Adjudication
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KEYWORDS: |
Housing Grants Construction and Regeneration Act 1996, determination of employment, status of adjudicators decision, repudiation, stay of payment, Withholding Notice, without prejudice to other rights, conflicting adjudicators decisions, Judge Thornton. |
In Bovis Lend Lease Limited v Triangle Development Limited [2002] Judge Thornton QC reviewed the extensive authorities to decide whether and when payment could be withheld against against an adjudicator's decision ordering payment. In doing so he considered the status of an adjudicator's decision particularly in the context of determination of employment of the contractor and the contract provisions. He also considered the effect of the claim for damages for common law repudiation on the adjudicator's order for payment.
Bovis entered into a management contract with Triangle to refurbish and fit out three existing Victorian school houses into 43 luxury residential apartments and associated works at Silverthorne Triangle, Thackeray Road, London. The contract incorporated the JCT Standard Form of Management Contract, 1998 Edition and provided for the work to be completed in four phases between 16 October 2000 and 16 July 2001.
In 2002 several inter-related events occurred:
The work was divided up into work packages. The contract required the architect to issue interim certificates. The architect decided that Bovis, as management contractor, had been in default in the manner in which it had checked the relevant applications for payment of three work package contractors and disallowed the entire sum being claimed for each of them. This removed substantial sums from the sums previously certified and led to the two negative valuations in two interim certificate nos. 23 and 27. These were issued on 9 April 2002 and 21 June 2002 with the final date for payment under the terms of the contract being fourteen days later, respectively, 23 April 2002 and 5 July 2002. The final date for the giving of a valid notice to withhold payment against the sums certified was 16 April 2002 and 28 June 2002, being seven days before the respective final dates for payment.
Triangle contended that it was agreed that a sum of £100,038.07 retention would be released early in return for which the parties would immediately mediate the dispute as to the negative interim certificates and the deductions that had been made. Triangle considered the early release to be an on-account payment towards the sums deducted from the interim certificates pending that mediation. Triangle contended that Bovis then declined to participate in a mediation despite the issuing of an additional interim certificate on 28 June 2002 certifying as due for payment a sum of £100,038.07 with a final date for payment of 29 July 2002. Triangle had paid that sum.
Bovis did not accept that the sum was an on-account payment towards the sums deducted from the earlier interim certificates.
On 25 July 2002, the architect served on Bovis a notice under clause 7.2 of the contract to the effect that Bovis were failing to proceed regularly and diligently with the carrying out of its obligations. On 26 July 2002, Bovis responded that the default notice did not comply with the procedural requirements of the contract and that the underlying factual basis for its issue did not exist. Bovis had always contended that the default notice was invalid and erroneously given and that the determination of its employment was invalid.
On 7 August 2002 Bovis served notice that Triangle had repudiated the contract by engaging new contractors and that, therefore, Bovis was accepting that repudiation and was treating the contract as being at an end. This amounted to the exercise by Bovis of its common law rights, preserved by clause 7.12 of the contract, to accept what it regarded to be Triangle's repudiatory breach of contract.
On 8 August 2002 Triangle replied that the contract had not been repudiated by Triangle and that it expected Bovis to improve its performance on site. On the same day, the architect wrote to Bovis and asked that a programme detailing the steps that Bovis propose to take to complete the work be delivered within seven days.
On 9 August 2002, Triangle sent Bovis a notice under clause 7.2 of the contract as a follow-up to the earlier default notice dated 25 July 2002 that determined Bovis' employment under the contract on the grounds that the originally specified default had continued for more than fourteen days from 25 July 2002.
On 31 July 2002, Triangle issued a notice under clause 2.10.1 of the contract informing Bovis of its intention to withhold or deduct liquidated damages following certificates of non-completion of two blocks or sections of the works that the architect had issued on 24 June 2002, and referred to a sum of £87,000 as being due.
On 2 August 2002 the notice was issued that clauses 4.3.4 and 4.12.4 of the contract provided for and which had to be served before liquidated damages could be deducted from sums otherwise payable under interim certificates.
In the period July to September 2002 three adjudications were started and decided with the same adjudicator.
