statistics for dwellings officially designate as unfit less than 5 per cent of the total (i.e. 885,000 unfit dwellings). The most common reason for unfitness is disrepair (46%), followed by facilities for the preparation and cooking of food and dampness. Externally, faults occur most commonly in roof features and rainwater goods (34%), exterior wall finish (26%) and windows (25%). Internally faults are most common in ceilings (22%). This is an increase in the number of houses which are in disrepair when compared to the previous year’s survey.

Sustainable Solutions for Old Windows

Plastic windows are often put into older buildings, to ‘upgrade’ wooden windows, though the pvc-U they are manufactured from gives them an expected lifespan of not much more than 30 years. They may provide improvement in insulation via double-glazing and improved draft-proofing and so are often viewed as the sustainable solution. This is potentially belied by the reduction in light transmission, pvc-U window’s limited lifespan and the carbon footprint created in their manufacture.  Pvc-U can now be recycled and one major manufacturer recycles up to 90% of old pvc-U windows, including the glass, though even this process has a carbon footprint in the energy used to re-create the window parts.

Listed historic buildings cannot be sympathetically re-fitted with modern plastic windows and the appearance of many otherwise handsome, though non-listed, older buildings has been spoilt by the addition of carelessly chosen replacement windows. The making, rebuilding and repairing of sliding sash windows has merit.

Wooden window frames and sashes of whatever age can be easily repaired if they have not been allowed to rot, though sliding sash windows in particular are often seen by the inexperienced as more trouble than they are worth to restore.  However weights, cords, pulleys and other traditional sliding sash accessories are readily available and slender, pre-manufactured double glazing units can sometimes be used to replace original Victorian glass, which was often especially thick in larger windows. An expertly restored wooden sliding sash should be no harder to open and close than a UPVC replacement.

Good timber is durable, if taken care of it will last for centuries, though it does require periodic maintenance involving paint and repair. Paint too has a carbon footprint, though modern non-volatile paints are improving all the time. Pvc-u is low-maintenance but cannot be repaired as easily, so its longevity is not as good and older plastic windows may suffer permanent discolouration from exposure to sunlight. They can also become stained, mildewed and bird droppings are reportedly particular problems.

Early steel windows, manufactured prior to the introduction of rustproofing treatments at the end of the 1930’s also require additional maintenance. Wartime painting was often neglected and rust allowed to set in, often unseen beneath the putty in the glazing rebates. Cracked glass, provoked by compression from the building up of corrosion products, is a sure sign.

Such windows are often worth conserving and may be put back in good order. Careful removal of glass and putty, followed by grinding off rust to bright metal and the application of a good zinc based primer is essential, before re-glazing and painting.

When extensive conservation work is required, involving the repair or replacement of hardware, the dismantling of composite assemblies, or the piecing in of replacement bars, it may be worth having the windows taken out, removed to a workshop, stripped down and hot dip galvanized before re-assembly.

Le tour racing towards ArchiFACT

 

Alternative (Construction) Dispute Resolution (ADR)

The term ‘alternative dispute resolution’ might originally have been applied to any method of resolving disputes other than litigation. Language changes and ADR is now commonly used to describe alternatives to any imposed, externally-regulated and binding system of resolving disputes.

It may mimic processes such as courtroom trials or arbitration hearings, or adopt wholly dissimilar procedures. There are formal protocols or codes of conduct available which can be followed if wished. (Guidance on this may be obtained from various bodies, of which the Centre for Effective Dispute Resolution, CEDR[1] is one, and reference may usefully be made to the Commission of the European Communities’ green paper which defines alternative dispute resolution as ‘out-of-court dispute resolution processes conducted by a neutral third party, excluding arbitration proper’.[2]).

Traditionally, alternative dispute resolution is entered into voluntarily and governed by agreement between the parties in dispute. More recently, ADRs which are conducted by the court or entrusted by the court to a third party (ADRs in the context of judicial proceedings), are taking on a greater significance in Europe. For example, pursuant to Rules 26.4 and 44.5 of the Civil Procedure Rules for England and Wales, which came into force on 26 April 1999, the court may suspend a case to allow the litigants to have recourse to mediation and can order the litigants to make financial penalty payments if they refuse mediation.

