Adjudication – Award – Enforcement – Parties contracting to build warehouse units – Dispute arising as to payment – Dispute being resolved at arbitration – Claimant, as unsuccessful party, raising jurisdiction objections – Claimant seeking to enforce adjudicator’s award – Whether dispute crystallising between parties at time of notice of adjudication – Whether adjudicator having power to order payment of lesser sums than in defendant’s original interim application – Claimant’s action dismissed – Defendant’s claim allowed
The claimant engaged the defendant to design and construct two warehouse/industrial units in St Austell, Cornwall. The contract sum was in excess of £5.5m. The contract administrator was AECOM. When work was completed, it came to just over £6m. The defendant issued an interim application for payment, seeking the gross sum of £8m and the net sum of £2.3m. AECOM informed the defendant that the sum so far paid to it of around £8m was the correct amount and no further sums were due to it. It promised to write to the defendant with details of outstanding defects with the work but failed to do so.
The defendant commenced adjudication proceedings and the claimant was ordered to pay to the defendant the sum of £417,919.66. Although the claimant lost the adjudication, it issued pre-emptive part 8 proceedings seeking a declaration that the adjudicator did not have the jurisdiction to award a sum which was less than the original interim application. The defendant issued a separate part 7 claim seeking to enforce the award made by the adjudicator.
The claimant argued that the dispute had not crystallised between the parties at the time of the notice of adjudication. Further, since the claim referred to adjudication had related only to a part of the defendant’s original interim application, and had expressly excluded other elements of that application, the adjudicator had not been empowered to order payment of only part of the interim application as opposed to the entire application.
Held: The claimant’s action was dismissed. The defendant’s claim was allowed.
(1) The general view was that crystallisation might require no more than the service of a claim by the claiming party and subsequent inactivity for a further short period by the responding party. In practice, in the overwhelming majority of cases dealing with that point, the court had found that the dispute had crystallised by the time of the notice of adjudication. The existence of a dispute or difference might be inferred from what was said or not said by the party in receipt of what might be termed “a claim. There did not have to be an express rejection of a “claim” by the recipient. A claim for the purpose of giving rise to a dispute or difference might not be a claim for money or for the payment of money. The variety, extent and scope of disputes were infinite. It might involve simply an assertion of a right by one party. One needed to determine whether there was a claim and whether or not that claim was disputed from the surrounding facts, circumstances and evidence pertaining up to the moment that the dispute, subsequently referred to adjudication (or arbitration), had crystallised: Monmouthshire County Council v Costelloe and Kemple Ltd (1965) 5 BLR 83, Amec Civil Engineering Ltd v Secretary of State for Transport [2004] EWHC 2339 (TCC), Ringway Infrastructure Services Ltd v Vauxhall Motors Ltd [2007] EWHC 2421 (TCC), Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd [2009] EWHC 322 (TCC) and Beck Interiors Ltd v UK Flooring Contractors Ltd [2012] EWHC 1808 (TCC) considered.
Applying those principles to the issue of crystallisation in the present case, however it was analysed, the dispute about what, if any, sums were due to the defendant on the basis of interim application had crystallised long before the notice of adjudication. By that time, a claim had been asserted and then expressly rejected. Nothing more is required for a dispute to have crystallised. It was clear that the claim should have been assessed long before it eventually was, and that if supporting documentation was missing, that would no doubt be reflected in any subsequent assessment by the employer or his agent: Gibson (Banbridge) Ltd v Fermanagh District Council [2013] NIQB 16 applied.
(2) A claimant was entitled to prune his original claim for the purposes of his reference to adjudication. If his interim application for payment was for measured work and loss and expense, he might decide that, because the loss and expense claim could be difficult to present in an adjudication, he would instead focus in those proceedings on just the straightforward claim for measured work. That was a process to be encouraged. Claims advanced in adjudication should be those claims which the referring party was confident of presenting properly within the confines of that particular jurisdiction. Moreover, there was no doubt that the claimant was liable to make an interim payment to the defendant under the contract. On the adjudicator’s analysis, a substantial sum was due to the defendant in respect of the measured work element of the 115 changes included in the interim application. That amount, at least, should have been paid. The adjudicator’s decision was therefore a decision reflecting the claimant’s existing liability to pay. It manifestly did not create a liability to pay when none existed before. The mere fact that the defendant had limited its own claim to the measured work value of the 115 changes, did not in any way limit or prevent the claimant from defending that claim, and raising its own cross-claim by way of set-off. That would have been an entirely legitimate defence to the claim in the adjudication, whatever the notice of adjudication or the referral might have said. Accordingly, the absence of a cross-claim in the present adjudication could not be the result of the wording of the notice of adjudication or of the referral, because neither would or could have prevented the claimant from raising any legitimate cross-claim by way of defence to the limited claim being advanced in the adjudication: Fastrack Contractors Ltd v Morrison Construction Ltd [2000] BLR 168, David McLean Housing Contractors Ltd v Swansea Housing Association Ltd [2002] BLR 125 and Pylon Ltd v Breyer Group PLC [2010] EWHC 837 (TCC) applied.
Abdul Jinadu (instructed by Bertram Law, of Exeter) appeared for the claimant; Krista Lee (instructed by Michelmores LLP) appeared for the defendant.
Eileen O’Grady, barrister
