Stellite Construction Ltd v Vascroft Contractors Ltd

[2016] EWHC 792 (TCC)

Stellite engaged Vascroft to carry out shell and core works at a substantial house in Hampstead. The contract was based on the JCT SBC Without Quantities 2011 form. Completion of the works was delayed. Stellite claimed liquidated damages and when Vascroft did not pay, referred its claims to adjudication. The Adjudicator decided that time for completion had been set at large and that no liquidated damages were due. Stellite maintained that the Decision was unenforceable as a result of a breach of the rules of natural justice. Stellite said that Vascroft had not argued that time for completion of the Works was at large and the Adjudicator had not given the parties a fair opportunity to comment on this proposition. The breach was of fundamental importance to the outcome of the Decision. Having decided that time was at large, the Adjudicator went on to decide that a reasonable date for completion was 5 March 2016. Stellite said that neither party had asked for a decision on the reasonable date for completion, nor had the parties’ submissions addressed the issue. Therefore the Decision as to a reasonable date for completion was also outside the Adjudicator’s jurisdiction and/or in breach of the rules of natural justice.

Therefore, Mrs Justice Carr found herself in the unusual position of having to deal with a claim by the Referring Party for declaratory relief that the Adjudicator’s decision had been made in breach of natural justice. The first issue was whether or not the parties had had a fair opportunity to set out their respective positions in relation to the question of whether or not time was at large. As the Judge said, what is and is not fair will depend upon all the circumstances: circumstances that need to recognise the compressed and limited context in which the decision was delivered. In deciding that there was no breach of natural justice, Mrs Justice Carr analysed the submissions made during the adjudication and came to the conclusion that the issue of whether time was at large was obviously “in play between the parties”. The parties were each aware of the relevant material and the issues had been canvassed fairly before the Adjudicator. The Judge said that:

“When one traces the Adjudicator’s reasoning ... it can be seen that there has been no breach of natural justice. This is not a case where the Adjudicator was relying on a new authority or line of authorities, let alone some external information, fact or expertise, or some expertise peculiar to himself, which he did not share with the parties. Rather he was applying ventilated law to the material before him in circumstances where, as he put it, the parties had, to their common knowledge and understanding, approached the issues on the facts from ‘slightly different angles’.”

The Adjudicator had decided the case, not by accepting the precise submissions of one party or another, but rather by reaching a decision on a point of importance on the material before him.  The Judge concluded by reminding the parties that it would be “a rare case where there has been a breach of the rules of natural justice”.

The second issue arose out of the first. The Adjudicator, having found that time was at large, went on to consider what the reasonable completion date was.  Whilst to all intents and purposes, this may have seemed like the next logical step, the problem was that in proceeding to consider the issue, the Adjudicator had exceeded his jurisdiction. As the Judge noted:

“It is important not to confuse the fact that the Adjudicator may have had material with which to decide an issue with having the jurisdiction to resolve it. The two are not the same.”

Here, the Notice of Intention to Refer did not confer jurisdiction on the Adjudicator to consider alternative claims that did not affect the sums that might be due to Stellite in liquidated damages. The Judge did not consider that even allowing for some latitude, the words “or such other amount that the Adjudicator deems appropriate” could be stretched to encompass a claim for unliquidated damages (or any other amount brought in any claim for money under the contract). As far as Mrs Justice Carr was concerned, those words simply allowed for the awarding of a lesser sum than Stellite had claimed if, for example, Vascroft had established an entitlement to an extension of time under the contract. What those words did not do was confer jurisdiction on the Adjudicator to determine a reasonable time for completion, which could only be relevant to a claim for unliquidated damages. To reinforce the point, the Judge noted that the parties had not actually made reference to any claim for unliquidated damages (or a reasonable time for completion outside the context of a claim for liquidated damages).

Whilst Vascroft had raised a claim for extensions of time by way of defence to Stellite’s claim for liquidated damages, the question of whether or not Vascroft was entitled to an extension of time under the contractual provisions was quite separate and distinct from the question of what would be a reasonable date for completion in the event that time was at large.

What was the result of the Judge finding that the Adjudicator did not have jurisdiction to determine the reasonable time for completion? It was not that the whole Decision could not be enforced. Instead, as the two parts of the Decision were separate, the Judge was able (and this was common ground between the parties) to sever that part of the Decision, which had been made in excess of jurisdiction, from the balance of the Decision, which the Adjudicator did have proper jurisdiction to make.

Back to the previous page

Click to download PDF