ADR can work well where all want a fair and equitable remedy – and badly where they do not. These voluntary and little-regulated processes can be disingenuously appropriated to obfuscate rather than resolve issues, so deferring the day of reckoning and delaying both technical and legal remedy. For this reason, non-binding dispute resolution procedures are useful only where those involved are capable of moderating self-interest with enlightened objectivity, in which the natural desire to avoid blame is balanced with the long-term benefit that comes from consensus rather than dispute.

Finding consensus between opposing interests, especially where the outcome is likely to be costly to one party, is difficult. It is useful for those involved to remember, when considering strict liability, that compromise over the cost of repair is often cheaper than litigation. If the parties can be persuaded that it is better to put their energies and money into resolution rather than dispute, alternative dispute resolution offers several tried and tested methods.

Comparison of Alternative Construction Dispute Resolution Procedures

[1] www.cedr.co.uk

[2] ‘Commission of the European Communities, Brussels, 19.04.2002, COM(2002) 196 Final Green Paper on Alternative Dispute Resolution in Civil and Commercial Law’.

Limitation of Design Liability

In a recent arbitration, almost 12 years after completion of a new-build, low-rise block containing flats, shops and communal facilities, a developer claimed against his builder for water damage.  The developer particularised the claim in terms of design defects with a few sweep-up allegations of poor workmanship.  The remedial scheme commissioned by the developer involved a redesign of that part of the building alleged to be at fault.  The developer sought compensation from the builder for the full cost of the remedial works.

The builder confidently rejected liability for the cost of correcting design flaws as the design was produced by the developer’s chosen architect whose design the builder had been obliged to accept.  

While the builder correctly understood how the design work had been undertaken, insufficient attention had been paid to the peculiar split between design liability and design duty under the building contract.  The builder had entered a modified JCT design and build contract.  This made the builder liable for negligent design while requiring the builder: to engage the developer’s architect, to implement the architect’s design and not to alter the architect’s design.  Thus the builder had liability for a design over which he had no control.  

The design, as evidenced by the drawings, was completed more that 12 years before the action was brought.  Practical completion was less than 12 years before the action was commenced.  The developer held that, as a builder’s duty continued until practical completion, the action was not statute barred.  The builder disagreed, holding that if the action was statute barred against the architect, insofar as the claim was for deficiencies in the architect’s design, it must also be statute barred against the builder.   The developer also argued that there was an implied continuing duty to review the design during inspections.  However the building contract did not include a requirement for, and the architect was not engaged to carry out, routine periodic architectural inspections during the works.

From the outset, reports by the project insurer’s surveyor, the occupant’s surveyor and the developer’s surveyor informed the legal proceedings and formed the basis for the remedial work, which was completed earlier this year.  It was while the case was approaching a hearing and after the remedial work was complete that I was invited to prepare expert evidence and still later that the developer obtained an expert report. 

I reported that the design was flawed (but not as the developer asserted) and that the developer’s remedial scheme was similarly flawed.   The developer’s expert advised revising the developer’s case and the builder, on receipt of the developer’s expert’s report, stated that it raised issues other than those pleaded and applied to have much of it struck out unless the claim were revised.  Such a late fundamental revision to the Statement of Case may have exposed the developer to a claim for abortive costs and the developer eschewed this advice and resisted the application.   The arbitrator was minded to allow the claimant’s expert evidence on the basis he could properly ignore any part of it which did not go to the pleaded issues.

Both parties, now close to a hearing, were in possession of expert evidence which put into question the validity of the claim as pleaded but which showed there was, subject to the Statute of Limitations, a viable claim.   The developer’s costs already exceeded the sum claimed and the anticipated costs to go to a full hearing would make the parties’ costs greatly exceed the sum in dispute.  The result was a compromise settlement following the experts’ meeting.  Regrettably, due to the legal costs incurred, the settlement left both parties out of pocket by more than the sum claimed.  A high price to pay for the experienced gained.  An earlier reading of the contract documents and appointment of experts could have brought the dispute to a cheaper, quicker and more effective resolution.