The binding effect of an adjudicator’s decision

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Disputes arose during the construction of Greenwich Creekside, in London

Essential Living engaged Elements under an amended JCT Construction Management Trade Contract 2011 to design, supply, manufacture and install modular units for Greenwich Creekside, a mixed-use development in southeast London. Disputes arose between the parties and an adjudication was commenced. An award was made that included determination of Elements’ variation and extension of time claims and Essential Living’s claim for liquidated damages (the Decision).

Elements subsequently submitted its documents for the purpose of the final calculation of the completion period and the final trade contract sum, which included increased claims for variations, extensions of time (based on a new delay analysis), no deductions for liquidated damages and additional prolongation and disruption costs. Essential Living issued court proceedings seeking a declaration that Elements was not entitled to claim or pursue any sums that differed from the values and/or basis contained in the Decision, unless it was overturned or altered by the court.

The court held that whilst the Decision related to interim applications, it could have a binding effect on subsequent contractual processes. A factor considered was whether the contract permitted elements of the Decision to be reopened.

In respect of the completion period, the contract required the construction manager to complete a fresh assessment following completion of the works, which included reviewing previous decisions and whether or not any relevant events had been specifically notified under the relevant contractual provisions. When the Decision was issued, the time period for this assessment had not expired nor had any such assessment taken place.  The court held that the Decision could not (and did not purport to) override the contractual requirement for a subsequent assessment of the completion period.

However, the contract did not permit any reconsideration or revaluation in respect of variations previously accepted and valued under the contract in assessing the final trade contract sum. In fact, the contract provided that effect should be given to agreed variations and valuation of such variations, including direct loss and/or expense. Therefore to the extent that the variations were determined in the adjudication, the Decision was binding, pending any final resolution.

In paragraphs 77 to 79 of the judgement, the court summarised the position:

“A careful analysis is required to ascertain whether any claim now sought to be advanced by Elements is subject to a binding decision by the adjudicator in the adjudication decision. It is not sufficient for Essential Living simply to point to similarities in the arguments or show that the sums claimed are 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 terms of the contract. It is a matter for the construction manager, carrying out his obligations under the contract, to consider the arguments and evidence put forward by the parties on each element of the final account that is disputed. In respect of each disputed element, the construction manager must determine whether it is agreed under the contract, determined in the adjudication decision and binding, or whether there is a fresh basis of the claim that requires or permits him to make a fresh assessment. It is not a matter that the court can resolve by way of a general declaration. It is a matter of fact and degree, requiring careful analysis of the evidence and argument on each disputed item. That necessitates a detailed inquiry into the substance of each claim that is not suitable for a Part 8 claim.”

Parties should carefully consider the benefits that may arise from this decision in future payment disputes and adjudications. If a party wants to benefit from an adjudicator’s decision beyond an interim application, regard should be had not only to the wording of any referral but also to the subsequent contractual provision and processes which may allow for reassessment of a particular issue. If the contract allows for a decision to be reassessed at a later date, this may mean any decision of an adjudicator would only temporarily bind the parties. 

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