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Construction disputes landscape Q1 2025

April 2025
Ian Masser, Kayleigh Rhodes and Joseph Roberts

Welcome to our first quarterly update for 2025. As anticipated, the construction industry still faces challenges, including commercial and geo-political headwinds. Insolvencies within the sector threaten project progress and stability, whilst new payment, retention and reporting requirements continue to come into force. Negotiating appropriate contract terms and conditions, and environmental, social, and governance (ESG) issues remain important risk management points this year, alongside navigating the increased adoption and use of artificial intelligence (AI) and digital systems and tools. 

BSA, building safety and related matters

Government’s response to The Grenfell Tower Public Inquiry Phase 2 Report

The government’s response was presented to Parliament on 26 February 2025. The Phase 2 Report had made 58 recommendations in total. The government has largely accepted the findings: 49 recommendations were accepted in full, with the remaining nine being accepted in principle (with an implementation outline to follow further consultation). The recommendations are voluminous – see our earlier article for details of the response to these.

The Public Inquiry identified that misleading marketing of products and the manipulation of test data had led to the use of products which were unsuitable for high-rise buildings. The government has since published a Green Paper outlining proposed reform of the construction products sector, with consultation due to end on 21 May 2025. It will be worth construction professionals and their insurers monitoring the evolution of this.

Regarding the statutory guidance, the government has committed to continuously reviewing Approved Document B, for example to address new materials, techniques, and technologies. The latest amendments took effect on 2 March 2025. Further consultation is expected later this year. The government will review the definition of ‘higher risk building’ (HRB), with conclusions to be published in Summer 2025. This may lead to more buildings falling within the scope of the enhanced regime under the Building Safety Act 2022 (BSA) and associated legislation.

Recent BSA-related orders

Vista Tower, a 16-story residential block, has been the subject of litigation concerning fire safety defects, including combustible insultation and fire stopping issues. In May 2024, the Department for Levelling Up, Housing and Communities obtained a Remediation Order (RO) against the freeholder (Grey GR), requiring the remediation of the building safety defects by September 2025. Prior to the RO, Grey GR had applied for a Remediation Contribution Order (RCO) against the original developer and associated bodies. The First Tier Tribunal (FTT) found it just and equitable to make a RCO for over £13 million against the original developer and 75 associated bodies. The 76 companies are jointly and severally liable, with the onus on them to determine their respective contributions to this sum. The FTT observed that the ‘just and equitable’ test is fact-sensitive and described the core factors it considered – our article provides more information on the case and nature of the order.

The first Building Liability Order (BLO) was made by the Technology & Construction Court (TCC) under section 130(3)(b) of the BSA late last year in 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024] EWHC 3179 (TCC). In summary, the TCC determined that fire safety breaches in the building gave rise to a “relevant liability” and were a “building safety risk” and it was just and equitable to make the BLO. The decision confirms the potential scope and application of BLOs in practice and reinforces that such orders are not confined to fire safety matters – they may apply to other structural defects.

We have also seen recent court guidance on the use of Building Information Orders this quarter.

Other appeals

In March 2025, the Court of Appeal heard two BSA-related cases, namely the Adriatic Land 5 Ltd v The Long Leasehold Leaseholders at Hippersley Point and (1) SVDP & (2) Get Living Plc v Triathlon Homes LLP. The second appeal concerned whether it is possible for a RCO to deal with liability for costs incurred prior to the relevant provision of the BSA coming into effect and if so, one should have been made in the circumstances. The appellant argued an RCO should not be made for such costs and should not have been made in any event. It is worth monitoring the outcome of these hearings since they will provide further judicial guidance on the application of the BSA.

We still await the Supreme Court’s judgment in the URS Corporation Ltd v BDW Trading Ltd appeal (heard in December 2024). This is another important case to monitor, with significant implications for developers, construction professionals, and their insurers.

Delays in the Gateways

The Gateways are ‘hard stop’ check points in the building control and approval process introduced by the BSA. Non-compliance with the requirements may result in significant consequences. However, reports of delays and connected issues have been felt within the industry (further described here) and are directly impacting project progress. This aspect of residential projects therefore requires careful thought to be given to appropriate risk allocation and project management from the outset. At the end of last year and into 2025 we have seen bodies, including the HSE/BSR, Construction Leadership Council and other professional institutions, sharing guidance in support of building control processes and the enhanced building safety regime which applies to HRBs. This potentially represents a fertile area for future dispute between parties, especially in time-sensitive projects.

