Construction Law: Autumn Update transcript

This webinar was hosted by Sadia McEvoy, Counsel at Ashurst; Matthew Bool, Partner at Ashurst; Dyfan Owen, Partner at Ashurst; Nicholas Hilder, Partner at Ashurst; Madeleine Pope, Senior Associate at Ashurst; Louise Mercer, Senior Vice President at Marsh & McLennan.

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NH:  Good morning all and thanks very much for joining Ashurst's Construction Law Autumn Update for what promises to be a topical and timely discussion. My name is Nick Hilder and I'm a partner in Ashurst's Projects group, focusing on construction law. and I'm joined here today by my colleagues from the firm's construction team.

I'm delighted to welcome a special guest, Louise Mercer, Senior Vice President at Marsh McLennan. Louise is an expert on all construction insurances.

And so on the menu today, we have Sadia McEvoy, who will begin by bringing us up to speed with building safety, Matthew and Louise, who will talk us through the changing landscape of the construction insurance market.

Dyfan Owen is going to cover all things Brexit in a seven minute slot, so no pressure there. Madeleine who's going to provide an update on recent construction caselaw developments. And we'll finish off with some questions from the virtual floor. And the idea is that the webinar will be as interactive as possible. 

And thanks to all of those who've already submitted questions. If you'd still like to submit a question, we'll discuss any aspects of the points covered. Please send these to events.london@Ashurst.com, and we'll seek to cover those. You've got the e-mail address up there in the top right hand corner. So without any further ado, it's over to Sadia for her update on building safety.

SM: Thanks, Nick, and good morning, all.

It's really important that we start by acknowledging that we, as lawyers, understand how challenging and difficult the issues of building safety and fire safety are right now, for our clients, and indeed, for people in general, not only in terms of the evidence being given to the Grenfell Inquiry, but also in respect of the uncertainties that currently exist in relation to the regulations.

And, of course, the insurance situation added to the challenges we're facing with Brexit and Covid-19. the building safety problems are really difficult. and we recognize that.

For the purposes of this webinar, I only have a few minutes. So this will largely be a run through of the current position.

As you'll appreciate, the situation is developing all the time. We had a press release on Saturday, a Government report and a House of Lords reading of the Fire Safety Bill yesterday. So we'll be coming back unquestionably to the subject of building safety in more depth in future webinars.

So, turning to the current position in relation to the Grenfell Inquiry. As you all know, the two mains of strands of inquiry following the fire were the Hackitt Report and the Grenfell Inquiry.

They have distinct mandates: the Grenfell Inquiry was setup to establish what happened on the night of the devastating fire, and why 72 people lost their lives.

The first phase of the Inquiry, focusing on the events of the night, 14 June, reported last October - so a year ago. Simultaneously, the Hackitt Report was commissioned to review the regulatory system and is consistent with what we've been seeing from the evidence given at the Grenfell Phase Two Inquiry in the last few weeks.

The Report found that the regulatory system covering high rise and complex buildings just was not fit for purpose. Confusion and ignorance as to what the regulations actually say, failure to prioritize quality and safety, lack of clarity over responsibility, and inadequate enforcement and regulatory tools were identified as key problems.

The Hackitt report was published in 2018, and the second phase of the Grenfell Inquiry is currently underway. It is looking at the technical causes of the fire and the role that central and local Government had in promoting fire safety at the time.

Many of you will be familiar with the nature of the evidence that's been given in the last few weeks. They've been looking at the cladding products used in the refurbishment of the tower. The evidence recently given by employees from Kingspan and Celotex - who sell insulation products - completely support Hackitt's findings in terms of confusion and lack of accountability.

So what are we seeing in terms of legislative change? As many of you will know, the first legislative. change was the ban in December 2018 of combustible cladding on high rise homes and certain other buildings over 18 meters, such as hospitals and care homes, but not hotels.

