10-10-2024
Summary
In the recent case of Bell Building Ltd v TClarke Contracting Ltd [2024] EWHC 1929 (TCC) the court upheld the enforcement of an adjudicators decision in a “smash and grab” case where the adjudicator awarded a sum greater than that claimed in the referral.
The case serves as a crucial example of the intricacies involved in adjudication, andunderscores the importance of precise submissions whilst highlighting the unintended consequences that can arise from strategic decisions made during the adjudication process.
Background of the Dispute
The dispute originated from a JCT subcontract between Bell Building Ltd (“Bell”) and TClarke Contracting Ltd (“TCL”) for the construction of a data centre at Greenwich Point, London.
On April 20, 2023, Bell issued interim application number 18 (“IA18”) in the gross sum of £20,915,777.43, less retention. TCL responded with a "Pay Less Notice" on June 6, 2023, notifying a sum due of £710,120.61. After some debate about the validity of this notice, TCL made the reduced payment.
TCL paid a further sum of £685,591.18 in relation to interim application number 19(“IA19”).
Subsequently, Bell contested the validity of the Pay Less Notice issued against interim application number 18, arguing that it was ineffective, and referred the matter to adjudicationclaiming payment against IA18 on a “smash and grab” basis.
The Adjudication
Within the adjudication, Bell claimed payment of £1,443,981.51 (plus VAT), being the sum Bell calculated to be the outstanding amount due under IA18. This sum was claimed on a ‘smash and grab’ basis in the absence of a valid pay less notice.
Bell calculated the sum due by acknowledging that it was common ground that £710,120.61had already been paid by TCL against IA18 per the contested payless notice, and that a further £18,084,322.36 had been received at the date of the Notice (which included the £685,591.18 paid against IA19).
Bell specified in its referral that the adjudicator was not given jurisdiction to determine the "true value" of the payment claim, but also included the common caveat giving the adjudicator jurisdiction to grant "such other relief as is necessary, just and equitable to resolve the dispute".
During the adjudication, TCL challenged Bell’s calculations, contending that the adjudicator could only consider the payments related to IA18. This argument inadvertently limited the scope of the adjudicator’s evaluation.
The adjudicator found TCL’s Pay Less Notice against IA18 invalid and was expected to award Bell the sum claimed.
However, the adjudicator acknowledged that that “It is [TCL’s] position that I cannot take into account a payment made under Application No. 19 as that will be outside my jurisdiction.”
Taking TCL’s argument at face value, the adjudicator therefore corrected Bell’s calculation as to the sum due against IA18, excluded the £685,591.18 payment made in relation to IA19, and awarded Bell £2,129,672.69. A sum significantly greater than the amount originally sought.
Court Ruling on Enforcement
TCL sought to resist the enforcement of the adjudicator’s decision, arguing that the adjudicator exceeded his jurisdiction by awarding a higher sum and/or had valued IA18. TCL also asserted that the adjudicator had breached natural justice by not indicating that he intended to award a greater sum that that sought in the Referral.
The Court disagreed with TCL and upheld the adjudicator’s award, holding that:
- No Breach of Natural Justice: The adjudicator had not acted arbitrarily; instead, he relied on the material presented by both parties to arrive at his decision rather than going off on a frolic of his own.
- Jurisdiction and Submissions: The adjudicator was operating within his jurisdiction. TCL's argument invited the adjudicator to ignore the payments against IA19, which in turn opened the door for a larger assessment of the sums due. The adjudicator did not carry out a valuation, he corrected the arithmetic based on the submissions made.
Conclusions and Key Lessons Learned
The unexpected outcome in the adjudication and the subsequent judgment reinforces several important lessons for parties engaged in adjudication:
- Precision in Framing Arguments: Parties must be meticulous in how they frame their submissions. TCL’s attempt to narrow the adjudicator’s focus inadvertently led to a greater liability for them.
- Understanding the Implications of Defences: parties and their representatives must carefully consider the potential ramifications of the arguments they raise. What may seem like a strategic move can backfire, resulting in unexpected outcomes.
- Awareness of the Adjudicators Jurisdiction: A clear understanding of the adjudicator's jurisdiction is essential. Misinterpretations can lead to outcomes that do not align with the parties' expectations.
The ruling serves as a compelling reminder of the complexities inherent in adjudication and the need to take a strategic, and thoughtful approach to submissions.
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