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When is a dispute a dispute?

17 August 2016

It is inevitable, considering the many features of a construction project, and the expensive risks associated therewith, that disagreements will arise between contractors, employers and their agents. The way these disagreements are managed will determine how easily they may be overcome. More and more often, parties are turning to adjudication for this.

In order for an adjudicator to have jurisdiction, however, a dispute must actually exist between the parties. Determining whether a dispute is, in fact, a dispute which is ripe for adjudication is more complex than it first appears.

It is typical that in construction projects parties will raise issues which will be discussed at length, usually over a protracted period of time. The question is, when do these issues crystallise into disputes which are capable of being referred to adjudication.

A number of construction contracts provide for the issuing of a notice of dispute which signifies that at least one of the parties to the contract believes that a dispute has come into existence. The issuing of such notice does not, however, automatically mean that a dispute exists and further interrogation may be required.

Where the term “dispute” is not defined, regard must be had to the common law. The definition of a dispute has been thoroughly considered in the United Kingdom and the applicable case law is of persuasive value.

In the English case of Halki Shipping Corp v Sopex Oils [1998] 1 W.L.R. 726 it was held that a “dispute” means any claim of which the opposing party has been notified, which that party has refused to admit or pay.

In the English case of AMEC Civil Engineering Limited v Secretary of State for Transport [2005] B.L.R. 227, [2005] 1 W.L.R. 2339 the Court of Appeal approved the following seven propositions:

  • The word dispute should be given its normal meaning;
  • Judicial decisions on particular situations where the word “dispute” was in dispute, produce helpful guidance;
  • The mere fact that one party notifies the other of a claim does not automatically give rise to a dispute. A dispute will only arise if the claim is not admitted;
  • The circumstances under which a claim is not admitted are numerous and variable;
  • The period of time for which a party may remain silent before a dispute is to be inferred depends upon the facts of the case and the contractual structure;
  • If a deadline is imposed by a party for responding to a claim, that deadline, although a relevant consideration, does not automatically curtail what would otherwise be a reasonable time for responding; and
  • If the claim is so vague that it cannot be reasonably responded to, neither silence by the other party nor an express non-admission is likely to give rise to a dispute for the purposes of adjudication.

Author: Michelle Kerr, Senior Associate