Since the ban, there's been a further consultation on extending it, including by lowering the height and adding hotels and hostels to the ban. That consultation closed in May and the findings are currently under review.

Then there are three further planned legislative developments: The first and most imminent is the Fire Safety Bill. This will amend the Fire Safety Order 2005 which regulates fire safety in non-domestic premises, whatever their height, including workplaces and the non-domestic parts of multi-occupied residential buildings. So that means that it includes the common parts of blocks of flats.

The Fire Safety Bill confirms that the external envelope should be part of fire risk assessment including cladding and balcony. Prior to this Bill, there was uncertainty about this.

There's also been a longstanding uncertainty as to whether the entrance doors to flats should be included within the common parts, or whether they are the owner's responsibility and this has also been clarified. In other words, the Bill confirms things that should have been clear before and addresses some of Hackitt's concerns about unnecessary complexity and confusion.

The Bill's been through the House of Commons, and had its third reading in the House of Lords yesterday. The House of Lords has passed three amendments, which include banning leaseholders from bearing fire safety remediation costs and implementing a couple of other Grenfell Phase One report recommendations.

So, what this means is that the Bill now has to go back to the House of Commons so that the Lords' amendments can be considered. And, as of last night and this morning, a date for that has not yet been set.

The second legislative development is that we're likely to see more substantial amendments coming through in the near future to the fire safety regime. Another consultation on further amendments to the Fire Safety Order closed on 12 October last month and the findings are currently being analysed.

You'll all be aware of the third significant legislative development, the Building Safety Bill, which was published in draft form in July of this year. Since then, it has been subject to pre legislative scrutiny by a Housing, Communities and Local Government Department Committee, in conjunction with interested parties.

The Committee's report was published yesterday, having heard from 30 live witnesses and read evidence from, I think, almost 600 interested parties. You can find the report on the Parliamentary website. It's very detailed with over 40 recommendations on ways in which the Bill can be improved.

In terms of some of the key issues raised by the Committee, the overriding message was that the Government has to improve on the detail of the practical operation of the regime if it's to demonstrate that its proposals will provide the necessary reform, and I think that will be very welcome to everyone in the industry. Other key recommendations include: ensuring that appropriate transition periods are provided for. Again, this will be very welcome in light the onerous responsibilities on duty holders.

Secondly, clarity from the Government on how building safety remediation works will be paid for - the Committee proposes that this money must come in the short-term from central Government, and, in the longer term, it must come from central Government or from the construction industry itself.

And thirdly, a commitment from the Government to the principle that leaseholders should not pay towards the cost of remediating historical building safety defects that echoes what the House of Lords have been debating recently in relation to the Fire Safety Bill. So these are some of the areas where we can expect to see more development.

The Government's objective was to introduce the Bill to Parliament in early 2021, but this now seems unlikely in light of the recommendations and we will probably now see it introduced later in 2021 at the earliest.

Finally, I just wanted to touch on insurance and fire safety. It's well understood that there's a huge shortage of fire inspectors, and also the ones that we do have are struggling to access affordable professional indemnity insurance. This is having a lot of knock on consequences in the context of the residential market.

A Government Press Release on Saturday was helpful in that it confirmed that funding will be provided to train 2000 more building assessors to speed up the valuations process on property. The Press Release also provided clarity in relation to when an EWS1 form is appropriate. For those of you who are unfamiliar with this form, it was produced by the RICS about a year ago due to lenders' concerns about cladding on blocks of flats. It's a standardised reporting form that states whether there is combustible cladding on the external wall of the building or not.

In Saturday's Press Release the Government confirmed that owners of flats in buildings without cladding do not need an EWS1 form to sell or remortgage. So that frees up inspectors to work on buildings that actually do have cladding on them.

The Press Release also made a somewhat nebulous statement that the Government is working with the insurance industry to ensure that professional indemnity insurance is available for assessors. And while the Government understands the wider problems we're seeing in terms of the insurance market, they haven't been forthcoming on the solutions really beyond stating that they lie in the clarity that the new regime will provide.