On 13 September 2002 and in response to the adjudicator's first decision, Triangle served on Bovis a composite notice which:
The adjudicator declined to correct his first decision on the grounds that the matter of the sum of £100,038.73 was a separate issue unrelated to Triangle's obligations to make payment of monies that he had decided should have been included in relation to Works Contractors. There was therefore no error in his decision to be corrected.
Bovis had started CPR Part 8 proceedings in its attempt to enforce the adjudicator's decision that Triangle should pay £158,020.71 within 7 days of 12 September 2002. Part 8 is applicable where a party seeks the court's decision on a question which is unlikely to involve a substantial dispute of fact.
The main issue was whether the adjudicator's decision that Triangle must pay Bovis £158,020.78 was superseded by contractual provisions allowing Triangle to withhold payment as a result either of the determination of Bovis' employment or as a result of Bovis' alleged repudiation of the contract or as a result of the service of the withholding notice dated 13 September 2002.
In order to decide the issue, Judge Thornton considered six sub-issues:
These issues involved a consideration of the closely inter-woven contractual provisions concerning payment, the service of withholding notices, termination of the contractor's employment and adjudication.
Judge Thornton observed that ordinarily, a decision of an adjudicator would give rise to a contractual entitlement to immediate payment without deduction, set off, withholding, reliance on a cross-claim, abatement or stay of execution. This was because the sum in question was due by virtue of the statutory and contractually backed provisions requiring compliance and full effect to be given to the decision of an adjudicator in addition to it being due by virtue of the underlying contractual provisions. It was for this reason that courts had repeatedly held that no deduction or withholding will ordinarily be allowed from an adjudicator's decision.
Judge Thornton observed that the courts had developed three exceptions to the general rule:
Judge Thornton observed that the relevant principles governing set off and withholding from an adjudicator's decision were set out in the decision of Judge Hicks in VHE Construction PLC v RBSTB Trust Limited [2000] BLR 187:
".. that enforcement proceedings such as these are proceedings to enforce a contractual obligation, namely the obligation to comply with the decision. The decision does not have the status of a judgment, nor is there any corresponding provision to section 66 of the Arbitration Act 1995, under which, by leave of the court, judgment may be entered in terms of an arbitral award, or the award may be enforced in the same manner as a judgment. There is, however, a question whether the obligation to "comply with" a decision which requires the payment of a sum of money has any greater effect than to make that sum a simple debt, for example by excluding certain defences which could be raised in answer to an action on such a debt. ...".
Judge Thornton observed that Judge Hicks then considered whether any of the contractual provisions that had been relied on by the paying party merely gave the adjudicator's decision the status of a simple debt or, instead, made it more substantial and impregnable by excluding defences such as set off. His conclusion was that
"... section 111 [of the HGCRA] constitutes a comprehensive code governing the right of set off against payments contractually due. [The paying party] has not complied with it. It would make a nonsense of the overall purpose of Part II of the Act, to which sections 108 and 111 are central and in which they are closely associated, not least by the terms of section 111(4), if payments required to comply with adjudication decisions were more vulnerable to attack in this way than those simply falling due under the ordinary contractual machinery. To return to the question I left unanswered in paragraph 56 above, therefore, I find these compelling reasons for concluding that in clause 39A.7.2 and 39A.7.3. [which Judge Thornton observed were in similar terms to clauses 9A.7.2 and 9A.7.3 in the instant contract] at least on the facts of this case, "comply" means "comply, without recourse to defences or cross-claims not raised in the adjudication."
Judge Thornton listed the cases which had followed and applied Judge Hick's statement of principle and cited in argument:
Northern Developments (Cumbria) Limited v J & J Nichol (2000) BL 158, Judge Bowsher;
Solland International Limited v Daraydan Holdings Limited 15 February 2002, Judge Seymour and
Levolux A.T. Limited v Ferson Contractors Limited (2002) BLR 341, Judge Wilcox
Judge Thornton then dealt with the suggested conflict between the above line of authority and three decisions of Judge Lloyd. It was suggested that Judge Lloyd had held in these decisions that an adjudicator's decision did not create a separate obligation to pay from the underlying contractual obligation that was protected from set off or withholding. Judge Thornton observed that when the three decisions were carefully considered, they do not conflict with, but instead illuminated the general principles summarised by Judge Hicks in the VHE case.
