Adjudication Update

In C & B Scene Concept Design Ltd v Isobars Ltd, it was held that an error in law made by the Adjudicator constituted an excess of jurisdiction with the result that the court refused enforcement.

Recorder Moxon Browne QC agreed with Isobars that if no election was made between payment alternatives A and B (i.e. between lump sum stage payments or periodic valuation) of Appendix 2 of the JCT Design & Build Contract payment provisions, the entirety of clause 30 of the contract must fall away and the Scheme would apply. The Adjudicator had erred in law in basing his decision upon the provisions of clause 30.3.5, which provides that if no written notice is given, an employer must pay the amount claimed in an interim application in full. The Adjudicator's decision was based exclusively on consideration of a contractual provision, which did not apply to the parties to the adjudication. He had asked whether the interim applications were the subject of a timely notice to withhold payment and had found that the absence of any such notice was conclusive of the defendant's liability to pay the amounts set out in those applications. He had not asked what, according to the payment terms defined by the Scheme, was the value of the work done. He had therefore answered the wrong question and had acted in excess of his jurisdiction. Enforcement of the decision was refused and leave was given to defend the action and pursue a counterclaim.

In Yarm Road Ltd v Costain Ltd, HHJ Havery QC had to consider whether a contract between the parties was a construction contract within the meaning of section 104 of the HGCRA. There was an original contract dating from August 1995, which preceded the HGCRA, and a novation agreement dated August 1998, which, of course, would be covered by the HGCRA. Costain suggested that if the novation agreement constituted a construction contract within the meaning of the HGCRA then the HGCRA would have retrospective effect. The claimant could thus refer a dispute to adjudication at any time, which could relate to work done as far back as 1995. Costain submitted that it would be absurd for the Act to be able to apply retrospectively.

HHJ Havery QC disagreed and found that the wording of the act was clear so that the novation agreement did fall within section 104 of the HGCRA and that Yarm Road could proceed to adjudicate any disputes, which had arisen.

In Balfour Kilpatrick Ltd v Glauser International SA, HHJ Gilliland QC had to consider the meaning of the word "dispute" in the TeCSA Adjudication Rules.

The defendant to enforcement proceedings argued that the Notice to Refer was defective since it sought to refer more than one dispute in a single reference. The contract between the parties incorporated the TeCSA Rules. Here, even though the judge held that there was only one dispute, namely how much money was due at the time of the adjudication, he also held that a dispute under the TeCSA Rules was not confined to a single dispute. Rule 11 states that the dispute related to the "matters identified in the notice". Separate notices are not necessarily required for each dispute.

HHJ Gilliland QC also rejected arguments that the number or complexity of the matters made them unsuitable for adjudication. The claimant would have been prepared to grant further time, and as such, the process was neither unfair to the defendant nor in breach of natural justice.

In Maxi Construction Management Ltd v Mortons Rolls Ltd, the pursuer contended that it was entitled to an interim payment in terms of a document entitled "Application for Payment No. 10". Lord MacFadyen held that the application did not constitute a "claim by the payee" within the meaning of paragraph 12 of Part II of the Scheme, firstly because it was an application for agreement of the pursuer's valuation in terms of paragraph 2.5.20 of the Employer's Requirements, and not a claim for payment at all, and secondly because it did not, in any event, comply with the requirements of paragraph 12 of the Scheme in that it did not specify the basis on which it was calculated.

Further, the application did not meet the specific contractual requirements of an Application for Interim Payment or the requirement that it be accompanied by a detailed build-up of the value of the work executed. Whilst an application for an interim payment need not set out in full detail the basis of calculation of items already paid for under earlier applications, paragraph 12 required specification of the basis of calculation of any new matter included in the application in question. For example, one claim was for extension of time costs associated with formal instruction to suspend site operations, yet no other explanation of the £35k was provided.

LAD's

In our last issue we reported on the comments made by Lord MacFayden about adjudication in City Inn v Shepherd. The judgment is also interesting for the comments the Judge made about liquidated and ascertained damages. It is of course well established that LAD's must be a genuine pre-estimate of the likely losses, which will be incurred if, in construction contracts at least, completion is late. If they are not they will be deemed a penalty and the clause will be unenforceable. Lord MacFayden said:

"ÖIn order for a provision to be classed as a penalty, it required to involve the concurrence of two events, namely (i) a breach of contract and (ii) a result or consequence which was regarded by the court as unconscionable in that it amounted to oppression or the imposition of a punishment. It was to be borne in mind that the rule against penalties was an exception to freedom of contract, and ought on that account to be kept within strict parameters."

Health & Safety

The HSE has launched a "workers web page" which is intended to cover the roles and responsibilities of employers and employees in relation to health and safety matters. The website at www.hse.gov.uk/workers includes details on how to contact the relevant and enforcing authority if it is found that a workplace is unsafe.

Birse Construction Ltd have been fined £80,000 plus costs of £20,000 following the death of a worker in 1998 after a fall from a roof at a height of 5 metres. Two and a half weeks before the death HSE inspectors had visited the site and issued notices stopping work on two separate roofs because the gap between the roofs and the guard rails was greater than it should have been. No action to date has been taken against the sub-contractor by whom the worker was employed as they went into receivership shortly after the accident.

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