Category: Claims

Enforcement of Adjudication decisions

Adjudication, as a form of Alternative Dispute Resolution (ADR) is a faster form of resolving a dispute between parties to a contract. However there is a golden rule when Adjudicating on the same dispute.

The current position is quite straightforward.

If a dispute referred to Adjudicator is the same or substantially the same as a previous Adjudication, an Adjudicator cannot decide on this second dispute. He will not have jurisdiction.

In a recent Court of Appeal case this was put to the test.

In Brown v Complete Buildings Solutions Ltd [2016],  the judge was required to rule on whether an Adjudicator had jurisdiction to decide on a dispute referred to him. As the matter of the dispute had been argued in a previous Adjudication, it was argued that the Adjudicator did not have jurisdiction.

Timeline of events

A Joint Contract Tribunal (JCT) Minor Works Building Contract (2011) was entered into between the parties to demolish a residential house in Ashtead, Surrey and build a new house. The Contract Sum was £496,578.

The Architect certified Practical Completion on 9th April 2013 and then issued a Certificate of Making Good Defects on 25th October 2013. On 31st October the Architect issued a Final Certificate for the sum of £115,450.50. This sum remained unpaid and on 20th December 2013 the Contractor sent a letter to the Employer stating this Final Payment of £115,450.50 was due.

The sum remained unpaid and a Notice of Adjudication (the First Adjudication Notice) was issued on 7th February 2014 in accordance with Clause 7.2 of the Contract.

Mr. C Calcroft was named as the Adjudicator by the Adjudication Nominating Body (ANB). In this Adjudication is was accepted that the Architect’s Final Certificate was in breach of contract as it was not issued in accordance with Clause 4.8.1 of the Contract, but rather relied on clause 4.8.4 which provided:

If the final certificate is not issued in accordance with clause 4.8.1,

4.8.4.1  the Contractor may give a payment notice to the Employer with a copy to the Architect/Contract Administrator stating what the Contractor considers to be the amount of the final payment due to him under this Contract and the basis on which the sum has been calculated and, subject to any notice under clause 4.8.4.3, the final payment shall be the final amount.

 4.8.1.3 If the Employer intends to pay less than the sum specified in the Contractor’s payment notice, he shall not later than 5 days before the final date for payment give the Contractor notice of that intention in accordance with 4.8.3 and the payment to be made on or before the final date for payment shall not be less than the amount stated as due in the Employer’s notice.

Further Clause 4.8.5 of the Contract established that where the Employer did not give a counter notice under clause 4.8.4.3 it was obliged to pay the Contractor the sum stated as due in the Contractor’s notice.

The Adjudicator, Mr. Calcroft issued his Decision on 1st April 2014 where he concluded that the Final Certificate (CBSL) issued on 30th October was ineffective and further found that CBSL’s letter of 20th December 2013 was not a valid Payment Notice in accordance with Clause 4.8.4.1 of the Contract on the following two grounds:

  1. It was based on the ‘Final Certificate’ being issued late, whereas it was in fact invalid
  2. The terms of the 20 December 2013 letter did not comply with clause 4.8.4.1 in view of the way it was expressed as it did not make clear that it was:
  • a notice
  • Issued pursuant to clause 4.8.4.1

The Adjudicator ruled that since no Payment Notice had been served, no sum was payable.

On the same day as Mr. Calcroft issued his Decision, 1st April 2014, CBSL sent a letter which was detailed as a “‘notice pursuant to Clause 4.8.4.1 of the Contract.” This was followed on 24 April 2014 with a further Notice of Adjudication (the Second Adjudication Notice).

The ANB appointed Mr. C Hough as Adjudicator on 29th April 2014. Brown disputed Mr. Hough’s jurisdiction on the basis that he was being asked to decide the same, or substantially the same, dispute as had been decided by Mr. Calcroft in the First Adjudication. They therefore declined to participate in the Adjudication and further did not serve a notice under Clause 4.8.4.3 of the Contract. In layman terms the Employer did not issue a Payless Notice.

Mr. Hough issued his Decision on 27th May 2014.

