Can a party on the wrong end of a smash-and-grab adjudication resist enforcement of the decision where the Adjudicator uses that party’s own submissions to calculate a higher award than the sum initially claimed?

This was the key issue at hand in the case of Bell Building Ltd v TClarke Contracting Ltd.

The court’s decision to enforce the Adjudicator’s award in a greater sum than that which had ostensibly been claimed on the face of the initial referral confirms the UK’s staunchly pro-adjudication stance. Challenges to the enforcement of adjudicators’ decisions rarely succeed—and parties must be careful what they argue for, since the Adjudicator can and will respond to those submissions.

What happened?

The dispute arose from a sub-contract between TClarke Contracting (“TCL”), the main contractor on the construction of a London data centre, and Bell Building Ltd (“Bell”), a subcontractor. Bell submitted an interim payment application (application nr. 18) amounting to approximately £2.9 m. TCL responded by serving a Pay Less Notice reducing the payment to £710k, and paid that amount.

Bell claimed the Pay Less Notice was invalid and referred the dispute to adjudication. In the application, it sought payment of £1.4m — less than half the sum notified in its application nr. 18. Bell based its calculation on sums that TCL had already paid, including sums paid in respect of a later payment cycle (application nr. 19).

TCL challenged Bell’s calculation, on the basis that taking payment cycle 19 into account would be outside the Adjudicator’s jurisdiction. The Adjudicator agreed. Determining that the Pay Less Notice was invalid, he re-did the sums and awarded Bell the greater figure of £2.129 million!

TCL initially attempted to block enforcement by asking the court to make a binding determination as to the validity of the Pay Less notice using the short-form procedure in Part 8 of the Civil Procedure Rules. In so doing, however, it relied on several, complex variations to the Contract leading the court to conclude that the question was not suitable for Part 8, as one likely to involve a substantial dispute of fact.

Bell therefore pressed on with its adjudication enforcement proceedings. TCL sought to defend the enforcement on the basis that the Adjudicator awarding more than Bell had claimed amounted to a valuation exercise that exceeded the Adjudicator’s jurisdiction in a smash-and-grab adjudication and/or amounted to a material breach of the rules of natural justice.

What did the court decide?

• The court stood behind the Adjudicator’s decision.
• Natural justice was not breached. The adjudicator did not “go off on a frolic of his own” when increasing the calculation; he simply “corrected the arithmetic” based on TCL’s own submissions. Both parties were aware of the material the Adjudicator relied on.
• Bell’s referral gave the Adjudicator license to grant “such other relief as is necessary, just and equitable to resolve the dispute.” TCL itself opened the door to a different, greater assessment of the sum due when it made submissions about the quantum of the claim.

What can contractors learn from this?

Be very careful what you argue for. In the rough and tumble of adjudication, a responding party may make submissions that inadvertently open the door to a larger award. While an Adjudicator may not have the power to determine ‘true value’ in a smash-and-grab, they can correct the arithmetic. Be vigilant in your submissions.

 

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This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.

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