Contractor goes to court over Hull hospital as legal bodies report record rise in construction disputes

Construction giant Balfour Beatty is suing a contractor for £1.4m in a row over a £65m hospital development in Hull.

The news comes as two of the UK’s largest construction adjudication bodies reported a record rise in disputes, as the economic downturn takes hold.

Balfour Beatty Engineering Services – formerly known as Haden Young – had been hired by main contractor Shepherd Construction to carry out M&E works on new facilities at Castle Hill hospital in April 2007.

In a writ filed at the High Court, Balfour Beatty claimed that Shepherd had deducted £2.2m from its payment after the subcontract works came in five months late.

However, on 2 July, an adjudicator ruled that the subcontract completion date should be extended to 10 June 2008, and that Shepherd was not entitled to deduct the costs.

Shepherd was also ordered to cover the adjudicator’s fees and expenses which, added to the other sums, totalled over £1.4m, plus interest and costs.

According to the writ, Shepherd has failed to pay the money and its “final account statement” on 13 July indicated it did not intend to pay.

I suspect people will chase for overdue payment rather more quickly now

Simon Baylis, TeCSA

Both parties declined to comment. An initial hearing is due next week.

Meanwhile, adjudicator-nominating bodies the RICS and the Technology and Construction Solicitors Association (TeCSA) have both reported unprecedented rises in the number of disputes they handle (see graphs).

Research by law firm Reynolds Porter Chamberlain revealed that the RICS nominated 990 adjudicators last year but was set to appoint 1,400 this year. TeCSA appointed about 70 adjudicators last year and is likely to nominate 120 this year.

Simon Baylis, chairman of TeCSA, put the increase in adjudications down to the recession. He said: “There is a much greater urgency to get hold of money. Lending institutions are not lending and businesses cannot cope with funding things themselves or running the risk of their clients becoming insolvent. I suspect people will chase for overdue payment rather more quickly now.”

Barrister Tony Bingham said firms were also attempting to recover money more quickly by bringing smaller cases to adjudication, under which money could be recovered in the 28-day time period, rather than pursuing a single large claim at the end of a contract. He thought this trend could continue after the recession as people got used to the adjudication system.

The RIBA reported that it was seeing a similar level of adjudications to last year. Adam Williamson, the body’s head of professional standards, said that although the start of 2009 had been “relatively quiet”, the number of adjudications had doubled in June and July compared with the same months last year. He said the lower rise in adjudications at the RIBA might be explained by some firms opting to take disputes to other adjudication bodies.