In other words, once it's clear who is responsible and accountable for different building risks, the insurance market will be able to better understand and price the risk. They argue that the new system will reduce claims too, as risks will be managed effectively.

However, as, it will be some considerable time before the new regime is in place, the difficult PI market is not going to go away anytime soon. And I think now's a good time to hand over to Matthew and Louise to explore this in more depth.

NH:  Thanks Sadia. That's a really thorough and helpful summary and I think it is clear that insurance is going to have a key role to play in this area. And I think that's right. We should now hand over to Matthew and Louise will talk in greater depth about what we're seeing in the insurance market.

MB:   Well, thank you, Nick, and good morning, everybody.

The topic of insurance in the construction sector is incredibly broad and we can easily spend an entire session on this and only just scratch the surface. But, Louise and I propose to focus on three main areas.

Firstly, we will provide some observations on the current state of the construction insurance market, then we'll go on to discuss some of the challenges in the professional indemnity insurance market. Then we'll look to wrap up by providing some advice and practical tips about mitigating these challenges.

Now, Louise and I are going to be acting as a bit of a tag team today. So, at this point, I will hand over to Louise, to tell you a little bit more about the market, and then I'll rejoin in a few moments time.

LM:   Thank you, Matthew. Good morning, As most of you probably already know, the construction insurance market is significantly hardening, with a continued move towards more restricted cover, increased premium rates, and higher access levels.

Market capacity has reduced dramatically over the past 18 months with many insurers putting their construction books into run off.

Insurer focus is on profitability with stricter guidelines being put on underwriters from head office, which shows a greater emphasis on analytics and reliable data, particularly with respect to historic claims activity.

Water damage is a key concern, accounting for 60% of all claims within the London market. There's also been a prolonged and significant hardening of the professional indemnity market. A Lloyds Review found PI to be the second worse performing sector across all lines. Expensive claims have meant that the PI market has lost money every year for the last five years. The ongoing uncertainty of cladding related exposures, and the current position of Covid 19, added further layers of concern on insurers.

During 2020 the market has continued to harden with significant rate increases for all professions, but in particular architects, engineers, surveyors and D&B contractors, The basis of cover continues to become more restricted.

Many policies are now written on an aggregate cost inclusive basis. Whilst the Grenfell Phase Two Inquiry remains ongoing and before a clear building safety framework is agreed, professional indemnity insurers remain very concerned about fire safety.

When restrictions started to appear on PI policies, they were in the main worded to only restrict cover for combustible cladding systems. However, most insurers now have their own more restricted fire safety wording. Common restrictions around fire safety we've seen include low aggregate cover limits, no defence costs, no consequential loss cover, restrictions for tall buildings and exclusions to not just the cladding system but also other elements of a building. Insurer restrictions have developed to the extent that anything to do with an alleged breach of professional duty around the fire safety of a building, is potentially now excluded. 

There are tough times ahead in the PI market and contracting parties need to agree how best to manage uninsured risk. Generally, a building contractor will be able to maintain a higher level of PI cover than an architect. So a developer, forced to agree a limitation on liability due to a lack of PI cover with an architect needs to avoid giving the contractor similar level of limitation.

In addition, a developer may not wish to accept the first offer of PI cover, and an automatic reduction in liability. The parties should work together to investigate whether further layers of PI cover are available at suitable cost, and how the uninsured risk is best managed.

MB:   Thanks, Louise. Now, from a legal perspective, I mean, this hardening in the market is having a very clear impact on the contracts that we're dealing with day-to-day. And there are three points that I would like to make here.

Firstly, and as Louise said, express limits or carve outs in respect to the level and scope of PI insurance are becoming the norm. And as lawyers, we are spending a lot more time reviewing the nature of these exclusions and advising on their risks.

