Lawyer Monthly Magazine - August 2019 Edition

these stakeholders can pursue remedies against consultants and contractors should they need to. Without the benefit of collateral warranties or third party rights, the stakeholder’s ability to recover any loss they might incur in the event of subsequent building defects is limited under English law. Under a Design and Build project, one collateral warranty from the Main Contractor (who is fully liable for all his sub-contractors) may go a long way to covering off most of the risk. In contrast, under Construction Management, those tenants, purchasers and funders are going to need collateral warranties or third party rights from every single Trade Contractor no matter how big or small his Trade Contract, given that the buck no longer stops with one Main Contractor who is responsible for everything. That leaves everyone in the position of trying to extract numerous collateral warranties or third party rights from a Trade Contractor under a modest Trade Contract for say, £100,000 worth of signagework. You can bet that the signage Trade Contractor has little appreciation that the delivery of his collateral warranties may be a pre-condition to the drawdown of the developer's funding under an upstream facility agreement with the bank.If the tenants, purchasers and funders of a construction project cannot get their hands on sufficient collateral warranties or third party rights from all the numerous Trade Contractors involved in a project then they will perceive there to be a “liability gap”. Their usual response to try and close this liability gap is to press the developer for an indemnity under which the developer himself effectively guarantees the work of all those Trade Contractors and makes himself liable for any defective design or workmanship on the project. This is clearly something experienced developers try to avoid. They can seek to put in place project insurance policies that may go some way to covering such risks or try and negotiate limitations on their liability in the first place. So, Construction Management is not really a procurement route for the uninitiated developer embarking upon its first project and this form of procurement often requires a considerable effort in managing the expectations of the upstream stakeholders. How would you say the issues you may face in construction today, differ from when you first began to practice? Without a doubt, the biggest change relates to the dispute resolution procedure of “adjudication”. When I first began to practice construction law, it was not uncommon for the more hard- there is no one person who assumes overall responsibility for everything; • by contrast to a Design and Build procurement where the developer is in one contract with one Main Contractor, under Construction Management the developer finds itself in direct contract with many Trade Contractors. Look at it this way: Instead of receiving one Adjudication Notice on Christmas Eve from one disgruntled Main Contractor, there is the potential for the developer to receive30AdjudicationNotices on Christmas Eve from 30 disgruntled Trade Contractors. (I discuss Adjudication in more detail below). So downstream in Construction Management, the developer is faced with a myriad of contractual relationships with Trade Contractors and this, in turn, gets reflected in the developer's upstream relationships with the project's stakeholders. The tenants, purchasers and funders of any construction project will invariably require “collateral warranties” or “third party rights” from those consultants and contractors who design and build the projects theyhavean interest in. These are the means by which “So downstream in Construction Management, the client is faced with a myriad of contractual relationships with Trade Contractors and this, in turn, gets reflected in the client’s upstream relationships with the project’s stakeholders.” 57 AUG 2019 | WWW.LAWYER-MONTHLY.COM Professional Excellence By Ian Reid, Trowers & Hamlins LLP