In the recent case of MW High Tech Projects UK Ltd v Balfour Beatty Kilpatrick Ltd the Technology and Construction Court ("TCC") reinforced the principles relevant when deciding whether or not a dispute had crystallised.
The parties contracted in respect of the building of a laboratory in Hull, with Balfour Beatty Kilpatrick Ltd ("Balfour Beatty") engaged by MW High Tech Projects UK Ltd ("MW") to carry out mechanical and electrical works.
The works were delayed. Balfour Beatty intimated five contractual notices of delay to MW, but no responses were issued by MW within the 16 week periods required by the parties' contract.
By letter of 30 July 2019 Balfour Beatty produced an expert report in support of their claim and increased the extension of time sought by 71 days to 282 days in total. The letter requested confirmation within seven days that the extension of time was accepted.
Eight days later, having received no response, Balfour Beatty referred the dispute to adjudication. The adjudicator decided in Balfour Beatty's favour and awarded the full extension of time claimed.
The case brought to the TCC
MW raised court proceedings to seek a declaration that the adjudicator did not have jurisdiction to decide the dispute and that the adjudicator's decision was therefore invalid.
MW's argument was that the dispute had not crystallised prior to the commencement of the adjudication. If that was correct then the referral of the dispute to adjudication was premature.
The principles for assessing whether or not a dispute has crystallised have been set out and refined in case law. The courts avoid an overly legalistic analysis and instead consider the essential claim that has been made. It is possible to infer that a dispute has arisen where a party does not respond to notification of a claim.
The matters to be decided by the TCC
In this case, amongst the issues to be decided by the TCC were whether or not service of the expert report on 30 July 2019 constituted a new notification of delay, and – if so – whether the 16 week contractual period for MW to respond to the notification was restarted on that date. If Balfour Beatty's letter of 30 July 2019 was a new notification of delay then a dispute could not have crystallised prior to the commencement of the adjudication.
On the other hand, if the letter of 30 July 2019 simply added further particulars to the previously notified claim then it did not restart the 16 week contractual time period for MW to respond. In that scenario, it was possible that a dispute could have crystallised and that the referral to adjudication could be valid.
The TCC's decision
The TCC considered the content and effect of the expert report and its accompanying letter. The expert report contained a detailed critical path analysis on which Balfour Beatty relied. The total extension of time sought was only marginally longer than the cumulative extension of time previously claimed.
The TCC decided that the letter of 30 July 2019 and its enclosed expert report did not amount to notification of a new claim. The TCC noted that it is possible but not inevitable that new evidence will amount to notification of a new claim, and that it was relevant that the position advanced by Balfour Beatty on 30 July 2019 was not "materially different" to the delay claim previously notified and rejected. The causes of the delay had not changed.
The TCC found that the adjudicator had jurisdiction to determine the dispute. The adjudicator's decision was therefore valid and binding on the parties.
Points to take away
- Whether or not a dispute has crystallised is heavily dependent on the specific facts of the case;
- Failing to respond timeously to a contractual notification or other correspondence may give rise to an inference that a dispute has arisen;
- The production of new evidence in support of a claim may amount to notification of a new claim if the position advanced is materially different to the position previously notified; and
- The outcome of any contractual claim will depend on the precise terms of the contract. It is therefore important that any claim is considered with those precise terms in mind. The contract between the parties in this case was the JCT Design and Build Sub-Contract 2011 with bespoke amendments.
Originally published 18 June, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.