NH International (Caribbean) Ltd v National Insurance Property Development Company Ltd (Trinidad and Tobago)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Neuberger |
| Judgment Date | 06 August 2015 |
| Neutral Citation | [2015] UKPC 37 |
| Date | 06 August 2015 |
| Docket Number | Appeal No 0031 of 2014 and 0032 of 2014 |
| Court | Privy Council |
[2015] UKPC 37
Lord Neuberger
Lord Mance
Lord Clarke
Lord Sumption
Lord Reed
Appeal No 0031 of 2014 and 0032 of 2014
Privy Council
From the Court of Appeal of the Republic of Trinidad and Tobago
Appellant
Alvin Fitzpatrick SC Jason Mootoo
(Instructed by Ward Hadaway)
Respondent
Alan Newman QC Iain Daniels
(Instructed by Sheridans)
Heard on 30 June 2015
These two appeals arise out of two interim, or partial, awards made by an arbitrator, Dr Robert Gaitskell QC ("the Arbitrator"), who was appointed to determine disputes which had arisen out of an agreement ("the Agreement") dated 6 March 2003, under which National Insurance Property Development Company Ltd ("NIPDEC") engaged NH International (Caribbean) Ltd ("NHIC") to construct the new Scarborough Hospital in Tobago.
Following disagreements between the parties, NHIC suspended work on the project in September 2005, and, in November 2006, it purported to exercise its right to determine the Agreement. The parties then referred a number of differences to arbitration pursuant to the terms of the Agreement. The Arbitrator was duly appointed to determine these issues, and in due course, he issued a total of five awards. Two of the issues determined by the Arbitrator were then challenged. The first was his decision, which was contained in his second award, that NHIC was entitled to terminate the Agreement. The second determination which was challenged arose under his third award, and it related to certain financial claims which he had to resolve.
The issues raised by the two appeals are connected, but, in terms of the legal and practical issues which they raise, they are each self-contained. The Board will address the two issues in turn, after setting out the relevant terms of the Agreement.
The Agreement was expressed to be subject to the FIDIC General Conditions of Contract for Construction, First Edition 1999 ("the Conditions"). The first appeal turns on clauses 2.4, 14 and 16 of the Conditions. The second appeal turns on clauses 2.5, 16 and 19 of the Conditions.
Clause 2.4 provided that the Employer, ie NIPDEC, "shall submit within 28 days after receiving any request from the Contractor [ie NHIC], reasonable evidence that financial arrangements have been made and are being maintained which will enable the Employer to pay the Contract Price … in accordance with clause 14". Clause 14 set out the contract price and procedure for payment, including provisions for interim certificates and a final certificate, referred to as "Payment Certificates".
Clause 16.1 entitled the Contractor, after giving 21 days prior notice to the Employer, to "suspend work (or reduce the rate of work) unless and until [it] has received the … reasonable evidence". Clause 16.2 entitled the Contractor to terminate the Agreement if, within 42 days of giving notice under clause 16.1, it had not received the reasonable evidence required by clause 2.4.
Clause 16.3 provided that on termination under clause 16.2, the Contractor should cease all work and leave the site. Clause 16.4 stated that, after termination under clause 16.2, the Employer should, "(a) return the Performance Security to the Contractor", "(b) pay the Contractor in accordance with sub-clause 19.6" and "(c) pay to the Contractor the amount of any loss of profit or other loss or damage sustained …".
Clause 19.6 required the Engineer appointed under the Agreement to "determine the value of the work done and issue a Payment Certificate". The clause went on to provide that the certificate should include "(a) the amounts payable for any work carried out for which a price is stated in the Contract", (b) the costs of certain plant and materials, and (c) any other costs which have been reasonably incurred. Clause 15.3 provided that, "as soon as practicable" after service of a notice of termination, the Engineer should proceed to determine the value of the works.