Judge Lloyd's three judgments were:
KNS Industrial Services (Birmingham) Ltd v Sindall Ltd (2001) 75 Con LR 71;
Glencot Development and Design Co Ltd v Ben Barrett & Son (Contractors) Ltd [2001] BLR 207 and
David McLean Housing Contractors Limited v Swansea Housing Association Limited [2002] BLR 125.
Judge Thornton observed that in KNS, Judge Lloyd was faced with an argument that clause 29.6.3 of the contract in that case, which allowed for the determination of the contractor's employment and was the equivalent of clause 7.3.4.1 in the instant case, had the effect of overriding the requirement that the decision of the adjudicator had to be complied with. Judge Lloyd concluded
"other rights under the contract which were not the subject of the decision remain available to the relevant party. If therefore by the time an adjudicator makes a decision requiring payment by a party to the contract has been lawfully terminated by that party (or that party has real prospects of success in supporting that termination) or some other event has occurred which under the contract entitles a party not to pay then the amount required to be paid by the decision does not have to be paid."
Judge Thornton observed that Judge Lloyd was affirming the general principle that immediate effect should be given to an adjudicator's payment decision as well as pointing out that that principle can be excluded by other terms of the contract.
Judge Thornton then considered Judge Lloyd's decision in Glencot. In that case, after a detailed consideration of the law relating to the need for an adjudicator to be impartial and to the facts of the case, Judge Lloyd concluded that there was sufficient evidence that the adjudicator was not impartial to preclude his giving summary judgment to enforce the adjudicator's decision since, if that lack of impartiality was made out at the trial of the enforcement claim, the adjudicator's decision would be held to be a nullity. However, although the adjudicator's decision could not be relied on in the summary judgment application being heard by Judge Lloyd, an interim payment of part of the underlying claim was ordered which was based on the evidence of the underlying claim set out in the adjudicator's reasons for his decision. Judge Lloyd concluded that the receiving party had established that it had a real prospect of success in relation to a substantial part of the claim. It was in this context that Judge Lloyd stated
"an adjudicator's decision does not create a cause of action as such; it is merely an expression as to liability and quantum about the dispute that has arisen under the contract. ... Under the Act and the Scheme that decision cannot be challenged if it is within the jurisdiction of the adjudicator as the parties are taken to have agreed to be bound by it and cannot in law question the decision if it is valid. The cause of action (or chose in action) remains the original claim (if upheld) and is not the decision of the adjudicator, but the amount recoverable is the amount the adjudicator decides is due."
Judge Thornton observed that in essence, Judge Lloyd decided that where an adjudicator's decision is valid, the parties are taken to have agreed to abide by that decision. However, if there was a dispute as to the validity of the decision, the claiming party was still free to rely on its entitlement to judgment or an interim payment based on the underlying cause of action that had been dealt with by the adjudicator since that cause of action survived and did not merge in, and was not superseded by, the disputed adjudicator's decision.
Judge Thornton observed that Judge Lloyd then returned to this area of law in David McLean which was summarised by Judge Seymour in Solland International Limited v Daraydan Holdings Limited 15 February 2002). Judge Seymour explained that Judge Lloyd was concerned with an adjudicator's decision in an unusual situation where
"in the course of the very decision as to how much was due to the contractor the adjudicator had to reach a conclusion as to whether the contractor was entitled to any, and if so what, extension of time. The converse of a decision that the contractor was not entitled to loss and expense over the full period of delay as was excluded from the evaluation of the loss and expense to which the contractor was entitled to. there was thus a decision of an adjudicator as to the period over which the employer was entitled to liquidated and ascertained damages. Subject to the question of the giving of a notice of intention to withhold payment in respect of such liquidated and ascertained damages against the sum which the adjudicator had determined was payable to the contractor, there was no reason why a set off was not appropriate. Judge Lloyd held that an effective notice of intention to withhold payment against the decision of the adjudicator had been given. In those circumstances his decision is wholly in line with and not a departure from the approach which I [and earlier decisions of the TCC and Court of Appeal] consider to be appropriate."
