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Litigation lawyers pick over construction carcass

Litigation lawyers pick over construction carcass

Despite cancelled projects and a stall in developments, construction lawyers are reporting an increase of work.

DESPITE cancelled projects and a stall in developments, constructions lawyers are reporting an increase of work. 

Corrs Chambers Westgarth reports that while front-end property lawyers may be missing clients, there is a boom in the litigation and negotiation of existing contracts.

“Certainly on the dispute side there has been a significant up-swing in work and we see that continuing in the near future,” said Corrs partner Andrew Pitney.

A UK survey by building and property consultants Tuffin Ferraby Taylor earlier this year found that 67 per cent of construction lawyers saw a rise in work over the past six months. The majority said they had about 30 per cent more business.

This news comes despite some large developers’ drop in profits and negative forecasts.

Leighton Holdings Ltd, Australia’s largest construction firm, posted a half-year net profit of $111.1 million in February. The company predicts that its full year net profit to come in at $480 million, down from $607.9 million in the 2008 financial year.

The property developer Mirvac Group recently reported a net loss of $645.7 million for the first-half of the 2009 financial year. The company’s 2008 profit was $171.8 million, down 69 per cent on 2007.

Getting out of contracts is big money for litigation lawyers in the construction arena. “Another trend we are seeing at the moment is a lot of rigour being applied to trying to get out of contracts … because their funding has become too expensive or because there’s no market for their products.”

Corrs’ Pitney said that while there have been similar increases in Australia, property work in general has decreased. He said that good lawyers will be able to adjust to client demand.

“Some firms will position their front-end lawyers in a banking group or a separate project and split the litigation,” he said, adding Corrs does not do that.

Rod Dann, also a partner at Corrs, said the firm’s “synergy” between the property and construction divisions has meant that the construction practice is performing much better as a whole than it was last year. But he said that an increase in clients trying to recover cash does not necessarily equal an increase in work generally:

“I would say that because there are tougher economic times and cash is all important, while there is a greater propensity to get involved in pursuits … it is also the case that participants … have less appetite for a really lengthy dispute,” said Dann.

The firm maintains, however, that while there may be a shifting demand in the area, construction work is not likely to dry up soon.

“I think to the extent that there are still problems with the economy, to the extent that participants in the construction market are having to lay people off and to the extent that they are very much focussed on cash flow, I see [disputes] continuing,” said Dann.

“The propensity to absorb loss in relation to a particular contract or project is less in a tough economic environment.”

Construction lawyers are also seeing a “very significant” increase in the work coming form contractors wanting to defend against the losses suffered by project failures, Jim Doyle, director of Doyles Construction Lawyers said.

As contractors and the private development sector worry about financing and the viability of the projects they commit to, lawyers are being called in to deal with the risk issues, Doyle said. 

Additional reporting by Kate Gibbs.

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Litigation lawyers pick over construction carcass
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