Delivered 25 June 2025
By John Paul Nahous
Attorney at law at Pollonais Blanc de la Bastide & Jacelon.
JUDICIAL COMMITTEE OF THE PRIVY COUNCIL
Lord Hodge, Lord Briggs, Lord Burrows, Lord Richards & Dame Janice Pereira
PRACTICE AREAS AND CONSIDERATIONS
This decision provides valuable learning on (a) the interplay between Clauses 53, 55.1, 56.1 and 70.1 of Part I and 5.2 of Part II of the FIDIC Conditions of Contract for Civil Engineering Construction 1987 Edition (“the FIDIC Conditions”); (b) whether a review of a claim by an employer’s employees/agents, who are not engineers appointed under the FIDIC Conditions, constitutes a determination of a claim for the purposes of these provisions when a contractor and employer deal with each other directly; and (c) whether such employees’ authority to carry out such an assessment are binding where approval to make such a payment is required from the employer’s board of directors.
This case highlights the importance of contractors ensuring that they ascertain and appreciate the extent to which their employer’s employees/agents are given authority by its board of directors to make binding assessments and determinations under Clause 53.4 of the FIDIC Conditions (which allows an employer to directly assess and determine a contractor’s claim where there was noncompliance with the contractual procedure). It also re-enforces the need for an employer’s board of directors and their employees/agents to understand and ensure strict compliance with any delegation of the board’s power, and to communicate the extent of the same to a contractor.
RELEVANT BACKGROUND
In March 2003, Dipcon Engineering Services Limited (“Dipcon”) and the Urban Development Corporation of Trinidad and Tobago (“UDeCOTT”) entered into a written contract (“the Contract”) by which Dipcon was to carry out certain engineering and infrastructural works in relation to the Oropune Gardens Phase II housing development project being undertaken by UDeCOTT (“the Project”). The Written Contract incorporated Parts I and II of the FIDIC Conditions.
In July 2006, Dipcon completed the works under the Contract and discussions were held between the parties’ representatives to settle the final accounts. These discussions ultimately resulted in UDeCOTT proposing to pay to Dipcon a lump sum (“the Final Account Sum”) in full and final settlement of all claims relative to the Project. During the course of settling the final account Dipcon submitted an additional claim in the sum of TT$11,255,800.00 plus interest on this sum (“the Additional Claim”) which it had requested that UDeCOTT consider this claim when it agreed to accept payment of the Final Account Sum.
UDeCOTT paid the Final Account Sum to Dipcon by several instalments, the last of which was in April 2012. Then in March 2012, one of UDeCOTT’s officers advised Dipcon that the Additional Claim had been re-assessed at $11,686,956.25 by members of UDeCOTT’s team (none of whom were the engineer appointed under the Contract) and that the same was being submitted to UDeCOTT’s Board of Directors (“the Board”) for approval. The Board did not approve the payment of the Additional Claim and UDeCOTT denied that it was liable to pay the same. As a result, Dipcon filed an action in the High Court for payment of the Additional Claim. The provisions of the FIDIC Conditions on which Dipcon heavily relied in support of its appeal and which were ultimate considered in detail by the JCPC were as follows:
- Clause 53.4 “Failure to Comply” which states:
“If the Contractor fails to comply with any of the provisions of this Clause in respect of any claim which he seeks to make, his entitlement to payment in respect thereof shall not exceed such amount as the Employer or any arbitrator or arbitrators appointed pursuant to Sub-Clause 67.3 assessing the claim considers to be verified by contemporary records (whether or not such records were brought to the Employer’s as required under Sub-Clauses 53.2 and 53.3)”; and
- Clause 70.1 “Increase or Decrease of Costs” which states:
“There shall be added to or deducted from the Contract Price such sums in respect of rise or fall in the cost of labour and/or materials or any other matters affecting the cost of the execution of the works as may be determined in accordance with Part II of these Conditions”.
Proceedings Before the High Court
In its action before the High Court, Dipcon averred that Clause 70.1 of Part I of the FIDIC Conditions stipulated that the Additional Claim was to be added to the price stated in the Contract, that UDeCOTT had quantified and assessed this claim, and that an oral agreement had arisen between the parties in April 2010 when one of UDeCOTT’s employees/agents agreed that the Additional Claim was payable to Dipcon.
On 2 November 2017, Rahim J delivered a judgment in which he found that, inter alia, there was no oral contract and the Board’s approval was required for the Payment of the Additional Claim after it had been re-assessed as the employees who undertook this exercise had no authority to make an assessment under the Contract. He also found that Dipcon knew and acknowledged that the Board’s approval was required. For these reasons, the Judge ruled that, at the very most, UDeCOTT would have promised to revisit/re-assess the additional costs figure and seek approval for its payment and dismissed Dipcon’s Claim. Dipcon appealed.
Proceedings Before the Court of Appeal
On appeal before Smith, Kokaram and Wilson JJA, Dipcon abandoned its case of an oral agreement pursuant to Clause 70.1 of the FIDIC Conditions and mounted its appeal solely on the grounds that Clause 5.2 of the same enabled the determination of the Additional Claim to be made pursuant to Clauses 55.1 and 56.1 of the FIDIC Conditions. Although it was not contained in any grounds of appeal, during the course of submissions, Dipcon sought to rely on Clause 53.4 of the FIDIC Conditions to assert that no board approval was needed.
The Court of Appeal found that a claim under Clause 70 must be determined in accordance with Part II of the same and must be assessed pursuant to Clause 53. In applying this test to Rahim J.’s findings of fact (with which the Court of Appeal concurred), and in particular his finding that Dipon acknowledged that the Board’s approval was necessary for the Additional Claim to be assessed and paid, the Court Appeal upheld the High Court’s decision.
APPEAL BEFORE THE JUDICIAL COMMITTEE OF THE PRIVY COUNCIL
Before the Judicial Committee of the Privy Council (“the JCPC”), Dipcon maintained that the Additional Claim fell to be considered under Clause 53.4 of the FIDIC Conditions and due to the fact that the parties had conducted their dealings with each other directly, the assessment of the same carried out by UDeCOTT’s employees amounted to a determination of this Claim. Therefore there was no need for Board approval or such approval was merely a rubber stamp. Alternatively, Dipcon averred that the Additional Claim was payable under the parties’ course of dealings which deviated from strict adherence to the FIDIC Conditions.
The JCPC accepted that Clause 53.4 of the FIDIC Conditions permitted UDeCOTT to deal directly with Dipcon and determine the Additional Claim, but ruled that in the absence of a delegation of its powers, such an act can only be carried out by the Board. Unless there was evidence to show that the Board had authorized the assessment and verification of the additional Claim, the re-assessment undertaken by UDeCOTT’s employees did not make it an act of the company. In light of the lower courts’ concurrent and unchallenged findings of fact that the Board’s approval was necessary for the determination of the Additional Claim and that Dipcon both knew and had acknowledged this, the JCPC concluded that Dipcon could not demonstrate that UDeCOTT had determined the Additional Claim. It was therefore not entitled to payment of the same on this basis.
In light of the said concurrent finding of fact, the JCPC also found that there was no course of dealings which entitled Dipcon to payment of the Additional Claim.
Having arrived at these conclusions, the JCPC dismissed the appeal.
The Appellant (Dipcon) was represented by Tom Poole KC and Adam Riley instructed by Blake Morgan LLP (London)
=The Respondent (UDeCOTT) was represented by Ravindra Nanga SC instructed by John Paul Nahous of Pollonais, Blanc, de la Bastide & Jacelon and Edwin Coe LLP (London)
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