So whereas it was fairly standard a few years ago for most consultants to maintain PI insurance on, say, five million or £10 million on "each and every claim" basis, a growing number, and particularly fire consultants, and approved inspectors, are only able to obtain insurance on an aggregate basis. And for those, who can still procure "each and every claim" based policies, these are increasingly subject to sub limits, or exclusions, the most common of which as Louise said, relate to cladding and fire safety claims.

Now often, PI certificates, which a consultant or a contractor may provide to evidence the cover that they have will refer to these exclusions in quite broad terms. So when you are drafting the relevant insurance clauses in your contracts, it's key to get into the detail of this wording and speak with your insurance advisors so that you are clear as to the nature of these exclusions. And if there are deficiencies or gaps, then engage with the consultants or contractor to see if it's possible to supplement the cover that they have.

And my second point, and the second trend that we're seeing is a marked increase in the number of consultants and contractors wanting to have caps or to exclude their liability, in particular for cladding and fire safety claims. Now, this is understandable because consultants and contractors will want their contractual liability to be back to back with their insurance cover.

Now, whether or not this is agreed will be subject to negotiation, but it is becoming increasingly difficult for developers and employers to resist these types of exclusion clauses where the main reason for their inclusion is because of the lack of insurance cover in the market, which is really beyond the control of the contractors and consultants.

So where you are faced with a consultant or a contractor asking for a cap or an exclusion of liability, my advice again, is to interrogate the drafting carefully. Avoid being too general and try to define as clearly as possible what is and what is not excluded.

However, I think this trend is actually creating a significant problem for the sector because the effect of these clauses is simply to push risk back to employers who are then in the unenviable position of either having limited or no recourse if there was an issue or problem relating to say cladding, or the fire safety of the building. So, going forward, I do think we're going to need to see a risk sharing based approach whilst the resolution to the issues facing the PI market is found.

Now, my third point, which in many ways is more of an observation, is the impact that these changes may have on design and build as a form of procurement. Now, for many years design and build has been the most common form of procurement used in development. And as most of you I'm sure will know the main advantage for this being single point responsibility, the one main D&B contractor, assuming full responsibility for the design and the construction of the building or the project.

Now, most D&B contractors are able to assume this greater level of risk because they have taken novation of the original designers thereby giving them recourse to the team who design the building. However, if a novated architect or novated engineer is not able to obtain PI insurance for the cladding or fire safety systems that they have designed and have capped or excluded liability for these elements in their appointments we should not be surprised if D&B contractors try to do the same in their building contracts.

Now, we're already seeing D&B contractors raising concerns about the existence of carve outs and caps in design team appointments. And if this trend continues and D&B contractors are not able to assume responsibility, for key elements of the design of a building, then you can start to see the advantages of D&B being undermined.

Now, what is the effect of all of this? Well, again, simply these risks are going to be pushed back up the chain to employers and their funders. And, you know, this could have a profound impact on the delivery of new buildings and schemes in the future.

So, you know, this is a challenge, which needs to be resolved as a matter of urgency, and it's going to need a combination of Government, insurance market, and industry representatives to find a solution for the benefit of the entire construction sector.

Now, having said that, there are various practical steps to mitigate some of these issues, and Louise has got some very good tips and advice to help with these.

So, I'll, hand over to Louise now to close our section.

LM:  Yes, we thought it'd be useful just to run through a few tips on how to best work through this difficult insurance market. Be prepared for change, and review internal budgets, don't assume that insurance will cost the same as it did on the last project. And early engagement with your broker is vital. It is taking much longer to obtain quotes as insurers are under-resourced, in terms of team numbers, quality, inexperienced staff, plus, they need sign off from their senior managers.

We also need to conclude the placement 100% before we can be confident that the terms are fully supportable, all of which just takes a lot more time. It's taking months rather than weeks to put programs together.

