When to adjudicate?
Introduction
In the recent Technology and Construction Court decision of All in One Building and Refurbishments Limited v Makers UK Limited the Court gave useful guidance on when it is possible to commence adjudication.
The factual background was that Makers engaged All In One ("AIO") pursuant to a sub-contract to re-furbish flats.
Makers purported to determine AIO's employment under the sub-contract. AIO alleged that the termination of the sub-contract was in itself a fundamental breach of the sub-contract. AIO claimed loss of overheads and profit on the incomplete works. The only detail given by AIO was a figure of 21.10% for lost profit and overheads. No breakdown of this figure was provided.
AIO then commenced adjudication claiming lost profit and overheads at 21.10%. No evidence supporting this figure was given with the Referral. The Adjudicator invited AIO to give further particularisation of this part of the claim and gave Makers time to respond. The Adjudicator then awarded a sum for loss of profit and overheads at a reduced percentage of 8.6%.
Rather than pay the Adjudicator's decision, Makers argued that it was invalid on the following bases:-
- There was no dispute.
- The decision of the Adjudicator to deal with the issue of loss and overheads was a breach of natural justice.
The Court decided that the proper approach to adopt when deciding whether there was a dispute was a rigorous and common sense approach, bearing in mind that the issues arose in a comparatively modest construction dispute. The Court said there was no warrant for being legalistic and overly technical and decided that a dispute had arisen.
Makers tried to argue that as the claim was akin to a draft final account then two months had to pass from the claim before there could be a dispute. The Court said even if this was right a distinction must be drawn between the date when a payment is due and an argument over entitlement to payment. Makers had made it clear that entitlement to payment was being denied and the Court said that was a dispute which was capable of being resolved prior to the due date for payment.
Makers argued that the Adjudicator carried out an independent exercise which had not been contended for by either party in fixing a figure of 8.6% and that this was a breach of natural justice. The Court decided that the Adjudicator had used material put before him by AIO and Makers in reaching a figure of 8.6% and that Makers had at one stage canvassed a figure of 8.6% as an appropriate mark-up. Accordingly the Court found there was no breach of natural justice by the Adjudicator in reaching a figure of 8.6%.
This decision is of interest as the Court backed the Adjudicator's approach of allowing the Referring Party to detail a claim submitted to Adjudication during the 28 day period. Furthermore, there was judicial comment that so long as a dispute has arisen it can be referred to Adjudication prior to the due date for payment of the sum in question.
Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.
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