The Biz - Builders Information Zone (Law)

Q. Will a claim for the recovery of unpaid monies by a firm of engineers, be subject to the Pre-Action Protocol for Construction and Engineering Disputes?

A. Yes, decided Mr Justice Jackson in the case of Cundall Johnson and Partners LLP v Whipps Cross University Hospital NHS Trust [2007].

The case, whilst dealing with other issues, concerned a claim by the claimant, Cundall Johnson and Partners LLP, against the defendant, Whipps Cross University Hospital NHS Trust, for the recovery of professional fees arising from the demolition of certain buildings. The case could equally apply to an engineer’s claim for fees against a contractor.

The parties entered into correspondence with one another, with the defendant requesting paperwork from the claimant in order that it could verify whether or not the fees claimed were indeed due. When this paperwork was provided, it was illegible. Lawyers were subsequently instructed by both parties, yet the claimant failed to provide clear versions of the necessary paperwork, and instead issued court proceedings without complying with the Protocol.

At court, the claimant submitted that it did not have to comply with the Protocol as the claim was a matter of simple debt recovery. The Protocol is stated to apply ‘to all construction and engineering disputes’, subject to some exceptions detailed at paragraph 1.2 of the Protocol.

 

As the claim for the recovery of fees did not fall within one of the exceptions listed at paragraph 1.2 of the Protocol, the judge held that the Protocol did apply and the fact that it could be characterised as a debt recovery claim was not relevant.

As a result of this breach of the Protocol, the judge ordered that proceedings be stayed whilst the parties complied with the Protocol.

It is clear from this ruling that parties to a dispute and their legal advisors should pay careful consideration as to whether or not the Protocol will apply to their claim, before rushing into legal proceedings.

Q. What is the Fair Payment Guide and Charter and who does it affect?

A. The Fair Payment Guide and Charter was published on 1 January 2008 by the Office of Government Commerce (OGC). It affects those contracting with public sector bodies such as local authorities or housing associations.

The thinking behind the Guide and Charter is the need to encourage fair payment practice in the construction industry, which historically incurs substantial losses of money and diminution of productivity as a result of confrontation between parties concerning payment issues.

The Guide itself includes a model form of Charter, and encourages all public sector clients and their principal contractors to sign a Charter broadly in the terms of the model Charter contained in the Guide. There is, however, no obligation on principal contractors or public sector clients to sign up to the Charter.

The Charter has been endorsed by the government and signed by the OCG, the Local Government Taskforce, the Construction Industry Council, the Construction Federation and the National Specialist Contractors Council.

The Charter commits clients, lead contractors and their supply chains to, amongst other things:-

• Greater transparency

• No unfair withholding of retentions

• More efficient payment procedures, and

• Payment periods not exceeding 30 days.

A press release from the OCG states that it will, together with the Public Sector Construction Client’s Forum’s Fair Payment Working Group who prepared the Guide and Charter, plan to monitor the progress of the implementation of the Charter and the recommendations, together with the savings made as a result of the Charter, during the next two years.

Further information can be obtained from the OCG website http://www.ogc.gov.uk and a copy of the Fair Payment Guide and Charter can be found at www.ogc.gov.uk/documents/CP0159FairPaymentPractices.pdf.

Stephen Homer can be contacted on 0870 427 3883 or mailto:s.homer@ashfords.co.uk