We are seeking new markets, especially on the PI side, our PI team have facility with some additional markets. Our expectation is the general market will get worse before it gets better. We need to provide a high level of information. Quality broking packs provide insurers with the confidence they need to see. We need to demonstrate risk mitigation, particularly in the areas where we are seeing the claims: so water damage, fire prevention. It's best to build long-term relationships with insurers and consider having the same insurer across your property and construction programs.

We suggest you interrogate the cost that contractors are including for insurance within their bid, and make sure that the contracts contain the correct insurance clauses all the way down the chain. If contractor caps are appropriate, ensure that the cap is not eroded by incidents, covered by insurance.

Finally, one particular area was significant claims for water damage and fire claims where contractors are working within existing structures. It's therefore important that parties agree between themselves, the best way of arranging insurance. Property insurers and liability insurers are currently pushing back on providing a waiver of subrogation and charging a lot more where works are within existing structures.

I'll now hand over to the Brexit update.

NH:  Thank you. Thanks Louise sorry I was struggling with the mute button.

So now turning to Dyfan and looking beyond the end of lockdown 2.0 and 2020. We are coming to the end of the Brexit transition period on 1 January, 2021 and so Dyfan, I wonder what should those negotiating construction contracts or managing existing projects bear in mind?

DO:  Thanks, Nick. Good morning, everyone. And yes, so the consequences of Brexit, whether there's a last-minute deal or not, is going to be a huge challenge for the construction industry, as you said, as it is are seeking to recover in the wake of the pandemic.

I thought I'd just share a few points for those who negotiate and manage construction contracts, and two of the inevitable consequences that the UK leaving the EU will be that there'll be new Customs and Border controls in place, which will slow down, movement of goods and increased cost. And there may be Tariffs on goods if there's a "no-deal".

There will also be uncertainty in relation to movement of workers, services and data into and out of the EU and in those circumstances, contractors, sub-contractors and suppliers are likely to be most vulnerable. And if contracts are silent on risk allocation, then they'll be the ones that have to cover additional costs and could be hit with delay damages.

But there may be provisions in existing construction contracts that provide some relief, or, an ability to negotiate provisions that seek to share some of the risk, in relation to those points and a few areas to think about, I thought, I would cover. The first, is change of law.

Certain change of law provisions might enable contractors to be entitled to an extension of time or additional costs. But the wording of the change of law provisions is very important.

So for example, how law is defined, you know, whether it covers hard, soft law, guidance, et cetera, whether the provisions provide the laws that are foreseeable. So, again, it's probably arguable that some of the laws in relation to Brexit will be foreseeable.

A relevant example is the 2016 JCT suite of documents, which tend to be drafted so that they only apply to legislative changes which have an impact on the physical design and construction of the works.

Now, not all statutory changes resulting from Brexit will necessitate a change to the works. So, for example, a change in position on import duties will not see a change to the works. So focusing on the particular provisions, the change in law provisions themselves, is very important. And also, bearing in mind, any changes in law coming down the track.

The second point is resources, and there's a recognition that Brexit could lead to uncertainty in terms of availability of skilled workforce. And parties might want to consider whether there are any provisions in their construction contracts which might address the potential need for additional resources and perhaps share the risk around that.

The third area is tariffs, taxes, and customs. A point to bear in mind is whether there are any provisions that address tariffs and taxes. For example, we've seen contractors seek to negotiate provisions that provide that employers will pay the risks associated with delay to importation of materials. And contracts might also include fluctuation provisions, which could provide some relief from tariff increases in a no deal scenario. So, for example, the JCT fluctuation schedule.

Another area to, bear in mind is European standards. And it's worth thinking about how they are addressed in your contracts, and whether references to European standards is appropriate going forward.

So for example, compliance with certain standards may be referred to as conditions precedents of practical completion. And it may be the case that particular UK standards (e.g., relating to product safety) will apply rather than European standards. And there may be an increased risk of a divergence between the UK and European standards going forward, and as time passes.

