Being a member of the awkward squad can cost you, even when right is on your side. These days it pays for both sides of a dispute to co-operate with each other
Are you one of those Contract administrators, architects, engineers, or quantity surveyors who plays fast and loose with the contractual claims machinery? One who gives arbitrary extensions of time and half-baked valuations, and ignores the need for the odd certificate here and there? If so, take a hint, read what the judge said in Skanska vs Egger (Barony) Ltd (2 March 2005). Of what went on, on that site, the judge said: “The conduct of Egger in relation to the administration of the contract and refusal to efficiently use the contractual mechanisms relating to claims is conduct that properly should be reflected in a costs order.” No, I am not saying that Egger was half-baked; what I am saying is that Egger’s behaviour had an effect on the judge. Nor am I saying of Skanska that they presented a grossly inflated account, but if you are a contractor and create that impression in the mind of a judge, he might say as he did in Egger vs Skanska: “The reactive conduct of Skanska in presenting a grossly inflated account based on contract analogous figures whilst at one level understandable, nonetheless must be condemned because it fed the suspicions of Egger and the behaviour of both rendered a negotiated settlement impossible.”
Don’t stop there. Are you inclined to the “maintenance of some exaggerated claim figures”? If so, read what the judge said: “Skanska’s maintenance of some exaggerated claim figures was unattractive and significantly contributed to the climate of mistrust between the parties which in turn was an impediment to settlement.” Keep going. Do you also take a stance of which an outsider such as a judge or arbitrator or adjudicator might say – as the judge did of Skanska’s – “it did not contribute towards further and future co-operation”? And what do you make of the judge’s view of Egger (the employer and contract administrator) when the judge said: “Egger’s conduct at all times during the trial demonstrated an intransigence that serves to underline the inference that litigation to the end was the only way that Skanska were able to recover certain monies.” Well, if you do operate in this way you are behind the times. And, if so, you may well find that the tribunal decides to thump you. So in this particular dispute Skanska was the overall net winner, but the judge would only order Egger to pay half of Skanska’s costs.
The story behind all this is worth a moment to recall. Egger is in the wood and timber products business. They, with Skanska, designed and built a fully automated factory where virgin timber was fed in at one end and high-quality chipboard emerged at the other. The project’s guaranteed maximum price was £12m. There was lots of “design development” on the way; and delays, extensions of time claims, loss and expense claims, you name it, said Skanska. The contract pre-dated adjudication which, said the judge, was unfortunate since, had swift references to an adjudicator been made while the contract was current, the contract machinery would have been operated by the adjudicator and prevented “heads being buried in the sand”. Anyway, the up-shot of the whole affair was a whopping big piece of litigation. The disputes about the final account had costs, wait for it, of £9m. Skanska’s claim recovery, by the way, was £2,883,039 plus some pence – not much of a return for £9m expenses.
If you do operate in this way you are behind the times. And, if so, you may well find that the tribunal decides to thump you
What was the judge looking at? “Attitude” that’s what. Put Skanska and Egger on one side for a moment. Think in wider terms. Think, you. Think, disputes. They are ordinary in the construction business. That’s because things change on the hoof. And when the bill comes in the customer is frequently a tad miffed. The dispute is with us so easily. Add “attitude” to the dispute, antics and lack of co-operation and the courts will brand you as wrongheaded. “Attitude” gets in the way of getting the problem solved. And if your attitude has got in the way then you will be penalised in costs. It’s odd at first to say that the parties in a dispute are duty bound to co-operate to solve the dispute. But a moment’s thought drives in the common sense. “Attitude” in a building contract is the stuff of disputes. Now the court is stamping on it. Develop a bit of “attitude”, get penalised in costs; you may even lose the case.
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on email@example.com.