Category Archives: Adjudication

Construction: Employer could not challenge adjudication in enforcement proceedings

In construction disputes if an adjudicator has decided the issue referred to him, and he has acted in accordance with natural justice, his decision will be enforced by the court.

The defendant must pay now and argue later.

There are two narrow exceptions to this rule:

1. Involves an admitted error. For example a calculation error admitted by everyone, including the adjudicator. Here in the absence of an arbitration clause, the court would have jurisdiction to make a final decision on the point, and correct the error. However if there is an arbitration clause in the construction contract, the court would not have the power to determine the issue and the decision would be enforced.

2. Involves the proper timing, categorisation or description of the relevant application for payment, payment notice or payless notice. However it would not be open to a defendant to seek to avoid payment of a sum found due by an adjudicator by raising the very issue on which the adjudicator ruled against the defendant in the adjudication.

If the issue is a short and self-contained point, which requires no oral evidence or any other elaboration than that which is capable of being provided during a relatively short interlocutory hearing in the court enforcement proceedings, then the defendant may be entitled to have the point decided by way of a claim for a declaration.

It is envisaged at paragraph 9.4.3 of the Technology and Construction Court Guide that separate Part 8 proceedings will not always be required in order for such an issue to be decided at the enforcement hearing.

This procedure will rarely be used, because it is very uncommon for the point at issue to be capable of being so confined.

Very often, the defendant’s point is straightforward: the adjudicator was wrong and that, with regard to its timing, or its content, the relevant payment notice was invalid and/or that the defendant’s pay less notice was valid and prevented payment. Here, the defendant will have issued Part 8 proceedings seeking a declaration to that effect, and the claimant may issue its own enforcement claim or,the parties may agree that, if the defendant loses its Part 8 claim, it will pay the sums awarded by the adjudicator in any event.

These “consensual approach” cases all involved a significant degree of agreement between the parties. In particular, they all involved CPR Part 8 claims issued by the defendant challenging the decision of the adjudicator, and seeking a final determination by way of court declaration.

In all those cases:

1. There was a tacit understanding that the parties’ rights and liabilities turned on the decision as to whether or not the particular notice had been served in time and/or was a valid application for payment or payment/pay less notice.

2. The issue of a separate Part 8 claim was important in two respects:

2.1 it provided a means whereby the defendant could detail its challenge to the adjudicator’s decision so that the claimant could see and understand the precise basis of the challenge and the declarations sought and

2.2 the existence of a separate Part 8 claim meant that the court knew what was going to be involved at any subsequent hearing. This was vital to the court for the making of directions. A Part 8 claim means more involved arguments than would ordinarily arise on an adjudication enforcement, so the court will be able to list the hearing for a longer timeslot, and will be less concerned about fixing it within the usual 28 days.

Problems have arisen elsewhere because there has been no such consent.

This was the position in Hutton Construction Lted v Wilson Properties (London) Ltd [2017].

Here the High Court laid down the following guidelines for these cases:

1. The defendant must issue a CPR Part 8 claim setting out the declarations it seeks or, at the very least, indicate in a detailed defence and counterclaim to the enforcement claim what it seeks by way of final declarations. A prompt Part 8 claim is the best option.

2. Where there is a dispute between the parties as to whether or not the defendant is entitled to resist summary judgment on the basis of its Part 8 claim, the defendant must be able to demonstrate that:

(a) there is a short and self-contained issue which arose in the adjudication and which the defendant continues to contest;

(b) that issue requires no oral evidence, or any other elaboration beyond that which is capable of being provided during the interlocutory hearing set aside for the enforcement; and

(c) the issue is one which, on a summary judgment application, it would be unconscionable for the court to ignore. For example, that the adjudicator’s construction of a contract clause is beyond any rational justification, or that the adjudicator’s calculation of the relevant time periods is obviously wrong, or that the adjudicator’s categorisation of a document as, say, a payment notice is wrong, when, on any view, it was not capable of being described as such a document.

Such an issue could still only be considered by the court on enforcement if the consequences of the issue raised by the defendant were clear-cut. If the effect of the issue that the defendant wishes to raise is disputed, it will be most unlikely for the court to take it into account on enforcement. Any arguable inter-mingling of issues would almost certainly be fatal to the defendant being able to claim that their challenge falls within this limited exception.

