NH International (Caribbean) Limited v National Insurance Property Development Company Limited

In a construction contract incorporating FIDIC conditions, the question whether material supplied by an employer amounts to reasonable evidence of maintained financial arrangements is ordinarily a factual or evaluative judgment for the arbitrator. A court must not substitute its own assessment unless there is an error of law, no supporting evidence, or a conclusion that no reasonable arbitrator could reach. Contractual notice provisions requiring employer claims to be notified promptly and particularised may bar unnotified set-offs and cross-claims. They do not necessarily prevent a genuine abatement argument concerning the value of defective or poorly performed work.

NH International (Caribbean) Ltd was engaged by National Insurance Property Development Company Ltd to construct a hospital under an agreement incorporating the FIDIC General Conditions. After payment-related disagreements, NHIC suspended work and purported to terminate the agreement under clauses 2.4 and 16.2. The arbitrator upheld the termination in his second award. Rajnauth-Lee J upheld that decision, but the Court of Appeal set it aside.

The arbitrator later determined the financial consequences in a third award and allowed certain employer counterclaims. Jones J dismissed NHIC’s appeal on the set-off issue. The Court of Appeal allowed NHIC’s appeal on two other points but upheld the rejection of its argument that clause 2.5 barred the counterclaims. The appeals concerned the proper scope of appellate review of the arbitrator’s assessment and whether clause 2.5 governed set-offs, cross-claims and abatement.

1. First appeal allowed. The Board restored the arbitrator’s conclusion that NHIC had validly terminated the agreement on 3 November 2006 under clause 16.2. Whether the letters relied on by NIPDEC constituted reasonable evidence under clause 2.4 was a finding of fact, or a secondary factual judgment, rather than a question of law. The arbitrator was entitled to consider the practical requirement for Cabinet approval and to conclude that general assurances of governmental commitment were insufficient.
2. Where parties agree to arbitration, courts must respect the arbitrator’s fact-finding, assessment of evidence and formation of judgment. A court may intervene for an error of law, absence of evidence, or a conclusion that is unsupportable or one which no reasonable arbitrator could reach. Mere disagreement by the court, even strongly held disagreement, does not justify setting aside or varying the award. The Court of Appeal had impermissibly substituted its own assessment of the evidence and the weight to be given to it.
3. The arbitrator had erred in his alternative conclusion that the financial assurances related to an insufficient sum. That error did not affect his independent primary conclusion, which was supported by the evidence and involved no error of law.
4. Second appeal allowed. Clause 2.5 applied to any employer claim for payment under the conditions or otherwise in connection with the contract, including claims intended to operate as set-offs or cross-claims. Such a claim had to be notified as soon as practicable and supported by particulars. The final words of the clause prevented the employer from using set-off or a cross-claim as a means of avoiding those requirements.
5. The clause did not prevent a genuine abatement argument, such as a contention that defective or poorly performed work was worth less than the contractor claimed. The reasoning of Mellowes Archital Ltd v Bell Products Ltd (1997) 58 Con LR 22, 25–30 supported that distinction. The third award was remitted to the arbitrator to reconsider the counterclaims in accordance with the Board’s conclusions and the unchallenged directions of the Court of Appeal. Costs submissions were invited within 14 days.

Procedural history

• Privy Council: Both appeals allowed. The finding that the agreement was validly terminated was restored, and the third award was remitted to the arbitrator.
• Court of Appeal of the Republic of Trinidad and Tobago: Set aside Rajnauth-Lee J’s decision upholding the arbitrator’s second award. In relation to the third award, allowed NHIC’s appeal on two points but upheld the rejection of its set-off argument and declined to remit the award in light of its decision on termination.
• High Court: Rajnauth-Lee J dismissed NIPDEC’s challenge to the arbitrator’s finding of valid termination. Jones J dismissed NHIC’s appeal concerning NIPDEC’s counterclaims and set-offs.