The decision of Mr Justice Forbes on 20th March 2003 in Beck Peppiatt Ltd
v Norwest Holst Construction Ltd [2003] TCC is another case which deals with
the definition of dispute. Justice Forbes gave an extempore judgment
dealing robustly with the argument that dispute was to be interpreted
differently in adjudication than in litigation or arbitration.
The Law
Justice Forbes first examined the law defining what is a dispute.
Beck submitted that the adjudicator had no jurisdiction to determine
three claims referred to him by Norwest in a second referral to adjudication
dated 17th February 2003. Beck submitted that there was no dispute between
the parties with regard to any of the claims as at 17th February 2003,
within the meaning of section 108(1) of the Housing Grants Construction and
Regeneration Act 1996.
Beck submitted that the law with regard to what constituted a dispute
for the purposes of adjudication was in an unsatisfactory state. Beck
suggested that there was a degree of conflict between the decisions of the
judges of the TCC in London and those made by the TCC judges elsewhere. Beck
submitted that for the purposes of adjudication, the judgments of the TCC
judges in London had correctly diverged from the decision of the Court
Appeal in Halki Shipping Corporation v Sopex Oils Limited[1998] 1 W.L.R.
727, in which the Court of Appeal considered what constituted a dispute for
the purposes of arbitration. Beck suggested that in Halki the Court of
Appeal had defined the word dispute in terms that were not appropriate for
the purposes of adjudication.
Beck submitted that an important feature of the decisions of the London
TCC judges had been the apparent conclusion that a claim not only had to be
made but that a reasonable period of time for it to be considered had to
elapse before the matter could be said to have crystallised into a dispute:
for example, the judgment of His Honour Judge Thornton QC in Fastrack
Contractors v- Morrison [2000] BLR 168 at p. 177.
Beck suggested that the decisions of the London TCC judges was a more
restricted approach to the meaning of dispute in adjudication than that
adopted by the Court of Appeal in Halki.
Justice Forbes held that the cases did not support the propositions
advanced by Beck. Justice Forbes did not consider that the word dispute
has been interpreted by judges of the TCC, for the purposes of adjudication,
in a way that was inconsistent with Halki, a decision that was fully binding
on the court at first instance.
Justice Forbes considered that the law was satisfactorily stated by His
Honour Judge Lloyd Q.C. in his decision of Sindall v Solland [June
2001], in which he said that for there to be a dispute for the purposes of
exercising the statutory right to adjudication it must be clear that a point
has emerged from the process of discussion or negotiation that had ended and
that there was something which needed to be decided.
Justice Forbes considered that Judge Lloyds statement of principle was
easily understood and was not in conflict with the approach of the Court of
Appeal in Halki. As observed in Halki, dispute was an ordinary English
word which should be given its ordinary English meaning. This meant that
there would be many types of situation which could be said to amount to a
dispute. Each case would have to be determined on its own facts.
Justice Forbes considered that attempts to provide an exhaustive
definition of dispute by reference to a number of specified criteria were
best avoided. Justice Forbes therefore rejected the suggestion that the word
dispute should be given some form of specialised meaning for the purposes
of adjudication.
The Facts
Justice Forbes then applied the law as stated in terms of Halki to the
facts of the instant case.
Beck was Norwests sub-contractor for construction works at the First
Central Guinness headquarters. Three matters (the Issues) which were the
subject of the referral to adjudication by Norwest on 17th February were
(1) whether Beck was entitled to any further extension of time beyond the
five weeks already allowed by Norwest;
(2) the final evaluation of any loss and expense payable to Beck; and
(3) the final evaluation of the variation account.
The series of events followed a familiar pattern in construction in which
the subcontractor made various claims and the contractor requested further
substantiation. The first notification of delay to the progress of works was
on 22nd February 2002. On 29th April 2002, Beck submitted a claim for an
extension of time for the sub-contract works. On 21st July 2002, Beck
notified Norwest that the delay now amounted to 15 weeks. On 9th August
2002, practical completion was achieved under both the main contract and the
sub-contract. On 13th August 2002, Beck commenced adjudication proceedings
in relation to 19 claimed variations to the sub-contract works. On 19th
October 2002, Beck indicated a further ten matters in respect of which it
was said that Norwest had required variations to the sub-contract works. On
23rd October 2002, Norwest wrote to Beck to indicate that it required
documentation to be submitted for the purposes of the final account. On 24th
October 2002, Beck repeated its claim for a 12 weeks extension of time, and
on 1st November 2002 Norwest requested appropriate information from Beck to
substantiate that particular claim.
On 18th December 2002 Beck wrote to Norwest in relation to the three
matters referred in the instant adjudication. The letter was in the form of
an ultimatum that Beck would resort to adjudication at the end of January
2003 if its claims had not been satisfactorily dealt with by Norwest by that
date. On 23rd January 2003, Norwest awarded a further three weeks extension
of time to Beck. On 29th January 2003, Beck received Norwests final account
statement comprising 11 lever arch files. On 31st January 2003, Becks
ultimatum contained in the letter of 18th December 2002 expired without any
agreement being reached in respect of the final account.
