Partner Projects and Corinthian entered into a contract for the construction of a new five bedroom house. The contract was based on the JCT Standard Form of Building Contract, Private Without Quantities with Contractor’s Design Portion, 1998 edition. The contract contained express terms entitling Partner Projects to interest at 5% over base on late payments. Further, the adjudication provisions allowed the Adjudicator a discretion when deciding the period and circumstances in which contractual interest could be paid.
Five disputes arose which were referred to adjudication. A sixth dispute was also referred to adjudication. The Adjudicator decided in Partner Projects favour and awarded interest based upon a rate of 8.5%. The decision referred to two interest rates i.e. 10.5% and 8.5% with the former derived from the contractual provisions and the latter from the Late Payment of Commercial Debts (Interest) Act 1998.
Corinthian argued that the Adjudicator did not have the power to award interest and had acted in excess of jurisdiction. Corinthian argued that the Adjudicator was not entitled to award interest on sums which had not been certified by the architect under the contract and, insofar as the Adjudicator had apparently awarded interest under the Late Payment Act, he had no jurisdiction to do so given that the claim for interest on this basis was only made in Partner Projects’ Reply and not the Notice of Adjudication.
The Judge agreed that an Adjudicator had no freestanding or inherent power to award interest in the absence of a contractual provision granting such power. However, the Judge considered that the Adjudicator was able to award sums greater than those certified by the architect because the contract gave him the power to open up and review certificates. In the view of the Judge, what the Adjudicator had done was to have opened up, reviewed and revised the architect’s certificates and to substitute for the sums actually certified the sum that he considered should have been certified. Once this had been done, the Adjudicator must be entitled to award interest on the sums due under the corrected certificates. This was not an excess of jurisdiction. This was particularly the case here the Adjudication Notice specifically invited the Adjudicator to decide whether, pursuant to clause 30.1.1.1 PPL was entitled to interest. Accordingly, the question of Partner Projects’ entitlement to interest was squarely covered by the Adjudicator’s terms of reference. If the Adjudicator had concluded that PPL was entitled to interest when, on a true construction of the contract, it was not entitled to such interest, then that would have been an error of law in determining a question that was referred to him. It would not have been a case of answering the wrong question; rather he would have answered the right question in the wrong way.
Corinthian was not entitled to a stay of execution on the basis of Partner Projects’ alleged insolvency. On the evidence, Corinthian failure to pay the sums awarded by the Adjudicator was held to have contributed significantly to Partner Projects’ uncertain financial position.