Dispute Avoidance/Adjudication Board (DAABs): Dos and Don’ts

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Dispute Avoidance/Adjudication Board (DAABs): Dos and Don’ts

9th April 2024

Dr. Franco Mastrandrea

Partner

francomastrandrea@hka.com

T: +44 (0) 7884 436 537

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Introduction and Context

This short guide to DAABs in construction is an elaboration upon a presentation made by the author at the Riyadh International Disputes Week 2024.^[1]More specifically, the RICS/HKA Event on 7 March 2024, Session 1: The Beginning of the Journey – Conflict Avoidance, Dispute Boards and the Use of early ‘Technical’ Dispute Resolvers.

What is a DAAB in construction?

A Dispute Avoidance/Adjudication Board (“DAAB”) is part of a multi-tiered dispute resolution procedure.

A Dispute Adjudication Board (“DAB”) was first introduced by FIDIC into its 1999 suite of contracts. It was designed to promote the prompt payment to the Contractor. It was intended to provide a rapid decision, temporarily binding on the Parties unless and until it was varied or overturned by a final dispute resolution process (typically in the international marketplace, arbitration).

This was in no sense new. In the United Kingdom, statutory adjudication had been introduced in 1996^[2]By the Housing Grants, Construction and Regeneration Act, 1996 (‘the HGCRA’) (as amended by Part 8 of the Local Democracy, Economic Development and Construction Act, 2009)., had by 1999 already been given its first major backing by the English courts^[3]Macob Civil Engineering Ltd. v. Morrison Construction Ltd. [1999] BLR 93, in which, Dyson J (as he then was), said: ‘The intention of Parliament in enacting the Act was plain. It was to introduce a … Continue reading, and was – despite initial scepticism (primarily by the legal profession, which saw little future in it and appeared intent largely to ignore it) – in due course to prove profoundly successful.^[4]There is a separate and serious shortcoming associated with enforceability in connection with international projects where no statutory adjudication applies to the contract in question and the losing … Continue reading

In the FIDIC 2017 suite of contracts, the DAAB replaced the DAB. It seems that FIDIC had decided that dispute avoidance should become a primary focus. Sub-Clause 21.3 of the Red Book provides:

‘If the Parties so agree, they may jointly request… the DAAB to provide assistance and/or informally discuss and attempt to resolve any issue or disagreement that may have arisen between them during the performance of the Contract. If the DAAB becomes aware of an issue or disagreement it may invite the Parties to make such a joint request…

The Parties are not bound to act on any advice, and the DAAB shall not be bound in any future Dispute resolution process or decision by any views or advice given during the informal assistance process….’ (Emphasis supplied).

First, questions arise over scope: what assistance, informal advice, advice and/or views, and how/in what form should they be expressed? These matters are developed in more detail below.

Second, a question may arise over consequences.

Thus, suppose that an issue has arisen over the quality of the work, such that leaks appear in the partially completed works during periods of inclement weather. The Employer contends that the Contractor has failed to carry out the work specified properly (and thus points to an allegation of poor workmanship), whilst the Contractor says that the issue is one of poor detailing or building tolerances not been properly specified by the Employer (and so points to an issue of poor design). Asked for advice, the Dispute Advisory Board suggests that changes be made to the remainder of the works. The Parties act on that advice and defer arguments over responsibility for the originally leaking work to another day. The Contractor thereafter removes the offending work and continues with the work in accordance with the advice received from the Dispute Advisory Board. Whilst there is some improvement, the leaks are not entirely removed.

Although it might be said that the Parties are not bound by the assistance, advice and/or views received from the Dispute Advisory Board they may well feel aggrieved – having followed it. Worse still, one of them is likely to feel even more dissatisfied if in due course, in discharge of its adjudicatory function, the Board concludes that it is not bound by its own earlier advice or views (as Sub-Clause 21.3 permits it to do). Indeed, if the additional expenses incurred to rectify the work once more are deemed attributable to one of the Parties due to its initial shortcomings, tensions could easily exacerbate.

These grievances are likely to be harboured notwithstanding the immunity afforded to the DAAB by way of Sub-Clause 8(c) of the standard FIDIC General Conditions of Dispute Avoidance/Adjudication Agreement which removes liability for all but the most egregious of failings by the DAAB.^[5]I.e. fraud, gross negligence, deliberate default or reckless conduct.

DAABs Dos

Pausing there, it seems to the author that the Dispute Avoidance Board can/should usefully do the following things:

Be aware of and familiarise itself with:

progress on the project against programme. More particularly, the Dispute Avoidance Board should familiarise itself with:
(a) project delays experienced and the likely impact on the date for completion.
(b) localised delays and the likely impact on performance.
(c) the alleged/likely causes and extent of those delays.
(d) the Parties’ proposals if any to mitigate/recover those delays including any re-programming, acceleration, the introduction of additional resources
disruption to the progress of works and the likely causes and extent of such disruption
issues over quality of work and the Parties’ proposals to remedy those defects
the extent of variations and their potential valuation

Express views/advise the Parties on its interpretation/and anticipated likely application of the contract provisions to particular scenarios, which the Parties can consider/adopt in seeking to agree an incipient dispute..

DAABs Don’ts

By contrast, it seems to me ill-advised for the Parties to ask the Dispute Avoidance Board (and if so asked I suggest that the Board should reject) to volunteer, suggest, or otherwise involve itself in/offer advice on/make proposals on the following:

prequalifying, tendering, or awarding any service contracts, subcontracts, or supply contracts,
planning the Works,
procuring the Works,
quality assuring/quality controlling the Works,
recording progress of the Works,
varying the Works,
preparing budgets, estimates, interim payments, final accounts and/or closing out final accounts for any of the Works,
determining whether the Works or any part thereof are complete, are ready for or have satisfied any tests, or are ready for taking over,
providing/approving design for the Works or any part thereof,
health and safety matters,
otherwise designing/administering/managing the Works.

Thus, it would be inappropriate the author suggests, for the DAAB – in the absence of the Parties’ express agreement as to allocation of risk and responsibility as between them – to offer advice on/make proposals on/promote for example:

(a) the introduction of a consultant Project Manager when the original contractual arrangements for the Works did not envisage the employment or presence of such a Project Manager,

(b) on a management contracting or construction management original contractual arrangement for the Works the repackaging of work,

The reasons for these suggested strictures are that

these are matters for which the Parties should retain the contractually allocated risk and responsibility, which should not be removed, diluted, or confused in any way by the Dispute Advisory Board’s attempts to assist, and
the Dispute Advisory Board will have nothing approaching the Parties’ own knowledge and grasp of the particular project detail.

Useful analogies in the Board’s involvement in this advisory role and its approach to discharging it seem to the author to be to the Peer Review process associated with the production of an expert report, or the Reality Testing role of a party’s case by a Mediator. Assistance, informal advice, advice and/or views should, it is suggested, be limited to prompts to the Parties’ own deliberations, such as raising relevant questions – for example: ‘have the Parties addressed/explored/considered…’

Dispute Adjudication Board Dos

By way of preliminary, it should be noted that FIDIC 2017 provides generally that if either party is dissatisfied with the Engineer’s determination it must give a Notice of Dissatisfaction in the required form within 28 days after receiving Notice of the determination. Failing this, it will be deemed to have accepted that determination as final and binding (Sub-Clause 3.7.5).

It is suggested that the DAB should provide timely interim or final decisions/declarations by applying the interpretations/applications that it may previously have shared with the Parties, or adjusted in responses to their feedback, typically on:

defects claims
(a) are there such defects?
(b) which of the Parties is responsible for the defects?
(c) how should they be evaluated?
variations claims and their evaluation: typically will the evaluation be value or cost driven?
prolongation claims and their evaluation: typically this will involve the proper identification and valuation of project time-sensitive costs.
localised delay claims and their evaluation: typically this will involve the proper identification of localised time-sensitive costs.
disruption claims and their evaluation: typically this will involve locating efficiency that would have been achieved absent the disruption and efficiency achieved consequent upon the other party’s interference.
acceleration claims and their evaluation: typically this will involve elements of both delay and disruption and (challengingly) incremental costing.
the identification and removal of duplication of recovery – a commonplace and recurring issue.

Dispute Adjudication Board Don’ts

Drawing largely on the experience from the UK law on adjudication, it is suggested that Dispute Adjudication Boards should not:

proceed in the absence of jurisdiction, or in excess of it.^[6]See, for example, Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358, per Chadwick LJ, at [52].
fail to make decisions within the (statutorily or contractually) stipulated period(s) for so doing.^[7]See, for example, AC Yule & Son Ltd v Speedwell Roofing & Cladding Ltd [2007] EWHC 1360 (TCC), holding at [6] that, in order to be valid, an adjudicator’s decision must be completed … Continue reading
proceed with bias.^[8]See, for example, AZ v BY [2023] EWHC 2388 (TCC), in which Constable J held, at [20], that the important question was whether the deployment of the without prejudice material gave rise to a question … Continue reading
fail to decide all significant matters referred.^[9]See, for example, Dawnus Construction Holdings Ltd v Marsh Life Ltd [2017] EWHC 1066 (TCC).
otherwise act in breach of the rules of natural justice.^[10]See, for example, Ridge v Baldwin (No 1) [1963] UKHL 2.
fail to satisfy any other contractually stipulated requirements (to the extent that such requirements are not in contravention of any statutory adjudication requirements that may apply).^[11]Thus, see in the UK the requirements of section 108 (5) of the HGCRA, providing: ‘If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the … Continue reading

About the Author

Franco Mastrandrea is a Chartered Quantity Surveyor and Chartered Arbitrator with over 40 years of experience in the construction industry. He has acted as expert on more than 50 international project management, delay and quantum-related disputes.