The dispute between the parties as to whether or not the issue should be dealt with on enforcement would have to be dealt with shortly at the enforcement hearing itself. Due to the inevitable time constraints of such a hearing it will be rare for the court to decide that the issue can still be raised as a defence to the enforcement application even though the issue and its effect is disputed.

Because it is a potential abuse of the court process, a defendant who unsuccessfully raises this sort of challenge on enforcement will almost certainly have to pay the claimant’s costs of the entire action on an indemnity basis. Conversely, if the claimant does not agree to the defendant’s proposal to deal with the issue on enforcement, but the court finds that the issue does fall within the limited exception, it is the claimant who runs the risk of being penalised in costs.

In this particular case

1. It was common ground that:

1.1 The proper meaning and interpretation of the documents was a straightforward matter for the court. No other evidence of any kind was required.

1.2 If the adjudicator was wrong, and those documents did not constitute a proper claim for payment or a payee’s notice, then the defendant’s payless notice was valid and there is no entitlement to summary judgment.

So it was one of those rare cases where the substantive point in issue can be determined at the enforcement hearing.

2. The defendant’s challenge was of a type which should have been the subject of a separate Part 8 claim at the outset. The defendant’s solicitor’s correspondence did not make clear how and why the enforcement was being resisted. Neither did the witness statement.

So, it was only when the Part 8 claim was provided that the claimant (and the court) was given an inkling as to the defendant’s stance. But even that was inadequate. No specific declarations were sought in the Part 8 claim.

Further the defendant endeavoured to rerun the issues in the adjudication and rely on other matters too, such as the earlier sequence of interim applications and how they were dealt with by the parties. The court, on an adjudication enforcement, simply could not deal with all of the points – and more – raised in the adjudication.

The defendant now wished to rely on a number of factual matters. Once they have been set out properly, they might be agreed, but the claimant had not had sufficient time to consider them and its precise response. There may well be disputes. That was another reason why the defendant’s challenge was wholly inappropriate for any consideration on the summary judgment application.

The adjudicator’s decision ran to 73 closely-typed paragraphs. The adjudication had lasted from 11 October to 15 November 2016. The court had seen only some of the documents relating to the adjudication.

Absent any consent from the claimant, it could not be right, to let the defendant shoehorn into the time available at the enforcement hearing the entirety of that adjudication dispute.

“Such an approach would mean that, instead of being the de facto dispute resolution regime in the construction industry, adjudication would simply become the first part of a two-stage process, with everything coming back to the court for review prior to enforcement. That …. cannot be permitted.^

The challenge to the adjudicator’s decision failed and the claimant was entitled to summary judgment.

The defendant could pursue its Part 8 claim separately. The defendant would need to amend that claim and there needed to be a proper exchange of pleadings.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Construction: Failure to serve notices did not preclude further adjudication

In Kilker Projects Ltd v Purton (t/a Richwood Interiors) [2016] the High Court had to decide whether failure to serve a ‘payment notice’ or ‘pay less notice’ as required by the Housing Grants, Construction and Regeneration Act 1996 (as amended) (“the 1996 Act”), prevented the paying party from challenging the payee’s contractual entitlement to that payment meaning that the ‘notified sum’ in section 111 of the 1996 Act became “final and conclusive” as to the sum due under the contract.

The claimant submitted that the 1996 Act and the Scheme for Construction Contracts (England and Wales) Regulations 1998 (amendment) (England) Regulations 2011 regulated payment and cash flow. They did not decide the true substantive entitlement to payment under the contract and they did not conclusively determine entitlement to payment. A party who had failed to give the requisite payment and/or pay less notices must pay the amount stated in the payee’s payment notice by the final date for payment. However, having paid, that party was then entitled to seek a determination of any dispute about the valuation of the contractual entitlement of the contractor for the works, and it could do so in adjudication.

The defendant said the effect of a failure by a party to issue a payment notice and/or a pay less notice was that the payer agreed the payee’s valuation for that payment and must pay the application sum in full. In an application for final payment, a failure by a party to issue a payment notice and/or a pay less notice meant that the final account was agreed. It remained open to the payer to challenge the valuation in litigation or arbitration, for instance by proceedings for restitution, but the agreed valuation could not be re-opened in a subsequent adjudication.

