This is an adjudication enforcement application by the claimant employer, Mailbox (Birmingham), against the defendant contractor, Galliford Try Construction, pursuant to Part 24 of the Civil Procedure Rules.  The contractor challenged the validity of the adjudicator’s decision and the enhanced interest on the liquidated damages awarded pursuant to the Late of Commercial Debts (Interest) Act 1998 (“Late Payment Act”).

The contractor agreed to carry out refurbishment works of a mixed use retail and office space in Birmingham under a JCT Design and Build Contract (2011 edition) as further amended by the parties. The employer then purported to determine the contractor’s employment under the contract. However, a dispute arose between the parties as to responsibility for the delay, liability of liquidated damages, the proper valuation of the final account and lawfulness of the termination by the contractor.

The adjudicator, Mr Peter Curtis, provided his decision on 9 November 2016 in which the employer was entitled to liquidated damages (amounting to the sum of £2,477,152.86) and interest on the sums awarded in adjudication pursuant to the Late Payment Act. Further, the adjudicator ordered the contractor to pay 75% of the adjudicators fees and expenses and the employer to pay the rest (25%).

The main challenge to this adjudication enforcement proceeding was whether the adjudicator’s decision that an initial assignment and subsequent re-assignment of the contract between the employer and the security trustee were valid.  O’Farrell J in the TCC held that the initial assignment was an equitable assignment pursuant to Section 136(1) of the Law of Property Act 1925.  Further, the re-assignment was also valid and took place on or before the date of the commencement of the adjudication proceedings.  To reach such decision, O’Farrell J reviewed the language of the debenture that the claimant had executed in favour of the security trustee and also the notice of assignment given to the defendant shortly after the building contract was executed.  Accordingly, the adjudicator did have jurisdiction to hear the dispute referred and provide his decision.

When considering the interest for the late payment of liquidated damages, the Court considered Section 1(1) of the Late Payment Act which provides that it is an implied term in a contract, to which the Act applies, that any qualifying debt created by the contract carries simple interest.  Further, Section 3(1) provided that a qualifying debt is a debt created by virtue of an obligation under the contract to pay the whole or any part of the contract price. As the employer’s entitlement to the liquidated damages awarded by the adjudicator was not a qualifying debt under the Act, the adjudicator did not have jurisdiction to award the interest under the Act.  Interest was awarded at the “usual” rate of 2% over base from when the cause of action accrued, which was when the defendant failed to pay the sum awarded by the adjudicator (the Court referred to Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38). Such decision is in accordance to Section 35A of the Senior Courts Act 1981 which enables the court, in proceedings for the recovery of a debt or damages, to award simple interest at such rate as the court thinks fit or as rules of court may provide.