Independently valuing a termination account

We were instructed by one of the largest construction and energy law firms in the UK, on behalf of their client who was the employer in a JCT contract with a main contractor whose contract was terminated part way through construction. The main contractor claimed that the Employer had repudiated the contract and made a seven-figure termination account claim (the termination account) which we were instructed to independently value as part of an ongoing adjudication proceeding.

Producing our opinion

We identified that there were two elements to the termination account: the valuation of work performed between the date of the last interim payment certificate and the date of termination (the measured work element); and the costs incurred by the main contractor because of the termination (termination element).

The measured work element involved a review of progress claimed against the records submitted to make a valuation in accordance with the contract. As the termination account was, in effect, the final account we performed a check of the interim payment certificate to ascertain whether any adjustment was necessary to make a final assessment.

The variation account contained around 50 variations with differing levels of agreement at the date of termination, and the introduction of new variations in the termination account. We assessed the variation account by establishing entitlement; there was either an instruction or there wasn’t an instruction. In the latter case, the valuation was £nil. If there was an instruction, we reviewed the detail of the records to make a valuation.

The termination account was comprised of loss of profit, subcontractor termination costs and staff costs. We made a valuation of each part of the termination account by, first, giving an opinion on whether the cost was caused by termination and, if so, the extent of the loss suffered by the main contractor.

Our deliverables

The timescales were extremely tight and going from a standing start meant no time could be wasted; we had to get very quickly into the detail of the termination account. We delivered our report and valuation submitted with the adjudication response in a 10-day turn around, and we delivered our report and valuation to be submitted with the rejoinder in a 4-day turnaround.

We attended a meeting, attended by both parties and the adjudicator, where we answered the adjudicator’s questions about our valuation and explained to the adjudicator how we had arrived at our valuation by reference to the evidence. The meeting was a full day, conducted online, and went through each issue within each element of the account.

Outcome

The instructing solicitor, and their client, highly commended the professionalism of our conduct and the work we performed. Our assessment resulted in a 40% reduction in the sum claimed by the main contractor.