In an interesting case, the burden of proof was revisited by the courts in further detail.
As always, we followed with interest…
The question of ‘where does the burden of proof lie’ was revisited in this case and the answer seems to be where the law placed it!
Construction contracts are different from many other forms of commercial contracts in that works can take a significant period to complete (often years!).
Therefore, in a bid to ensure the effective delivery of the contract, a third person, for example, an architect, engineer or project manager is appointed to deal with the certification of payments and claims.
Under English construction contracts, adjudication provisions are statutory and; for international construction contracts adjudication clauses are drafted accordingly.
The Adjudicator, has the power to open up, review and revise the decisions of an architect, engineer or project manager and correct a decision.
In principle this allows for disputes to be resolved whilst the contract proceeds and the decision of the adjudicator binds the parties on an interim basis.
It is therefore essential for the parties, the adjudicator or the arbitral tribunal to know where the burden of proof lies.
The introduction of stepped dispute resolution provisions into construction contracts has added an additional level of complexity in this regard and it is for the arbitral tribunal, when considering the dispute to decide who carries the burden of proof.
Where an adjudicator has made a decision in relation to a payment or awarded an extension of time, the arbitral tribunal must consider whether that decision has any effect on the burden of proof.
Further, consideration must be given as to whether the slate is wiped clean and the party claiming time and/or money is obliged to prove its entitlement again.
Recently, the Court of Appeal granted permission for the appeal of a TCC decision in relation to burden of proof findings made by an adjudicator.
The said claim had previously been valued at zero due to lack of evidence and was subsequently allowed to be re-adjudicated with improved evidence.
As can be seen, this raises an important question as to the extent to which burden of proof findings in one adjudication are binding on future adjudicators…
When an adjudicator finds that the burden of proof has not been satisfied, the outcome of the adjudication may be affected in two ways:
- They may decline the relief sought by the Referring Party.
- They may make a positive award or declaration flowing from his finding as to the burden of proof.
Examples of the first kind are cases where an extension of time claim fails due to insufficient evidence.
Accordingly, such claims may be re-adjudicated if the revised claim is sufficiently different from the original, for example; if it is based on different delay events.
So when would this be the case?
Hitachi Zosen Inova (HZI) were employed by SSE to construct a power plant in Yorkshire.
Parts of the works were subcontracted to Sisk. During the course of the works, a payment application was put forward by Sisk, application number 6, for £4.5 million.
Included in this was a claim for £1.1 million for acceleration in relation to the Boiler Hall. This application was rejected by HZI including the claim for acceleration. Subsequently, Sisk referred the dispute to adjudication.
Sisk, in the adjudication, claimed for a “` as to the correct valuation of each of the items in dispute” as well as payment of whatever sum the adjudicator found to be due.
However, the adjudicator’s decision contained a declaration which set out in a schedule the “correct valuation of each of the items in dispute” as well as a monetary award which was significantly less than the amount claimed for by Sisk.
In relation to the acceleration claim, the adjudicator found that the claim itself was valid, but the quantum evidence provided by Sisk was insufficient, and did not satisfy the requirements of the subcontract. Accordingly, the valuation schedule attached to the decision stated that the adjudicator did not have sufficient details to value the works of the Payment Notice 6 and valued it at £nil.
Sisk instigated a further adjudication specifically in relation to the acceleration claim. The subsequent claim relied on the previous adjudication decision as supporting the merits of the claim and submitted much more extensive evidence in relation to quantum. The adjudicator found in Sisk’s favour and ordered a payment of £825,703.11 in respect of the acceleration claim.
HZI challenged this decision on the basis that it ran contrary to the initial decision in valuing the acceleration claim at £nil.
Importantly, this challenge by HZI was rejected by the Technology and Construction Court (TCC) and the TCC granted enforcement, noting that the scope of previous adjudication decisions is to be determined by reference to what an adjudicator actually decided rather than the issues or questions referred to him/her.
It was clear that in this case the adjudicator in the first adjudication had refrained from making a decision as to the valuation of the acceleration claim.
He had determined that no sum was payable for the claim as part of Sisk’s Application No. 6 due to a lack of evidence, although he “did not decide the valuation of [the claim] for any other purposes than in the context of the claim pursuant to Payment Application 6.”
In turn, this case raises difficult questions as to the relevance of burden of proof findings in the interpretation of adjudication decisions.
The decision of the TCC in this case seems difficult to reconcile with the position reached in the Mailbox case. In the Mailbox case, it was made clear by the adjudicator that he was only deciding the contractor’s extension of time defence (to the employer’s claim for liquidated damages) on the basis of three events advanced by the contractor.
It was clear this left open the potential for extensions of time to be claimed subsequently on other grounds.
The court in that case found that the adjudicator’s decision in awarding liquidated damages left no room for extensions of time to be claimed afresh.
HZI have received permission to appeal and it is hoped that the above issues will be clarified by the Court of Appeal.
Key note for Consideration.
For now, parties would be well advised to consider any burden of proof issues prior to commencing an adjudication and give careful thought to any adverse findings which may arise as a result.
If such issues cannot be fixed through further evidence gathering, they can sometimes be addressed through careful drafting of the adjudication papers.