He ruled that the dispute he was being required to determine was not the same or substantially the same as the Adjudication determined by Mr. Calcroft. He further found that Mr. Calcroft had determined that no certificate had been issued in accordance with Clause 4.8.1 (Final Certificate) and this decision was binding on both the parties and him. However, he determined that the 1st April 2014 notice was an effective notice under Clause 4.8.4.1 (Payment Notice from the Contractor to the Employer) and Brown’s refusal to pay had created this dispute, which was not the same or substantially the same as the one previously dispute.

As Brown had not issued CBSL with a Payless Notice, the sum fell due for payment. Brown was required to pay:

  • £115,440.46 to CBSL within 7 days
  • Interest of £817.70 up to the payment date, increasing at a rate of £17.90 per day until paid
  • The Adjudicator’s fees of £1,944.

Brown did not pay and on 11th June 2014 CBSL initiated proceedings in the Technology and Construction Court (TCC) Manchester District Registry. They were granted permission to issue an application for Summary Judgment. Brown applied for an adjournment and an application to transfer the proceedings from Manchester to London. They did not however pay the required fee for the request to transfer.

Judge Raynor QC refused the application to Adjourn and ruled in CBSL’s favour on 10th July 2014. He found that the sum of £118,500 was due, with costs summarily assessed at £6,000. However he stayed execution of the judgment until 8th August 2014. Brown had to make application to set aside by 8th August 2014.

Brown applied on 31st July 2014 for the order to be set aside and have the hearing transferred to London. Judge Raynor QC dismissed the application in a fully reasoned judgment and Brown was further ordered to pay costs, summarily assessed at £5,750.

It is from this judgment Brown made an appeal to the Court of Appeal.

The issue and the argument

A number of case law precedents were cited by both parties. The applicable principles are summarised as follows:

  1. The parties are bound by the decision of an Adjudicator on a dispute or difference until it is finally determined by court or arbitration proceedings or by an agreement made subsequently by the parties.
  2. The parties cannot seek a further decision by an adjudicator on a dispute or difference if that dispute or difference has already been the subject of a decision by an adjudicator.
  3. The extent to which a decision or a dispute is binding will depend on an analysis of the terms, scope and extent of the dispute or difference referred to adjudication and the terms, scope and extent of the decision made by the adjudicator. In order to do this the approach has to be to ask whether the dispute or difference is the same or substantially the same as the relevant dispute or difference and whether the adjudicator has decided a dispute or difference which is the same or fundamentally the same as the relevant dispute or difference.
  4. The approach must involve not only the same but also substantially the same dispute or difference. This is because disputes or differences encompass a wide range of factual and legal issues. If there had to be complete identity of factual and legal issues then the ability to re-adjudicate what was in substance the same dispute or difference would deprive clause 9.2 of The Scheme for Construction Contracts (England and Wales) Regulations 1998 (The Scheme) of its intended purpose.
  5. Whether one dispute is substantially the same as another dispute is a question of fact and degree.

The reference above to “fact and degree” are interpreted from further case law precedent from a 2006 Court of Appeal case, Quietfield Limited v. Vascroft Construction Limited [2006] EWCA Civ 1737 where the matter of an Extension of Time (EoT) was referred to Adjudication and Determined. The matter was subsequently referred to Adjudication again, however the Adjudicator determined he did not have jurisdiction as this was the same dispute. At the Court of Appeal it was found:

  1. Clause 9.2 of The Scheme provides that an Adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to Adjudication with a decision reached. It must that the parties may not refer a dispute to Adjudication in these circumstances.
  2. This mechanism being adopted to protect respondents from having to face the expense and trouble of successive Adjudications on the same or substantially the same dispute. There is an imperfect analogy here with the rules developed by the common law to prevent successive litigation over the same matter
  3. If the first Adjudication is substantially the same as the second Adjudication is a question of fact and degree. If the contractor identifies the same Relevant Event in successive applications for EoT, but gives different particulars to its expected effects, the differences may or may not be sufficient to lead to the conclusion that the two disputes are not substantially the same. Particularly if the particulars of expected effects are the same, but the evidence by which the contractor seeks to prove them is different.
  4. Where the only difference between disputes arising from the rejection of two successive applications for an extension of time is that the later application makes good shortcomings of the earlier application, an Adjudicator will usually have little difficulty in deciding that the two disputes are substantially the same.