The fifth area to think about is force majeure. Now, force majeure certainly had his time in the sun, in recent months, a lot of focus because of Covid as well and a lot of thought has been given to it already in terms of Brexit.

Nevertheless, it's worth reviewing contractual provisions to see if any force majeure provisions might be applicable. Most contracts provide for force majeure clauses which kick in when certain unforeseen events occur and prevent one party from performing the contract.

Now the issue with Brexit, of course, is that it has arguably been foreseeable for some time, although the consequences of that may be debatable. And it may also not prevent parties from performing, but rather simply make performance more difficult and expensive.

So there are just some areas to think about, both in relation to existing projects, and the negotiation of future projects. Time is short, but it's time to focus on the potential impact of Brexit and to give thought to any appropriate risk allocation, and also to review contracts to see what relief might be available.

But even if there are provisions in contracts that deal with the consequences of Brexit, as a disputes lawyer, you'd expect me to remind everyone that there's an obligation on parties to provide evidence that any triggers for relief have occurred that they might want to rely on and to retain all necessary documents. And of course, to meet the right notice requirements in their contracts as well.

NH:  Thanks Dyfan, that's really helpful. And just moving on to the second point on your slide and the impact of Brexit on disputes. Do you think it will impact the way disputes are resolved?

DO:  Yes, I think time will tell, but I think it's probably worth just covering choice of law in the first instance. So one area I don't think it will impact is the choice of law and the attractiveness of English law. Particularly in the construction industry, English law provides a great deal of certainty and respects parties' autonomy and there are lots of authorities that deal with the standard four contracts. None of that will change as a result of Brexit so it will remain a good choice of governing law. The position in relation to the courts is a bit more complex and time will tell.

The UK has benefitted as part of the EU from certain regulations, the Brussels Regulations and the Lugano Convention, which essentially make it quite straightforward for the parties to enforce judgements from the UK Courts in any EU member states and, from the 1 January, they'll fall away.

So the UK is trying to put in place protections, is looking to re-join the Lugano Convention and to accede to the Hague Convention, but they won't necessarily provide the full protection currently available.

So, if parties are concerned about the potential to enforce in an EU member state, then certainly an area worth keeping an eye on. And looking at their contractual relations, because the choices of English law and the attractiveness of English courts might change over time. 

NH:  Perfect, thanks for that, Dyfan, and really useful stuff there. And lots of questions coming in on Brexit over the feed. But before we pick those up, I'll just hand over to Madeleine for a bit of a case law update. Madeleine?

MP:   Thanks, Nick, and hello everyone. If one looks over the last few months, there have been a number of interesting cases that have been handed down. And of course I'm not going to try and take you through all of them in the space of time today. Rather, what I thought I would do is focus on two areas, which have had some particularly interesting developments for the construction sector.

The first area, which is up on the slide there, is the enforcement of adjudications by insolvent companies. As many of you will be familiar, the Supreme Court handed down its decision in Bresco in June this year, whereby it found that an insolvent party might commence an adjudication without restriction. No doubt welcome news for any insolvency practitioners.

However, the case unfortunately held that the adjudicator's decision would not always be enforceable. And that it will be left to the discretion of the court as to whether enforcement is going to be to be made.

So just how will that discretion be exercised? Well, since the landmark case, the issue has come before the courts twice, helping to provide clarity on the matter.

The first notable case is up on a slide there and is John Doyle Construction v Erith Contractors.

This was the final account dispute concerning landscaping works for the 2012 Olympics where the insolvent John Doyle applied to the TCC to enforce an adjudicator's award in its favour for £1.2 million. In considering the matter, Justice Fraser set out a number of key principles to consider in an application for enforcement in favour of an insolvent. Crucially, Justice Fraser found it was a question of whether the adjudicator had considered the entire financial dealings between the parties.

If the decision only dealt with one element of their dispute (such as a smash and grab on one particular payment application) it would not be enforced. Secondly, he also found that adequate security would be needed to be provided over the adjudicated sum, any cross claim and an adverse costs order.