Judge Thornton adopted Judge Seymour's reasoning which showed that David McLean was a case where the court was giving effect to and complying with a further decision of the adjudicator as to extensions of time and their corollary, the extent of delayed completion by the receiving party and its entitlement to liquidated damages for delay. It was for that reason that effect was not given to the separate decision in favour of the paying party that a sum of money was due to it.
Judge Thornton held that
Triangle contended that it had determined Bovis' employment under the contract and was entitled to rely on clause 7.6.4.1 of the contract. Bovis disputed the validity of both the substantive determination and the procedural validity of the notice.
Clause 7.6.4.1 provided that, following a clause 7 determination of Bovis' employment, the provisions of the contract requiring further payments to be made to Bovis did not to apply.
Judge Thornton held that it was not relevant in enforcement proceedings, to consider the underlying or procedural validity of the determination unless it could be seen that there were substantial grounds for that challenge. The evidence served by Bovis would not raise any substantial grounds for challenging the validity of Triangle's determination in summary judgment proceedings. Judge Thornton held that for the purposes of activating clause 7.6.4.1, Triangle merely had to point to an architect's default notice which was valid in appearance and for which there was no evidence that it was given in bad faith and to its own follow-up notice of determination which had the same characteristics. Judge Thornton held that unless and until there was an adjudicator's decision or an arbitrator's award that decided or declared that the determination was invalid or a nullity, Triangle was entitled to proceed on the basis that the determination had current, albeit potentially temporary, validity and that it was entitled to rely on clause 7.6.4.1 if that was applicable to the enforcement application.
Bovis further argued that clause 7.6.4.1 was governed by section 111 of the HGCRA. Bovis argued that clause 7.6.4.1 could not be relied on since no withholding notice had been served which notified Bovis of Triangle's intention to rely on that clause prior to Bovis' adjudication notice dated 23 July 2002.
Judge Thornton considered whether it was necessary for Triangle to serve a section 111 withholding notice before it could rely on the right to avoid payment provided for by clause 7.4.6.1. He observed that Section 111 applied to any payment: "of a sum due under the contract". Judge Thornton held that the wording was not appropriate to cover clause 7.6.4.1 since that clause had the effect, on the determination of the employment of the contractor, that: "the provisions of this Contract which require further payment shall not apply". Judge Thornton held that it followed that, following a determination of the contractor's employment, but in no other circumstances, further potential contractual payments that the contract would otherwise have required, were no longer to be regarded as accruing due under the contract at all. Thus, any sum which any term of the contract would have required payment of had the contractor's employment not been terminated ceased to be subject to a contractual requirement of payment on a determination. It followed that the service of a section 111 withholding notice was not prerequisite to a paying party's reliance on clause 7.6.4.1 of the contract as a defence to enforcement proceedings.
Bovis contended that clause 9A.7.2 took precedence over clause 7.6.4.1 and that, in consequence, Triangle's obligation to discharge the direction of the adjudicator and make a payment of £158,020.71 trumped the provision in the contract that, following a determination of Bovis' employment, contractual obligations requiring payments to be made to Bovis should no longer apply.
Clause 9A7.2 provided that the parties would, "without prejudice to their own rights under the Contract", comply with the decision of the adjudicator and would ensure that the decisions of the adjudicator were given effect.
Judge Thornton observed that the starting point in any consideration of what contractual terms, if any, could prevail to enable a set off or cross-claim to be relied on in answer to an enforcement claim was the decision of the Court of Appeal in Parsons Plastics (Research and Development) Limited v Purac Limited [2002] BLR 334. Judge Thornton observed that Pill LJ considered the principle to be that:
"It is open to the [employer paying party] to setoff against the adjudicator's decision any other claim they have against the [contactor receiving party] which had not been determined by the adjudicator. The adjudicator's decision cannot be re-litigated in other proceedings but, on the wording of this sub-contract, can be made the subject of set-off and counterclaim."