Dispute trends and news

The TCC Annual Report

Overall, in terms of the classification of types of claims, adjudication enforcement accounted for most of the new claims (194), followed by construction and construction materials cases (179) and procurement (70). The report highlights a 7.49% fall in new claims issued during the period and the settlement rate remains at approx. 80%, with claims reported to reach trial within 12-18 months of issue. The report attributes the positive settlement levels to robust case management. The TCC is hearing cases involving combustible cladding, along with general fire protection issues. A TCC BSA Working Group has been exploring bespoke case management procedures for these disputes: more to come this year. Another TCC Working Group is examining AI in litigation. We anticipate the next version of the TCC Guide during 2025. Click here to consider the TCC Annual Report directly.

Adjudication

Adjudication matters remain active in 2025. Equally, we anticipate seeing more adjudication enforcement matters coming through the TCC. It is worth keeping an eye out for future content Beale & Co have planned on adjudication processes, case law and wider updates.

We continue to see adjudication in respect of a range of issues, not simply payment disputes. Our last quarterly update referenced the High Court judgment of BDW Trading Limited v Ardmore Construction Limited [2024] EWHC 3235 which concerned the potential to resolve fire safety claims on residential projects via adjudication. The decision confirmed that an adjudicators’ jurisdiction to decide disputes arising “under the contract” extended to causes of action under the Defective Premises Act 1972. It also emphasised the courts’ general reluctance to interfere with adjudication decisions (save in exceptional circumstances), despite potentially complex arguments on jurisdiction and fairness. Our previous article contained more information and commentary on the case.  We understand that permission to appeal has since been given; we will continue to monitor developments in due course.

Increased use of Alternative Dispute Resolution (ADR)

Further to our 2024 quarterly updates, we continue to observe further support for mandatory ADR in claims, particularly in the form of mediation, coming from the courts. For example, the decision in DKH Retail Ltd & Ors v City Football Group Ltd [2024] EWHC 3231 (Ch) received attention earlier this year. Building on the decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, it is another clear example of the courts’ enthusiasm in exercising powers to order parties to mediate under the revised Civil Procedure Rules. It is worth considering the requirements of any applicable Pre-Action Protocol too.

Procurement Act 2023

The highly anticipated Procurement Act 2023 went live on 24 February 2025, bringing with it a significant overhaul of UK public procurement designed to streamline procedures, increase transparency, and strengthen supplier accountability. To help you prepare, Beale & Co have produced a Guide which can be accessed here, together with a shorter summary on the significant changes (here). The five most critical changes for business to note include:

  1. Tougher exclusion and debarment rules (see Guide: pp.12-16);
  2. Greater focus on integrity and public benefit (see Guide: pp. 6-7);
  3. Performance monitoring and key performance indicators (KPIs) (see Guide: pp. 15-16 and 21-22);
  4. More flexible procurement procedures (see Guide: pp.8-10); and
  5. Increased transparency and legal oversight (see Guide: pp. 23-25.

We anticipate further guidance from the TCC regarding the process for and content of procurement challenges. It is also possible that we may see further legal challenges because of the new procurement procedures, application of the exclusion and debarment rules, KPI monitoring and reporting, and requirements on prompt payment and transparency. This may also lead to disputes as parties continue to get to grips with the new regime.

Contractual terms and relationships

Based on case law from 2024, and with a view to avoiding disputes in 2025 (and going forward), you may be interested in these recent updates from our Contracts and Project Advisory Team:

It is best practice to set projects and commercial relationships up for success with clear and appropriate contract structures and documents. Having these in place should also help to minimise the risk of future issues or disputes.

International considerations

Tariffs

It is worth continuing to monitor the impact of the trade war and tariffs introduced by countries, such as the US, China and Canada, and the impact this may have on the supply chain and goods (both on international and domestic projects). Beale & Co recently covered the potential risks connected with the imposition of tariffs globally and whether there is any protection under popular standard industry forms of construction contracts in a recent Global Vantage update (linked here).

Understanding whether there is any contractual protection available to a consultant or contractor (i.e. under bespoke provisions dealing with force majeure, change in law, or inflation) and the applicable notice requirements and consequences of such provisions may be increasingly important. Such considerations would apply to live projects/contracts, as well as those being tendered now. The construction industry previously saw similar issues and disagreements arising following the impact of the COVID-19 pandemic and Ukraine war for example.

Rebuilding Ukraine

Earlier this year, and with potential peace talks in motion, we provided an update on the evolving position in Ukraine and potential recovery and reconstruction opportunities. For more information on the potential opportunities, as well as other hurdles/risks and contractual considerations to bear in mind, please visit our website.

Environment, ESG, and wider climate risk

PFAS

PFAS are a group of synthetic chemical compounds that do not occur naturally and are characterised by a unique structure. PFAS has a range of beneficial characteristics, including strong resistance to heat and degradation, and repellent properties against oil and water, making them desirable for a range of products. These compounds persist for decades however, earning them the title “forever chemicals.” PFAS chemicals have spread in the environment, contaminating drinking water and soil. Long-term exposure to certain PFAS has also reportedly been linked to various health issues, such as cancer, developmental disorders, and liver damage.