The central claim made by Brown was that Mr. Hough was being asked to determine the same or substantially the same dispute as Mr. Calcroft had been asked to determine. This was further reinforced as it was for the same sum of money, with the only material difference being no valid Final Certificate in the first Adjudication

Decision

  1. A further case was quoted, this being Matthew Harding (trading as M J Harding Contractors) v. Paice and Springhall [2015] EWCA Civ 1281 where it was stated in the text of the Judgment:

It is quite clear from the authorities that one does not look at the dispute or dispute referred to the first adjudicator in isolation. One must look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided which determines how much or how little remains for consideration by the second adjudicator.

It was found in a unanimous decision that in the second Adjudication, the Adjudicator was both entitled and correct to conclude that he was not considering the same or substantially the same dispute as the first Adjudication. Mr. Hough had recognised that both parties were bound by the Decision in the First Adjudication that the Final Certificate was ineffective and that the letter of 20th December 2013 was not a valid notice under the Contract. Mr. Hough was being asked to determine if a different notice served 4 months later had different consequences.

While both Adjudications relied on the ineffectiveness of the ‘Final Certificate’ and claimed the same sum, the Relevant Event was CBSL’s notice of 1st April 2013. Neither this notice nor the consequence of it (CBSL’s entitlement to be paid if no Payless Notice was issued served) gave rise to dispute referred in the first Adjudication. Crucially CBSL were not making good a shortcoming in the earlier letter by bring a new claim via a new and different route as it relied on a letter issued after the Decision of the first Adjudication and therefore raised a different dispute. This had been dealt with by Judge Raynor QC in his judgment, “what was decided in the First Adjudication was the ineffectiveness of the notice given in December 2013. That was not raised at all as an issue in the Second Adjudication.”

The appeal was therefore dismissed.

 

What is the lesson here?

It the same lesson as in Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC), follow the contract and stick to its strict timetables particularly around the Payment Mechanism

In this case Brown could have protected themselves by issuing a Payless Notice, but did not. There would still have been a dispute, that is clear, but as the second Adjudication was found to be a different dispute, so too would a second Adjudication where a valid Payless Notice was in place.

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Delay analysis

In the previous post we examined the key elements of a successful claim and established 4 main requirements, these being:

• Cause
• Effect
• Entitlement
• Substantiation

Additionally we examined the role of the Programme, its function and how it is used in assessing delays.

In effect we can say the following about the Contract (Baseline) Programme, it is:

• The intentions of the Parties at the time of contract
• Shows the intended time and sequence of how the works are intended to progress
• Shows a clear critical path to completion
• Shows dates when the Employer’s input is required, linked to the critical path

As the Programme should be updated periodically in a claim situation the Programme will be:

• The Yardstick against which to measure the effect of delays
• Should be based on the works included in the contract at the time the contract was entered into.
• Should be revised to take into account Extensions of Time (EoT) or re-sequencing of the works.

The Principles of Delay Analysis

It must be borne in mind that a delay does not automatically lead to an EoT and generally “float” which is shown in the programme will be critical, particularly around who “owns” the float.

On most projects the project owns the float and this float will be used up first, in the event of any delays. Only after the float has been used up can the completion date be affected by any subsequent delays. It must also be remembered that a delay may occur that is not on the critical path of the project works.

When a delay takes place the first activity that should be undertaken is a delay analysis, this is to establish the effect of the delay event. For the Contractor or Sub-Contractor to establish an entitlement to an EoT, it is necessary to link the cause with the effect, in other words to establish that an Employer caused delay has actually affected the completion date.

There are two commonly used delay analysis, these being:

• Impacted As-Planned Delay Analysis
• Time Impact Analysis

We will now investigate both.

