Carillion in the news and construction disputes

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With the collapse of Carillion, the legal press has been busy recently trying to unravel how such a giant of the construction industry could have come unstuck. Whilst the impact of such a behemoth’s fall from grace should not be understated, the saga serves to highlight the problems encountered daily by countless individuals and businesses in the construction world.

As in the case of Carillion, problems can readily flow from contractor insolvency, or a contractor’s inability to complete the works they agree to perform. Nonetheless, as those unfortunate enough to be embroiled in a construction dispute can attest to, problems arise far more frequently from issues concerning the design of a building or the implementation of that design. These problems can often be further categorised into inadequate workmanship or inadequate supervision.

The long and the short of it is that construction, development, or home-improvement projects are inherently risky, and problems can arise at any stage along the line, whatever the size of the project. With the best will in the world even the most conscientious contractors or architects make mistakes, and against this backdrop both consumers and businesses need to ensure they are as protected as they can be in the event any aspect of the project goes wrong, or in the event a relationship goes sour. If it is too late to take that pre-emptive step, those same consumers and businesses need to take urgent and decisive action as soon as it appears a problem may exist.

In either of these respects – either pre-emptive or after the event action - the legal framework under which the project is run is often key; it defines liabilities and responsibilities, and is the main source of recompense for any disgruntled employer. That said, there are other important considerations to have, particularly before the project gets underway. For example, the track-record and financial standing of the appointed professionals should be investigated before anything else (whether they be the architect or contractors, and whether the works relate to a modest domestic extension or a multi-unit commercial development). In an ideal world nothing would go wrong, and professionals/contractors would always deliver what they promise. Unfortunately though that is not always the case, and distress, frustration, and financial loss often follow when problems arise, even if this is solely due to tools being downed and the inevitable unending delays that brings.

As such, an employer should always have one eye on whether the people they have entrusted to deliver have the ability to rectify any problem and repay any loss that is suffered following any failure to meet the requisite standards.

It can be extremely difficult, if not impossible, to identify just where problems (or losses) may occur at the start of a project, but a very good starting place is to make sure that the legal framework – whether that comprises a simple written agreement or a complex commercial contract or contracts – defines the responsibilities everyone involved assumes. The contracts can also mandate insurance cover to give that additional, and invaluable, extra layer of protection to the person or business that is ultimately spending a significant sum on the works, and who stands to lose the most if the project goes south.

It is also very important to make sure that the obligations each party assumes are as clear as possible. For example, if a problem develops after the project is concluded, it may initially be difficult to establish whether that particular problem was caused by inadequate design, or the inadequate implementation of that design.

In larger contracts, this latter category can also be divided into situations caused by poor workmanship or poor project management. Different parties will likely be responsible depending on which category the problem falls into, and unfortunately this can be very unclear.

In a traditional construction forum, this would generally mean difficulty in establishing whether it is the architect or contractor to blame. Invariably, if neither accepts responsibility, it will be down to the employer to prove its claim against either, or both parties. This can be difficult, and will involve the appointment of an expert to help with establishing who is actually at fault, and whether a claim exists as a result.

Unfortunately though, construction projects, whatever their size, are not always carried out under a legal framework that clearly identifies who is responsible for what. In those circumstances, the employer will need to establish that the relevant professional owed a duty to that employer, and that the professional is in breach of that duty (for example, by failing to provide adequate design specifications, or by failing to adequately oversee the construction process). Such a duty can be inferred by law, or by reference to the (perhaps piecemeal) documents that may exist.

Ultimately, if a project is not completed to the standard required, it is likely that one of the parties engaged as part of that project is at fault. If loss is suffered as a result, it is likely the injured party can recover that loss. Unravelling what may be a complicated set of circumstances to establish who is actually to blame is one of the key steps, and this needs to be done at as early a stage as possible; this can exponentially increase the chances of recovering any losses, and mitigate the distress and delay suffered. As such, aggrieved employers should not delay in seeking advice as soon as it is evident a problem may exist (the worst case being they may lose their right to a remedy at all if they delay too long).

It will always be true to say that prevention is better than cure, but fortunately, in the majority of circumstances, when it comes to problems arising from construction projects the cure can be as effective if it is administered quickly.