Adjudicator’s decision overridden by the mechanism of the contract.
 EWHC 1400 (TCC)
Mrs Justice O’Farrell
Adjudicators’ decisions; Delay; Extensions of time; Final accounts; Interim payments; Liquidated damages; Part 8 claims; Scheme for Construction Contracts
The Claimant, Essential Living (Greenwich) Limited (“Essential Living”) was the employer and at times, the Construction Manager on its own project. Essential Living contracted the Defendant, Elements (Europe) Limited (“Elements”), for the design, supply, manufacture and installation of modular units for a mixed-use development in London (the “Works”). Elements was engaged in December 2016 to perform the Works pursuant to an amended form of the JCT Construction Management Trade Contract 2011 (“the Contract”). Delays occurred to the Works and completion was not achieved within the original Contract period. On 5 July 2019 a certificate was issued certifying that the Works were practically complete on 31 May 2019. Elements issued its final interim application on 11 March 2019 (the “Application”). However, as the Works were significantly delayed, Essential Living issued a payless notice and sought to deduct liquidated damages.
Following this a dispute arose and Essential Living consequently referred the dispute to adjudication on 9 April 2019. Elements’ claim was for an entitlement to adjustments to the Trade Contract Sum, claims for variations, extensions of time and loss and/or expense contained in the Application. Essential Living’s claim was for liquidated damages and financing costs in the valuation dated 20 March 2019. The adjudicator decided in favour of Essential Living who commenced legal proceedings to enforce the decision (the “Adjudication Decision”). Those proceedings were compromised by a consent order whereby Elements agreed to pay the award, excluding the remedial costs.
Shortly after, Essential Living appointed Somerset Consult as the Construction Manager. On 10 May 2021 Elements issued its documents for the purpose of calculation of the Final Trade Contract Sum under clause 2.27.5, and a provisional calculation of the Final Trade Contract Sum, pursuant to clause 4.6.2 of the Contract. Elements position was that the valuation and determination of those matters contained in the Adjudication Decision was limited to the disputed Application and not relevant to the determination of the Final Trade Contract Sum. The parties disputed the amount in the Final Trade Contract Sum. Consequently, Essential Living commenced Part 8 proceedings to seek declaratory relief for the sums it was awarded in the Adjudication Decision on 7 October 2021. The case was heard before Mrs Justice O’Farrell and covered the following issues: (1) the impact of the Adjudication Decision on claims for extensions of time, liquidated damages and delay damages; (2) the impact of the Adjudication Decision on evaluation of the Final Trade Contract Sum, including variations and loss and/or expense; and (3) the impact of the Adjudication Decision on any subsequent adjudication.
The starting point for the Judge was Paragraph 23(2) of the Scheme which provides that the decision of an adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, arbitration or by agreement. However, Mrs Justice O’Farrell found that the Adjudication Decision could not override the contractual mechanism requiring a subsequent assessment by the Construction Manager following practical completion. This was because the Adjudication Decision was stated clearly to determine the latest interim valuation of the Works, the Application, and not the Final Trade Contract Sum. Therefore, the Construction Manager’s final determination of the Completion Period under clause 2.27.5, would determine any liability on the part of Elements’ for liquidated damages and finance charges.
As for the impact of the Adjudication Decision on evaluation of the Final Trade Contract Sum, the Judge decided the Construction Manager is not required, or permitted, to reconsider or revalue variations that had been accepted and valued in accordance with the contractual procedure. So, to the extent that variations were agreed, or disputed and determined, the Adjudication Decision remained binding, pending any final resolution by litigation or settlement. Therefore, it was the Construction Manager’s obligation to consider the arguments and evidence before him and carefully assess whether any claim brought in calculation of the Final Trade Contract Sum was new or subject to a prior decision. Lastly, when deciding on the impact of the Adjudication Decision for any subsequent adjudications, the Judge held the parties were not entitled to re-adjudicate on any of the matters and claims previously decided. Mrs Justice O’Farrell emphasised it is a matter of fact and degree as to whether any matters which a party might seek to refer to a subsequent adjudication are the same, or substantially the same. Regard must be had to the basis of the claim made, whether it amounts to a new cause of action and whether such claim is permitted under the Contract.
This case serves as a useful reminder for parties to assess their contracts having regard to the contractual and factual matrix within which an adjudicators decision will be made. Additionally, it is a further example of courts enforcing the key principle that an adjudicator has no jurisdiction to re-adjudicate on any matters or claims already decided by a previous adjudicator.