In this case, this is where the liquidators fell down, as it was found that the quality of the security being offered, which was an after the event insurance policy, and a letter of credit, was not sufficient for these purposes. Therefore, the judge refused to enforce the award in this case.

However, over in the County Court was the case of Styles v Wood. This case gave further guidance on the security issue in particular. In that case, the court enforce the adjudicator's award, stating that a combination of the following solutions might be appropriate security.

Those being ringfencing sums so they're not available for distribution in the insolvency, after the event insurance, which covers the cost and claims in question and providing undertakings such as a guarantee or bond.

So what does this all mean? Well, whilst insolvency practitioners clearly have the right to adjudicate and they may use that as an effective, less expensive and fast tool, they will need to prepare for the inevitable questions as to whether they have a dispute that concerns the final rights between the parties and whether they have provided satisfactory security to enforce the adjudicator's decision. In particular, whether they have ringfenced the sums and are offering an undertaking such as guarantees and bonds.

Equally, those facing such disputes from insolvents should now be live to these issues, and know that they can test the enforcement of an adjudication award on these grounds.

The next set of cases I wanted to turn to concern rights on termination of construction contracts. The first case, up on the slide, again, was Attorney General of the Virgin Islands v Global Water Associates, being a case that has particular implications for drafting of related contracts in turnkey projects.

In this case, Global Water Associates was engaged by the British Virgin Islands to build a water treatment plant. It entered into two contracts: design and build contract, and a maintenance contract to maintain the facility for 12 years. However, the British Virgin Islands had not done the prep work ready for the build.

And so Global Water Associates terminated the contract and claimed damages under both the design and build contract and the profits it was going to make under the maintenance contract. The case went to various hearings, including an arbitration, and ultimately ended up with the Privy Council who found that the lost profit on the related maintenance contract was able to be claimed.

That was because the court said it was in the reasonable contemplation of the parties at the time they had entered into the contract, noting that both contracts were entered into on the same day; everybody knew that completion of the building contract would lead to the commencement of the maintenance contract; the documents incorporated into both the maintenance contract and the design and build were the same; and very importantly, the building contract did not expressly limit the employer's liability to loss of earnings under that particular contract. Thus, in effect, the Court has made it clear that in a two contract procurement exercise, an employer will be at risk on termination, for earnings under both contracts unless they expressly say otherwise.

So, if you're an employer, you want to mitigate against this by expressly limiting your liability in the design and build contract to that contract. On the other hand, if you're a contractor, you might want to stay silent in the negotiations with the knowledge that the courts take a broad view on this issue, or, if your bold, again, expressly put it in your contract.

The other notable case on termination was Energy Works. (Hull) Limited v NW High Tech Projects UK Limited.

Now while this case did not provide new law, it also has important implications for the drafting of construction contracts.

MW:  High Tech was engaged as the main contractor under the EPC contract to design and build a gasification power plant. The project suffered difficulty and the employer terminated the EPC contract. In accordance with the contractual arrangements that were in place, MW High Tech then assigned its subcontracts to the employer.

Now the employer subsequently brought a claim against NW High Tech who sought to pass that liability onto its subcontractors. However, in a preliminary hearing, the court held that the assignment of that subcontract, from NW High Tech to the employer, transferred the benefit of all accrued and future rights leaving MW High Tech with no contractual claims against its subcontractors.

This meant that the contractor had no ability to pass down to the subcontractors any liability it had to the employer under the EPC contract - an absolute disaster scenario. Now to avoid this scenario, it was suggested that clear words should have been used so that the assignment was only in respect to the future rights and not in respect to the accrued rights.

Accordingly, the case sets the warning to review subcontract terms very carefully before they're assigned to an employer, and to check when you're negotiating or drafting these provisions, what the assignment provisions provide, and ensuring that they only relate to future rights and not accrued rights.