Judge Thornton observed that in that case, the adjudication was a purely contractual adjudication without the statutory backing of the HGCRA. Judge Thornton held that fact immaterial when considering the applicability of the principle applied by the Court of Appeal in Parsons Plastics to the effect that appropriate terms of the contract can defeat the requirement that immediate effect should be given to an adjudicator's payment decision. Judge Thornton held that it was only clear words that could trump the payment decision. In Parsons Plastics, the relevant clause provided that:
"nothing contained in this Deed whether expressly or by incorporation or by implication shall in any way restrict [Purac's] equitable or common law rights of set off. Without prejudice to the generality of the foregoing, [Purac] shall have the right to set off against any sum due to [Parsons] whether hereunder or otherwise a fair and reasonable sum in respect of or on account of any claim or claims that have been made against [Purac] by the Purchaser the subject matter of which touches or concerns the Sub-Contract Works."
Judge Thornton observed that the principle was applied by Judge Lloyd KNS, where a sub-contractor had given notice that it intended to suspend work on the grounds of non-payment. Having done so, the main contractor terminated the sub-contractor's employment under the sub-contract. The adjudicator decided that the sub-contractor was not entitled to suspend working. The result of that decision was, Judge Lloyd concluded, that the main contractor was entitled to terminate the sub-contractor's employment. One of the questions for decision by Judge Lloyd was whether the sub-contractor was entitled to payment following another of the adjudicator's decisions that a payment should be made by the main contractor. This second decision had been made notwithstanding the determination of the employment of the sub-contractor under a contractual provision which gave the main contractor the right to defer further payment 'until after completion of the Sub-contract works and the making good of defects' following the determination of the subcontractor's employment.
Judge Thornton observed that in the course of his judgment, Judge Lloyd stated that
"[Counsel for the sub-contractor] submitted that when an adjudicator decided that an amount had to be paid, it had to be paid notwithstanding, it seemed, any provision in the sub-contract.
..... In my judgment the answer is clear. Clause 38A7.2 expressly provides that-'
the parties shall, without prejudice to their other rights under the contract, comply with the decisions of the adjudicator ...'
Therefore other rights under the contract which were not the subject of the decision remain available to the relevant party. If therefore by the time an adjudicator makes a decision requiring payment by a party the contract has been lawfully terminated by that party (or that party has real prospects of success in supporting that termination) or some other event has occurred which under the contract entitles that party not to pay then the amount required to be paid by the decision does not have to be paid."
Bovis contended that clause 9A7.2 required Triangle to be bound by the adjudicator's payment decision and to comply with and give effect to it. These clear-cut obligations fell outside the ambit of clause 7.6.4.1 which only applied to payments which were required to be made by the provisions of the contract.
Judge Thornton held that since the obligation imposed on Triangle that it was to comply with and give effect to the adjudicator's payment decision was itself a contractual provision requiring further payment, there was no scope for contending that clause 7.6.4.1 did not include clause 9A7.2 in its embrace.
Judge Thornton held that this conclusion was reinforced by the qualification to Triangle's obligation to comply with the payment decision contained in clause 9A7.2. Triangle's payment obligation was qualified by the phrase: "without prejudice to their own rights under the contract". One of Triangle's over-arching contractual rights that was encompassed by that phrase was the right no longer to be contractually obliged to make further payments to Bovis following a determination of Bovis' employment under clause 7.
Bovis argued that the proviso to clause 9A7.2 was only of limited effect and was inapplicable to the instant case. Bovis relied on the passage in Judge Hicks' judgment in VHE that construed the same phrase in a similarly worded clause:
"... [Counsel for the paying party] contends, as I understand it, that that entitles [the paying party] to exercise its right under clause 24.2.1 of the contract to "deduct the [liquidated damages claimed] from any sum due ... to [the paying party] under this contract" including the money due under the adjudication decisions. I agree with [counsel for the receiving party] that that involves reading "without prejudice to" as equivalent to "subject to". There may be contexts in which that meaning is required, but the more natural and usual one is "but leaving unaffected".
Bovis contended that if the phrase "without prejudice to [Triangle's] rights under the Contract" was read as if it stated "but leaving unaffected [its] rights under the Contract" rather than "subject to [its] rights under the Contract", it was clear that the proviso did not extend to the provisions of clause 7.6.4.1.
