In Severfield vs Duro Felguera, the defendant refused to come to court. The judge’s response – to ask the other side’s experts to act as impartial advisers – holds useful guidance for adjudicators
Arecent case that brings up a couple of interesting points is that of Severfield (UK) Ltd vs Duro Felguera UK Ltd. First is the question of why it had to be tried in court at all: none of us could ever fathom why construction works for steelwork in power generation plants should be excluded from the Construction Act.
Parliament in its wisdom decided such works were excluded from the payment rules and adjudication. In his ruling on the Severfield case, Mr Justice Coulson has this week given a nudge to the Department for Business, Innovation and Skills to get these exclusions on the agenda for the revisions to the Construction Act that are now under way. He remarked: “The injustice to the claimant caused by parliament’s insistence on the exceptions (and its refusal over many years to remove them) has become even more apparent.” So come on, parliament: pay attention, please.
Apart from all that, the Severfield judgment contains some very good guidance for construction adjudicators and arbitrators, too. The claim was a final account subcontract. Severfield supplied and erected the structural steelwork for Duro Felguera at Carrington power station, Manchester. Ages ago they argued to and fro about the final account. The usual QS stuff was on the agenda: value of measured works, value of variations, value of loss and expense, and a counter-claim from Severfield for liquidated damages for being late – which even included a claim for £600 for car parking.
There was a schedule showing the differences advanced by Severfield and Duro Felguera. Oh, excuse me, tut-tut: I called them “differences”. The fashion is to call that column the “delta”. Hmm.
All that eventually went in front of the judge. But Duro Felguera announced it was not taking part. Adjudicators and arbitrators are sometimes faced with that too. So, what? As the judge did here, the job is to take on board all the previous written exchanges, because the missing party has of course taken a position on each and every item. The judge said: “The hearing on 14 November 2017 took all day. I was conscious of the absence of the defendant. I therefore asked many questions of counsel, the factual witnesses, and both experts.”
He took the initiative to establish the facts; he was inquisitorial. That, I suggest, is how adjudicators and arbitrators should manage those circumstances as well
He took the initiative to establish the facts; he was inquisitorial. That, I suggest, is how adjudicators and arbitrators should manage those circumstance as well. It might even be the correct approach when one side turns up with an incompetent or amateur representative, or is the party in person with no knowledge of legal proceedings, yet the other side has an experienced construction lawyer.
Now then, how did the tribunal deal with the “delta”? On this final account Severfield employed two experts: one on QS analysis, the other on programming. The dispute decider will rely a great deal on two elements. First is the utter impartiality of the experts. Despite being instructed by Severfield, the two experts had to demonstrate they were there to be an independent helper for the judge (or arbitrator or adjudicator). The second element is the expertise of the judge (or arbitrator or adjudicator). He or she has to have been around the block in our construction business. Mr Justice Coulson has been dealing with construction rows, disputes and claims for umpteen years. That second element is needed for arbitrators and adjudicators too; it is what gives them insight. And when an expert becomes ever so enthusiastic about this or that notion, the role of the inquisitor is to ask awkward questions of the expert.
The expert QS here, Ann Nash, did superbly well. The judge had no trouble accepting her measured works figure. So too the extra management input to cope with what became a piecemeal working load for the steelwork. On the face of it, this was a nightmare task when it came to fathoming the value of variations. There were three categories: variations where the dispute/difference/delta was less than £10,000 (there were oodles of these); variations between £10,000 and £20,000 (these were also numerous); finally, big-uns where £2.9m played £611,000. The judge did all this in a one-day hearing (heaven knows how many days he poured over the account and reports).
As for the variations under £10,000, the expert QS carried out a detailed sampling exercise. Note the word “detailed”. She valued some up and some down. The judge said: “Taking Mrs Nash’s evidence on these low-value variations in the round, it seems to me that the proportionate way of arriving at a figure is to make a 20% reduction to the amounts claimed by the claimant.” Fair enough. For those between £10,000 and £20,000, which the expert had spot-checked, the judge decided, on the two largest variations, “to take a rough and ready approach to the issue” by taking a figure halfway between both parties’ figures. Fair enough, again. As for the big-uns and the massive difference, the judge had to decide on information to reflect a “fair and reasonable” figure – not easy, but that’s the job.
The judgment is an example of attempting to take a proportionate approach to deciding a mass claim in a final account. Can you imagine, though, how much court time would have been incurred if Duro Felguera had decided to turn up and to argue the case? In the event it was as though the judge was taking the sort of approach we do in adjudication: the application of broad justice.