Contact us to enquire about our market-leading expert services.

References[+]

References
↑1	More specifically, the RICS/HKA Event on 7 March 2024, Session 1: The Beginning of the Journey – Conflict Avoidance, Dispute Boards and the Use of early ‘Technical’ Dispute Resolvers.
↑2	By the Housing Grants, Construction and Regeneration Act, 1996 (‘the HGCRA’) (as amended by Part 8 of the Local Democracy, Economic Development and Construction Act, 2009).
↑3	Macob Civil Engineering Ltd. v. Morrison Construction Ltd. [1999] BLR 93, in which, Dyson J (as he then was), said: ‘The intention of Parliament in enacting the Act was plain. It was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis, and requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement’.
↑4	There is a separate and serious shortcoming associated with enforceability in connection with international projects where no statutory adjudication applies to the contract in question and the losing paying party in the adjudication fails (or more often with impunity, refuses) to implement the DAB decision. In those circumstances, enforcement can currently be achieved only through the New York Convention (if it has relevantly been acceded to). This means in turn that an arbitration award in its favour has first to be obtained by the winning party, which is then obliged to issue Convention enforcement proceedings, thereby undermining the unique advantage of speed heralded by the protagonists of adjudication.
↑5	I.e. fraud, gross negligence, deliberate default or reckless conduct.
↑6	See, for example, Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358, per Chadwick LJ, at [52].
↑7	See, for example, AC Yule & Son Ltd v Speedwell Roofing & Cladding Ltd [2007] EWHC 1360 (TCC), holding at [6] that, in order to be valid, an adjudicator’s decision must be completed within this period.
↑8	See, for example, AZ v BY [2023] EWHC 2388 (TCC), in which Constable J held, at [20], that the important question was whether the deployment of the without prejudice material gave rise to a question mark over the decision, in the sense of an objective legitimate fear of partiality.
↑9	See, for example, Dawnus Construction Holdings Ltd v Marsh Life Ltd [2017] EWHC 1066 (TCC).
↑10	See, for example, Ridge v Baldwin (No 1) [1963] UKHL 2.
↑11	Thus, see in the UK the requirements of section 108 (5) of the HGCRA, providing: ‘If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply.’

Design considerations for Internal Fire Protection – an Architect’s perspective

Article

Design considerations for Internal Fire Protection – an Architect’s perspective

8th April 2024

Magdalena Prus

Associate Technical Director

magdalenaprus@hka.com

+44 20 7618 1200

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As first published in Fire Protection Association Journal, March 2024

Introduction

Internal fire protection elements, including passive and active fire protection measures, are vital in providing fire safety for the occupants of a building in the event of a fire. Effective fire protection measures not only ensure an adequate standard of life safety, but also provide a level of protection to property that includes:

the protection of building fabric and content;
the preservation of business continuity; and
the protection of heritage and environment assets.

All aspects of a building’s lifecycle, including design, construction, and maintenance, are equally important in providing fire-safe buildings. This is reflected in the most recent fire safety reforms under the Building Safety Act 2022. The Gateway regime required for Higher Risk Buildings, which includes high-rise residential developments,^[1]Buildings meeting the height threshold of 18m or more or having seven or more storeys. provides a strengthened regulatory framework during the design, construction, and occupation of the building.

Designers play a critical role in ensuring that buildings are equipped with adequate fire protection systems and features. In order to achieve a comprehensive and holistic approach to fire safety, various factors need to be considered from regulatory compliance to human behaviour in emergency situations.

This article explores key considerations for the implementation of internal fire protection measures within buildings from the perspective of an architect, with a particular focus on Passive Fire Protection (“PFP”). It also considers the connection between fire protection and business continuity, emphasising the need for proactive planning and integration of fire safety measures into overall risk management strategies.

Setting out requirements

PFP measures play an important role in the event of a fire by (amongst other things) limiting the spread and effects of fire and smoke, assisting in fire rescue operations, and protecting escape routes. The most common examples of PFP measures include:

compartment walls and floors;
fire-resisting construction elements (such as fire-rated partitions, doors and glazing);
fire-stopping seals to gaps and penetrations through fire-resisting elements;
cavity barriers within concealed voids; and
structural fire protection.

The relevant regulations and guidance governing internal fire protection in England are included in the Building Regulations 2010 (as amended in 2022) (“the Building Regulations”), and Approved Document Part B Volumes 1 and 2, 2019 edition (with 2020 and 2022 amendments) (“ADB”). ADB sets out “practical examples and solutions on how to achieve compliance for some of the more common building situations”,^[2]Approved Document B Volume 2: Buildings other than dwellings, 2019 edition, incorporating 2020 and 2022 amendments, PDF, pg.5. but in unusual, non-standard, and/or more complex situations, there may be a need for alternative methods of demonstrating compliance with the ‘functional’ Requirements of the Building Regulations, including a fire safety engineering approach.

The primary aim of the Building Regulations is “to ensure a reasonable standard of life safety in a fire”.^[3]Approved Document B Volume 2: Buildings other than dwellings, 2019 edition, incorporating 2020 and 2022 amendments, PDF, para.0.7, pg.12. ADB states that “the protection of property, including the building itself, often requires additional measures [and] Insurers usually set higher standards before accepting the insurance risk”.^[4]Approved Document B Volume 2: Buildings other than dwellings, 2019 edition, incorporating 2020 and 2022 amendments, PDF, para.0.7, pg.12.) Whilst the aspect of a building’s design relating to insurance is not mandatory, in certain circumstances a project can demand more demanding requirements than the life safety standards set out in the Building Regulations and ADB. For example, in historic buildings, secure archiving facilities, data centres, cultural institutions (art galleries and museums), or industrial/ commercial sites, in order to minimise damage to the heritage building fabric, and/or to reduce the impact of a fire on the contents (historical collections, equipment and the like) and/or business continuity.

In those circumstances, it is important to note that “provisions solely for life safety are unlikely to provide the full level protection to buildings and property in a fully developed fire scenario”.^[5]BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, pg.19. Guidance and publications have been prepared to assist designers/ architects involved in projects where ‘higher’ best practice standards and framework are required, including BS 9999: 2017 ‘Fire safety in the design, management and use of buildings: Code of practice’ (“BS 9999”) or ‘The LPC Design Guide for the Fire Protection of Buildings: A code of practice for the protection of business’ (“the LPC Design Guide”). The above publications are clear, however, that if there is a conflict between the ‘fire safety’ and ‘business-led’ requirements, the safety of the occupants must take precedence.

Business continuity

The impact of fire incidents on business operation and continuity can be severe, leading to loss of reputation and customers, financial, legal, and regulatory penalties, or closure of business. BS 9999 states that “the primary method for examining the potential for property and business loss should be a risk assessment… to provide a link between the provisions for life safety and those for property protection and business continuity”.^[6]BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, paras.A.1 and A.2, PDF pg.271. In other words, the risk assessment process involves assessing the inherent risks, determining the objectives for property protection, and identifying criteria/controls required to keep the risk at a level that is acceptable to the client/client’s insurer. The process should be undertaken by either the owner/occupier (as self-assessment), a suitably competent member of the design team, an insurer’s fire specialist, or a fire safety engineer.^[7]BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, para.A.3, PDF pg.272.

BS 9999 and the LPC Guide provide details of the risk assessment process and list the following aspects of the business that should be considered:^[8]‘The LPC Design Guide for the Fire Protection of Buildings. A code of practice for the protection of business’, Section 1.4.2 ‘The risk assessment process’, PDF, pg.11.

“occupancy”: the building’s usage, layout and processes;
“estimated values at risk”: building structures and content;
“surroundings”: building’s type and proximity to other sites;
“fire protection”: augmentations to fire protection systems; and
“security”: site requirement.

Whilst there may be minimal scope for an architect during the risk assessment process, the collated information and identified strategies should form part of a Project Brief to inform the architectural design of internal fire protection at later stages of the project.

Design considerations for Internal Fire Protection

The requirements and strategies for the project should be decided at an early stage of the design process. The LPC Design Guide recommends “early and close” communications between the client, designers, and insurer, to provide “the opportunity of discussing and developing the most cost-effective passive and active fire protection measures appropriate to the specific property and business protection needs”.^[9]‘The LPC Design Guide for the Fire Protection of Buildings. A code of practice for the protection of business’, Section 1.3 ‘Risk management considerations’, PDF, pg.9. The purpose of early liaison is to ensure proper coordination between all parties and stakeholders involved in the design decision-making process. This also allows for any additional objectives that go beyond life safety to be identified and agreed upon with the client.

