Building contract – Adjudicator – Award – Claimant carrying out construction works for defendants – Disputes arising concerning alleged failure to complete works – Adjudicator making award in favour of defendants – Defendants claiming liquidated damages – Whether defendants entitled to damages following issue of certificates of non-completion – Claim dismissed
The claimant contractor entered into a contract with the defendants to convert three agricultural barns into four dwelling-houses. The contract, the price of which was £568, 000, was on the JCT Standard Building Contract with Quantities (2005) and was therefore an agreement within section 107(2) and (4) of the Housing Grants, Construction and Regeneration Act 1996. Section 108 of the Act gave the parties a right to refer disputes to adjudication.
The parties disputed the completion of the works and they entered into two separate adjudications. The first, instigated by the claimant in respect of unpaid sums, resulted in an award in its favour of £79,900. The defendant initiated the second dispute, alleging that the claimant had failed to complete the works by the due dates so that they were entitled to a certificate of non-completion in respect of each of the three barns and to deduct or be paid liquidated and ascertained damages (LADs) at the rate stated in the contract.
An award was made in favour of the defendants, requiring the claimant to repay to them the sum of £7,381 pursuant to the order of the contract administrator. The adjudicator also found that the defendants were entitled to the sum of £4,112 under the notice of withholding, although that was considerably less than the £138,185 claimed. He further found that the defendants were entitled to certificates of non-completion, but made it clear that they could not require payment of LADs until those certificates had been issued. The defendants subsequently claimed LADs for non-completion in the sum of £71,314 and both parties applied to the court to enforce the adjudicator’s decisions.
An issue arose, inter alia, as to whether the defendants’ claim for LADs was a natural consequence of the adjudicator’s declaration that they were entitled to certificates of non-completion and the subsequent issue of those certificates.
Held: The defendants’ claim was dismissed.
The defendants could not enforce their claim to recover £71,314 from the claimant. Section 108(3) of the 1996 Act gave the court jurisdiction to enforce the adjudicator’s decision. What followed logically from that decision was a declaration that the contract administrator ought to issue the certificates of non-completion and nothing more. The adjudicator had specifically concluded that he could not decide in the adjudication that the claimant was to repay the sum of £71,314, or any sum.
There was a significant difference between the present claim and the circumstances in which it was possible to calculate the sums that were a direct consequence of the adjudicator’s award; for example, where the adjudicator had decided that a party was entitled to recover a sum of money that could be calculated by reference to figures accepted by the adjudicator in the course of the adjudication. In the instant case, it would be necessary to consider the effect of contractual provisions, on which the adjudicator made no affirmative finding, in order to conclude that the defendants were entitled to LADs. That might be a matter for a separate application for summary judgment or a further adjudication, but it was not within the court’s jurisdiction for enforcement of the current adjudicator’s award.
It was well established that the purpose of the 1996 Act was to introduce a mechanism for the prompt settlement of disputes in construction contracts on a provisional basis. That required adjudicators’ decisions of to be enforced promptly pending the final determination of such disputes by litigation, arbitration and agreement. It followed that the intention of parliament was that the adjudicator’s decision should be given effect in a way that was consistent with providing a quick and effective remedy on an interim basis and without consideration of arguments relating to other provisions in the contract: Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] 3 EGLR 7; [1999] 37 EG 173, Ferson Contractors Ltd v Levolux AT Ltd [2003] EWCA Civ 11; [2003] 1 All ER (Comm) 385, and MJ Gleeson Group plc v Devonshire Green Holdings unreported 19 March 2004 applied.
Only grounds could be used for refusing to enforce an adjudicator’s award with immediate effect. Equally, if a dispute had not been referred to an adjudicator or had not been the subject of an adjudicator’s decision, the 1996 Act did not apply and there was no decision to enforce. In such a case, the right of set-off does not arise. Section 111 of the 1996 Act provided a comprehensive code governing the right to set off against payments contractually due. The effect of the statutory provisions was generally to exclude a right of set -ff from an adjudicator’s decision: Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2001] 1 All ER (Comm) 1041, VHE Construction plc v RBSTB Trust Co Ltd [2000] BLR 187; and William Verry Ltd v Camden London Borough Council [2006] EWHC 761 (TCC) applied.
Stuart Kennedy (instructed by Michelmores LLP, of Exeter) appeared for the claimant; Patrick Clarke (instructed by Ashfords LLP) appeared for the defendants.
Eileen O’Grady, barrister