In response to the risks, The Lloyd’s Market Association (LMA), introduced exclusion wording for PFAS in newer policies (i.e. model clauses LMA5595 and LMA5596), which may become widely adopted across the market. Click here to see our article for more detail. We have also considered the risks of PFAS for the construction industry and contractual obligations in this update.

Biodiversity net gain: marking one year on

12 February 2024 saw the introduction of the mandatory biodiversity net gain (BNG) policy. The BNG requirements stipulate that developers in England must achieve at least a 10% biodiversity net gain (some local authorities are requiring higher gains) following completion of a development, and maintain it for 30-years. The BNG is measured against the site’s condition at the ‘base date’: the date the relevant planning application was submitted. Our earlier article describes the salient points to note in respect of BNG, how to measure it, what we have seen in the first year, and its relevance to the construction and engineering sectors.

Digital & AI

UK Government launches AI Playbook

The UK Government took another step towards embedding AI into public sector operations with the launch of its AI Playbook earlier this year. This new guidance aims to support civil servants in understanding and implementing AI safely and responsibly. Although the Playbook is designed for government use, it has implications for businesses working with public sector bodies, including those in construction and insurance. In our article (accessed here) we consider some of the key takeaways, including the introduction of the stronger AI framework for public procurement and increased focus on AI safety and governance. We also examine the potential implications for AI adoption in construction, collaboration, and other future trends which may arise as a result.

Important appeals

The appeal in Disclosure and Barring Service (Appellant) v Tata Consultancy Services Ltd (Respondent) relates to an earlier TCC decision on liability and quantum arising from an IT infrastructure dispute. The appeal was heard in mid-March 2025. The parties had claimed against each other after the project faced challenges: one aspect of the new system was significantly delayed and another remained incomplete. The decision will touch on several important contractual issues.

The position on whether artificial neural networks, used in AI and machine learning, are capable of patent protection will be under the spotlight again this year. The Supreme Court has granted permission to appeal the Court of Appeal’s judgment on patentability in Comptroller – General of Patents, Designs and Trade Marks v Emotional Perception AI Limited [2024], with the appeal hearing anticipated during 2025.

EU AI Act: prohibited AI practices now in force

The EU AI Act came into force on 1 August 2024. Most of its provisions apply from 2 August 2026, but provisions prohibiting certain AI practices came into effect on 2 February 2025 and are relevant to UK companies if they work in the EU. The EU AI Act also prohibits the placing on the market, putting into service or use of multiple AI systems. Click here to see our article containing more information.

Payments and commercial

Cabinet Office publishes new Procurement Policy Notes on approaches to supplier payment processes when procuring major government contracts

Late last year, the Cabinet Office published Procurement Policy Notes 015 and 018 (PPNs), outlining how in-scope organisations may consider a supplier’s approach to payment when procuring major government contracts. To “meet” the appliable standards in the PPNs, a bidder must demonstrate that it has paid at least 95% of invoices (or 90% with an action plan) within 60 days and paid all invoices within an average of no greater than 55 days. If the bidding supplier fails to hit the required thresholds, it will be deselected from the relevant procurement (impacting its ability to win that opportunity). Click here to read our article which gives more detail and outlines how the PPNs apply.

Get ready to report on your retentions

New legislation requires large companies in the construction industry to report on certain payment practices and policies, specifically on the proportion of retention sums withheld from suppliers. This is one of several measures to be introduced by the government which aims to improve payment practices and increase transparency, benefiting the supply chain. Our article (here) describes the disclosure requirements and discusses the sanctions for not complying.

Our earlier update also examines additional measures introduced, such as the new Fair Payment Code (please see section 6 of the article for detail).  The Code, underpinned by fair payment principles, will help smaller firms to identify reliable and trusted partners. A Gold Award is designated to those companies paying at least 95% of all invoices within 30 days. The Bronze Award will apply to those paying at least 95% of all invoices within 60 days. The Code intends to boost cashflow, by lengthy payment terms and tackling late payments which cause financial strain and issues on projects.

Concluding remarks

Our quarterly updates contain a high-level summary of the key themes, trends and disputes observed, together with commentary and future predictions. We will continue to provide these updates throughout 2025. In the meantime, watch out for future content on many of the topics and themes covered above, including via our mailshots and dedicated articles page.

Should you have any questions on the items covered in this update or require support in understanding how these recent legal developments might apply to your own contracts or projects, please contact Ian Masser or your main Beale & Co point of contact.

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