Substance is key in Notifications of Claims

July 22, 2012 · Posted in Legal · Comment 

The main job during the execution of the agreement as “Engineer” (under the GCC) or “Principle Agent” (within the JBCC) demands frequent decisions and judgements around the actions on location. This function will also be often undervalued and will attract major liabilities.

Experts in the building and engineering industry are often appointed as the Engineer or Principle Agent. It is required of the specialist accomplishing this critical function to be au fait not only with the terms of the contract, but the execution thereof.

What are the implications of inadequate decision making by the Engineer or Principle Agent under these types of building agreements? One particular instance in which the courts discussed the yardstick with which the Engineer or Principle Agent is to be assessed is inside the case of Hawkins & Osborn (South) (Pty) Ltd vs Enviroserve Waste Management. The decision not only sets the current benchmark in this regard, but additionally sounds a reminder to Engineers and Principle Agents to behave in a sensible manner when conducting themselves as the Employer’s consultant on location.

In cases like this, as in a number of other scenarios in the building and engineering sector, the Employer (Enviroserve Waste Management) concluded a verbal contract with the Engineer. The Engineer was employed to monitor and administer a number of contract works.

The Employer then signed a written agreement with a Service provider to perform digging on top of a certain site. The written agreement between the Employer as well as the Service provider included the General Conditions of Contract for Works of Civil Engineering Construction – 6th edition.

The service provider raised a disagreement in relation to a “notification” of likely claims communicated to the Engineer within a letter. The Engineer did however not value the letter as suitable notice. The results of the Engineer’s final decision would be a deadlock between the Employer and the Contractor which had to be sorted out by an Arbitrator. The Arbitrator determined that the letter was without a doubt appropriate notice and that the builder was eligible to claim as advised therein.

As a result of the Arbitrator’s ruling, the Employer had to pay the Contractor’s claim, but then claimed damages for breach of contract from the Engineer in the High Court. The Employer based its claim on an allegation that the Engineer breached the contract by neglecting to construe the Contractor’s letter as an most appropriate notice of the intent to claim payment for further work as considered in clause 50(1) within the GCC.

The main court established that no violation of agreement had happened as the Contractor’s letter did not constitute proper notice as considered in clause 50(1) within the GCC.

Nonetheless, it had been held by the Supreme Court of Appeal that:

“…there were absolutely no reason why the notice contemplated in GCC 50(1) cannot be in the form of a letter granted the letter was framed as to convey unequivocally towards the addressee that the writer was invoking, or depending upon, the conditions of the agreement which provided for the giving of notice. It could do so expressly or by insinuation. In the present case, the contents of the last paragraph of the Contractor’s letter was so closely connected with the substance of clause 50(1) that it completely satisfied that standard. The letter furnished the info required by clause 50(1) (a) and (b).”

The Contractor’s letter did comply with the conditions of the contract for the reason that it included the information that was required to represent a notification as needed by clause 50(1) of the GCC. The technical strategy used by the Engineer in working with the “notification” by the Contractor was not considered to be reasonable by the Court of Appeal. On the flip side, the Court discovered that the Engineer’s behavior in this regard wasn’t satisfactory as assessed against the norm of the “reasonable engineer”.

The letter therefore constituted a notice which any sensible engineer would’ve construed as such. The Engineer’s inability to do this therefore constituted a violation of the Engineer’s duty of care and, thus the agreement with the Employer. The Engineer was found liable to the Employer for the amount due and payable to the Contractor under the award of the Arbitrator in the initial settlement between the Employer and the Builder.

Focussing exclusively on particular legal fields, Dirk is able to make early and accurate assessment of merits and manage legal disputes effectively. His specialist practice areas include construction law and engineering law, insurance law, property law, medical law and product liability law.

Adjudication Introduced

February 28, 2012 · Posted in Education · Comment 

From the government white paper on Producing an Natural environment for Reconstruction Expansion and Progress inside the Building Industry in 1999, it was argued that the standard mechanisms and methods for last dispute resolution (typically arbitration or litigation) are much too high priced and time consuming.

In March 2001 federal government printed a draft code of practice, entitled “Adjudication in Engineering and Construction Contracts in South Africa”, proposing a move towards fast and reasonably priced dispute resolution mechanisms in said contracts.

The Development Sector Development Board (“CIDB”) issued a draft Practice Manual for public remark in August 2003. This practice guidebook, printed on the back of the white paper, also advocates using adjudication as the cost and time effective alternative dispute resolution mechanism to arbitration and litigation.The world Bank also advocates that adjudication processes be utilized on jobs which it funds.

The Primary Construction Arrangement in the Joint Building Contracts Committee (“JBCC”) published in March 2004, integrated adjudication in the local development industry even further.

Adjudication – The general Rules

Whilst adjudication is presently being introduced locally, several members of the construction industry remain unclear concerning what adjudication is and the way it can be applied. Despite the fact that the terms and conditions of adjudication are agreement specific, adjudication can, in broad phrases, be defined as becoming: “… an accelerated and cost effective sort of dispute resolution. The result is really a conclusion by a 3rd party intermediary that is closing and binding about the events in dispute, until the choice is reviewed by litigation and arbitration.”

