Civil Engineering vs VGC Construction: Did you hear the one about…?

Let me tell you about the dispute between Jackson Civil Engineering and subcontractor VGC Construction. It was over 65km of duct and cabling work on the M3. The contract period was 26 weeks but it ran well over. The design of certain parts of the works was incomplete. So, by the time of the 14th interim accounts, the amount claimed by VGC swamped the original subcontract sum by about £1m. One item in that was a “one-liner” claim from VGC boldly asking for £300,000 for “delay and disruption”. You can guess what the one-liner reply from Jackson was.

At once you have the makings of a dispute. In truth, it nearly always happens that the main contractor becomes nervous about paying its subcontractors one penny over the order value. And who can blame a main contractor for not paying a bare, unsupported interim claim for 10 bob, never mind a whopping £300,000. Mind you, many a standard form contract actually obliges the main contractor to make a fair fist of calculating delay and disruption sums due to its subcontractors irrespective of what the subby says – so watch out!

The dialogue between VGC and Jackson took its usual course. Jackson asked VGC to substantiate not only the delay claim but the variations claim of numerous heads, as well as the re-measurement of the works done. Meanwhile, that £1m or so divided the parties. They wrestled with the measured account and variations, and VGC scrabbled around for better particulars about extension of time, prolongation costs and disruptive working losses. It’s not clear why VGC then ran out of patience, but it did, and in May called for an adjudicator. VGC wanted its £300k. “Oh, come on, you withdrew the £300k delay claim while you went away to gather your proof,” said Jackson. “No, no,” said VGC. “We said we would work on it but didn’t withdraw it.” “Well,” said Jackson, “it’s hardly a dispute, it’s a one-liner.” And so the adjudication went on. VGC was claiming a gross amount of £4.3m. Jackson, which had previously paid £3.6m, denied any balance was due and re-claimed £650k of contra account for good measure.

The award of the adjudicator was one of those “no reasons given” awards. I confess to not liking that approach. Losers really deserve to know why they lost. Anyway, the adjudicator ordered Jackson to stump up £746k. Jackson balked. It was that £300k item that troubled it. Within weeks it was in front of High Court judge Mr Justice Akenhead.

The award of the adjudicator was one of those ‘no reasons given’ awards. I confess to not liking that approach. Losers really deserve to know why they lost

Jackson’s first point was that the claim had been “withdrawn” from the interim account long before the adjudication. The judge rejected that on the evidence. Point two said the £300k claim was of such a “nebulous nature” it had not matured into a dispute. You can’t come to adjudication unless the claim is actually, in law, a dispute. “It is a dispute,” said the judge, and here’s why. On receipt of VGC’s interim account, Jackson rejected several items, including the £300k delay claim for want of justification. Bingo! Jackson’s rejection created the dispute.

The want of evidence and carefully explained rights to loss and expense by VGC is a risky way to come to an adjudication. But dispute it certainly is. So there is no room there to oust the £300k claim as a “no-dispute” issue.

Point three is important. Unsurprisingly, VGC tried during the adjudication to sharpen its claim with “new” materials. This business of new materials in the middle of a lightning speed adjudication is a real concern for adjudicators. Jackson told the adjudicator he had “no jurisdiction” to take the new stuff on board. New it was, but was it fully within the scope of the dispute? The judge appears to have focused on whether there was sufficient time for Jackson to address the new material. And since Jackson did address it, there can be no complaint as to the fairness of letting it in. The hint, however, is that Jackson addressed it on the hoof while saying “it reserved its position” as to whether it was right to let it in.

The judge was cautious about a party calling for a decision while reserving its position as to whether the adjudicator can decide at all. It’s called blowing hot and cold. Not on. Jackson was told to pay up.