Balfour beaten

When things do go wrong on a job, there is a tendency to put everything into the actual construction process and let the progress monitoring paperwork slide.

That was the case for Balfour Beatty Construction Ltd, which was refurbishing a block of flats for Lambeth Council under a £3.9m contract. The job went wrong. Balfour Beatty submitted delay notices and eventually the architect finalised an extension of time. The only problem was that the extension expired seven months before Balfour Beatty completed and Lambeth stopped £356,000 in damages.

The company couldn't determine the critical path of its works, but argued that it was irrelevant as the path changed almost weekly as the scope of the works grew. Failing to persuade the architect, Balfour Beatty went to adjudication, where after eventually carrying out his own checks to determine what had happened, the adjudicator decided Balfour Beatty should get a further extension and Lambeth should cough up £284,000 of the money it had withheld.

Lambeth, however, refused to pay. Usually the courts enforce adjudicators' decisions, so Balfour Beatty shot off to get it sorted.

But the company's failure to establish a critical path network counted against it. The court also ruled that the adjudication wasn't impartial because Lambeth hadn't been given enough time to reply to Balfour Beatty's submissions during the adjudication, which was not enforced.

Certified? Some folk should be
Keep enough cash in reserve. You might need it.

Imagine: the contract's been running for a year. You've done over £450,000 worth of work, had 10 valuations agreed with the professional quantity surveyor, certified by the architect and paid by the client.

Now it's August 2000 and you're on valuation number 11. Again, it's been agreed with the professional quantity surveyor and the architect has certified the gross sum. The client hasn't issued a notice of intention to withhold, so you confidently expect a cheque for £29,408 and you'll be able to pay your suppliers and subbies.

When the cheque doesn't come, you call the client. "We aren't paying you," he says. You tell him he's got to pay: you've got an architect's interim certificate and there's no notice of intention to withhold.

"Ah," he says, "we only have to give a notice of intention to withhold if there's a sum due under the contract. The amount in an interim certificate is not the same. Your work might be defective."

Luckily, the court takes your side and says payment was due within 14 days of the interim certificate being issued. "If the client has a problem," says the court, "he should sort it out separately. In the meantime, he pays."

Great, you win. There's only one problem. The £29,000 should have been paid in August 2000 and the court reached its decision in January 2002. Your suppliers and subbies will have got sick of waiting months ago.

Death by disclosure
Although any documents must be disclosed when you go to arbitration and litigation, anything that you say to your lawyer remains completely confidential.

A dispute arose on the Mughad oil development project in the Sudan.

In the ensuing arbitration, the contractor indicated it knew what figure the client's project manager would have settled at during the claim negotiations.

The client was convinced that a mole must be advising the contractor and sought a court order to disclose their identity and documents.

The contractor's solicitor denied he had any such documents and refused to identify any potential witnesses. "He could be killed," he said. "Your clients kill people. They wiped out half the cabinet."

The court held that what is said by potential witnesses to lawyers and who says it does not have to be disclosed.

When Claims go Global
Produce alternative evaluation methods if you can.

Laing Management Ltd, the management contractor for the new Scottish Widows' HQ in Edinburgh, employed John Doyle Contractors Ltd on two works contracts. Both companies agreed the works had been delayed until 21 January 1996 but Doyle wanted another 22 weeks' extension on the second contract and a labour disruption payment of £1.6m. Doyle argued that the first contract had delayed the second until 12 February 1996.

However, the company couldn't separate the cause and effect of its money losses and calculated its labour loss by comparing production in a non-disrupted period with the disrupted period.

Laing argued this was a global claim that assumed Laing was responsible for the whole cost. The court held that even if the global claim failed, there might still be individual losses that could be identified and for which Laing was responsible. It told Doyle to go back and try to prove its detailed loss and expense.