Allied engaged Paradigm to construct 40 dwellings and other works. During 2008 the works were delayed, the reasons for which were disputed.

 

In January 2009 the Employer’s Agent issued Notice of Interim Payment 15. Paradigm issued a withholding notice. Paradigm claimed Allied had failed to complete the works by the contractual completion date and that it had failed to proceed regularly and diligently. Allied responded with two letters: one complained that payment had not been made; the other, from Allied’s solicitors, responded to the withholding notice.

 

Paradigm then served on Allied a notice under the contract (the “First Notice”), identifying breaches of the contract and called upon Allied to remedy those breaches or it would determine the contract. A formal Notice of Determination (the “Second Notice”) was later issued.

 

Allied referred the matter to adjudication alleging that Paradigm had wrongfully determined the contract and that Allied should be awarded sums due under the contract. Paradigm argued that as it had not received a letter of claim from Allied, issuing a Notice of Adjudication was premature. It reserved its position as to the adjudicator’s jurisdiction. These objections were repeated in Paradigm’s Response. Also, as the dispute concerned the determination of the contract and the losses that flowed from it, as these losses had not yet crystallised, adjudication was not the appropriate forum to deal with this dispute.

 

The adjudicator found in Allied’s favour. Paradigm refused to pay the awarded sums. Paradigm defended enforcement on the basis that a dispute had not yet arisen.

 

The judge stated:

 

 

In this case it was clear that prior to the Second Notice and the ejection of Allied there was a dispute between the parties as to whether grounds existed to justify termination by Paradigm. However, there was no dispute in relation to the financial consequences or entitlements which would or might arise from that termination. Though it may have been obvious to Paradigm that a dispute regarding unlawful termination would have financial consequences, this was immaterial to deciding what was actually in dispute at the time of the Notice of Adjudication. It was not unusual for parties to adjudicate separately on liability and quantum.

 

The judge stated regarding the reservation of jurisdiction:

The judge found that there was no effective jurisdictional objection from Paradigm on the grounds that no dispute had crystallised regarding the financial consequences of any unlawful termination.

 

Paradigm’s letter identifying that it had not received a letter of claim was not a jurisdictional point but a general complaint from Paradigm. That letter did reserve Paradigm’s position on a different matter, which was no longer pursued, but the fact it did so on a specific point merely highlighted its awareness that it needed to reserve its position. This suggested that failing to reserve its position as to the non-crystallisation of a dispute was deliberate.

 

Any jurisdictional objection in Paradigm’s Response was similarly ineffective as it merely incorporated and cross-referred to the objection in the letter, which was in itself ineffective.

 

Furthermore, there is no jurisdictional requirement for a letter of claim to be submitted prior to commencing adjudication. So even if Paradigm were disputing jurisdiction on these grounds, such an objection was a bad point to make.

 

Paradigm had not only failed to make an effective reservation, but it acceded to the jurisdiction of the adjudicator to resolve all the matters that were the subject of the Referral. Therefore he enforced the adjudicator’s decision.

 

Despite Allied having secured judgment in its favour the judge assessed the £34,752.28 (excluding VAT) claimed by Allied as disproportionately large. He noted that the matter was not immensely complicated and such simple matters rarely cost more than £10,000 to £15,000. He awarded £20,500 in costs.

 

The judge, in refusing to award indemnity costs against Paradigm, said that the distinction between indemnity and standard costs is less marked on summary assessment than on final assessment by a costs judge. A more stringent costs order may be made if the enforcement challenge was wholly unjustified or unarguable, but this was not the case here so indemnity costs were inappropriate.