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Changing the scope is a Compensation Event whether you realise it or not

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When the Northern Ireland Housing Executive had a meeting May 2013 “clarified” to Health Buildings Limited that asbestosis surveys were to be carried out in every room it arose they did not think they were issuing Compensation Event merely clarifying the scope of the works under an NEC3 Professional Services Contract.  They were incorrect.

This matter was adjudicated on 14 August 2013 heard before the High Court in Northern Ireland who supported the Adjudicator’s Decision on 24 October 2013 and heard by the Court of Appeal who again fully supported the Adjudicator and the first instance Judge manned down their decision on 13 February 2014.

The case clarifies a number of points regarding the NEC Form of Contract on which case remains very limited.

Clause 61.3 and time bars

Clause 61.1 requires the Employer to notify Compensation Events in relation to matters which arise for him.  Clause 61.3 requires the Contractor to notify Compensation Events within eight weeks of becoming aware of them or losing their entitlement to additional time and money unless the Employer should have notified the event.  In this case the Consultant had not notified Compensation Event within eight weeks of the meeting and the Employer, not believing that it was a Compensation Event, refused to notify the Compensation Event.  The Employer then relied on the matter being time barred.  In the Court of Appeal the NIHE suggested that the proper commercial interpretation of the Clause 61.3 read with Clause 61.1 was that the Consultant could not “keep in his back pocket” instructions but rather was obliged to notify that within the eight week period.  The Court disagreed.  The Employer was relying on an exclusion clause to escape liability and therefore any ambiguity in that clause must be interpreted against the Employer and to give effect to the arguments raised by the NIHE additional wording would have to be added into Clause 61.1 which is not present.

Are minuted oral instructions compliant with Clause 13.1?

The Judge in first instance found that they were and in the Court of Appeal the parties accepted that the instruction complied with the Contract.  Therefore seems that minuting of instructions under the main forms of NEC which the communication must be in a way which can be “read, copied and recorded” complies with the Contract.

Conclusion

This case provides a number of points which are useful:

1.    The speed at which the Courts in Northern Ireland were able to deal with this matter;

2.   Handing down a Court of Appeals Decision within six months of the Adjudicator’s Award is laudable.  In Northern Ireland the Courts do not have the specialised technology or construction division as in England and the Court of Appeal time is under pressure.  However, this demonstrates that the system in Northern Ireland is prepared to bring these matters to a conclusion rapidly;

3.         In an unamended NEC3 Contract the Employer cannot rely on the other party (the Consultant in this case or the Contractor in a Standard ECC Contract) failing to confirm Compensation Events from instructions they have received.  This provides considerable support to those that believe the Employer should be proactive in notifying their own Compensation Events and assessing changes positively.  Had this matter been early warned and dealt with at a risk reduction meeting in which it was properly debated by the parties whether it was a Compensation Event or not and settled then the NIHE and Health Buildings would both have saved themselves much trouble and legal expense.

4.    Communications under Clause 13.1 include things minuted at meetings.  This is an important clarification of a point which comes up frequently;

5.   Finally, this is another example of the Courts giving effect to the NEC Form of Contract and further undermines arguments that the Form of Contract is in some way compatible with the proper administration of the law.

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