Dispute and FIDIC DAB

The Brief

A Dutch international electrical sub-contractor client engaged JEPSON CONSULT on a Tank Terminal and associated Pipeline project in Rotterdam Port which was nearing completion and was incurring significant losses. The subcontract works included the engineering, design, supply, installation and pre-commissioning of the electrical and instrumentation and the supply only of the motor operated valves. The form of contract was the FIDIC Silver Book and the Main Contractor was from Poland. The dispute was complex and involved a multiplicity of issues including scope arguments, variations, defects, testing, taking over, delay damages, acceleration and delay and disruption. At the time of JEPSON CONSULT appointment the subcontract works had incurred substantial delay, disruption and acceleration costs and the client’s consultant QS had compiled and submitted a global claim for circa EUROS 5,000,000 which was rejected by the contractor. The contractor counterclaimed for Delay Damages and asserted the sub-contractor had been substantially overpaid. JEPSON CONSULT was commissioned to produce a Report on the merits of the case and provide strategic advice going forward. JEPSON CONSULT worked from the client’s offices to access and study all the necessary documentation that was available and interview senior project personnel in order to produce a comprehensive report. It was apparent the clients global contractual claim as presented would likely fail. However, the record revealed many acts of the contractor that contributed to the clients EUROS 5,000,000 plus overspend could only be described as reprehensible including inter-alia starving the sub-contractor of necessary main contract programming information (to conceal the contractors own delays) making it extremely difficult for the subcontractor to co-ordinate and manage the subcontract works and also prevented the subcontractor from planning its works resulting in ad-hoc working and considerable inefficiency and delay costs.

JEPSON CONSULT concluded in its Report that the client was entitled to a substantial additional payment taking account of all issues and the amount paid to date and should seek advice from a Dutch Construction lawyer on making a claim for damages based on the reprehensible conduct of the contractor whose actions were out with the terms of the contract and Dutch law requirements to act reasonably and with fairness. JEPSON CONSULT also recommended the variation account be further particularised with explanatory narratives, instructions and documentary evidence and a report produced on the reasons for failure of the Motor Operated Valves (MOV) which provided the contractor with another reason to withhold monies from Interim Payment Applications.

JEPSON CONSULT working from the clients offices produced a Damages Claim with supporting evidence under the guidance of the client’s Dutch lawyer, A Defence Submission to the Delay Damages claim, addressed the deficiencies in the variation account and scope issues with the clients personnel and prepared a report on liability for failure of the MOVs with the aid of a technical specialist brought in by the client and drafted replies to contractual letters from the contractor on this and other subjects. The MOVs were Supply Only to the contractor who installed them in the pipelines and failure occurred when put into use. The evidence indicated that the damage to the valves internally occurred after the valves had been installed in the pipelines. Despite submitting all this information, the contractor did not engage in constructive discussions and maintained his stance that the subcontractor had been overpaid. The client therefore commenced DAB proceedings. The Dutch lawyer went on record and JEPSON CONSULT assisted in preparation of submissions to the DAB including the witness statements. In another reprehensible act the contractor then attempted to belatedly call in the Performance Bond in the Dutch courts. With the aid of the Defence Submission to the Delay Damages claim the client’s Dutch lawyers successfully defended the call on the Performance Bond and shortly after commercial negotiations commenced between the parties and a satisfactory negotiated settlement was achieved before the DAB proceedings concluded.

The key to success in this difficult and complex case included:

1.      JEPSON CONSULT reporting that the merits of the case were in favour of the client being paid substantial additional monies and strategic advice on how to proceed to recover those monies including representing the claim on a different basis.

2.      JEPSON CONSULT delving into the detail of the available records and mastering the facts and arguments and producing clear and concise written submissions.

3.      JEPSON CONSULT working closely with the client’s appointed Dutch lawyer.

JEPSON CONSULT has a proven track record in resolving difficult and complex cases aided by “out of the box” thinking. As one satisfied client put it:

“We employ Mr Jepson for his wisdom”

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