Although the High Court may not yet be the domain of hashtags and the twitterati, the last two months have seen the publication of important reports which allow us to see what is "trending" in the world of litigation. The Annual Report of the Technology and Construction Court1 for 2009-10 was published on 18 August 2011, and followed the publication by the Ministry of Justice of its Judicial and Court Statistics2 for 2009-10, on 08 July 2011.
Barlow Lyde & Gilbert has already analysed the latter report in a Litigation Trends briefing3 by Neil Jamieson. In anticipation of the publication by the TCC of its court-specific Annual Report which looks at activity in the TCC between October 2009 and September 2010, we therefore decided to research new claims started in the TCC in 2011 to see what this year's activity tells us about the state of the construction industry and the extent to which it is involved in litigation.
In the Royal Courts of Justice in London there was a fall in litigation of a quarter, and the biggest impact on the figure was the number of originating proceedings in the Bankruptcy and Companies Courts, although the trend was followed across the Queen's Bench and Chancery Divisions. The TCC has bucked that trend, however, with 502 new cases in the London TCC in 2009-10, compared to 516 actions in 2008-09 – and with both those numbers being substantially higher than in the previous four years, where the average number of new cases was fewer than 385.
Sue or be sued?
In our research, we wanted to look a little deeper into the overall numbers of claims in order to find out the incidence of the various types of construction industry persons involved in active London TCC claims – in other words, who are the claimants and who are the defendants? Again, those figures are revealing, with the overall picture being dominated by contractors and subcontractors, both as defendants and claimants, as the table shown on the following page illustrates:
There was a considerable amount of similarity between the above figures, and their counterparts for 2009:
In order to bring those figures up to date, we then had a look at cases started in the London TCC this year. Our figures took us up to the middle of July 2011, so we have also included in brackets the projected number of claims for this year, based on the activity in 2011 so far:
Professionals in the firing line
As previously mentioned, claims brought by and against contractors continue to dominate the business of the TCC. A contractor (which, for the purposes of our research, includes sub-contractors) is up to four times more likely to be involved in litigation than any other type of person involved in the construction industry. However, the number of cases brought by or against contractors appears to be relatively static – indeed, if anything, there appears to be a very slight downward trend in claims brought against contractors in 2011, with a fall of up to 9 per cent on this year's projected figures.
By contrast, the statistic that leaps out from this year's figures is that claims against professionals appear to be markedly on the increase. For instance, although there were only 18 cases against architects in 2009, that jumped by more than 50 per cent last year, and that figure looks set to be maintained in 2011. Claims against Consulting Engineers also look to have increased considerably, with only 32 claims last year, but a projected growth of more than 40 per cent to 45 claims this year.
In pure percentage terms, the figures for Quantity Surveyors are the most alarming, with a 500 per cent hike since 2009 and a 50 per cent increase since last year. Of course, it is worth noting that the actual numbers of claims are low, with a projected total of only six claims against Quantity Surveyors this year; however, prospective claimants appear to be undeterred by the fact that cases against Quantity Surveyors are traditionally thought to be difficult to bring, a view which the TCC confirmed in the decision of Dhamija v Sunningdale Joineries & ors (2010)4, a case in which Barlow Lyde & Gilbert acted, and about which I wrote last year5.
A price to be paid
Whether the increase in claims against construction professionals will have an impact on insurance premiums within the industry remains to be seen. However, developers may wish to think twice before running a claim against a professional as a fall-back position, where (for instance) the sub-contractor that ought to have been pursued has become insolvent, because in the long term, such a strategy is likely only to drive up the costs of consultants' fees and thus the cost of construction projects.
It is worth bearing in mind that the construction sector only grew 0.5 per cent in Q2 2011, when order books would have been fuller after the lack of productivity during the harsh winter in February of this year, as reflected in the Q1 2011 figures which saw the sector shrink by 3.1 per cent. That being so, any trend within litigation that risks driving up costs within the industry, when growth in the UK construction as a whole is at best fragile – and at worst, negative – is not one that should be welcomed. On a more positive note, however, the total number of claims against construction professionals that end up in formal litigation remains low, with only a projected 79 such claims this year. This suggests that the continued willingness of the construction industry to innovate and engage with ADR as a means of resolving its differences is an approach that is serving the industry well.
4  EWHC 2396 (TCC)
5 See Building, 29 October 2010; and Estates Gazette, 11 December 2010
Additional research by Warren Stapley and Roisin McGrellis, Litigation Assistants
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