On a typical project, a fire safety strategy report is produced which “should include the key assumptions and conditions that underpin the design”.^[10][1] BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, para.7.2, pg.50. The next step involves translating the agreed requirements and standards into ‘physical’ fire protection proposals by designing and specifying products and systems, which when installed correctly, would meet those requirements/standards.^[11]The proposals are typically recorded in the scope of work documents, drawings and written specifications, either a performance / output based specification setting out the required performance or a … Continue reading BS 9999 sets out the following key points for a designer to consider as part of the design process:-^[12]BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, para.7.2, pg.50.

Reviewing procurement options, including roles and responsibilities of the key parties. By way of an example, in a ‘traditional’ arrangement, an architect / designer is likely to be involved throughout the project (from design to completion), whereas if a ‘Design and Build’ procurement is adopted, the building is typically delivered by the Contractor and its design team, based on the Employer’s Requirements (“ERs”) / performance-based specification set out by the Client.
Understanding the building lifecycle issues, beyond design and construction, such as the need for maintenance. This would include a reasonable allowance for the fire protection elements to be properly inspected, tested, maintained, repaired and / or replaced without compromising the recommended fire performance.
Ensuring that specified products and systems are appropriate for the end-use of the building, including durability issues, and that they have appropriate test reports demonstrating their fitness for the proposed application.
Ensuring that the proposed fire-resistance periods and criteria are appropriate. For example, different fire-resistance criteria apply to a structural steel member that becomes part of the compartment wall than to a steel element which is only required to maintain its loadbearing function.
Addressing the detailing and buildability of various fire protection elements so they correctly interact with each other and with the other construction elements (services, structure and the like) once installed. This would include the interface and junction arrangements between different specialist trades, including the allowance for damage and repairs during the installation of the adjacent elements.
Ensuring that there is an appropriate level of interaction and coordination between different specialists sub-contractors, and that their roles and responsibilities are clearly defined and understood.

Conclusion

Identifying the appropriate fire protection requirements at an early stage of the project is an important part of the design development. This includes mandatory fire safety and, where required, the protection of property/business continuity. Clearly defined requirements and strategies will allow the designer to implement adequate internal fire protection measures having regard to all three aspects of the building’s life; design, construction, and maintenance.

About the Author

Magdalena Prus is a Chartered Architect with over 12 years’ experience and holds a Master’s Degree in Construction Law and Dispute Resolution from King’s College, London. In her role as an Expert Witness / Forensic Architect, Magdalena has been involved in the analysis of a wide range of technical issues in adjudication and litigation proceedings, relating to residential and commercial buildings, schools, hotels, hospitals and car park structures across the UK.

HKA Services

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We collaborate with various stakeholders including owners, operators, contractors, subcontractors, law firms and government agencies, tailoring our services to meet their individual requirements.

Contact us to enquire about our market-leading expert services.

References[+]

References
↑1	Buildings meeting the height threshold of 18m or more or having seven or more storeys.
↑2	Approved Document B Volume 2: Buildings other than dwellings, 2019 edition, incorporating 2020 and 2022 amendments, PDF, pg.5.
↑3	Approved Document B Volume 2: Buildings other than dwellings, 2019 edition, incorporating 2020 and 2022 amendments, PDF, para.0.7, pg.12.
↑4	Approved Document B Volume 2: Buildings other than dwellings, 2019 edition, incorporating 2020 and 2022 amendments, PDF, para.0.7, pg.12.
↑5	BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, pg.19.
↑6	BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, paras.A.1 and A.2, PDF pg.271.
↑7	BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, para.A.3, PDF pg.272.
↑8	‘The LPC Design Guide for the Fire Protection of Buildings. A code of practice for the protection of business’, Section 1.4.2 ‘The risk assessment process’, PDF, pg.11.
↑9	‘The LPC Design Guide for the Fire Protection of Buildings. A code of practice for the protection of business’, Section 1.3 ‘Risk management considerations’, PDF, pg.9.
↑10	[1] BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, para.7.2, pg.50.
↑11	The proposals are typically recorded in the scope of work documents, drawings and written specifications, either a performance / output based specification setting out the required performance or a prescriptive specification identifying a specific product / system.
↑12	BS 9999: 2017 ‘Fire safety in the design, management and use of buildings – Code of practice’, PDF, para.7.2, pg.50.

Procedural considerations of being an Expert Witness

Article

Procedural considerations of being an Expert Witness

19th March 2024

Michael Tonkin

Partner

michaeltonkin@hka.com

+971 4 337 2145

Expert Profile

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Igor Corelj

Principal

igorcorelj@hka.com

+971 4 337 2145

Expert Profile

In the first of a forthcoming series of articles considering the ‘procedural aspects and challenges of being an expert witness in international arbitration’, HKA Quantum Expert and Arbitrator Michael Tonkin and Quantum Expert Igor Corelj focus on the effective delivery of expert witness evidence.

Part 1 – Effective delivery of expert witness evidence – the Experts’ view

Much has been written about expert witnesses in terms of:

the good/bad/ugly;
how to get the best from your expert/s; and
the best ways of receiving expert evidence.^[1]Redefining the role and value of Expert Evidence – Professor Doug Jones AO RFD CIArb FRI Arb

The authors of this paper (Michael Tonkin^[2]Michael Tonkin is a Partner and Quantum Expert based in HKA’s Dubai office. Michael has acted as a lead expert on around 65 occasions and has been appointed arbitrator on over 65 matters. Michael … Continue reading and Igor Corelj^[3]Igor Corelj is a Principal and Quantum Expert based in HKA’s Dubai office. Igor has acted as a lead expert on 15 occasions and in more than 25 complex engineering and construction arbitrations. … Continue reading) are both experienced expert witnesses with a combined experience in excess of 50 years in the international construction industry. Together they have shared their thoughts on this important topic, having also canvassed views from other expert witnesses, instructing solicitors, clients and arbitrators.^[4]i.e. the users of arbitration

One of the challenges with the effectiveness of the process of receiving expert witness evidence is that there is no singular professional body that regulates expert evidence,^[5]Chartered Surveyors are regulated by the RICS, see Practice Statement “Surveyors Acting as Expert Witnesses, 4^th Edition” but the authors are not aware of any other similar regulations and so different expert witnesses (despite sharing the same areas of expertise) may have a different understanding as to how to deliver expert witness evidence and, with particular relevance for this article, how to engage in a joint expert witness process. The purpose of this article is not to suggest that that the tribunal should fill that gap and “regulate” expert witnesses, rather how to achieve effective delivery of evidence from the expert witnesses.

Training, experience, background and culture will all play a part in why expert witnesses may have a different understanding of how to present expert witness evidence, however in the authors’ experience, this difference in understanding can have a major impact on the expert witness process, leading to frustration from the tribunal, parties, counsel, and indeed the expert witnesses themselves.

Direct, honest and professional communication in-person or by video conferencing^[6]For the sake of clarity, not by email or telephone should be the most effective way of mitigating future problems, and the authors suggest that this is the case both between the expert witnesses and between the expert witnesses and tribunals.

As to communication between the expert witnesses, such communication should not be difficult because the expert witnesses should be working to the same standard – that being that their opinions should be the same irrespective of which side has instructed them.^[7]The authors cannot stress enough the simple and fundamental question that expert witnesses should be asking themselves when forming an opinion: would my opinion be the same if I was instructed by the … Continue reading Whether or not this is the case is a separate discussion, but the principle is clear.

As to communication between the expert witnesses and the tribunal, the authors suggest that ongoing and active communication between the tribunal and the expert witnesses is effective and helpful because the expert witnesses have an overriding duty to assist the tribunal with issues within their areas of expertise. Lack of such ongoing and active communication may result in the tribunal getting evidence they did not expect or require and which may then lead tribunals to appoint a further expert witness, who only then gets clear instruction.

Some tribunals may feel that they should not need to directly communicate with expert witnesses ahead of any evidentiary hearing as to what the expert witnesses need to do, however, and consequential of the points raised above, the view of the authors is that communication is usually very helpful and, in some circumstances, may be essential. Furthermore, the earlier the communication, the better.

For context, where two experienced and highly professional counsel have a difference in views on a procedural matter and they cannot agree, naturally they turn to the tribunal for direction, and so it is logical in the authors’ view that expert witnesses should also be able to do the same. Ongoing communication between the tribunal and the expert witnesses can proactively facilitate better expert witness evidence, save costs, reduce bottlenecks, and should as a minimum be considered.

The purpose of this paper is to propose a solution to some of the challenges that expert witnesses face which might not be visible to tribunals. The expert witnesses’ overriding duty is generally accepted to be to the tribunal,^[8]May not be express in all jurisdictions. and so the more we can do to share the challenges we face, the more tribunals will be able to “help us help them”.

The authors are of the view that the following process could increase the potential for an effective expert witness process.

1. Identify and establish with the parties, the issues of which it is considered expert witness evidence to be appropriate.^[9]For example the Protocol for the Use Party-Appointed Expert Witnesses in International Arbitration, Preamble 3. Ciarb.

It is extremely beneficial for all who are involved in an arbitration to understand what issues will require expert witness evidence and so which disciplines of expert witnesses will be required.

