Legal disputes set to rise in 2021
The Construction Leadership Council (CLC) has warned that the number of contractual disputes related to COVID-19 is likely to rise across the sector this year.
It issued a plea for the industry to continue “to support the long-term health of our sector by constructively resolving all contractual disputes arising from the pandemic”.
The organisation said it expected to see an increase in the number of claims triggered by the virus crisis, with financial consequences the most frequent bone of contention. “Whilst parties may be inclined to settle an entitlement to additional time for completion, there is a reluctance to agree financial losses, costs and expenses,” it said in a new guidance note.
The CLC said its own research across the industry had uncovered a change of tone in the ongoing response to the crisis. “In the short term, many reports indicated a positive and increased level of collaboration (especially from public sector and proactive clients/tier 1s) within Q2 and Q3 of 2020. However, in [the] longer term, indications were that commercial behaviour was hardening throughout the supply chain.”
Louise Robling, a partner at law firm Bevan Brittan, agreed attitudes have hardened over the course of the crisis. “I think there was some leniency back in March as the long-term impact of the pandemic was so uncertain, which made planning for it very hard,” she told Construction News. “Now we are 10 months on from the first lockdown, I think employers will expect contractors and their supply chain to have contingency plans in place to mitigate any time or cost impact of COVID.”
In May last year, the CLC issued detailed guidance to industry, setting out the steps firms might take to avoid the escalation of disagreements, while the Cabinet Office also issued its own plea to industry to take a “responsible” approach on enforcement over missed or delayed commitments.
“Records and evidence are your best weapons,” Robling advised firms concerned about the threat of disputes. “Make sure you can use contemporaneous records to demonstrate the effect of COVID on productivity and costs, and set out what you did to minimise the impact.”
Similar advice was issued during a CN webinar focused on dispute resolution aired in July last year, which advised firms to set aside emergency funds to cover legal wrangles and to keep detailed records.
At the time, Arcadis director of contract solutions Ed Spencer observed: “If worse comes to worst and you end up in front of an adjudicator or a judge, it’s usually the party with the most detailed and accurate contemporaneous records who’s in the stronger position.”
The CLC warned that 2021 is likely to provide a “perfect storm” for disputes, with the national economic slowdown, the impact of Brexit, lower construction activity, the end of government support schemes and the introduction of reverse-charge VAT all placing additional financial pressure on firms.
Source: Construction News