The client instructed Samuel Okoronkwo Jr. in relation to a potential dispute arising from a construction subcontract entered into with a main contractor concerning drylining works carried out on a large residential development project.
The client was engaged as a drylining subcontractor under a JCT form of contract with contractor design obligations. The client’s position was that it did not have overall design responsibility and that it was required to carry out works based upon the architect’s specification, providing assistance where necessary.
The contract works commenced in January 2020 with an anticipated duration of approximately 58 weeks. The project was subsequently affected by delays, including disruption arising from the Covid-19 pandemic, variations, design changes and delays in receiving access to working areas. The client’s position was that the main contractor had sought to attribute delays to Covid-19, whereas the client considered that a significant proportion of the delay was caused by changes, late instructions, incomplete areas being provided and other matters outside of the client’s control.
The client explained that the works involved multiple buildings and approximately 550 apartments. The client was responsible for carrying out the drylining works, including the installation of internal walls, skimming and associated works. The client maintained that the programme was disrupted due to areas not being ready when provided, partial releases of work areas, variations and delays in approvals.
The client maintained detailed records including site photographs, progress records, labour records, resource information, site instructions, look-ahead programmes, progress reports and email correspondence. The client’s case was that these documents demonstrated the cause and effect of the disruption and the additional costs incurred as a result.
The client had sought an extension of time from the main contractor, which had been acknowledged, but the client maintained that the associated prolongation costs had not been paid. The client’s position was that it had incurred significant additional costs due to extended site management, labour and resources required to complete the works.
The client estimated that its prolongation and disruption claim was approximately £1.4 million. The client had previously received settlement offers from the main contractor in the region of £985,000 and £995,000 in relation to the final account, both of which had been rejected as the client considered that it was entitled to a higher sum.
The client was seeking advice prior to commencing adjudication proceedings, particularly in relation to the merits of the claim, the impact of contractual notification requirements and the appropriate procedure for advancing the claim.
The principal issue was whether the client had a viable claim for additional payment arising from prolongation, disruption, variations and additional works carried out during the project.
Counsel considered the importance of establishing clear causation between the actions of the main contractor and the delays suffered by the client. Counsel advised that the claim would need to demonstrate the original contractual programme, the works that were expected to be completed, the events which caused disruption, the effect of those events on the programme and the resulting additional costs incurred.
A further issue concerned the contractual notification procedure and the main contractor’s potential argument that the client had failed to provide notices in accordance with the subcontract provisions. The client acknowledged that the notification procedure had not been followed strictly in accordance with the contract.
Counsel considered that although contractual notice provisions were relevant, there was no automatic principle that a party would lose its entitlement to payment solely because formal notice requirements had not been complied with. Counsel advised that the client’s position would be strengthened by demonstrating that there had been ongoing communications, including site instructions, progress reports, meetings and email correspondence which provided notice of the relevant events and disruption.
Counsel also considered the issue of design responsibility and whether the client could be held responsible for delays relating to specialist ceiling works. The client maintained that delays arose from late approvals, redesigns and delays associated with the manufacturer selected by the main contractor. Counsel advised that the client would need to demonstrate that any alleged delay was caused by matters outside of its control.
Counsel further considered the valuation of the claim, including the additional management costs, labour costs, prolongation expenses and any countercharges raised by the main contractor. Counsel advised that detailed evidence would be required to support the additional costs claimed and to distinguish genuine losses from matters already included within the contract price.
Counsel advised that the client appeared to have a potentially arguable claim against the main contractor and that there were sufficient issues to justify further consideration of adjudication proceedings. Counsel advised that the claim would need to be reorganised and presented in a clear manner by establishing the contractual baseline, identifying the delaying events, demonstrating the resulting impact and providing evidence of the financial consequences.
Counsel advised that the immediate focus should be on reviewing the contractual programme, the subcontract terms, variations, site instructions and correspondence in order to prepare a detailed chronology of events. Counsel advised that the claim should be structured around cause, effect and valuation, rather than relying solely on the existence of delay.
Counsel advised that particular attention should be given to the client’s resource records, including records of labour, subcontractor involvement, site management costs and additional resources required to complete the works. These documents would assist in demonstrating the difference between the intended resources under the original programme and those actually required due to disruption.
Counsel further advised that the client should provide the contract documentation so that the relevant clauses relied upon by the main contractor could be reviewed, particularly those relating to notification requirements, extensions of time and entitlement to additional costs.
In relation to the potential adjudication process, Counsel advised that the client should prepare the claim documentation before issuing a notice of adjudication. Counsel explained that following service of a notice, the adjudication process would proceed on a strict timetable, with the adjudicator appointed shortly thereafter and the referral notice required within the relevant period.
Counsel advised that the claim should incorporate the evidence already available, including photographs, correspondence, progress records, programme analysis and variation information. Counsel noted that the existing material appeared to contain the necessary ingredients of a claim but required restructuring to present a coherent narrative demonstrating the main contractor’s responsibility for the delays and additional costs.
Counsel advised that the client should consider whether to seek recovery through adjudication or continue negotiations, particularly given the previous settlement offers made by the main contractor. However, Counsel noted that commencing adjudication could place pressure on the main contractor to properly engage with the claim.
Counsel confirmed that he would be able to assist further once the client had provided the relevant contract documents, programme information, resource records and supporting evidence, with a view to preparing the claim and advising on the appropriate next steps.
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