The benefits of early engagement of expert witnesses in construction arbitrations are often written about^[10]For example, The MENA Leading Arbitrators’ Guide to International Arbitration, p238-239 and so are not set out again here. Notwithstanding, the authors note that the Ciarb protocol promotes early engagement of expert witnesses.^[11]Protocol for the Use Party-Appointed Expert Witnesses in International Arbitration, Preamble 3. Ciarb.

In the authors’ view, the process of early appointment of expert witnesses also needs to robustly establish the sufficient availability of expert witnesses^[12]Availability equally applies to the lead or named experts as well as, where used, their assistants and their commitment to the procedural timetable.^[13]The MENA Leading Arbitrators’ Guide to International Arbitration, p229 If the appointed expert witnesses are not sufficiently available, then the entire expert witness process can fail as a result.^[14]This will be the topic of a future article

2. Early and ongoing engagement between the tribunal and expert witnesses

The authors agree that regular engagement by the tribunal with expert witnesses is one way in which a tribunal can support the expert witness process and identify any challenges as they happen. Although there is certainly an increase in such early tribunal engagement, in the authors’ experience this is not the norm, and we would suggest given the benefits that it should be at least common/more common.

At an early stage of the arbitration process, expert witnesses should be trying to agree broad categories of documents that will be required for their work, but also setting out in which form these documents should be presented by the parties. When this work is done jointly by the expert witnesses, it can provide a significant saving in terms of time and cost.

The expert witnesses should also start at an early stage of the arbitration process to explore issues at a methodology/principle level. This should prevent the parties from producing unnecessary records, and instead focus on producing only those records that are necessary (on both the agreed and disagreed methodologies/principles). This should reduce the time and cost associated with identification of relevant records during document production.

In the authors’ view, the expert witnesses should be required to report regularly to the tribunal, setting out: their progress, what can be done in terms of issue of expert evidence and by when, along with any challenges the expert witnesses jointly face (assuming there is no sensible resolution between them). A short report to the tribunal or a virtual Case Management Conference are easily arranged and are cost effective. The authors have experienced both of these (as expert witnesses and arbitrator) and find them to be of considerable benefit to the arbitral process.

Where matters such as sampling of large volumes of documents arise, it is helpful for the expert witnesses to agree suitable methodologies before they proceed, and to the extent they cannot agree, they could raise this to the tribunal who may wish to intervene. Early intervention by a tribunal (after consultation with the Parties for reasons of due process) might prevent ships passing in the night and ultimately being presented with two analyses that are poles apart simply down to the sampling methodology, with the result of increased costs. The decision on methodology will need to be made at some point and the authors have seen early intervention by the tribunal on sampling prove this point.

3. Post Statement of Defence and Counterclaim (if any) establish within each discipline an initial common list of questions/key issues

It is at this stage in the arbitration proceedings that the parties should have crystalised the issue/s in dispute between them, and therefore the expert witnesses ought to be able to prepare an initial common list of questions/issues upon which they will need to opine.^[15]This is separate to the benefits of early involved by the parties of their appointed expert witnesses

The expert witnesses should prepare an initial list of questions (detailed or otherwise to suit the circumstances) which may change or develop as the case progresses and share these with the parties/tribunal.

This should assist the parties and tribunal with some initial thoughts as to whether the expert witnesses have the same understanding of the issues as them. Put simply, this is a ‘quality control’ mechanism which ensures that expert witnesses do not address issues which none of the parties contends.

4. Expert witness services prior to issue of any Expert witness reports

The authors agree that ideally the following should be made available to them before the issue of any expert witness reports:

Submission of all statements of case and factual evidence (witness and document production);
A common and catalogued data set; and
An updated common list of questions/issues.

All statements of case and factual evidence (witness and document production)

The authors support the view that expert witness reports should not be issued until the procedural submission of all statements of case and witness evidence and document production is complete. Whilst expert witnesses can certainly add value earlier in the arbitral process, until these submissions are complete then there are simply too many moving targets to be able to provide expert witness reports with sufficient certainty.

It follows that the authors’ do not typically consider memorial style pleadings in construction arbitration as being a cost-effective solution for expert witness evidence. Indeed, the authors’ experience is that for construction disputes, memorial style pleadings incur the most expert witness fees and are least likely to have expert witnesses reaching agreement.

Whilst it is understandable that some counsel do not want to make a submission that may eventually not be supported by their expert witnesses, engagement of expert witnesses in memorial procedures (by way of producing expert witness reports) invariably puts pressure on the independence of expert witnesses, especially in instances when communication with the opposing expert witness is not yet instructed. In this position, the expert witnesses will likely be confined to exploring limited documents (for an initial period of time) whilst the parties’ legal position is still being developed – without fully knowing the opposing party’s case (and factual position).

Put simply, the role of the expert witness is to address the legal position of the parties based on facts, and until these facts are known (be that agreed facts and/or disagreed facts), the expert witness reports may be viewed as being preliminary – and may often (and probably likely) be subsequently superseded. As a result, the memorial style procedure may result in some of the expert witnesses’ work being redundant, with associated time and costs being unnecessarily incurred.

A common and catalogued data set

The authors agree that it would be helpful if tribunals directed all expert witnesses to opine based on a common data set to provide opinions on a ‘like for like’ basis, and this may also extend to disputed data sets (if facts are disputed).

By disputed data sets we mean for example, where a Claimant has a set of say records which the Respondent disputes and the Respondent has a different set of records which the Claimant disputes. This can lead to twice as much work for expert witnesses in preparing two assessments i.e. one assessment based on each.

Perhaps in such an instance the parties and the tribunal may wish to explore an early determination of the facts because disputed facts may lead to disproportionate analyses and likewise unnecessary and numerous options. In a small and simple case this may not be much of an issue, however in large construction matters, the authors have experienced substantial time and money being incurred on such issues.

An updated common list of questions/issues

Prior to issue of the joint report, the expert witnesses should confirm the questions to be addressed on all the key issues and issue these to the tribunal and the parties.

This is yet another step to ensure that the expert witnesses both approach the joint report on the same basis by addressing the relevant issues between the parties.

5. The expert witnesses within each discipline produce a joint report identifying areas of agreement and disagreement, including fully reasoned opinions on each.

As an expert witness, the joint report is perhaps the most important report that is prepared, and it needs to be easily comprehended by the tribunal and be of practical use to the tribunal in preparing its award/s.

Where the authors currently see a significant gap in the delivery of expert witness evidence, is the point at which expert witnesses fully understand the opinion of their opposing expert witness, which is only once such opinion is committed to writing. By “fully understand” we mean receiving fully reasoned opinions, supported with any relevant annexures that are exchanged at the appropriate time, and this does not typically happen until a reply/individual report is issued. This, in the authors’ view, is too late since a fully independent opinion cannot be given until all views have been exchanged. In addition, if an expert witness has not previously exchanged their full view, then more time and cost will inevitably be incurred in subsequent consideration of those full views. Unfortunately, the authors have plenty of experience of this scenario which is unhelpful to all involved in the process.

Whilst expert witnesses in a joint process should be fully exchanging their honest and professional views (without reservation and without sharing the exchanges with their instructing lawyers^[16]Because these are ‘developing views’ which aid experts’ understanding of the opposing experts’ thought process – rather than formed opinions) there is, in the authors’ experience, a different understanding in how expert witnesses interpret this stage of the process and further, availability of some expert witnesses at crucial times limits what is actually exchanged.

Our proposed solution is that the joint expert witness report contains the following:

Areas of agreement setting out in a logical enumerated form, the full basis of any agreement noting any areas where factual or legal evidence may impact such agreement; and
Areas of disagreement. Such disagreements shall be enumerated, and against each item of disagreement the expert witnesses shall provide their full opinion (fully reasoned opinions, supported with any relevant annexures) on the disagreements (only on their own position not the opposing expert witnesses’ position) noting any areas where factual or legal evidence may impact such agreement.^[17]See Prague Rules 6.7 c This goes further than most joint reports in that the expert witnesses’ will be seeing each other’s full opinions in writing prior to submission of any report to the tribunal, thus allowing for a full dialogue to always happen. This still retains the benefit of a joint report process but incorporates the full opinions that an individual report normally brings.

This procedural step can be extremely effective if both expert witness teams: (i) work on the same basis, (ii) with the same level of understanding, and (iii) by applying the same professional standards expected from them.

This joint expert witness report can then form the final list of issues to be decided by the tribunal in its award and can also assist potential expert witness conferencing (discussed further below).

The success of this procedural step also depends on the ‘soft skills’ between the expert witness teams who ideally should be working as one team, splitting the work in an appropriate manner. This could again reduce the time and cost of the arbitration.

The authors have experienced some incredible collaborations which have been applauded by the tribunals (and the parties) for efficiency and clarity of addressing the precise issues on which their assistance was required. The authors are therefore of the view that this can work well in practice – but requires effort, as explained above.

6. The expert witnesses within each discipline next produce individual reply expert witness reports only on areas of disagreement but also containing views in the alternative showing what their conclusions would be if the other expert witnesses’ assumptions and methodologies were accepted by the tribunal.

The benefit of previous item 5 should be evident when the expert witnesses prepare their own reply individual report as the issues to be addressed will be clear and the opposing expert witness’ views on each issue will be clearly set out and distinct.

If upon the exchange of the reply reports the expert witnesses identify further areas that may be narrowed/explored, then they should jointly report to the tribunal (and the parties) that they should produce a joint statement which in a succinct manner would clearly and unequivocally set out all the agreements and all disagreements on all key issues in the matter.

Documents of such brevity and clarity should be primary documents in exploring expert witness evidence during the evidentiary hearing and may lead to expert witness conferencing (discussed below).

7. Expert witness conferencing

Given that following previous items 5&6 above there will be an enumerated and logical list of agreed and disagreed items, the opportunity for expert witness conferencing by the tribunal ahead of any cross examination should increase. Not only will the issues disagreed between the expert witnesses be clearly listed, but each expert witnesses’ opinions against these disagreed items will be set out.^[18]The MENA Leading Arbitrators’ Guide to International Arbitration, p243-245

Our suggested approach to receiving expert witness evidence should bring more clarity and focus on fully crystallised issues in the hearing, so that the tribunals get the best possible assistance – and likewise to equip the counsel in the testing of the expert witness evidence.

Conclusion

In this article the authors have set out suggestions for effective delivery of expert witness evidence based on positive and tested experiences, which can bring significant time and cost benefits – along with ensuring that the tribunal gets the best assistance on matters which require expert evidence.

Whilst certain suggestions may have become commonplace (such as list of issues and common data sets), the authors believe that benefits of a properly set out (and delivered) joint expert report and communication between the experts and the tribunals, have not been sufficiently explored. Therefore, by sharing the view from the experts’ corner we hope to encourage arbitration practitioners (and users of arbitration) to consider these challenges and suggestions to the benefit of arbitration users.

About the Authors

Michael Tonkin is a Chartered Quantity Surveyor, Chartered Arbitrator, RICS Accredited Expert Witness and CEDR Accredited Mediator with over 30 years of construction industry experience. He is an effective dispute resolver and has acted as quantum expert on more than 40 occasions.

Igor Corelj is a Chartered Quantity Surveyor and structural engineer with over 15 years of international construction industry experience. He has acted as a quantum expert six times and has assisted the named expert on numerous occasions.

HKA Services

HKA is a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services.

References[+]

References
↑1	Redefining the role and value of Expert Evidence – Professor Doug Jones AO RFD CIArb FRI Arb
↑2	Michael Tonkin is a Partner and Quantum Expert based in HKA’s Dubai office. Michael has acted as a lead expert on around 65 occasions and has been appointed arbitrator on over 65 matters. Michael is recognized as a Global Elite Thought Leader in WWL directories.
↑3	Igor Corelj is a Principal and Quantum Expert based in HKA’s Dubai office. Igor has acted as a lead expert on 15 occasions and in more than 25 complex engineering and construction arbitrations. Igor has been recognized as a Future Leader in WWL directories since 2021.
↑4	i.e. the users of arbitration
↑5	Chartered Surveyors are regulated by the RICS, see Practice Statement “Surveyors Acting as Expert Witnesses, 4^th Edition” but the authors are not aware of any other similar regulations
↑6	For the sake of clarity, not by email or telephone
↑7	The authors cannot stress enough the simple and fundamental question that expert witnesses should be asking themselves when forming an opinion: would my opinion be the same if I was instructed by the other party? The answer must be yes every time.
↑8	May not be express in all jurisdictions.
↑9	For example the Protocol for the Use Party-Appointed Expert Witnesses in International Arbitration, Preamble 3. Ciarb.
↑10	For example, The MENA Leading Arbitrators’ Guide to International Arbitration, p238-239
↑11	Protocol for the Use Party-Appointed Expert Witnesses in International Arbitration, Preamble 3. Ciarb.
↑12	Availability equally applies to the lead or named experts as well as, where used, their assistants
↑13	The MENA Leading Arbitrators’ Guide to International Arbitration, p229
↑14	This will be the topic of a future article
↑15	This is separate to the benefits of early involved by the parties of their appointed expert witnesses
↑16	Because these are ‘developing views’ which aid experts’ understanding of the opposing experts’ thought process – rather than formed opinions
↑17	See Prague Rules 6.7 c
↑18	The MENA Leading Arbitrators’ Guide to International Arbitration, p243-245

Is there still a role for the Hudson formula?

Article

Is there still a role for the Hudson formula?

15th March 2024

Dr. Franco Mastrandrea

Partner

francomastrandrea@hka.com

T: +44 (0) 7884 436 537

Expert Profile

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Introduction

In 2010 I ventured a general article on construction contractors’ overheads claims (“FM1”) ^[1]Mastrandrea, F, The Evaluation of Contractors’ Overheads Claims in Construction, [2010] The International Construction Law Review, 299.

This article^[2]For a more comprehensive review of this topic, see Mastrandrea, F, Does the Hudson formula have a future? , to be published in (2024) Const. L.J. Issue 3. briefly revisits a limited area covered in FM1, namely one of the appraisal methods for overheads claims which appears first to have been formally set down in Hudson, Building and Engineering Contracts, Sweet & Maxwell, 10^thEdition, 1970, at page 599, whose editor Mr. Duncan Wallace described it as the formula ‘usually used’ by contractors for the purposes of assessing the loss due to delay in completion, thenceforth labelled “the Hudson formula”^[3]The formula is: HO % in Contract Sum/100 x Contract Sum/Contract Period x Period of (Compensable) Delay.

As claimants using the Hudson formula often pursue overheads and profit together (sometimes termed ‘gross profit’) as part of a composite claim, the narrative here can equally apply to the profits component of claims advanced in that way.

A review of the caselaw and literature since 2010 suggests that the debate in this area has not much developed or been the subject of any significant comment.^[4]For an exception see The Society of Construction Law Paper 230, September 2021 by Ronan Champion, entitled The Hudson formula: Death by a Footnote?, which sought to identify whether the current … Continue reading

**The Hudson formula: origins**

As noted in FM1, the Hudson formula was at the time of the 10^th Edition the common ex-ante form of claim. It relied on the allowance for overheads and profit said to have been made by the contractor in its pricing of the particular project which was the subject of the claim; the claim sought to use that allowance as the basis from which to mimic the damage/ loss due to delay for which the other contracting party^[5]The method is not restricted to claims by contractors against employers, but can equally be deployed in analogous circumstances in sub-contract and other claims, whether for or against the relevant … Continue reading was allegedly responsible (based, essentially, on the fiction of the contractor being deprived of the opportunity of securing a contract of equivalent price as the original from which to earn a contribution to its overheads costs during the delay period).

Later developments in the formula

I suggested that the formula advanced at the time of the 10th Edition was not in any sense original. It was nevertheless surprising given further developments in the interim for Mr. Duncan Wallace in his subsequent Construction Contracts: Principles and Policies in Tort and Contract, Sweet & Maxwell, 1986, paragraph 8-29 to have asserted that no challenge had ever been made to the Hudson formula.^[6]By that date State of South Australia v. Fricker Carrington Holdings Pty Ltd [1985] SASC 8661, for example, had been decided in which, absent proof of agreement between the parties that it should be … Continue reading

The editors of Hudson did however move to the position to be found in the 14^th Edition, in 2020, as follows:

‘The head office overheads and profit percentage applied to the Hudson formula were originally those deducible from the Contractor’s tender. A more modern assumption is to use the head office and profit contribution deducible from the Contractor’s annual accounts sometime referred to as “a fair annual average”’^[7]Hudson, Building and Engineering Contracts, Sweet & Maxwell, 14^th Edition, 2020, paragraph 6-071, footnote 494..

In that form, it has a close resemblance to Emden’s formula.^[8]The most common Emden formulation is as follows: h ÷ 100 × c ÷ cp × pdWhere h = the head-office percentage (normally arrived at by dividing the actual total overhead costs of the organisation as … Continue reading

**Is Hudson now dead?**

It should be noted first of all, that the original Hudson formula had garnered some, albeit limited, judicial support, particularly at first instance.^[9]Most notably by O’Leary J in the Supreme Court of Ontario in Ellis-Don Ltd. v. The Parking Authority of Toronto (1978) 28 BLR 98. Furthermore, there has been no outright rejection of the Hudson formula in other jurisdictions.^[10]See, for example, in India the Supreme Court decision in McDermott International Inc. v. Burn Standard Co. Ltd. and others [2006] 11 SCC 181, in which it was held that there was nothing in Indian law … Continue reading

There is no doubt that a claim that relies upon an allegation that an allowance was made as a component of the original price prompts the following obvious questions (see FM1):

was any such allowance in fact made? and, even if it was;
was the price capable of sustaining such an allowance?

Estimates (including those that go into pricing tenders for construction work) are bound, to varying degrees, to be subjective.

Further, it is important to recognise that the Emden formula has its own unique issue. Whilst the unadulterated Hudson is internally consistent,^[11]In that all the component parts are equivalent: thus in Hudson all the variables are forward-looking; in Emden by contrast they are in part forward-looking and in part backward-looking. Emden is not. An equivalent issue would arise with a reconfigured Hudson. A further question would emerge where the actual percentage for overhead and profit was different from the percentage allowed in the original contract sum, namely whether the original contract sum could any longer be the appropriate basis for the formula claim.

Finally, there is a consideration, neither clearly articulated nor sufficiently explored to date, which may anyway justify the continued separate existence of an unadulterated Hudson formula, and in respect of which use of the organisation’s average actual overheads (and, in the case of composite claims, profit) would be inapposite because such an average would either materially overstate or understate the likely loss arising from delay. This would be so, for example, where – at one end of the spectrum – the contract in question is, for the particular contractor, of an unusual type (and could, for example, be serviced only by use of the particular resources and skills deployed to it), or one with an untypically high risk profile, or – at the other end of the spectrum – a contract which is for the particular contractor untypically mundane, or low risk.

Conclusion

Given that overhead and profit claims continue regularly to appear, and often form one of the largest heads of contractors’ claims for construction projects in distress, their appropriate evaluation remains a topic of significant importance.

The Hudson formula is and remains the single, widely recognised, ex-ante measure of overhead and profit damages or loss due to delay in completion.

Introducing a backward-looking component into a reconfigured Hudson formula generates material inconsistencies in that – as with Emden – this would be to seek in the same breath to use components of a claim which are forward-looking with another component which is backward-looking. It additionally raises the question whether the original contract sum can in such circumstances then appropriately be used in the formula. Such a hybrid cannot properly be regarded a Hudson formula claim, which as conceived was wholly forward-looking. It may also fail to take account of the peculiarities of the contract which is the subject of the claim which, as noted, may be especially unusual, risky, or mundane and which may on any such score justify retention of the Hudson formula in its unadulterated form.

Boiled down to essentials the Hudson formula has two serious drawbacks:

in common with its siblings Emden and Eichleay, it purports to make compensable project time the paramount operative component^[12]See FM1, from page 313. in the measure of damages/loss, when experience shows that overheads for particular projects are not typically priced in that way, and construction organisations’ actual overheads are not recorded or allocated by them in that way.
uniquely, it seeks to measure damages/loss through contract pricing of overheads. Adopting that approach exposes such claims to two further challenges, namely that:
(a)the overheads allowance contended for as part of the contract sum cannot without more be shown in fact to have been made (resolved by way, most persuasively, of pre-contractual disclosure); and
(b)the contract price was viable in the sense that it would have been able successfully to carry that level of overhead (resolved by way, most persuasively, of the contractor showing that its contract price was capable of sustaining such an allowance).

The real issue with the use of the Hudson formula approach is whether, if such a claim is to be entertained at all, and, leaving to one side the abiding shortcoming that it is premised on the basis of project duration (and other matters raised in FM1), overheads damages/loss can properly be measured by reference exclusively to

(a) a forward-looking pre-contractual estimate, alternatively
(b) a cannibalised version of the formula which has regard to actualities, but which introduces its own further shortcomings.

These are matters for courts and tribunals. Until the advantages and shortcomings of the formula are comprehensively considered, and these sorts of issues are definitively resolved, an unadulterated Hudson formula may still retain some vitality.

About the Author

HKA Services

HKA is a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services.

References[+]

References
↑1	Mastrandrea, F, The Evaluation of Contractors’ Overheads Claims in Construction, [2010] The International Construction Law Review, 299.
↑2	For a more comprehensive review of this topic, see Mastrandrea, F, Does the Hudson formula have a future? , to be published in (2024) Const. L.J. Issue 3.
↑3	The formula is: HO % in Contract Sum/100 x Contract Sum/Contract Period x Period of (Compensable) Delay.
↑4	For an exception see The Society of Construction Law Paper 230, September 2021 by Ronan Champion, entitled The Hudson formula: Death by a Footnote?, which sought to identify whether the current configuration of that formula had effectively led to its demise.
↑5	The method is not restricted to claims by contractors against employers, but can equally be deployed in analogous circumstances in sub-contract and other claims, whether for or against the relevant sub-contractor or other contracting party.
↑6	By that date State of South Australia v. Fricker Carrington Holdings Pty Ltd [1985] SASC 8661, for example, had been decided in which, absent proof of agreement between the parties that it should be used, the formula was discouraged unless its appropriateness was shown by the claimant. Bollen J, for the Supreme Court of South Australia said, at page 23: ‘I am sure that parties in dispute frequently use the [Hudson] formula. Often they will agree to its use. But if they do not agree to its use I think that evidence must be called to prove that its use is appropriate. It is not a formula in a statute or in a regulation. One cannot take a formula said by a textbook writer to be usually used and assert that arbitrators must use it.’
↑7	Hudson, Building and Engineering Contracts, Sweet & Maxwell, 14^th Edition, 2020, paragraph 6-071, footnote 494.
↑8	The most common Emden formulation is as follows: h ÷ 100 × c ÷ cp × pd Where h = the head-office percentage (normally arrived at by dividing the actual total overhead costs of the organisation as a whole by the total actual turnover); c = the contract sum; cp = the contract period; and pd = the period of (compensable) delay.
↑9	Most notably by O’Leary J in the Supreme Court of Ontario in Ellis-Don Ltd. v. The Parking Authority of Toronto (1978) 28 BLR 98.
↑10	See, for example, in India the Supreme Court decision in McDermott International Inc. v. Burn Standard Co. Ltd. and others [2006] 11 SCC 181, in which it was held that there was nothing in Indian law to show that any of the formulae adopted in other countries was prohibited in law or that the same would be inconsistent with the law prevailing in India, albeit noting that the Hudson formula had been criticized principally because it adopts the head office overhead percentage from the contract as the factor for calculating the costs, and this may bear little or no relation to the actual head office costs of the contractor. Cf. Batliboi Environmental Engineers Limited v. Hindustan Petroleum Corporation Limited 2023 INSC 850. Unibros v. All India Radio 2023 INSC 931.
↑11	In that all the component parts are equivalent: thus in Hudson all the variables are forward-looking; in Emden by contrast they are in part forward-looking and in part backward-looking.
↑12	See FM1, from page 313.

RICS Appoint Haroon Niazi as Chair of the Middle East and Africa World Regional Board

News

RICS Appoint Haroon Niazi as Chair of the Middle East and Africa World Regional Board

27th February 2024

HKA, a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services, is delighted to announce that Haroon Niazi FRICS, Partner, Construction, Claims and Expert Services Lead, EMEA has been appointed as Chair of the Middle East and Africa World Regional Board (WRB) by the Royal Institution of Chartered Surveyors (RICS).

As the new MEA WRB Chair, Haroon will lead the Board to deliver the agreed RICS strategy and objectives at a regional level by overseeing plans within the Middle East and Africa region. He succeeds the previous MEA WRB Chair, Chris Seymour FRICS.

Haroon, who leads HKA’s core construction claims and expert (CCE) services group across Europe, Middle East and Africa, will also take on a role and become a member of the Membership Services Committee (MSC), representing the MEA region. The purpose of the MSC is to advise on how RICS’ strategy is operationalised so that members feel valued and engaged while recommending the regional business plans developed by WRBs for approval of the RICS Board, as well as overseeing member services and experience.

“It is an honour to be appointed to this role. The WRB plays a key part in delivering RICS’ strategic objectives across the built environment, benefiting Members as well as key stakeholders both in the private and public sector. I look forward to working with RICS colleagues and fellow Board members as we aim to continue with some of our key initiatives.”
Haroon Niazi, Partner, Construction, Claims and Expert Services Lead, EMEA

Following Haroon’s appointment, the appointment process for new members of the MEA WRB will recommence. RICS is also undertaking the Board recruitment process for new opportunities on the Regional Advisory Boards in the UAE, Qatar, KSA and across Africa in 2024.

RICS press announcement can be read here: New WRB Chair Appointed in the Middle East and Africa (rics.org).

ABOUT HKA

Headquartered in the UK, HKA is a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services.

HKA brings a proud record of excellent service and high achievement to bear on today’s challenges. As trusted independent consultants, experts and advisers, we help clients manage disputes, risk and uncertainty on complex contracts and challenging projects. Our advice is impartial, incisive and authoritative.

We work with government agencies, local authorities, contractors, legal firms, and other professional service providers, as well as owners and operators, financial institutions and insurers. HKA’s global portfolio includes some of the world’s largest and most prestigious commissions across a wide range of industries, including aerospace and defence, buildings, energy and natural resources, environment and climate change, financial services, healthcare and life sciences, industrial and manufacturing, marine and shipping, mining and metals, oil and gas, power and utilities, real estate and tourism, sports and entertainment, technology, media and telecomms and transportation infrastructure.

HKA has in excess of 1,000 experts, consultants and advisors across 45+ offices in 17 countries with the skills and experience that are essential to get to the heart of even the most complex issues. Our people have vast first-hand experience spanning all major industries and the world’s most complex megaprojects, as well as an international track record of achieving successful outcomes.

For more information about HKA, visit hka.com and connect with us on LinkedIn, X (formerly Twitter, @HKAGlobal) and Facebook.

Media contact:

Name	Jude Wilson-Brown
Title	Marketing and Communications Director, Middle East and Africa
Number	+971 4 337 2145
Email	JudeWilsonBrown@hka.com

HKA consolidates its leading position and long history in Saudi Arabia

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HKA consolidates its leading position and long history in Saudi Arabia

12th February 2024

HKA, a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services, has consolidated its leading position in the sector – and long-term presence on the ground in Saudi Arabia with the official grant of its Regional Headquarters (RHQ) License.