Impacted As-Planned Delay Analysis

This is the most commonly used delay analysis and is particularly useful where no contemporaneous records are available or are inconclusive and incomplete to demonstrate a delay. Generally employer cause delays are added to the Baseline Programme (See Typical Baseline Programme with float below) and the effect of this delay on the project Completion Date is assessed. A short coming of this delay analysis is that it is unable to identify concurrency, sequencing, mitigation or acceleration.

13.1 Baseline Programme

Under Impacted As-Planned Delay Analysis the delays should be impacted in a chronological order and the delays effect on the Completion Date. It is possible that a delay could crystallise that is not on the critical path of the programme, but it should be included as subsequent actions could result in this delay having an impact at a later stage.

In very general terms if the delay, once its impact has been assessed and included on the updated Baseline Programme does not extend the time required for completion, then the analysis demonstrates that an EoT is not warranted. However if the analysis demonstrates that the Completion Date has moved out into the future, than an EoT is warranted. (See Typical Impact As Planned Programme which has 4 delay events included)

13.2 Impact As Planned x

Again in general terms if the Contractor completes his works earlier than the updated Baseline Programme (assuming there are no further delays) then this demonstrates that the Contractor has mitigated some of the delays. However if the delay has been properly analysed and its impact included in the updated Baseline Programme and the Contractor completes later than this updated programme, this demonstrates contractor caused delays which could leave the Contractor facing Liquidated and Ascertained Damages (LAD’s).

Time Impact Analysis

Time Impact Analysis is a recommended and accepted practice to be utilised for delay analysis. For Time Impact Analysis to be undertaken it is key that the Baseline Programme is updated on a regular and consistent basis to that when a delay event crystallises this can be analysed promptly and consecutively so that its impact can be analysed.

The Baseline Programme (as updated from time to time) should be brought fully up to date to the point immediately prior to the delay event taking place. This delay should then be evaluated and its impact inserted into the programme. (See Time Impact Analysis Programme which at the period update showed a 3 day delay and its impact analysed)

13.3 Time Impact Analysis Continue reading “Delay analysis”

Elements of a successful claim

In the previous post we examined the key components required to demonstrate an effective Extension of Time (EoT) claim from the perspective of the main headings that need to be addressed. It could be argued these headings form the basis of any claim event.

An integral element of this is the Delay Analysis employed.

There are effectively two major forms of Delay Analysis, these being:

• Impacted As Planned Delays Analysis

• Time Impact Analysis

We will investigate these in greater depth in the next posts.

However prior to this we need to evaluate the essential elements of a successful claim. This can be summed up as the 4 main requirements, these being:

Cause

Effect

Entitlement

Substantiation

We could ask the question, What is a claim? It can be defined as follows:

A claim is an assertion of a party’s rights under the terms of a contract or at law.

In the construction industry, a claim is usually in relation to additional time, additional payment or both additional time and payment. A significant driver of a claim will be variations to the contracted works which increase the scope and / or complexity of the works that have been contracted for. By way of example the following could lead to a claim for variation:

• Change to the quantity of works

• Change to the quality or characteristics of work

• Change to the sequence or timing of works

• Change to the levels, positions and / or dimensions

• Omission or addition of works

Some of these examples of variations to the contracted works may also lead to a claim for an EoT which may lead to additional payments being due as a consequence. However this can also prevent the deduction of “Liquidated and Ascertained Damages” (LAD’s) as the EoT (even if granted without costs) moves the date for the completion of the contract works.

Almost any claim, irrespective of form of contract will require the Contractor or Sub-Contractor to demonstrate that they have suffered a delay in some shape or form and here the programme is critical in demonstrating the delay. In effect the programme is both the Contractor or Sub-Contractors plan to complete the project works but also the yardstick to measure delays based on actual progress against the programme.

Most forms of contract require the Contractor or Sub-Contractor to submit a programme within a stipulated time frame, which then becomes the Contract (Baseline) or Approved Programme and updated accordingly periodically. A Joint Contract Tribunal (JCT) form of contract requires the programme to be submitted as soon as possible after the execution of the contract. However this will be to the start and completion dates that will be included within the contract data.

