Building contract — Adjudication — Scope of power of adjudicator to award interest – Appeal dismissed
The respondent was a subcontractor engaged by the appellant main contractor to carry out part of a construction project. The subcontract arrangements provided for payment by reference to an adjustable target cost. Following the completion of the works, a dispute arose over the amount payable to the respondent under those provisions.
The matter was referred to an adjudicator, pursuant to section 108(1) of the Housing Grants, Construction and Regeneration Act 1996. In its notice of adjudication, the respondent advanced a claim for interest. The appellant replied that no sum was owed to the respondent, so that the issue of interest did not arise. The adjudicator made an award in the respondent’s favour, including interest.
When the appellant refused to pay, the respondent brought proceedings to enforce the award. The appellant sought a declaration that the adjudicator’s decision was unenforceable. It argued, inter alia, that the adjudicator had had no jurisdiction to award interest. The judge rejected that argument, holding that para 20(c) of the Scheme for Construction Contracts (England and Wales) Regulations 1998 created a freestanding right to award interest, regardless of whether the contract itself provided for such an award, or whether the parties had agreed that an award of interest should be within the scope of the adjudication. The appellant appealed.
Held: The appeal was dismissed.
Para 20(c) did not create a freestanding power to award interest. It had to be read in the context of para 20 as a whole, so that an adjudicator could award interest only if questions as to interest were, within the meaning of that paragraph: (i) “matters in dispute” that had been properly referred to him; (ii) questions that the parties had agreed should be within the scope of the adjudication; or (iii) questions that the adjudicator considered to be “necessarily connected with the dispute”. However, in the light of the claim and reply, the parties, in the instant case, had indeed agreed that the question of whether interest should be paid on moneys outstanding was to be within the scope of the adjudication, and had thereby conferred upon the adjudicator a jurisdiction to award interest that he would not otherwise have had.
Stephen Furst QC and Louise Randall (instructed by Herbert Smith) appeared for the appellant; Nicholas Dennys QC and Simon Lofthouse (instructed by Pinsent Masons, of Manchester) appeared for the respondent.
Sally Dobson, barrister
