Adjudication: A 63 lever arch file problem

The opening blast on this adjudication involved 63 lever arch files turning up. It was yet another dispute under the NEC contract. And before I go any further let me say that disputes under that set of documents - whether NEC2 or NEC3 - are becoming a habit, and an expensive one at that. Gibson (Banbridge) Ltd was the main contractor to Fermanagh council. The job was a new waste management facility and offices. Price at the outset was £3.2m.

Then came the final account - or rather several goes at putting up the final account. It included a claim for £2m or so. The whole idea of NEC is that the project manager shall complete an assessment of any money applications made. He kept on asking for more and more information and got enough to fill Fermanagh’s town hall. Snag is, he never did come up with a figure, and - given the project was done by April 2008 - it’s not surprising that in September 2012 Gibson banged-off a notice of adjudication. An adjudicator from Cambridge, England was appointed. Then rolled in the referral of 63 files.

The project manager kept on asking for more and more information and got enough to fill Fermanagh’s town hall

Fermanagh’s legal team took up two points with the adjudicator to stymie the adjudication. The first was that no dispute had arisen yet, and so there was nothing to adjudicate. On the face of it that looks a thin complaint. After all, this toing and froing had been going on for years.

Fermanagh said, however, that the project manager was unable to assess what was payable because of the need for better information. Mind you, folk tend to say that sort of thing quite regularly. Better for the poor old NEC project manager to announce that the claim is hopelessly supported by evidence and argument and his valuation is twopence ha’penny. In other-words don’t “faff-about”.

The adjudicator gave short shrift to the no dispute argument and pressed on.

The second point is that Fermanagh shouted foul and this is hardly surprising, because the adjudicator gave it just seven days to serve its response. It pointed to the mass of stuff in the referral and asked for 21 days. The adjudicator refused. It would leave him with half an hour
on day 28 to come up with his analysis and binding decision.

The upshot of the adjudicator’s effort was to award over £3m payment to the main contractor.
Somewhat miffed, Fermanagh said it would take its two points to the High Court:

• No dispute
• Procedural unfairness

It lost on both.

As to whether a dispute has crystallised, there has been umpteen cases on this. Look, there is no special meaning, nor any hard-edged legal rules as to what is or is not a dispute. The sending of a claim or invoice or payment application is not enough for a dispute. But it is enough once it emerges that the claim is not admitted. That can happen easily. Prevarication is enough; silence after a while, or a missed deadline in the contract is enough. But a half-baked, vague, ill-defined claim such that a defendant cannot sensibly respond to it is unlikely to amount to a crystallised dispute, yet. The High Court judge said that the project manager ought to have assessed the account a long time before the adjudication. It’s no good waiting for or calling for better information from the contractor. If the information he sends is enough to make an assessment, even if it is well short of the amount applied for, damn well assess it as it stands. Just do it. The new dispute point was dismissed.

The concept of procedural fairness is said to be part of adjudication. Was it unfair to order the defence by day seven? No, said the High Court - the claim had been pending for months. There was ample opportunity for the project manager to inspect records prior to adjudication.

Let me put it this way - whenever there is a merest hint of parties being at odds, adjudication is just around the corner. This system has been with us for 15 years. There is no excuse for not having your ducks in a row and being ready to fire off a defence. Fermanagh has to pay up the £3m. It eventually turned out, after the adjudication, that the NEC project manager did his stuff and made it £300k. Wake up boys.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple