REUTERS | Tobias Schwarz

An appeal or just reinforcing the adjudicator’s decision?

I read the Court of Appeal of Northern Ireland’s decision in Northern Ireland Housing Executive v Healthy Buildings (Ireland) Ltd recently. The appeal was brought by the Housing Executive, who thought the High Court judge was wrong in law to uphold an adjudicator’s decision (which found in favour of Healthy Buildings). The Court of Appeal did not agree with the Housing Executive and upheld the first instance decision, which, in turn, meant the court supported the adjudicator’s findings.

Northern Ireland Housing Executive v Healthy Buildings (Ireland) Ltd

As you may be unfamiliar with this case, here are a few facts.

Healthy Buildings successfully tendered for the contract to carry out the asbestos management of the Housing Executive’s housing stock in and around Belfast. This involved asbestos surveys and the taking of samples to check for the presence of asbestos. The contract was worth in excess of £1.1 million and was subject to a pricing schedule and detailed specification.

In early January 2013, prior to formally executing their NEC3 Professional Services Contract, the parties attended a meeting. At all stages, Healthy Buildings argued that it was at this meeting that it was instructed to change the scope of its work (which would involve taking more samples and significantly more costs). It argued that this instruction was subsequently confirmed in the meeting minutes when they were circulated later that month. However, although the scope of works had changed in January 2013, the Housing Executive did nothing further and Healthy Buildings did not give its compensation event notification until May 2013. An issue then arose as to whether that notification was valid and/or time barred.

An adjudicator was asked to consider the matter and he found that:

  • There was a compensation event arising under the contract as the Housing Executive had issued an instruction affecting the scope of works.
  • Healthy Buildings had not given its compensation event notice out of time, so the matter was not time barred under clause 61 of NEC3.

The Housing Executive then applied to the High Court for declaratory relief, arguing that the adjudicator was wrong in law. However, the court did not agree. It held that clause 61.1 of NEC3 effectively requires a two-stage process, that the employer notifies the contractor of a compensation event by giving an instruction, followed by written notice of the compensation event. Here there had been an instruction, but not a compensation event notification.

That meant Healthy Building’s May 2013 compensation event notice was given under clause 61.3. It was given because the Housing Executive had “not notified the event to the Contractor” and could not be time barred (the eight weeks referred to at the end of clause 61 had not started to run). The court said its interpretation of the contract did not “produce such an absurd or irrational outcome as to compel a different construction”.

What does this mean?

I thought the Court of Appeal’s judgment was interesting for a number of reasons:

  • It analysed the “notifying compensation events” clause (clause 61) of the NEC3 professional services contract.
  • It demonstrates that adjudicators can grapple successfully with complex legal arguments, including the meaning of the NEC3 (which seldom appears in the law reports).
  • It indicates that parties do appeal adjudicators’ decisions, regardless of the procedure used and the name it is given.

On this last point, I am unsure of the specifics of Northern Ireland’s court process and whether it is the same as the CPR Part 8 process we are familiar with here. The judgment does refer to a declaratory relief application, so perhaps it is. Either way, whatever you call it, this judgment demonstrates that what happened in practice was, effectively, an appeal because the Housing Executive believed the adjudicator got the law wrong. I have written about Part 8 “appeals” before and, as there seems to be an increase in the use of Part 8 applications here, I am sure I will be writing about them again.

I will leave you with one final thought. Would the parties here have been better to proceed straight to court to get a declaration rather than starting with the adjudicator? Even though he was proved to have been right in his findings, it took two additional court processes to arrive at that point.

Turkeys, Christmas, I don’t know…

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