The court agreed with the claimant:

“In Matthew Harding t/a MJ Harding Contractors v Paice [2015] the Court of Appeal determined that the employer could refer to adjudication the question of the true valuation of a final account following termination, despite an earlier adjudication ordering payment of the contractor’s application for final payment in full on the basis of a failure to serve a valid pay less notice. In upholding the decision of Mr Justice Edwards-Stuart at first instance, Jackson LJ, with whom the other judges agreed stated:

……. [78] In my view the employer’s failure to serve a Pay Less notice (as held by the previous adjudicator) had limited consequences. It meant that the employer had to pay the full amount shown on the contractor’s account and argue about the figures later. The employer duly paid that sum, as ordered by the previous adjudicator. The employer is now entitled to proceed to adjudication in order to determine the correct value of the contractor’s claims and the employer’s counter-claims.””

Therefore, the claimant had been entitled to refer the final account valuation to the adjudicator and was now entitled to have the amount awarded in that adjudication enforced.

This blog is posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Construction: Adjudicator’s powers survived “binding settlement”

Section 108 of the Housing Grants Construction and Regeneration Act 1996 says:

“(1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.”

Where there is a dispute as to whether there has been a full and final settlement agreement between the contractual parties does the dispute arise “under” the construction contract or under the alleged settlement agreement or both?

In J Murphy & Sons Ltd v W Maher and Sons Ltd [2016] Murphy issued proceedings seeking a declaration that the adjudicator had no jurisdiction to entertain a dispute arising out of an alleged final settlement since:
– the alleged settlement agreement was a standalone agreement and
– there was no adjudication agreement applicable to that agreement and
– the disputed claim did not arise “under” the original sub-sub-contract.

The High Court said that adjudicator had jurisdiction because the adjudication clauses in the sub-sub-contract survived and were broad enough to cover a dispute arising under the alleged settlement agreement because that later agreement undoubtedly arose in connection with the original sub-sub-contract.

“A dispute as to whether all or some of the alleged entitlements which one contractual party has against the other has been settled in a binding way arises “under” the original contract.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Failure to serve Pay Less Notice did not prevent final account being challenged for all time

In Paice & Anor v MJ Harding (t/a MJ Harding Contractors) [2015] the contractor argued that:

1. if an employer wishes to pay less than the sum stated in the contractor’s account under clause 8.12 of the building contract, which incorporated the JCT Intermediate Form 2011 edition, it must issue a “Pay Less Notice”.

2. So the employer could only set aside the adjudicator’s decision to award the sum stated in the contractor’s clause 8.12 account in subsequent litigation by showing that its Pay Less Notice was validly served in time.

3. So if the employer failed to to serve a valid Pay Less Notice in time, it would deprive the employer of the right to challenge the contractor’s account.

The High Court pointed out that this would apply for all time even if the contractor had seriously overvalued his account and that the contractor would thereby obtain a windfall that the employer could never recover.

That would subject interim certificates to a more draconian regime than that which applies to the Final Certificate.

In the case of Final Certificates, if the employer commences adjudication or litigation within 28 days of it being issued, it ceases to be conclusive in respect of the matters raised in the litigation or adjudication (clause 1.9).

The High Court said that what would be due under clause 8.12.5 would be the “… amount properly due in respect of the account”.

In this case the adjudicator had not determined what was “properly due”.

He had decided that, in the absence of a valid Pay Less Notice, the employer had to pay the amount stated in the contractor’s account within 28 days.

The Court of Appeal has now backed the High Court. They said the employer could challenge the valuation arrived at on the contractor’s final payment application by applying for a further adjudication even though they had failed to issue a proper payment or Pay Less Notice.

The court said the employer’s failure to serve a Pay Less Notice had limited consequences. These were mainly that the employer had to pay the total shown on the contractor’s account and dispute the figures later. The employer had paid that amount, as the previous adjudicator had ordered. The employer could now proceed to adjudication in order to ascertain the true value of the contractor’s claims and of the employer’s counter-claims. So the High Court Judge had got this right.

So whilst the employer must comply with the adjudicator’s decision in the meantime by paying the sum ordered, it remains open to the employer to initiate further adjudication or litigation to decide what sum is properly due in respect of the contractor’s account.