Judge Thornton held that the phrase "without prejudice to" in the context of clause 9A.7.2, was making it clear that the obligation to pay an adjudicator's payment decision was not to be cut back or diminished by any withholding by the paying party which would not have been allowed in relation to the underlying obligation to pay and which had not been subject to a valid section 111 notice to withhold payment. Judge Thornton held that where there pre-existed some other contractual right to avoid payment which was not governed or affected by section 111 or by the terms of the adjudicator's decision, that contractual right survived an adjudicator's payment decision and, in the words of Judge Hicks, was left unaffected by the contractual obligation to give effect to an adjudicator's decision.
Judge Thornton held that if the phrase "without prejudice" had the extended meaning of "subject to", it was probable that any pre-existing entitlement to withhold could be used to defeat payment even if that had not been made the subject of a section 111 notice. Judge Thornton held that on any view the phrase was sufficiently wide in its ambit so as to extend the effects of the proviso to clause 7.6.4.1.
Bovis mounted a further argument that the sums in question had accrued due 28 days or more before the date on which Triangle could first have given a notice to determine Bovis' employment and Triangle had unreasonably not paid those sums. On this argument clause 7.6.4.1 did not apply, given the proviso to clause 7.6.4.1.
The proviso to clause 7.6.4.1 was that the clause was not to be construed so as to prevent the enforcement by Bovis of any rights under the contract in respect of amounts properly due to be paid by Triangle which Triangle had had unreasonably not paid and which had accrued 28 days or more before the date of determination.
Judge Thornton held that the sum in question did not accrue due before the determination of Bovis' employment but only accrued due after that determination. The constituent parts of the relevant sum did not become due or payable until the adjudicator's decision was made on 12 September 2002 when the interim certificates were amended by that decision.
Bovis argued that the consequence of the amendments decided by the adjudicator, was that the certificates were to be treated for all purposes as if only the amended interim certificates had been issued on the date that the original certificates were issued and as if the unamended certificates had never seen the light of day.
Judge Thornton held that the effect of the adjudicator's decision amending the two interim certificates was not to back date the accrual of the obligation to pay the sums inserted into them by amendment. Although the certificates themselves retained their original dates, the final date for payment of the sums added by the amendment was not the contractual fourteen days after the date of issue but was, by virtue of section 111(4) of the HGCRA, a date not later than seven days after the date of the adjudicator's decision to pay. Thus, the obligation to pay the relevant sum had not accrued more than 28 days before the determination of Bovis' employment but only accrued on, or within 7 days after, a date some days after that determination. Judge Thornton held that it followed that the proviso to clause 7.6.4.1 was not relevant to the instant case.
Triangle alleged that Bovis irrevocably repudiated the contract by its written notice in its letter dated 7 August 2002 notifying Triangle that it was treating the contract as at an end. Triangle argued that there was in consequence no necessity for Triangle to accept that repudiation since it had been presented with a fait accompli. This common law repudiation was confirmed by the adjudicator's third decision dated 26 September 2002 when he decided that Bovis had not accepted any repudiation of the contract by Triangle since Triangle had not repudiated the contract. Triangle argued that the consequence of that third decision was that Triangle was no longer obliged by its contractual obligation to ensure compliance with and give effect to the first payment decision by paying it forthwith but could, instead set off against it its own cross-claim for damages flowing from Bovis' repudiation of the contract.
Bovis contended that Triangle's common law damages cross-claim arising out of Bovis' repudiation could not be used for the purpose of defending and resisting payment of Bovis' claim based on the adjudicator's payment decision. That would amount to a withholding that was not allowed by the terms of the contract and had not been made the subject of any section 111 notice. Bovis concluded that this aspect of this case was on all fours with Judge Bowsher's decision in Northern Developments (Cumbria) Limited v J & J Nichol [2000] BLR 158 where he allegedly declined to give effect to a similar cross-claim.
Judge Thornton made the following observations in relation to the judgment in Northern Developments:
Bovis also relied on the decision of Judge Wilcox in Levolux A.T. Ltd v Ferson Contractors Ltd [2002] BLR 341.