The risk mitigation, advisory and construction expert firm gained its license under the regional headquarters programme from the Ministry of Investment of Saudi Arabia (MISA) on January 11^th. HKA is believed to be one of the first major international consultancy firms in the construction claims and expert sector to gain regional HQ status under the programme. This became a prerequisite for conducting business with state bodies, and for special tax incentives, with effect from January 1^st, 2024.

HKA, whose global headquarters is in the United Kingdom, has long-established offices both in Jeddah and Riyadh, supporting its work for Saudi clients and capital projects that stretches back more than two decades.

Making the announcement, Jad Chouman, HKA’s Partner and Head of Middle East, said it reflected the firm’s growth strategy for the buoyant Saudi market and the wider region. “The ambitious economic diversification underway in Saudi Arabia mirrors our own rapid growth, not only in construction claims and expert witness services, but also our wider offerings in forensic accounting and commercial damages, forensic technical services, and advisory services,” Chouman explained.

“HKA’s long-term commitment to the Saudi market dates back some 40 years, with our Jeddah and Riyadh offices having operated for over 15 years. The confirmation of our RHQ License is an exciting and natural evolution of our continued commitment to the region.”
Amanda Clack, HKA Partner and Regional CEO for EMEA

Husam Gawish, Partner and Head of Saudi Arabia Operations emphasised that HKA’s local operations met all the programme’s eligibility requirements. “We have a strong team in the country composed of senior managers, consultant experts, and administrative staff, and it’s expanding.”

“We’re experiencing growth across all sectors,” Gawish added. “As with the national economy, oil and gas remains vibrant, but our workload in construction generally, including infrastructure, buildings and tourism development, is increasingly significant.”

The consultancy has steadily expanded its historically contractor-centred business over the years and now serves a wide client base spanning both private and public sectors. Recent commissions involve strategic advisory services for several Vision 2030 gigaprojects.

ABOUT HKA

Headquartered in the UK, HKA is a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services.

For more information about HKA, visit hka.com and connect with us on LinkedIn, X (formerly Twitter, @HKAGlobal) and Facebook.

Media contact:

Name	Jude Wilson-Brown
Title	Marketing and Communications Director, Middle East and Africa
Number	+971 4 337 2145
Email	JudeWilsonBrown@hka.com

Michael Laming wins ROAP LATAM 2023 Cross-Examination Award

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Michael Laming wins ROAP LATAM 2023 Cross-Examination Award

31st January 2024

HKA, a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services, is delighted to announce that Michael Laming, Principal – Forensic Accounting and Commercial Damages based in the Madrid office, recently won the LATAM 2023 cross-examination course of Delos’ Remote Oral Advocacy Programme (ROAP).

Delos, a prize-winning arbitration institution, runs the Programme which provides participants with the opportunity to develop their oral advocacy skills, hone cross-examination techniques, and engage with remote hearings, all while being mentored by leading international arbitration advocates.

Michael, along with his paired lawyer Santiago Lucas Peña of Bomchil, were announced as the winners following their participation in the Delos LATAM cross-examination of quantum experts course.

The course provided participants with expert report materials and saw Michael take on the role of the expert under a mock tribunal setting in which he defended the expert reports in the Spanish language. Participants also supported their paired lawyer in preparing their cross-examination of the opposing side’s experts.

The final took place on Tuesday 23rd January, and Michael and Santiago were announced as winners by the Tribunal based on their impressive performance.

Please join HKA in congratulating Michael and all of the winners on their fantastic achievement.

ABOUT HKA

Headquartered in the UK, HKA is a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services.

For more information about HKA, visit hka.com and connect with us on LinkedIn, X (@HKAGlobal) and Facebook.

Media contact:

Name	Suzanne Rayson
Title	Marketing & Communications Director, Europe
Number	+44 1928 756 502
Email	SuzanneRayson@hka.com

HKA continues to support the vulnerable with donations to local charities in Johannesburg

ESG

HKA continues to support the vulnerable with donations to local charities in Johannesburg

25th January 2024

The HKA family believes in the continuous empowerment and uplifting of the vulnerable to build a better future for all. During a delicate period when families gather to celebrate the festive season and prepare for the new academic year, emotions can flare up as we reflect and plan. Our team in Africa was one with three charities during this time.

In 2019, our South Africa office adopted the Othandweni Family Care Centre based in Soweto, Johannesburg, as part of our Community Impact initiative. Othandweni, which means “Place of Love,” is a home to 90 children from infant to 18 years old. We have consistently kept our promise to the centre for nearly five years with donations, including funds, groceries, clothes and appliances. Recently, Maria Van Zyl, Business Support Administrator, and Ivan Van Zyl, Senior Driver, visited the centre to handover groceries and school uniforms for the children. As we continue to strengthen our relationship with the centre, we are proud to be part of the change and growth taking place in the lives of the children.

In addition to Othandweni Family Care Centre, we supported CHOC Childhood Cancer Foundation and Reach For a Dream Foundation. CHOC advocates for the health and well-being of children and teenagers diagnosed with cancer or life-threatening blood disorders and their families. The foundation aims to save lives through early detection and comprehensive support programmes for families affected by cancer. We donated R104,000 (approximately US$5,400) to the course to make a difference in the fight against cancer.

Dreams are meant to be reachable, and we all have a burning desire to achieve them. However, the journey can be challenging for children living with life-threatening illnesses. HKA donated R60,000 (approximately US$3,120) to Reach For a Dream, a course that seeks to alleviate the strain that life-threatening illnesses place on sick children and their families by providing these dreamers with the opportunity to believe in their greatest wish. Reach For a Dream offers the child a magical moment to regain their childhood that is being lost to an illness.

“On behalf of Reach For a Dream, I want to express our heartfelt gratitude for your recent donation to our organisation. Your generosity plays a crucial role in making a positive impact on the lives of children facing life-threatening illnesses.”
Lehlogonolo Mashiteng, Fundraising Manager, Reach For a Dream.

Click here to learn more about CHOC and Reach For a Dream.

Thank you to all our colleagues who continue to raise the bar through thoughtful and generous charity work.

Find out more about our ESG work

An insight into Forensic Accounting and Commercial Damages in the Middle East with Clare Lavin, Partner

Technical Interview

An insight into Forensic Accounting and Commercial Damages in the Middle East with Clare Lavin, Partner

10th January 2024

To be published in Middle East Consultant – February 2024 Edition

HKA Partner, Clare Lavin, recently spoke with Paul Godfrey, Head of Content of Middle East Consultant, giving an in-depth insight into Forensic Accounting and Commercial Damages in the Middle East.

Are there significant differences between the disputes you work on here in the GCC compared to those in other markets?

There are several notable differences. A fundamental one is how the parties to disputes in the Middle East are more inclined to go to arbitration or litigation. In other jurisdictions, there is greater use of alternative dispute resolution (ADR) options, such as adjudication in the UK.

In this region, it is sometimes possible to get the parties talking and explore mediation. Where some ‘middle ground’ can be found, it can lead to swifter settlement. But this tends not to be the preferred option as parties are more litigious. So, having worked for more than 12 years in the Gulf, I’d say I have been on the stand far more often than I would have been if practising in Europe.

Another difference is the diversity of the parties. Large-scale projects – from construction to product research and development (R&D) – almost invariably involve international partners and joint venture agreements. The GCC market attracts major players from around the globe. These partnerships combine essential local and international know-how, but if the project runs into difficulties, the differences in language and culture tend to fuel the fire of the dispute.

Arbitration centres in the region are developing to meet the needs of international parties. In addition, the separate system of local courts is also undergoing a radical transformation. Traditionally, all proceedings were conducted in Arabic, expert witnesses were court-appointed, and other experts only in an advisory role. We have seen an evolving role of international experts in local courts recently.

Our team includes Arabic speakers to reflect the diversity of our clients and workload. Given the increasing complexity of projects and disputes, local judicial reforms – such as allowing the use of foreign experts and English– can enhance clients’ confidence, and they are to be welcomed. The changes being rolled out seem positive from our experience so far in the UAE.

I’ve also been involved in commercial litigation work through the DIFC (Dubai International Finance Centre) courts. Again, my experience of its system of specialist courts and judges for different business sectors has been extremely positive, such as the flexible ways of conducting hearings, including the continuation of remote hearings.

What does your Early Case Assessment work involve? And can Forensic Accounting be applied proactively to manage risk, rather than just retrospectively when problems come to light?

An early assessment of disputed accounting treatments or damages – including lost profits or loss of opportunity, or indeed the interpretation of a contract – often paves the way to a negotiated settlement or mediation.

It’s true that much of our forensic work is reactive, responding to clients’ concerns when, say, a whistle-blower or internal auditor sounds the alarm, or irregularities are discovered in financial transactions or their reporting. In the construction sector, these investigations often focus on the procurement process, whether it’s transactions that were not conducted at arm’s length, overpricing or various forms of bribery and corruption.

Businesses may have different priorities, such as establishing a robust case for action against an employee, or correcting misrepresentations in company statements so the accounts show the true financial position.