Clearly the employer will want to avoid this drain on cash flow by serving the Pay Less Notice in time, especially if there are doubts as to the continuing solvency of the contractor when it comes to refunding the over payment.

This case helps in respect of final account payments. Here, a failure to serve a payment or Pay Less Notice will not usually prevent an employer from later challenging the true value of the work through adjudication or court proceedings.

The Court of Appeal has left the position in regard to interim payments less clear.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Adjudication: Linked issues formed single dispute

In Whitney Town Council v Beam Construction (Cheltenham) Ltd [2011] Akenhead J gave guidance as to one way of identifying whether or not two separate disputes had been invalidly referred to an adjudicator:

“A useful if not invariable rule of thumb is that if a disputed claim No 1 cannot be decided without deciding all or part of disputed claim No 2, that establishes such a clear link and points to there being only one dispute.”

In that case a claim for a final account and a claim for the financial consequences of termination were ruled part of a single dispute.

In Wycombe Demolition Ltd v Topevent Ltd [2015] an adjudicator awarded £113,666.63, with interest and his fees and expenses due from the employer (“Topevent”) to the claimant contractor (“Wycombe”).

Topevent complained that the adjudicator had no jurisdiction because more than one dispute was referred to him. The adjudicator was addressing both the issue of valuation and, what they said, were separate issues arising out of the termination/cessation of the works, and that they were two entirely separate disputes.

The High Court said it was plain from the Notice of Adjudication that the dispute between the parties concerned the outstanding payment due to Wycombe, following the cessation of works on site.

That payment was made up of a number of elements, including both the value of variations, and the financial consequences of termination and demobilisation.

There was a claim for one final payment comprising all outstanding sums, including the £4,000, for “wrongful termination of contract.” Wycombe wanted one final payment so as to be able to close their books on this contract. That could only be achieved if the adjudicator addressed all their outstanding claims. So there was a clear link between their rejected claim for the cost consequences of the “wrongful termination”, and the overall claim for all sums outstanding. They were not separate disputes.

Secondly Topevent’s representative had written a letter saying that the valuation of Wycombe’s work could not be carried out properly unless the amount of incomplete work was taken into account. That letter made a direct link between those two issues.

Accordingly, both elements of the claimed payment were part of a single dispute. They were simply different components of the total sum in dispute.

Even if there were two separate disputes paragraph 11.1 of the TecSA Rules which were the basis of the adjudicator’s appointment made it clear that the adjudicator could deal with “any further matters which all Parties agree should be within the scope of the Adjudication”.

The disputes concerned with the valuation of the work, and the dispute about termination, were addressed without qualification by both parties during the adjudication.

Indeed, Topevent’s counterclaim of approximately £180,000 was based on the latter. But Topevent had never suggested that the termination dispute should not be dealt with in the adjudication. In fact, they wanted it so decided.

So if were two separate disputes, Topevent’s acquiescence in, and failure to object to, the adjudicator dealing with both disputes, gave him the necessary jurisdiction anyway.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Operation of extension of time provisions not pre condition to liquidated damages claim

Can it be said in absolute terms that any failure on the part of a Contract Administrator (“CA”) to operate the extension of time provisions under a building contract prevents a claim for liquidated damages?

In the High Court case of Henia Investments Inc v Beck Interiors Ltd [2015] the Claimant, Henia Investments Inc (the “Employer”) sought declarations concerning its building contract (“the Contract”) with Beck Interiors Ltd (“the Contractor”) in relation to an Application for an interim payment that the Contractor had issued.

The Contract was the JCT Standard Building Contract without Quantities 2011 as amended.

One of the issues was whether a failure on the part of the CA to make a decision in respect of a contractually compliant application for extension of time rendered the CA’s Non-Completion Certificate invalid or otherwise prevented the Employer from deducting and/or claiming liquidated damages?

The court actually decided the case on other grounds but as a non binding aside it said the language of the principal liquidated damages provision, Clause 2.32, did not suggest that the CA fulfilling its duty to operate the extension of time provisions was a condition precedent to the Employer’s entitlement to deduct liquidated damages.

It seemed odd that, if there was to be a condition precedent that no liquidated damages should be payable or allowable unless the extension of time clauses have been operated properly, it was not spelt out as such.

