Gibson (Banbridge) Limited v Fermanagh District Council

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

Summary

(1) Where a claim has been submitted and discussions ensue between the contractor and the contract administrator, a reasonable time must be allowed for the contract administrator to prepare a response before it can be concluded that a dispute has arisen. In this case, however, a project manager’s assessment should have been made long before the notice of adjudication was issued and the adjudicator therefore had jurisdiction to decide the claim.(2) Breaches of rules of natural justice or procedural fairness will be material where the Adjudicator has failed to afford to a party a reasonable opportunity to respond to the case being made by the other party. In this case, the period allowed by the Adjudicator to the respondent to respond to the claimant’s claim was not materially unfair. The respondent had had considerable opportunity to consider the claim before the adjudication was commenced.

High Court, Northern Ireland, Queen’s Bench Division (Commercial), Judge Weatherup

Background

Fermanagh District Council (“Fermanagh”) sought to resist an Adjudicator’s decision of 27 October 2012 whereby the Adjudicator awarded a contractor Gibson (Banbridge) Limited (“Gibson”) the sum of £3,034,149.85.

The contract works were undertaken between March 2005 and February 2008. There were regular applications for payment:

  • Application 12 post-dated the completion of the work, having been issued on 10 April 2008.
  • Application 13 was submitted on 16 December 2009 and varied on 22 April 2011.
  • Application 14, an updated claim that was in effect the subject matter of the adjudication, was issued on 27 October 2011 with a claim in excess of £2 million.

The project manager did not complete an assessment of any of the applications made after the completion of the work on the basis that the information supplied by Gibson from the receipt of Application 12 onwards was inadequate. Gibson provided additional information that eventually comprised 63 files, although it contended that the information in the files had in large part already been provided to Fermanagh throughout the course of the exchanges between the parties.

On 26 June 2012, Gibson’s representatives wrote to Fermanagh’s representatives referring to agreed dates for the project manager’s inspection of all the documents and confirming agreement that following inspection on 3rd July 2012 there would be a four-week standstill period to permit the project manager to assess the sums due. Inspections took place in June, July and 10 September. On 20 September, Gibson’s representatives wrote to Fermanagh’s representatives that the project manager had not produced any certificate in relation to his assessment of the amount following the inspections.

The Notice of Adjudication was issued on 25 September 2012. Fermanagh argued that the Adjudicator had no jurisdiction as no dispute had crystallised between the parties, the matter having been referred prematurely without Fermanagh being given an opportunity to conclude its ascertainment of Gibson’s application for payment, The Adjudicator took the view that he had jurisdiction, on the basis that a dispute had arisen in November 2011, two weeks after Fermanagh had failed to make an assessment in response to application 14. He required Gibson to submit its supporting papers to the Adjudicator in 7 days and Fermanagh to respond in a further 7 days. Fermanagh considered 7 days to be too demanding and sought 21 days to reply. The Adjudicator refused.

Issues

The Court was asked to decide:

  • Whether a “dispute” had crystallised at the date the Notice of Adjudication was issued by Gibson?
  • Whether there was a breach of the rules of natural justice in that an unfair procedure was adopted by the Adjudicator who allegedly did not afford Fermanagh a reasonable opportunity to respond to Gibson’s reference?

Decision

The Court held that:

  • Where a claim has been submitted and discussions ensue between the contractor and the contract administrator, a reasonable time must be allowed for the contract administrator to prepare a response before it can be concluded that a dispute has arisen. In this case Gibson's claim under application 14 should have been assessed much earlier. If supporting documentation was not sufficient then that would have been reflected in the assessment. A dispute about adequacy of documentation should not result in there being no assessment or the assessment being unduly delayed. In this case, a reasonable time was afforded to the project manager to make the assessment after the inspections had taken place and a dispute had crystallised by 20 September 2012. Accordingly, the Adjudicator had jurisdiction to hear the claim.
  • Breaches of the rules of natural justice or procedural fairness will be material where the Adjudicator has failed to afford to a party a reasonable opportunity to respond to the case being made by the other party. In this case, the Adjudicator had been right in refusing Fermanagh’s request for an extension. The 7 day response time cannot be looked at in isolation as the claim had been pending for many months and Fermanagh had had the opportunity for extensive inspection of the records and had spent many days examining the records.
  • The basic time for the adjudication process is 28 days from notice to decision, which serves to demonstrate the expedition demanded by the process and consequently that many cases will necessarily have to be dealt with in a summary manner.
  • It may be that different procedures could have been adopted by the Adjudicator but it is not for the Court to decide what procedures should be adopted. The issue is whether or not the procedures that were adopted were materially unfair and in this case they were not.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

 

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