The programme update requirement should be stipulated in the contract, but for the protection of both parties should be at least within each Application for Payment (AfP) period. These updated programmes will be a record of progress made thus far and also be able to predict events that are yet to take place, based on the update. This is particularly relevant where an activity moves onto the critical path of the programme. In the event an EoT has been claimed and granted, this should be reflected on the next period updated programme and in particular showing where the contract-end date has moved to. This is particularly important where LAD’s could be levied.

In the event of a claim, it is good practice to produce an “As Build” programme at the start of any delay as this will provide a detailed record of actual progress that can be demonstrated at the time that the delay has crystallised.

It also needs to be borne in mind that not every delay will lead to a change in the completion date as the possibility exists that if the event is not on the critical path that the delay can be mitigated by moving the sequence of the programme around, however this could lead to disruption, which in itself could be subject to a financial claim. This could be on a number of grounds, although this list is not exhaustive, such as:

• Acceleration costs to catch up on the programme

• Non Productive costs • Additional staff costs

• Abortive costs

This leads to the question. What should the Contract or Approved Programme demonstrate?

• The intentions of the party at the time of contract

• The time and sequence of how the works are planned to be implemented

• A clear critical path

• Dates that require input from the Employer, particularly where it links to the critical path

• Dates that require input from key Stakeholders, particularly where it links to the critical path

• Identify “float” within the programme and who “owns” the float whether it is the Employer, Contractor or the project.

Who owns the float is particularly important as this will be utilised for any delays before the completion date can be affected by any delays. Where the project owns the float any initial delays by either Employer or the Contractor will utilise the float, whereas if the Contractor owns the float, then any Employer delays can immediately have an impact on the project end date.

You have had a delay event, its impacted on the end date of the contract and will attract a cost, what three things are critical to being able to demonstrate this delay successfully?

• Good records

• Good records

• Good records

And perhaps most important of all, a claims specialist to ensure that not only is the claim prepared in accordance with the contract requirements but in a way that is easy to follow and able to allow a third party to assess and determine liability in favour of the company bringing the claim.

Extension of Time

There are a number of claims that will be made under a contract, yet perhaps the one that is most often needed is an Extension of Time (EoT) to complete the works that have been contracted.

Amazingly despite these types of claims often being relatively straight forward they often fail because the party making the claim fails to adequately demonstrate their entitlement in the submission.

When drafting an EoT there are 8 key elements that need to be included, these being:

• The claim event

• Liability for the claim event

• Contractual compliance

• Contractual entitlement

• Statement of claim

• Substantiation

• Cause & Effect

• Delay analysis

We will now examine each of these main headings in a little detail

The claim event

This is exactly what the title says it is, state the event that has lead to the claim e.g. weather event and then provide the circumstances that lead to the event. This element should be short and concise and acts as an effective Executive Summary of what is to follow, where you detail the claim in greater detail.

Liability for the claim event

In outlining “The claim event” you are setting out what has caused the claim to be formulated and submitted. In this section you need to demonstrate liability lies with another or the other party to the contract and you want to determine liability for the event.

If the claim is by a Sub Contractor to a Main Contractor the possibility exists that the Main Contractor will have a similar right under the Main Contract with the Employer, particularly around weather events or force majeure. These types of events will usually entitle the party bringing the claim to an EoT, but this will obviously be dependent on the specific form of contract and its provisions.

In the Joint Contract Tribunal (JCT) Minor Works Contract grounds for an EoT are dealt with at Clause 2.7. In other forms such as the New Engineering Contract (NEC) often the claim will be dealt with as a Compensation Event.

Contractual compliance

Generally the Contractor or Sub Contractor will be required under the terms of the contract to submit notice(s) with detailed particulars, particularly in relation to an EoT. Where the time frame is silent in the contract then it will be within a reasonable time period.

Of course what is reasonable?

This is why it is better to define periods during the contract negotiation for the protection of all parties.

By way of an example in the International Federation of Consulting Engineers (FIDIC) form of contract at Clause 44.2 states:

44.2  Provided the engineer is not bound to make any determination unless the contractor has

(a) Within 28 days after such an event has arisen, notified the engineer with a copy to the  employer and 

(b) Within 28 days, or such reasonable time as may be agreed by the engineer after such notification submitted to the engineer detailed particulars of any extension of time to which he may consider himself entitled in order that such submission may be investigated at the time.