This was more especially the case as Clause 2.32.1 expressly imposed two other conditions precedent, namely the need:

– for the CA to have issued a Non-Completion Certificate for the Works and

– for the Employer to have notified the Contractor before the date of the Final Certificate that he may require payment of, or may withhold or deduct, liquidated damages.

The lack of any precondition as to the extension of time clauses having been operated properly could be explained commercially by the facts that:

1. There can be serious arguments between the Contractor and the CA (as there were here) not only as to whether delays have occurred by reason of which extensions of time can be granted but also as so as to whether the Contractor has properly complied with the notification and particularisation requirements required by Clause 2.27.

2. The extension of time application may range from being a wholly good to a hopeless one or it may relate to the whole of the delay or only a very small part.

In short, there may turn out to be no or only a limited entitlement to an extension of time, leaving intact all or most of the Employer’s liquidated damages entitlement.

3. The Contractor is not left without remedies which, in the short term, it can pursue through adjudication and in the long-term final dispute resolution processes.

It can challenge the refusal to grant an extension and/or the deduction of liquidated damages and, in the case of adjudication, secure relief if it can persuade the adjudicator that it is appropriate and that the Employer and the CA are wholly or partly in the wrong.

It could be argued that it is unfair on the Contractor to have liquidated damages deducted at a time when the CA has failed to consider extension of time claims. The answers to that were:

A the ready availability of those short and long-term remedies

B the existence of numerous potential defaults on the part of both Employer and Contractor which could cause serious financial consequences for the other and

C the mere fact that unfairness could happen in the short term does not necessarily or obviously require clauses to be interpreted to be conditions precedent to the ability of either party to secure such financial advantage in that short term.

So a failure on the part of the CA to operate the extension of time provisions did not preclude the Employer from deducting liquidated damages where the explicit conditions precedent in Clauses 2.32.1.1 and 2.32.1.2 have been complied with.

However under other building contracts, if the effective operation of extension of time provisions is clearly a condition precedent it may be a precondition to the Employer’s claim for liquidated damages.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Construction: paperwork not clear enough to amount to interim payment applications

In the High Court case of Caledonian Modular Ltd v Mar City Developments Ltd [2015], the defendant denied liability for any part of the amount awarded by an adjudicator. The adjudicator’s decision turned on the date on which the claimant had notified the defendant of the sum due under the letter of intent for the construction project.

On the claimant’s view, the relevant interim payment application was made on 13 February 2015. If that was right, it was common ground that the defendant’s payless notice of 25 March 2015 was out of time and invalid.

But the defendant said that the documents of 13 February were not a claim for or notice of the sum due for payment, and that the claimant’s claim was not made until 19 March 2015. If that view were correct, it was common ground that the defendant’s payless notice of 25 March would be within time and would have provided a complete defence to the claimant’s claim.

If the documents of 13 February did not constitute a fresh application for an interim payment, or a valid payee’s notice no further sums were due from the defendant to the claimant and the adjudicator had been wrong to conclude to the contrary.

The court said:

1. Neither the covering email of 13 February 2015, nor the three documents enclosed with it, stated that they were a new application for an interim payment. The documents said variously that they were a ‘final account application summary’ and an ‘updated account’.

2. A later invoice of 19 March 2015 did not say that it was in any way a default payment notice or that the payee’s notice had originally been provided on 13 February 2015. If that had been the claimant’s position, they would have said so in clear terms.

3. In between the email of 13 February and the invoice of 19 March, the defendant expressly asked the claimant what the 13 February documents were. Unsurprisingly, the defendant was confused as to what, if anything, they were supposed to do with those documents. The claimant’s explanation did not even begin to suggest that the documents of 13 February were in fact an entirely new interim application, or that a fresh claim had been made less than a fortnight after the last, in the middle of the month and not at the month’s end.

In all three documents that the claimant relied on as being applications for interim payment, the claimant had had the opportunity to say clearly that those documents were what they now said they were, namely a new application for an interim payment and/or a payee’s notice, but the claimant failed to do so.

This omission was significant. It suggested that the claimant’s case now, that the documents were in fact a fresh claim, was “something of an afterthought.”

