Case Summary: MW High Tech Projects UK Ltd v Balfour Beatty Kilpatrick Ltd [2020] EWHC 1413 (TCC) (05 June 2020)

This judgement of Mrs Justice O’Farrell rehearses some important arguments concerning the crystallisation of construction disputes.

What is Crystallisation?

It is well-established that, before a notice of adjudication can be served, a crystallised dispute or difference must exist between the parties. Jackson J first set out these guidelines in AMEC v Secretary of State for Transport [2004] EWHC 2339 (TCC) and these were further developed by Akenhead J in Cantillon v Urvasco [2008] EWHC 282 (TCC).

For a notice of adjudication to be made, you are required to:

  • Set out your claim in writing (and send this to the intended respondent);
  • Ensure the claim is easily understood and clear;
  • Clearly detail what is being sought;
  • Highlight the basis for your claim

Where, therefore, a notice of adjudication introduces a dispute where one did not exist previously, the notice will be deemed to be premature. Whether or not a dispute has crystallised will always be fact specific (Walter Lilly v Mackay [2012] EWHC 1773 (TCC)), meaning that the court is entitled to take into account the parties’ knowledge and understanding of the material events giving rise to these notices. If the dispute is not crystallised, then that party may have no right to issue an adjudication.

Crystallisation of a dispute is extremely important as the Courts can refuse to enforce decisions from adjudications if the notice to adjudicate has been served before a dispute has actually crystallised

Facts of the case

The claim arose out of a sub-contract (“the Contract”) between the claimant (“MW”) and the defendant (“BBK”) pursuant to which MW engaged BBK to carry out mechanical and electrical services in relation to the construction of a new laboratory building at Dansom Lane, Hull for a contract price of £23,370,077. The defendant, Balfour Beatty Kilpatrick (BBK) served five notices of delay between March 2018 and February 2019, as required by clause 2.17 of the parties’ JCT Design and Build Sub-contract. The claimant, MW, did not respond to these notices or request further particulars to support the extension of time (EOT) claimed within the 16-week period specified in clause 2.18.

Delays occurred to the works and in August 2019 BBK referred to adjudication its claim for an EOT. On 10 October 2019 the adjudicator published his decision, awarding BBK the full EOT sought and ordering MW to pay the adjudicator’s fees.

Arguments

MW argued that the adjudicator did not have jurisdiction to decide the dispute and the adjudication decision was invalid. Balfour Beatty Kilpatrick (BBK) had served a new delay report (“the Goodman Report”) on MW eight days before commencing the adjudication. This introduced a new relevant event giving rise to 71 out of the 282 days total extension of time claimed and a new critical delay analysis. Under the Contract MW was entitled to up to 16 weeks to assess such a claim; no dispute could crystallise until a reasonable time had elapsed for MW to consider the claim and either accept or reject it. Eight days fell far short of the agreed contractual allowance or a reasonable time necessary to assess the Goodman Report. Accordingly, MW contended that no dispute had crystallised when BBK sought to refer the claim to adjudication.

BBK’s case is that the adjudicator had jurisdiction to determine the dispute and the adjudication decision was valid. BBK gave MW notice of delay and claimed an extension of time by the letters between March 2018and February 2019, in compliance with the contractual requirements. By letter dated 30 July 2019, BBK provided MW with the Goodman Report in support of its claims and invited MW to grant the extension of time within seven days. MW failed to respond to the letter. Accordingly, on 7 August 2019 BBK served its Notice of Adjudication. BKK contended that at the time that the adjudication was commenced, there was a crystallised dispute as to BBK’s entitlement to an extension of time, and the service of additional evidence in support of BBK’s claim did not affect the existence of that dispute or amount to a new claim.

Judgement

O’Farrell J considered clauses 2.17 and 2.18 of the JCT sub-contract. She highlighted that it was possible that by providing additional and supplementary material, a party might restart the 16-week period in clause 2.18, but it was not inevitable and it would depend on whether there had been a material change to the claim originally notified. O’Farrell held that the Goodman report was not a fresh notification. It was not materially different to the claim advanced previously; it was expert analysis to support that claim. The court held that the claimant was in breach of clause 2.18 by not notifying the defendant of its decision in respect of each delay notice and the last 16-week period ran from the date of the February 2019 letter. Therefore, the court granted the following declarations:

i) The adjudicator had jurisdiction to determine the dispute referred to him by the defendant on 7 August 2019.
ii) The adjudicator’s decision dated 10 October 2019 is valid and binding on the parties.
iii) The claimant shall pay to the defendant the sum of £37,251.66, being the amount paid by the defendant to the adjudicator in respect of his fees.

Implications

The provision of further information in relation to extension of time claims under the standard JCT contracts, does not necessarily restart the clock for crystallisation of a dispute. The Courts will look at the exact nature of the further information in deciding if it materially changed the original dispute and amounted to a new claim.

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