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In our latest update, we review the Technology and Construction Court (TCC) approach in Croda Europe Limited versus Optimus Services Limited , a dispute centered on the interpretation of secondary option W1 of the 2013 NEC3 Professional Services Contract. Option W1 offers a consensual decision-making process for dispute settlement if the project is not covered by the Act on Housing Subsidies, Construction and Regeneration of 1996 as amended (the Building Act).
- Croda has a facility in Hull that manufactures specialty chemicals. Optimus is an engineering and design company and was appointed by Croda in connection with expansion work at the Hull site using an amended 2013 NEC3 Professional Services Contract (the Agreement).
- Due to the nature of the work, the legal case law under the Building Act did not apply to this dispute, but the parties agreed on a consensual case law procedure under Option W1. (Option W2 is applicable when legal case law applies.)
- A dispute arose over the amount due to Optimus, and two decisions followed regarding:
- an estimate of the amount due – the judge ruled in Croda’s favor that Optimus had been overpaid by approximately £ 343,500;
- the correction of certain Optimus invoices and the arrangement that the amount classified as Croda due in the decision, plus VAT and interest, be paid to Croda. Croda was successful again.
In the TCC, Croda tried to enforce the judge’s decision in the second decision.
At the time of the hearing, the following issues emerged as the cause of opposition to Optimus’ enforcement.
- Clause W1.3 (5) of the contract gave the judge the authority to “review and revise any act or inaction by the employer in relation to the dispute” but did not give the authority (or jurisdiction) to revise an invoice.
- The contract did not provide for negative interim payments and therefore the judge did not have the power to award the award in the second decision on the payment of the overpaid amount to Croda.
Clause W1.3 (5)
The full text of W1.3 (5) is as follows:
“The judge can
- Reviewing and revising actions or inactivity of the employer in connection with the dispute and amendment of an offer that was treated as accepted
- Take the initiative to establish the facts and the law involved in the dispute.
- instruct a party to provide further information related to the dispute within a specified period; and
- instruct a party to take any other action it deems necessary to arrive at its decision, and to do so within a specified time. “
Optimus asserted that the expert was not responsible beyond the powers expressly specified in W1.3 (5) and was therefore not authorized to revise Optimus’ invoice.
The wording of W2.3 (4) of option W2 is identical to W1.3 (5) in option W1.
Croda’s position was that a uniform approach for similar or identical formulations in options W1 and W2 of this NEC3 type of contract was necessary for the proper drafting of the contract. The judge agreed, which means that Optimus failed on point 1. With respect to W2.3 (4), the powers listed cannot be an exhaustive list as in order to comply with the Building Act, the parties must be able to refer disputes under W2.3 (4) of the contract for decision.
If Optimus’ position were correct, there would be a marked discrepancy between the effect of W1 and W2, as W2.3 (4) would list the powers available to the judge without limiting the powers of the judge, while W1.3 (5) would do this was “a closed list of powers”. The judge stated that this was “an unlikely and uncommercial interpretation of the contract”.
Another consideration was that the approach taken by Optimus would mean:
- If a dispute falls under W1.3 (5), a party must resolve before arbitration. but
- No decision is available for any other dispute under the contract and a party must go directly to an arbitration tribunal.
The judge did not consider this a “reasonable construction” of W1 and “it just isn’t what it says” – he referred to Clause W1.1 which provides: “[a] Disputes within or in connection with this contract will be addressed and decided by the judge. “
Optimus argued that in submitting a negative interim payment from Optimus to Croda, the judge “fundamentally rewrote the agreement made by the parties,” which was outside of his jurisdiction.
The TCC rejected this proposal. Even if this is true (if the contract does not provide for negative interim payments), it is a contract that was open to the judge (i.e., a legal matter) and therefore not a fair reason to oppose enforcement.
In any case, had Optimus waived the right to challenge jurisdiction?
The TCC advocated this in each case by confirming the payment of the arbitrator’s fees and at the same time requesting the judge to correct his decision under the slip rule
without Optimus reserved his position to file a legal challenge and waived the right to challenge the enforcement of the decision.
Although the view of the TCC in this decision is not unexpected, there are still relatively few judgments on NEC contract types. The clear assessment of the correct construction of the wording, which requires a uniform approach to similar or identical formulations in W1 and W2, can lead to greater use of the W1 option in the future.
Read the original article on GowlingWLG.com
The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.
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