The method and Principles of Adjudication

Any dispute arising from, or even in connection using the agreement should be effective at getting referred to adjudication supplied the essential terms and conditions are integrated while in the contract at the ideal time. While the procedural specifications for referral of disputes and conducting the adjudication will change from agreement to agreement, one particular has the capacity to distinguish specified underlying rules:

* A party referring a dispute to adjudication should do so in crafting, will have to submit the dispute inside the time period stated from the contract with needed details, failing which it forfeits the right to dispute the make a difference.

* The terms and procedures of adjudication are agreed and detailed inside the contract, which results in an informed, transparent and speedy choice. If successfully referred, every single social gathering must be given a reasonable chance to condition their case (with no hearing), to be aware of what the case from it really is and also to generally be placed owning all evidence acquired by the adjudicator.

* Adjudicated disputes ought to be settled within the contract period because the agreement itself kinds the basis for enforcing the decision of the adjudicator. As a standard rule, all disputes are to be resolved within a 42 day interval of becoming referred to adjudication.

* The position associated with an adjudicator is just not that relating to an arbitrator. The adjudicator is tasked with settlement of your dispute in the contractual legal rights and obligations between the parties.

* Adjudicators must base their choices on the subject matter of the dispute at hand only and must keep away from conducting hearings to solve disputes. Adjudicators should really stay clear of person contact with either party and could not discuss issues using a party without having informing the opposite party of the dialogue as well as end result thereof.

* It really is necessary to effective adjudication that adjudicators achieve a stability between an inquisitorial method and adherence for the principles of organic justice in order to deal with the parties quite. An adjudicator may not for example get ready his own critical route analysis and draw any conclusions as a result, with out affording the parties an opportunity of making submissions about the accuracy thereof.

* Adjudicators have to answer all concerns set to them and are commonly required to deliver written factors for their choices.

* It goes without stating that adjudication can only triumph should the adjudicator is impartial and doesn’t have (or seem to acquire) any romantic relationship with any of the parties nor possess an curiosity during the outcome of your adjudication.

* The adjudicator should really also possess the ideal, following notifying the get-togethers, to talk about legal and specialized industry experts for guidance in parts in which the adjudicator recognizes that he will not be adequately equipped. This provision is aimed at making sure that justice is served, even supposing the adjudicator may well not personally possess every one of the techniques needed to resolve a make any difference.

* The decision of the adjudicator is final and binding on the parties, unless of course it is actually reviewed by either arbitration or litigation. The choice will become enforceable quickly, no matter if the dispute is to be referred for final resolution or not.

* Final resolution of the dispute may, in certain situations, only be referred to arbitration or litigation following a “cooling down” interval has elapsed letting the functions to create this choice following very careful consideration of the merits of their circumstance.

Can Adjudication Work?

Can adjudication work? You can only form a view on this with due regard of other jurisdictions where by adjudication were released, experimented with and examined. From the Uk, adjudication grew to become mandatory on all primary contracts and sub-contracts in 1998, from the introduction of the Housing Grants Development Regeneration Act (1996). From your subsequent statistics (dependent on somewhere around 4 850 adjudications up to September 2001) it’s obvious that adjudication can offer a fast summary treatment for resolving disputes:

* 74% of disputes referred resulted in a decision, the balance being settled or abandoned;

* 76% of referrals ended up completed in less than forty hours;

* 73% of disputes involved non-payment; other important matters were variations, decline / expense and details of legislation;

* 81% of adjudications involved a referral by a party lower within the construction chain;

* Almost fifty % of all referrals were by sub-contractors versus key contractors; and

* 68% of decisions were in favour with the referring party.

There can thus be little doubt that adjudication has had a marked influence over the construction industry inside the United kingdom.

The significant proportion of adjudications relating to “non-payment” difficulties does appear to reveal that where disputes tend to be more sophisticated, such as negligent layout or construction, and so are prone to affect even more contracts (these kinds of as insurance policies), parties may well be additional reluctant to resolve issues through adjudication.

An additional point of concern is the instant enforceability of selections. A party facing an adverse award might for example be obliged to generate payment to some party in intense money problem. Should the choice of the adjudicator then be decided as incorrect by a later forum, the party in the wrong end of the adjudicator’s decision then runs the threat that the recovery of monies paid may perhaps no longer be probable.

Adjudication Within the Upcoming

It truly is distinct that adjudication can, and possibly will, perform a significant position in the regional construction business being an more choice dispute resolution mechanism. A good working knowledge of processes, procedures and pitfalls underneath the many standard types of building contracts will be a pre-requisite in long term negotiations of contracts.

Adhering to the procedural prerequisites for declaring, conducting and settlement of disputes will demand some amount of talent and specialisation to properly protect a party’s legal rights under the contract.

The procedural and certain requirements of the variety of the conventional development agreements, such as FIDIC, BIFSA, JBCC and NEC will type the subject matter of a collection of foreseeable future publications.

The Construction and Engineering Regulation staff has the knowledge to help consumers involved in disputes where adjudication will be the selected dispute resolution mechanism.

Dirk is an attorney specialising in product liability and property law. He fills the void in the vast legal services market by offering specialist legal advice to specific industries.