Judge Thornton made the following observations in relation to the judgment in Levolux:
Judge Thornton then turned to the non-controversial facts of this case. The third decision of the adjudicator was that Bovis had no entitlement to treat the contract as having been repudiated by Triangle and it therefore had no right to treat the contract as at an end. Thus, Bovis had no contractual entitlement to cease work or to fail to complete the contract. Judge Thornton observed that the only possible conclusion, in the light of that decision, was that Bovis repudiated the contract in a way that did not require acceptance since Bovis had acted unilaterally, irretrievably and unequivocally to treat the contract as at an end and had ceased work under the contract without any contractual justification.
Judge Thornton held that the instant case was on all fours with the reasoning of Judge Bowsher in Northern Developments:
"... the repudiation issues might have been raised in a later adjudication either by the same or a different adjudicator. Depending on the timing of the decision of those adjudications, it might have turned out that in considering enforcement of the decisions there might be some set-off of the decisions as occurred in VHE, but that would arise merely as a coincidence of timing. ... If there are two conflicting adjudication decisions, it may be appropriate to set one off against the other in enforcement proceedings ..."
Judge Thornton held that the first and third adjudication decisions were in conflict. That situation had arisen because the parties chose to refer their existing disputes piecemeal to adjudication and although the same adjudicator was appointed to decide each of the three disputes, he had to consider each in isolation given the manner in which he had been nominated and in which the parties had presented their respective cases to him in each of the three adjudications. As a result, there were two conflicting decisions, one gave Bovis a right to payment and the other gave Triangle the right to cross-claim unliquidated damages flowing from Bovis' repudiation of the contract. It was not possible in a Part 8 claim to determine whether Triangle's cross-claim was sufficient to defeat or merely to reduce Bovis' claim but, given the availability of clause 7.6.4.1 to Triangle as an additional basis for defeating the entire claim based on the adjudicator's first decision, Judge Thornton considered that question to be purely academic.
Triangle sought to rely on its alleged entitlement to withhold payment of a sum of £100,038.07 that it contended it had already paid Bovis following the purported early release of retention and also to withhold a further sum of £15,084.59 on account of unpaid liquidated damages. Judge Thornton considered that these withholdings had not been preceded by a timeous withholding notice since, to be effective to avoid payment of the amended interim certificates nos 23 and 27, a withholding notice would have had to have been issued at least five days before those certificates were originally issued. T only relevant withholding notice was issued long afterwards.
Triangle also sought to show that £100,038.07 of the claim has already been paid as an alternative to its withholding defence. Judge Thornton considered that that defence raised a disputed question of fact which could not be raised in Part 8 proceedings.
Judge Thornton held that in the light of hiss conclusion that Triangle could defend Bovis' claim by relying on clause 7.6.4.1 and on its cross-claim for damages flowing from Bovis' repudiation, these alternative grounds and defence of Triangle did not arise.
Judge Thornton held in conclusion and summary:
Judge Thornton held that in the light of these decisions, there was nothing capable of determination under Part 24 and the Part 8 claim was decided by the answers set out in the summary.
The situation in Bovis Lend Lease Limited v Triangle Development Limited [2002] was complicated. The judgment of Judge Thornton required consideration of a complex interaction of adjudication decisions and the particular clauses of the contract in question. The judgment is of general application because it emphasises the essential contractual status of the adjudicator's decision. Judge Thornton has identified from decided cases the general principle that immediate effect should be given to an adjudicator's payment decision.
Judge Thornton also identified that the general principle can be excluded by other terms of the contract. His judgment is a useful summary of legal principle in this area based on the full list of decided cases. The application of the principle in the instant case is useful in the approach taken in the interpretation of such clauses. This part of his judgment must however be considered in the light of the judgment by the Court of Appeal in Ferson Contractors Limited v Levolux A T Ltd [2003] which firmly closed the door on any extension of the principle in KNS restricting the enforcement of an adjudicator's decision. This principle in Ferson was applied in Dumarc Building Services Ltd v Mr Salvador Rice [2004] which distinguished the judgment of Judge Thornton in Bovis Lend Lease.