It may be the case that the submission of these notices is expressed as Condition Precedent and in the event the Contractor or Sub Contractor fails to comply with condition may result in the wavering of any entitlement.

It is therefore essential for the parties to understand their obligations and expressed provisions of the contract and as a consequence to comply with the provisions. A contract is an even handed document (or at least should be) and all parties should endeavour to comply with all provisions therein, particularly if they want to rely on provisions to establish entitlement.

Contractual entitlement

As a general rule the contract (particularly where a standard form) will contain specific provisions which may entitle the Contractor or Sub Contractor to an EoT for one or a series of events.

By way of an example under FIDIC, there are a number of different conditions:

Clause 6.4 – Late Drawings
Clause 12.2 – Adverse physical obstructions or conditions
Clause 27.1 – Discovery of fossils or antiquities
Clause 36.5 – Additional tests not provided for
Clause 40.2 – Suspension of the works
Clause 42.2 – Failure to give possession of site
Clause 44.1 (a) – Additional or extra work
Clause 44.1 (c) – Exceptionally adverse climatic conditions
Clause 44.1 (d) – any delay, impediment or prevention by the Employer
Clause 44.1 (e) – any special circumstances, other than through default by the Contractor
Clause 69.4 – Contractor’s suspension of the works

Statement of claim

As the claim is effectively in two parts, first you demonstrate entitlement (as demonstrated in “Liability for the claim event”, “Contractual compliance” and “Contractual entitlement”) and then the details of what has transpired to lead to the claim. Therefore it makes sense to again make a clear and succinct statement on what the Contractor or Sub Contractor is claiming.

Substantiation

This is where the claim will succeed or fail effectively as its one thing to prove a contractual entitlement it’s another to prove that you have that entitlement based on what has occurred.

This section needs to be robust and will have all the evidences that the Contractor or Sub Contractor seeks to rely upon as the documentary evidence. This documentary evidence will be made up of a number of different contract and non contract documents, which all drawn together in a single document support the assertions made in the overall claim document. These can include, but be limited to the following:

• Letters
• Site Instructions
• E-mail’s
• Method Statements
• Risk Assessments
• Progress Reports
• Record Photographs
• Minutes of Meetings
• Programme’s (Baseline and updated)
• Schedules
• Trackers
• Statements of Fact
• Expert Witness Statements

Cause & Effect

Being read and drafted together with the “Substantiation” will be the “Cause & Effect” which as the title suggests is where you demonstrate a cause; e.g. adverse weather for a prolonged period outside of the normal for that period; with the effect; which would in all likelihood be delay to works on site at the minimum and may result in works that are damaged and require to be re-done.

In order to be successful in a claim merely listing the events in chronological order should not be sufficient to demonstrate a full entitlement. The real art in putting together the claim is for the narrative to tell the person assessing the claim a story describing how the event has affected the works.

This should commence with what the planned works were and how they were affected, in particular making reference to planned sequences, durations and mythologies (Note how the list in the previous section becomes important here, the status of the works to the planned at the time of the claim event and detailing the changes that took place as a direct result of the claim event.

Delay analysis

Undertake a delay analysis which demonstrates the effect to the programme.

There are a number of internationally recognised delay analysis methods and the most appropriate method will effectively be determined by circumstances surrounding the claim event. This can include but not be limited to the following:

• Level and detail of records available
• The robustness of the Baseline Programme and effects of any periodic updates
• Available time (Particularly around contracts that time bar events after the passing of a period of time)

• Degree of accuracy

• Level of proof required under the contract.

We will review Delay Analysis Methods in greater detail later.
Of course every claim will be different and some may need very basic details under the defined headings detailed above, but likewise others can be extremely complex and may be to demonstrate more than one entitlement. Like any document it should be clear and concise to enable the person that has to make a Determination being able to do so based on the submission. If the claim submission is haphazard and difficult to follow, it could lead to the claim being rejected even though there was an entitlement.