Legal

Vinci v Beumer: Baggage delays lead to £9.7m payout

16 August 2018 | By Theresa Mohammed and Matthew Watson

Gatwick Airport (Image: Dreamstime)

The £9.7m High Court award to Vinci was the latest twist in its long-running Gatwick Airport dispute with subcontractor Beumer. Theresa Mohammed and Matthew Watson explain how the decision was reached.

Theresa Mohammed

Matthew Watson

The latest judgment in the series of disputes between Vinci Construction UK and its subcontractor Beumer Group UK was handed down in July. The main contractor was seeking to to enforce the adjudicator's decision in the seventh adjudication between the parties over a Gatwick Airport project. The High Court ruled in Vinci’s favour, awarding the firm £9.7m.

It provides a timely reminder of the importance of the timing of applications under the contract, and of the early raising and clear stating of any claims for breaches of natural justice. 

Vinci appointed Beumer as its sub-contractor on 8 November 2012 under an amended NEC3 subcontract to carry out specialist works on the baggage handling system at the new Pier 1 at the South Terminal of Gatwick Airport.

The subcontract provided for sectional completion. Due to delays with two of these, on 30 August 2017, the liquidated damages provisions related to the section five works and section six works were found to be enforceable by Mrs Justice O'Farrell.

Following that judgment, Vinci issued a payment certificate claiming £9,671,500 in liquidated and ascertained damages (LADs). But Beumer refused to pay and by 30 November 2017 its payment of £9.7m was overdue. Vinci referred the dispute to adjudication.

Six previous adjudications

By this stage, the two parties had already engaged in a total of six adjudications under the subcontract, all of which were commenced by Beumer. 

In the seventh, adjudicator Mr Brian Eggleston – who had also been the adjudicator on adjudications four to six – dismissed Beumer's extension of time claims and awarded Vinci the full amount plus interest.

Beumer again failed to pay and resisted enforcement for breach of natural justice on three grounds:

Beumer argued that in adjudications four and six, Mr Eggleston had decided certain contract instructions entitled the subcontractor to additional monetary compensation, and this meant he could not now deny the firm an extension of time for the same contract instructions. But in adjudication seven, Mr Eggleston refused to award an extension of time to Beumer because the claims were "all time-barred".

Mr Jonathan Acton-Davis QC, sitting as Deputy High Court Judge, held that additional money claims and extension of time claims were not the same dispute – especially as one related to substance and the other to timing – and therefore there was no breach of natural justice.

Inconsistent decision argument

Beumer used the argument that the adjudicator failed to give adequate reasons for his decision, in conjunction with the inconsistent decision argument. The failure of the inconsistent decision argument, together with the stated reasons of time-barred extension of time claims meant the judge quickly found that there were adequate reasons given by the adjudicator for his decision.

In the earlier adjudication proceedings between the parties, Beumer was criticised for running inconsistent arguments against Vinci, on the one hand, and against its subcontractor Daifuku Logan, on the other. Beumer cited those criticisms as support for disclosure of the Balfour Beatty adjudication documents because it believed Vinci was now running an inconsistent case. 

The Balfour Beatty adjudication took place in the autumn of 2016 in front of Mr Eggleston and Beumer contended that this created a conflict of interest and his failure to resign amounted to a breach of natural justice. The judge disagreed for three reasons. Firstly, Beumer made no objections to Mr Eggleston as adjudicator in adjudications four to six, despite knowing about the Balfour Beatty adjudication. Secondly, Beumer failed to make the legal case for disclosure, and thirdly, the evidence available did not show any inconsistency. Therefore, the claim of breach of natural justice failed on all three fronts.

It is vital that any extension of time claims are made in accordance with the terms of the contract. There is little sympathy for the contractor who misses a deadline. Also, it is not sufficient to arrive at enforcement proceedings with a complaint about a breach of natural justice without having addressed it substantively in the adjudication.

Theresa Mohammed is a partner and Matthew Watson a solicitor at Trowers & Hamlins.

Leave a comment