Following on the termination theme, it should also be mentioned that there's another landmark case which is in the pipeline which was heard by the Supreme Court on the 12 November. So yeah, about 10 or so days ago. That was the case of Triple Point Technology v PTT Public Company Limited.

That case on appeal from the Court of Appeal, contends the question of whether liquidated damages can be claimed by an employer following termination of the construction contract.

Now, in the usual course, one would expect only common law damages to apply in this scenario. However, the Court of Appeal's decision has left open the option of liquidated damages to apply even after termination and where another contractor is engaged to complete the works. That obviously presents a number of concerns and problems for contractors who might be at the whim of the actions of another contractor that they have absolutely no control over. And so, it will be interesting to see what the Supreme Court will have to say, and no doubt, everybody will be looking to them and looking forward to it.

So, thank you.

NH:  Thanks, Madeleine, and thanks to all the panel. Lots of food for thought there.

So just looking at the Q&A coming in on the feed, we've got a good mix to pick from. I think first out of the box we'll get Dyfan back for some more on Brexit, given a couple of questions following on from your comments on choice of law with regards to the ability to refer disputes to arbitration. Will that be impacted by Brexit?

DO:  Yeah. That's a good question Nick, that, perhaps, I should have covered. It's too early, I would say to really know what the implications will be on the resolution of disputes. But one of the potential impacts, certainly, could be that arbitration will be more attractive. As I mentioned, it's a little bit up in the air in terms of the impact on the UK Courts and ability to enforce judgements across Europe, although they are trying to put protections in place to deal with that. But arbitration won't be impacted by Brexit as it is an international regime in place based on the New York Convention.

Which, essentially, provides that arbitral awards can be enforced pretty globally, so that won't be affected by Brexit. So, certainly, you know, English seated arbitration could find itself to be more attractive in the post Brexit world, but only time will really tell.

NH:  Thanks very much. That's helpful and another handful of questions coming in, on insurance, and perhaps one for Louise. You mentioned the state of the PI Insurance Market. But could you, say, a little bit more about the status of the latent defects insurance market?

LM:  Yes, the latent defects market for commercial buildings is strong. We've got one or two options for residential. So we've got less options on residential latent defects, but we still suggest that it's worth talking to your broker and seeking terms for latent defects insurer because it provides much better cover for the developer.

So yeah, there are challenges in the market but it's still worth seeking quotes.

NH:  Thank you. And probably time for just one more if we're quick. And staying with insurance, Matthew perhaps you could pick this one up and the comments regarding the PI insurance market and difficulties that poses for D&B procurement model? Do you see other procurement models gaining popularity as a result?

MB:  Well, thanks, Nick, and that's a very good question and I don't think there's actually a simple answer to that. I mean, I think if we find ourselves in a position whereby an increasing number of main contractors are unable to take responsibility or want to carve out elements of responsibility for parts of a building, be it cladding or fire safety systems because of gaps in their insurance cover. Then, yes, I think you could see a shift away from D&B with employers/developers and contractors looking at other forms of procurement be that traditional or perhaps some sort of hybrid or perhaps even more construction management.

But I think, you know, when you think about it, this won't really resolve the problem because the issues of fire safety and cladding and the PI market are all inter-connected. And so, I think, until we have certainty over the legal requirements going forward, and, as has been said, you know, the insurance market is able to understand and price these risks so that they can be properly insured.

I think the challenges that we currently face are going to continue, hence, why it's really important that the problems facing the market, the PI market, are resolved as quickly as possible.

NH:  Nice stuff, I think that's absolutely right, and, thank you to the panel, and thank you very much to the audience for joining and for submitting your questions. Got a little bit over time, but hopefully, we'll be forgiven. And, if you do have any further questions on any of the material that we've covered here today, please don't hesitate to reach out to your usual Ashurst contact and we will be putting a transcript of this session up on the website.

But other than that, I think, we'll bring this session to a close, and bid you a very good afternoon.

Thank you very much.