26th March 2020
Over the last few days I have read a number of articles from law firms, construction professionals and claims consultants on the impact of Covid-19. Unsurprisingly, a lot of these are focussing on contractual and common law rights of parties – with legal concepts such as force majeure, frustration, termination, suspension and others being discussed. There are no easy answers to these questions. I have yet to read an article which does not qualify its opinion with a phrase such as “the answer depends on the terms of your specific contract” or that the “answer will depend on the specific facts and circumstances of your project”. As ever, legal principles put you on a direction of travel but rarely, in my 30 years of experience as a disputes lawyer and now a mediator, have I come across a case where the answer was so clear cut that complete success or vindication was 100% assured.
In the UK, we have a common law system based largely on precedent. This means, over time, the law (via caselaw) provides answers to legal gaps, uncertainty or new events. But here also lies an obvious problem. The law has not developed legal principles to deal with such an extensive pandemic crisis as the one we are currently experiencing. Everyone is trying to look for historical precedent which is either not there or is so woefully out of context that it is of no value. As a society in general, not just a sector like the construction industry, there is no time or practical opportunity to develop the legal precedents to determine what rights, liabilities and obligations arise from the current Coronavirus pandemic.
My worry, based on some of the articles I have read in recent days, is that the Construction Sector will revert to what it often does when things go wrong – become adversarial. I think there is a real danger that a wild west claims mentality could happen! I doubt there is a project in the UK where contractual notices for extension of time, loss and expense, disruption, prevention and even termination have not been issued citing the Coronavirus. Understandably so, by the way, as in most contracts the failure to serve notices in real time is often a bar to future claims. I even read one article this week which was titled “How to win a smash and grab adjudication” in the current climate!
Perhaps an adversarial mindset is inevitable. If that is right, then once the pandemic is over, which it will be sooner or later, there could well be literally thousands of “Coronavirus claims” going to adjudication, arbitration and through the Courts. How can that be good for the industry overall?
So I want to advocate a different approach. In particular, an approach which is NOT adversarial. I should declare I have no self interest in this. As a mediator, lots of future claims and disputes arising from the current pandemic will undoubtedly mean more mediation work. However, I think my instincts as a mediator are part of the reason for looking at this current crisis in a different way. The construction industry needs to adopt an immediate policy of “no fault” in the context of the Coronavirus pandemic. In short, I am advocating the following actions/principles:
1. From the date the pandemic was first declared until the date it is declared as over, all claims or cross claims which arise out of or are materially connected with Coronavirus should be prohibited.
2. By application of a”no fault” principle, the consequences of the Coronavirus should be deemed a neutral event under the contract or common law. This means no LADs should be levied, no automatic rights of termination should arise , no claims for damages for disruption, loss and expense or other delay related events.
3. In practical terms, and notwithstanding the terms of the pre existing contract, there is nothing – other than the will to do it – preventing the parties from agreeing to vary the terms of their agreement or relationship to record the fact that the Coronavirus is a no fault event.
I am sure there are many arguments against what I am advocating, but my pre-emptive response is:
1. Right now, decisions on construction sites up and down the UK are being made not just on the health and welfare of workers but on economic grounds. Put simply, contractors, subcontractors, suppliers and employers are all worrying, right now, that if they take a decision based on the Coronavirus, that could expose them to crippling financial claims in the future which they may not be able to survive.
2. The health and welfare of people must be the decisive and determining factor when it comes to policy decisions in the current crisis.
3. The idea that a business or individual should be challenged in adversarial proceedings down the line for a decision they took to preserve the health and safety of themselves, their family or their workforce is, in the current climate, inconsistent with moral decency.
4. The industry should not wait for Government to act – primarily because it doesn’t have the bandwidth to do so. The Construction Industry needs to lead on this issue now. I would encourage all the relevant trade groups, associations and representative bodies in the UK Construction Sector to adopt a no fault policy around Coronavirus to existing projects. Even if the Industry as a whole will not move in the direction I am advocating, there is nothing to stop parties on individual projects adopting this approach