Clause 2.5 first provided that, if the Employer "considers itself to be entitled to any payment under any Clause of these Conditions or otherwise in connection with the Contract", it should, subject to certain specified exceptions (such as cost of electricity, water or gas or for "other services requested by the Contractor") "give notice and particulars to the Contractor". The clause secondly went on to provide that "[t]he notice shall be given as soon as practicable after the Employer became aware of the event or circumstances giving rise to the claim". Thirdly, clause 2.5 stated that "[t]he particulars shall specify the Clause or other basis of the claim, and shall include substantiation of the amount … to which the Employer considers [it]self to be entitled", that the amount should be assessed by the Engineer, and that it "may be included as a deduction in the Contract Price and Payment Certificates". Fourthly, clause 2.5 ended by stating that the amount so determined "may be included as a deduction in the Contract Price and Payment Certificates" but that the Employer should only be entitled "to set off against or make any deduction from an amount certified in a Payment Certificate, or to otherwise claim against the Contractor, in accordance with this sub-clause".
The primary facts relating to this issue are not in dispute. On 3 September 2004, NHIC issued a request to NIPDEC under clause 2.4. NIPDEC responded on 29 December 2004, enclosing a letter from the Project Administration Unit of the Ministry of Health ("the Ministry"), which advised that the Cabinet had approved additional funding for the project in the sum of $59.1m.
On 28 April 2005, NHIC sent a further request under clause 2.4, which was answered on 5 July 2005 by the Permanent Secretary at the Ministry, Reynold Cooper. Having referred to the fact that the estimated final cost was $286,992,070, Mr Cooper stated that the Ministry "advise without prejudice that funds are available in [this] sum to meet the estimated final cost to completion".
NHIC then wrote on 8 July 2005, expressing concern about the expression "without prejudice" and asking whether there had been Cabinet approval to payment of sums due under the Agreement. No response was received to this request. NHIC then suspended work under the Agreement on 23 September 2005 (having already reduced its rate of work on 23 June 2005).
On 19 October 2006, over a year later, NHIC received a letter from the new Permanent Secretary, Sandra Jones, dated 6 October 2006. After referring to the previous correspondence, Ms Jones stated that the Government "confirm[ed]" that (i) completion of the project "is of the highest priority", (ii) the current estimate for the work was $224,129,801.99, (iii) "these funds are available from the consolidated fund for disbursement to NIPDEC for onward payment to NHIC or for direct payment to NHIC", (iv) "moneys certified or found due to NHIC … will be paid by the Government", and (v) "the Government stands fully behind the project … and will meet the contractual financial requirements for completion of the project".
On 27 October 2006, NHIC wrote to NIPDEC requesting confirmation that Cabinet had approved the funds. No such confirmation was forthcoming and on 3 November 2006, NHIC issued a notice of termination pursuant to clause 16.2. Around this time, the Cabinet accepted a recommendation from Ms Jones that the funds referred to in the letter of 6 October 2006 be provided for completion of the project, and this decision was formally recorded in a note prepared by the Cabinet Secretary on 16 November 2006.
NIPDEC did not accept that the Agreement had been validly terminated, and contended that NHIC had had no right to terminate. However, the parties very sensibly proceeded (in NIPDEC's case, without prejudice to its contention) on the basis that the Agreement had been terminated. Accordingly the Engineer then proceeded to assess the value of the work that had been done up to the date of termination.
A number of issues arose between the parties, and their disputes were referred, in accordance with the terms of the Agreement, to the Arbitrator, who issued a total of five partial awards.
The ultimate question for the Arbitrator in the second award was whether NHIC had been entitled to determine the Agreement under clause 16.2, as it had purported to do on 3 November 2006. It is common ground between the parties that the answer to that question turns on whether, in the light of the letters summarised above, NIPDEC had given "reasonable evidence that financial arrangements have been made and are being maintained which will enable [NIPDEC] to pay the Contract Price … in accordance with clause 14" within clause 2.4.
After hearing and reading evidence and argument on this issue, the Arbitrator decided in his second award, dated 16 April 2007, that the letters of 29 December 2004, 5 July 2005 and 6 October 2006, whether taken together or separately, did not amount to such "reasonable evidence" that "financial arrangements" had been "made and maintained". Accordingly, he concluded that NHIC had been entitled to terminate the Agreement as it had purported to do on 3 November 2006. That decision was upheld by Rajnauth-Lee J, but set aside by the Court of Appeal. The first of the instant two appeals is NHIC's appeal against that decision of the Court of Appeal.
While his second award was being appealed, the Arbitrator went on to entertain submissions as to the amounts due to NHIC, as there...
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