In British Waterways Board (July 2001) Crt of Session the parties had been in discussions for some months on a
claim for some 4.9 million which had not resulted in resolution. The
contract appeared to be an NEC standard form in which Clause 90 had been
amended by Addendum Y(UK)2. Adjudication had been commenced which British
Waterways considered was in disregard to the terms of the procedure in
Clause 90. Accordingly British Waterways Board sought interim orders from
the Court in a petition for judicial review.
There was no dispute between the parties on the approach the Court had to
take. The Court had to be satisfied before granting any such interim orders
that the petitioners had a prima facie case. If the petitioners
showed that there was a case to try then the Court had to decide on the
basis of presentations by the Parties where the balance of convenience lay.
The main issue was whether or not there was a dispute which could be sent
to adjudication under Section 108 of the Housing Grants, Construction and
Regeneration Act 1996. Having heard submissions Lord McCluskey held that
there were substantial arguments, supported by authority, on both sides and
that there was an issue to try.
The matter to be decided therefore was where the balance of convenience
lay.
British Waterways argued that the contractors were acting in disregard of
the contract, namely Clause 90 as inserted into the contract by Addendum Y
(UK) 2. It was held that whether or not the reference to adjudication was in
disregard of the contract did not affect the balance of convenience.
The second argument by British Waterways Board was that there was little,
if any, prejudice to the contractor in not proceeding with an adjudication
at that stage. The dispute was essentially one about money. The contract
itself contained provisions about interest payable if payment were to be
made late. It was submitted that, if the procedures under the substituted
Clause 90 were followed, the maximum delay would not be likely to exceed
four weeks. In these circumstances it was submitted there was no material
prejudice to the contractor in a four weeks delay. In the context of a claim
for 4.9 million the sum of 9,400 in interest was not large enough to be
a material consideration.
The third argument by British Waterways Board was that if the
adjudication were to go ahead at that stage it would be necessary for the
parties to go to the expense of arguing the "dispute" and
presenting the arguments of parties to the adjudicator. Such expenditure
would be avoided if the disgreement were settled bv negotiation. No figures
were put upon this expense, and, in particular, no figure was submitted to
enable a comparison between such expense and the figure of 9,400,
representing lost interest.
The contractor submitted that the history of the dispute illustrated that
the parties were unmistakably at issue on a matter of dispute arising out of
the contract, but more importantly for the purposes of the balance of
convenience argument, that the parties had engaged in discussions over a
period of months and that these discussions had not resulted in a successful
resolution of the issue. It was submitted that the contractor faced a
substantial loss if the resolution of the dispute was not achieved at an
early date, because the overdraft rate was between 3 and 4% above base rate.
The rate of interest on any sum to be awarded in an adjudication was only 1%
above base rate. Accordingly the loss even over four weeks was calculable at
the sum already mentioned of 9,400.
Lord McCluskey held that in examining the prejudice that British
Waterways Board would suffer if the adjudication was allowed to continue,
they would simply be given yet another four weeks before the matter would
have to be adjudicated upon. It was not clear that parties would be able to
make any more use of those four weeks to reach an agreement that eluded them
in the last five months or so. No quantification of any financial loss to
British waterways Board had been offered to the Court.
Lord McCluskey held that in these circumstances the balance of
convenience favoured the refusal of the motions which had been placed before
the Court. Both the 1996 Act and the substituted Clause 90 both envisage the
desirability of proceeding to a speedy resolution of matters in issue
between the parties. If the matter were not already in issue, it could be
put in issue without delay, but the resolution thereof would be delayed for
some four weeks or thereby. The parties having had some months to
investigate and consider their respective positions and to research matters.
The extra cost of putting these matters in an appropriate form before an
adjudicator was likely to be not very great. No estimate was submitted of
what that cost was. Accordingly it was held that the balance of convenience
favoured the refusal of the motions which had been made.
Lord McCluskey declined to grant the motions.
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