The only other alternative explanation was that the claimant believed that it was in its best interests to be “studiedly vague” about the nature of the documents, so as to set up precisely the argument they advanced successfully in winning the adjudication.

On any view, if they intended to serve a valid payee’s notice on 13 February, they could and should have said that that was what they were doing.

They were even asked a question which, if that had indeed been their intention, required only that simple answer. It was not provided.

Accordingly, the court granted a declaration that the documents of 13 February 2015 were not a valid application for an interim payment, or a valid payee’s notice and that no sums were due in consequence of the adjudication.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Adjudication payment triggered implied contractual right to recover overpayment

Adjudication in construction disputes is designed to provide provisional resolution of disputes to preserve cash flow but the outcome is subject to final determination in later legal proceedings.

Provisions are implied into a construction contract under section 108(5) of the Housing Grants, Construction and Regeneration Act 1996, read with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (“the Scheme”).

By providing that the decision of an adjudicator is binding and that the parties shall “comply with it”, paragraph 23(2) of the Scheme makes the decision enforceable for the time being. It is enforceable by action founded on the contractual obligation to comply with the decision combined, in a normal case, with an application for summary judgment.

The limitation period for enforcement will be six years from the adjudicator’s decision. But the decision is only binding and the obligation to comply with it only lasts “until the dispute is finally determined” in one of the ways identified.

By use of the word “until”, paragraph 23(2) appears to contemplate that there will necessarily be such a determination. The short time limits provided by paragraph 19(1) also indicate that adjudication was envisaged as a speedy provisional measure, pending such a determination.

But there is nothing to prevent adjudication being requested long after a dispute has arisen and without the commencement of any proceedings.

Also its unlikely that the Scheme imposes on either party any sort of obligation to start court or arbitration proceedings in order to confirm its entitlement.

Either or both of the parties might understandably be content to let matters lie.

The Supreme Court in Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc (2015) has now provided some guidance as to when those proceedings must be brought and has come to some conclusions which could have bizarrely inconsistent results.

In that case Aspect had failed to pick up some asbestos on a survey which later impeded and added cost to Higgins’ contruction work. Higgins were awarded over £600,000 adjudication which was 75% of their claim. Aspect paid.

The contract was not entered into as a deed so the limitation period for bringing proceedings for breach of it was 6 years rather than 12 years from breach.

More than 6 years after their breach of contract Aspect sought recovery of monies they had paid Higgins under that adjudication award. However they issued proceedings for it within 6 years of paying it.

Aspect rested its claim on an implied term, alternatively in restitution.

The implied term was that:

“in the event that a dispute between the parties was referred to adjudication pursuant to the Scheme and one party paid money to the other in compliance with the adjudicator’s decision made pursuant to the Scheme, that party remained entitled to have the decision finally determined by legal proceedings and, if or to the extent that the dispute was finally determined in its favour, to have that money repaid to it.”

The court said it was a necessary legal consequence of the Scheme implied by the 1996 Act into the parties’ contractual relationship that Aspect must have a directly enforceable right to recover any overpayment to which the adjudicator’s decision had led to, once there had been a final determination of the dispute.

The obvious basis for recognising that right was by way of implication arising from the Scheme provisions which were themselves implied into the construction contract.

If and so far as the court’s decision abolishes the basis on which the payment was made an overpayment is, retrospectively, established. Repayment must then be required either by contractual implication or, if not, then as an independent restitutionary obligation.

Since Aspect’s cause of action arose from payment and was only for repayment, then whether it was analysed as in implied contractual terms or restitutionary terms, it was a cause of action which could be brought at any time within six years after the date of payment to Higgins on 6 August 2009.

Higgins complained that this gave Aspect a one-way throw and undermined finality. By delaying commencement of the present claim until 2012, Aspect can sue to recover all or part of the £658,017 paid to Higgins, without having the risk of ending up worse off, since Higgins was barred by limitation from pursuing the £331,855 balance of its original claim.

That, however, resulted from Higgins’s own decision not to commence legal proceedings within six years from April 2004 or early 2005 and |Higgins has assumed the risk of not confirming (and foregoing the possibility of improving upon) the adjudication award it had received.

Adjudication had been conceived as a provisional mechanism, pending a final determination of the dispute.