The earlier first reference to adjudication by Beck was still proceeding
in respect of contra charges. Beck had withdrawn other matters including the
Issues, after the adjudicator indicated that he did not have jurisdiction to
deal with them. It was his view that the disputes on the Issues had not
crystallised. At that stage, Norwest was content to accept that position. On
7th February 2003 Norwest recorded that Beck had received full information
by the 11 lever arch files, and gave notice that unless the account was
agreed by close of business on 12th February 2003 that there would be a
dispute and that the contract adjudication procedure would be immediately
commenced. On 11th February 2003 Beck stated that it required a reasonable
time to examine the 11 lever arch files. On 13th February 2003 Norwest
recorded that Beck already had the vast majority of the contents of the 11
lever arch files during the course of the subcontract and set this out in
its letter.
Thereafter Norwest commenced the second adjudication on 17th February
2003.
Beck submitted that Norwests documents, served in 11 lever arch files on
29th January 2003, made it necessary for Beck to have a sufficient and
reasonable period of time to decide what its position was in relation to
those claims before it could be said that a dispute had crystallised.
Justice Forbes held that Becks submission was an unrealistic and wholly
supportable view of the overall facts of the case.
Justice Forbes considered that Becks communication of 11th February 2003
to be disingenuous, given the tone and content of Becks letter of 18th
December 2002. In that letter Beck had put forward its position with regard
to the Issues on which Norwest put its position forward in the 11 lever arch
files sent on 29th January 2003. Justice Forbes held that a dispute came
into existence from 29th January 2003, if not before. Norwest rejected
Becks position as put forward in its December 2002 letter, by the service
on Beck of Norwests position with regard to the various items that remained
outstanding for the purposes of resolving the final account.
Justice Forbes considered that it was pointless to simply look at Becks 11 lever arch files in
isolation. That was to take the 11 lever arch files entirely out of the
factual context in which they appeared. That factual context made it quite
clear that those 11 lever arch files were Norwests response to Becks
asserted position in December 2002 in respect of the Issues. On a simple
view of the facts, the mere service of the lever arch files in the factual
circumstances of the case would be sufficient to give rise to a dispute. It
was quite clear that Norwest was rejecting Becks stated position in its
letter of 18th December 2002 and was putting forward a position of its own.
Justice Forbes observed that as it was, Norwest, very sensibly, agreed to give more time to Beck in
order to consider the matter. That was sensible because, in the event, it
might have been possible to resolve matters by agreement. To say that meant
that there was no dispute was totally at variance with the ordinary meaning
of the word dispute, as used in the English language. Plainly there was a
dispute by the end of January 2003, if not before.
Justice Forbes held that the factual circumstances of the instant case,
when considered in the light of the observations of His Honour Judge Lloyd
in Sindall v Solland plainly satisfied the requirements of a dispute. It was
clear, that a point was reached in February 2003 when the process of
discussion and negotiation had ended and that something was needed to be
decided, namely the correct position with regard to the Issues. Justice
Forbes held that position had been reached as early as the end of January
2003, although it was not necessary for the purposes of the judgment to
state that as a concluded decision. On any view, that position had been
reached by the time Norwests so-called ultimatum of 7th February 2003 had
expired. Accordingly, the declaratory relief Beck sought was dismissed.
Commentary
The decision of Justice Forbes is helpful guidance to both adjudicators
and parties. It is suggested that there is no difference between the
decision of Judge Thornton in Fastrack and the statement of principle of
Judge Lloyd in Sindall and the Court of Appeal in Halki. The problem in all
cases is to identify the end of the process of discussion and negotiation,
and this will vary with the facts. There can be no single test. It is
suggested that two situations need to be considered. First, if there is a
clear rejection of a claim, then a dispute will have crystallised. That was
the position in Beck, where Norwest had given an extensive 11 lever arch
file rejection. A dispute can arise when there has been a bare rejection of
a claim to which there is no discernable answer in fact or law. If on the
other hand there has been no response, then it may be necessary to decide
when the dispute crystallised. Rejection can occur when an opposing party
refuses to answer the claim. In that case a dispute may only arise once the
subject-matter of the claim, issue or other matter had been brought to the
attention of the other party, and that party had the opportunity of
considering and admitting, modifying or rejecting the claim or assertion
Fast Track Contractors Ltd v Morrison Construction Ltd (2000). In
Hitec
Power Protection BV v MCI Worldcom Limited (2002) Judge Seymour held that
there had to be an opportunity for the protagonists each to consider the
position adopted by the other and to formulate arguments of a reasoned kind.
If the parties had agreed that a third party was to give an independent
assessment or evaluation, the common role of the Architect or Engineer under
standard forms for extensions of time for instance, then no dispute can
exist before he had given that decision or the time for doing so had passed
R Durtnell and Sons Ltd v Kaduna Ltd (2003). The problem then is to decide
when a party has had a reasonable opportunity to consider its position. A
robust application of this principle is the decision in
Orange EBS Ltd v ABB
Limited [2003] decided after Beck. What is clear is that there is no special
test for adjudication, but the short timescales involved have focussed the
courts on the detailed definition of "dispute".
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