Adjudication
Edmund Nuttall Limited v Sevenoaks District Council (2001)TCC

© Daniel Atkinson 2001    23 July 2001

In Edmund Nuttall Limited v Sevenoaks District Council the two issues were whether the adjudicator had jurisdiction to correct a mistake in his decision and whether there was an implied term allowing the deduction of liquidated damages from an order of the adjudicator for payment.

The dispute concerned Nuttall’s entitlement to an extension of time, its claim for loss and expense as a result of delay and disruption and its claim for variations. Nuttall’s Notice of Adjudication was for almost £700,000 plus VAT. The Notice of Referral set out gross figures and did not give credit for sums already paid on account. The adjudicator decided that Nuttall was entitled to 18.2 weeks extension of time for phase 1, the sum of £403,119.28 plus VAT subject to such retention and liquidated damages as may be properly deductible under the contract. He expressly stated that his decision did not include any consideration of the three phases later than phase 1. Within 8 days of his decision, the Adjudicator acknowledged that he had failed to take account of £48,000 that had already been certified for loss and expense and referred to in the Referral. He said in a letter to the parties that the sum to be paid should be £354,319.28, but that he did not believe he had jurisdiction to amend his decision.

Nuttal then demanded payment from Sevenoaks of the erroneous sum of £403,119.28 plus VAT. Nuttall also stated that liquidated damages could not be deducted as the correct notice had not been given under the contract. Sevenoaks responded by setting out the calculation of liquidated damages showing that £43,230 was deductible and taking this from the corrected amount of £354,319.28 paid the amount remaining including VAT.

Mr Justice Dyson examined whether there was any defence to the claim as to £48,800 the subject of the mistake. It was held that the present case was not distinguishable from the case decided in Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000]BLR 49. In each case the Adjudicator made an error in deciding the issue that he had jurisdiction to decide. The cases could not be distinguished on the basis of the nature of the mistake. In this case however the Adjudicator informed the parties that he had made a mistake and that he would have corrected the error if he had power to do so. Justice Dyson referred to Bloor Construction (UK) Limited v Bowman and Kirkland (London) Limited and held that putting matters at their lowest it was at least arguable that the Adjudicator had the power to correct accidental errors within a reasonable time of giving his decision.

The question therefore was whether the Adjudicator’s letter to the parties was indeed a correction of his error. It was held that it was arguable that Sevenoaks would succeed in such an argument at trial, if the Adjudicator did have such jurisdiction to correct accidental errors. Justice Dyson therefore gave Sevenoaks permission to defend.

Mr Justice Dyson then examined the issue of liquidated damages. There were two methods allowed under the contract for Sevenoaks to recover liquidated damages, either by a deduction from sums due or by a request for payment of the liquidated damages. It was conceded that there was no document which amounted to a requirement for Nuttalls to pay liquidated damages. There was no notice of deduction as required by the contract.

Sevenoaks argued that the contract made no provision for the payment of a sum awarded by the Adjudicatot. A term of the contract was to be implied that where an adjudicator had made an award in favour of the Contractor, the employer should be able to deduct liquidated damages from the amount awarded. Justice Dyson did not accept this submission, since the contract worked perfectly satisfactorily without such a term. There was no obvious injustice or unfairness to Sevenoaks in rejecting the suggested implied term. Sevenoaks could at any time require payment of liquidated damages, although it may be disputed and referred to adjudication. If there was further payment due the Employer could properly deduct liquidated damages in accordance with the contract.

Justice Dyson held that liquidated damages were not properly deductible and ordered summary judgment for the relevant sum.