Though it was understandable that Higgins should wish matters to lie as they were following the adjudication decision, Higgins could not ensure that matters would so lie without either pursuing legal or arbitral proceedings to a conclusion or obtaining Aspect’s agreement. In the absence of Higgins doing that there would be finality.

This post is made out of general interest. It does not replace the need to get bespoke legal advice in individualcases.

Construction: availability of adjudication depends on nature of dispute not nature of remedy claimed

A claim for restitution can exist where there is no contract. There may be no contract because there was never agreement on the price. There the basis for claim is usually “unjust enrichment”. That is a different cause of action from breach of contract.

In a contractual dispute, where there has been a total failure of consideration, a party may recover the sums he has paid – as a claim for restitution instead of damages. In short the claim would be “for restitution”, but, would be based, not on unjust enrichment, but on “a total failure of consideration amounting to a breach of contract”.

In ISG Retail Ltd v Castletech Construction Ltd [2015], ISG Retail Ltd (“ISG”), had made an advance payment to Castletech Construction Ltd (“CC”) of £35,000 plus VAT. In return CC had provided nothing of value to ISG, so that, in breach of contract, there had been a “complete failure of consideration” by CC. So the adjudicator ordered CC to repay that sum forthwith.

CC said that the adjudicator had no jurisdiction to do what he did. Paragraph 1 of Part I of the Scheme for Construction Contracts (SI No 649 of 1998) (“the Construction Scheme”) confers the right on any party to a construction contract to refer to adjudication “any dispute arising under the contract”. CC said that ISG’s restitutionary claim was not made “under contract” because restitutionary claims are not made under contracts, they are made “in equity”, restitution being an equitable remedy – and as such the adjudicator had no jurisdiction/power to decide it under the Construction Scheme.

The High Court said CC had confused the dispute and the remedy.

The scope of the jurisdiction of the adjudicator had been determined by the nature of the dispute identified in the Notice of Adjudication, not by the nature of the restitutionary remedy claimed.

Here there was a total failure of consideration which is almost invariably the result of a breach of contract unless performance of the contract has been “frustrated”.

There was nothing in the Construction Scheme that deprived an adjudicator of the power to grant relief by way of restitution if that was an available remedy for the breach of contract in question.

It being established that the dispute arose from a breach of contract and was therefore within his jurisdiction, the adjudicator could award any remedy within his power – such as the payment of a sum of money – which the claimant was entitled to for breach of contract.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Agreed adjudication procedure could by agreement make final and binding decision

A Scheme Construction Adjudication under Section 108(3) of the Housing Grants, Construction and Regeneration Act 1996 (“Construction Act”) carries with it an implicit proviso that, unless expressly stated in the Construction Contract or agreed between the parties to the contrary, the adjudicator’s decision will be only temporarily binding on the parties, in the sense that they must comply with it, and the court will enforce it, irrespective of any complaints about its correctness or other issues which the losing party may wish to raise, unless and until the dispute is finally resolved. That final resolution may be by legal proceedings, by arbitration (where applicable) or by agreement.

In the High Court case of Khurana & Anor v Weber Construction Ltd [2015] the right of adjudication under the Scheme did not statutorily apply to the construction contract, because under Section 106 of the Construction Act the right of adjudication under the Scheme does not statutorily apply to construction contracts with residential occupiers for operations on a dwelling house.

Nonetheless in a letter the Defendant’s solicitor expressly proposed, and in their written response the Claimant’s solicitors expressly agreed to, the appointment of a quantity surveyor under the Scheme under procedures to be “conducted in accordance with” the Scheme “save that the decision of the independent structural quantity surveyor shall be binding on the parties.”

The court said both parties must be taken to have been aware that a Scheme adjudication decision would be only temporarily binding, unless expressly stated to the contrary. The words “save that the decision … shall be binding on the parties” could only sensibly have been intended to derogate from that default position.

The reasonable observer could only have concluded that those words in the Defendant’s solicitor’s letter clarified that unlike a Scheme adjudication, the adjudicator’s decision would be permanently, as opposed to temporarily, binding on the parties if their proposal was accepted.

The letter made it plain that the losing party to the proposed adjudication could not subsequently elect to re-run the whole dispute afresh in legal proceedings if that proposal was accepted (which it was by the Claimant’s solicitor’s letter).

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.