Companies and other organisations do also – and should regularly – take a deep, hard look at their internal controls. We carry out fraud risk assessments. Many aspects of a business may need to be reviewed, but the finance function and procurement processes are usually critical. What checks and controls are in place for tendering? Is there third-party verification of supplier lists? Having identified gaps and weaknesses, we design and recommend a framework of measures to mitigate the fraud risks. The reality is these cannot be eliminated entirely, hence the need for regular reviews.

IPOs (initial public offerings) are also driving a more proactive approach in the region, where most companies have previously been reactionary. International investors also want to see best practice in internal controls and accounting practice before investing.

As well as early case assessment, we’re also being brought in earlier in some cases to provide expert determination (whether contractual or not or binding on the parties or not) that can pre-empt a long-running dispute so that the parties focus jointly on a successful completion or enable an ongoing relationship. The risks and costs involved in arbitration or litigation are another incentive to do this.

Is there a typical issue you encounter in the Construction sector as opposed to other sectors?

While many of my colleagues specialise in construction, HKA experts and consultants also have sector-specific knowledge across a spectrum of industries. Our Financial Accounting & Commercial Damages team works across all sectors – but we also bring industry experience and insights to bear.

Valuation of damages requires a robust assessment of the loss of profits or opportunity, for example. In construction this often arises from delays in completing an asset – recent cases have involved a shopping mall and a major oil and gas facility. We also help determine losses associated with contract breaches and terminations.

What we’ve found in construction disputes is that loss of profit is often not identified as a head of claim. The income lost – because, say, a hotel or residential development opens a year late – should be a separate head of claim so the assessment captures the full quantum of damages for the client. Hence, the added value of combining commercial and construction expertise in the same team.

Would better, tighter contracts make for an easier life in the Construction universe? What would be your recommendations for change and reform?

It’s notable that our latest CRUX Insight analysis of major construction and engineering projects shows that ‘contract interpretation issues’ was the third-highest ranking factor in claims and disputes across the Middle East. More than 28% of projects were affected, compared with around 17% in the rest of the world.

In my experience, most commercial disputes also tend to arise from the misinterpretation or breach of contracts We do encounter the misuse of technical accounting language. The terms are either wrong in themselves or in the context of the contract, causing issues over their interpretation. As forensic accountants, we have to unravel the wording to arrive at the true meaning and intention, and then advise on the appropriate treatment and/or impact of these to the client, from a contractual point of view or indeed the financial reporting implications.

Tell us something about your experience with arbitration centres such as LCIA, DIAC and ICC?

We act anywhere clients and their contracts require, and have provided expert witness testimony for all the major arbitration centres. Personally, I’ve been appointed as an expert in arbitration matters involving DIAC, DIFC-LCIA that was, and ICC, among other centres.

Our six-strong Financial Accounting & Commercial Damages team based in Dubai is growing, but we also operate as part of a cross-border group with 10 Partners – most with Middle East experience – and some 30 consultants.

We’re familiar with how the different seats of arbitration operate, but the prime concern is the client experience. Our regional centres are becoming more user-friendly as they adopt the best international practice and vie for clients’ confidence. It seems to be working in as much as SCCA (Saudi Center for Commercial Arbitration), for example, reports an increase in its caseload.

What are the factors that are most prized in an accounting expert witness?

Previously, lawyers needed to look outside of the region for accounting experts, and in some cases still do, but there are many more experienced experts within the Middle East now who have been in the region for some time. Also, some disputes do have a regional nuance that requires an understanding of the dynamics in Gulf states.

Having been long-established in the region – our firm has more than 15 years of experience on the ground in Saudi Arabia, for instance – HKA has built long-term relationships as trusted advisors. That position is underpinned by our ability to offer a comprehensive range of services, draw on a global network of expertise, and provide tailored support in whatever jurisdiction our clients sit.

Forensic accountants need to be technically strong. That means not only having the appropriate qualifications but also mastery of the basics, from ledger entries to tracing transactions, as well as accounting conventions. Our commercial work also requires a clear understanding of different valuation methodologies and when they should be used.

It’s essential too to have the confidence and capability to communicate often complex accounting principles in a way that’s easily grasped by non-accountants, be the clients, lawyers, or judges/arbitrators. It helps that our team reflects the diversity of corporate sectors and stakeholders we serve, speaking their language and factoring in the pitfalls and challenges in their markets and industries.

Being commercially minded can mean, especially when we are dealing with imperfect information, having to stand back and look at the bigger picture – and taking a different approach (to achieve a robust valuation, for instance) rather than the bottom-up, detail-based ways of working often expected of accountants.

How do you see the future of Forensic Accounting in the GCC?

As with construction projects, there is a general trend toward ever larger and more complex disputes in other sectors too. This is a challenge that demands the involvement of multiple experts to address the different facets of a claim. There are advantages when these services are joined up to provide a more coherent and integrated solution to clients.

Forensic accountants must also be equipped to tackle cross-border, international disputes as foreign investment and involvement grow in the Gulf’s expanding economies. Many investigations are commissioned into regional branches of global businesses, which we find are not following international best practice.

Economic diversification and business innovation will also give rise to disputes in new and emerging sectors.

We believe that HKA’s global experience, solid foundations in the Gulf, and multi-service offering puts us a strong position to serve these changing needs of our clients in the Middle East.

Connect with Clare on LinkedIn

This publication presents the views, thoughts or opinions of the author and not necessarily those of HKA. Whilst we take every care to ensure the accuracy of this information at the time of publication, the content is not intended to deal with all aspects of the subject referred to, should not be relied upon and does not constitute advice of any kind. This publication is protected by copyright © 2024 HKA Global Ltd.

Mark Cameron joins HKA as Principal in the EMEA Region

News

Mark Cameron joins HKA as Principal in the EMEA Region

18th December 2023

HKA, a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services, announces today that Mark Cameron has joined the firm as Principal, for the Europe, Middle East and Africa (EMEA) region, based in Qatar.

Mark has over thirty years of experience working for Big Four corporate financial advisory and international business advisory firms. During this time, he developed a focus on infrastructure and real estate sector advisory and specialised in strategy, programme delivery, commercial and financial fields. Furthermore, Mark has extensive involvement in managing senior stakeholders in both government and private sector roles. Originally from the UK, Mark has been based in the Middle East for the past seven years, with his experience working across the region spanning a total of sixteen years.

“We are thrilled to have Mark on board joining the Middle East practice. In his new role, Mark will be a key asset at HKA, and his experience will be greatly valued as we continue to grow our presence in the region.”
Jad Chouman, HKA Partner and Head of Middle East

Mark will work closely with Dafydd Wyn Owen, Partner, Advisory Lead, EMEA, to strengthen HKA’s regional advisory service offering.

Speaking on his new role, Mark said: “I am very excited to start this new phase of my career and to be part of HKA’s growing advisory service line in the EMEA region. I look forward to working with globally recognised experts who consistently deliver meaningful business improvements for our clients”.

ABOUT HKA

Headquartered in the UK, HKA is a leading global consultancy in risk mitigation, dispute resolution, expert witness and litigation support services.

For more information about HKA, visit hka.com and connect with us on LinkedIn, X (formerly Twitter, @HKAGlobal) and Facebook.

Media contact:

Name	Jude Wilson-Brown
Title	Marketing and Communications Director, Middle East and Africa
Number	+971 4 337 2145
Email	JudeWilsonBrown@hka.com

Dispute Avoidance/Adjudication Board (DAABs): Dos and Don’ts

Dr. Franco Mastrandrea

Introduction and Context

What is a DAAB in construction?

DAABs Dos

DAABs Don’ts

Dispute Adjudication Board Dos

Dispute Adjudication Board Don’ts

About the Author

References[+]

Design considerations for Internal Fire Protection – an Architect’s perspective

Magdalena Prus

Introduction

Setting out requirements

Business continuity

Design considerations for Internal Fire Protection

Conclusion

About the Author

HKA Services

References[+]

Procedural considerations of being an Expert Witness

Michael Tonkin

Igor Corelj

Part 1 – Effective delivery of expert witness evidence – the Experts’ view

2. Early and ongoing engagement between the tribunal and expert witnesses

3. Post Statement of Defence and Counterclaim (if any) establish within each discipline an initial common list of questions/key issues

4. Expert witness services prior to issue of any Expert witness reports

5. The expert witnesses within each discipline produce a joint report identifying areas of agreement and disagreement, including fully reasoned opinions on each.

7. Expert witness conferencing

Conclusion

About the Authors

HKA Services

References[+]

Is there still a role for the Hudson formula?

Dr. Franco Mastrandrea

Introduction

The Hudson formula: origins

Later developments in the formula

Is Hudson now dead?

Conclusion

About the Author

HKA Services

References[+]

RICS Appoint Haroon Niazi as Chair of the Middle East and Africa World Regional Board

HKA consolidates its leading position and long history in Saudi Arabia

Michael Laming wins ROAP LATAM 2023 Cross-Examination Award

HKA continues to support the vulnerable with donations to local charities in Johannesburg

An insight into Forensic Accounting and Commercial Damages in the Middle East with Clare Lavin, Partner

Mark Cameron joins HKA as Principal in the EMEA Region

Follow HKA on WeChat

关注我们的官方微信公众号

**The Hudson formula: origins**

**Is Hudson now dead?**