28 April 2016 #Construction
Following the leading Judgment of Mrs Justice Carr in the Technology and Construction Court issued on 14 April in the case of Stellite Construction Limited v Vascroft Contractors Limited, Clarkslegal’s specialist construction law team acted for Vascroft Contractors Limited, a design and build main contractor, in successfully defending an application made to the Court by Stellite, a Developer, for a Declaration that an Adjudicator had, in reaching his Decision, breached the rules of natural justice in deciding that time for completion of a construction project was at large.
The Judgment is important as it deals with and summarises many issues that commonly arise with enforcing Decisions of Adjudicators in the construction industry, having regard to whether the Adjudicator has breached the rules of natural justice and whether the Adjudicator’s jurisdiction was exceeded. The Judgment deals very clearly with issues that need to be considered when examining whether there has been any breach by the Adjudicator of the rules of natural justice by reference to the nature, scope and extent of the dispute identified in the initial Notice of Adjudication, together with the arguments raised in defence to that claim.
In brief, Stellite engaged Vascroft under a Design and Build Contract for shell and core (Phase 1) works that permitted the granting of extensions of time for delays caused to Vascroft by “Relevant Events”. The Contract also provided for the payment of Liquidated Damages by Vascroft in the event of delay in achieving Practical Completion. In August 2015, Stellite issued a -signed Letter of Intent in relation to additional, Phase 2, Works not covered by the Contract for Phase 1 works. The Letter of Intent expired in November 2015 without the parties entering into a further contract for the Phase 2 works.
Stellite’s claim for liquidated damages due to delays in completing the Phase 1 works was rejected by Vascroft and who maintained that they were not responsible for delays caused and so were entitled to extensions of time. Stellite then took its claim to adjudication. In rejecting their claim, the Adjudicator found that time for completion was at large because delays caused by the carrying out of works pursuant to the Letter of Intent were not caused by “Relevant Events” and so could not have attracted extensions of time under the Phase 1 Contract. The Adjudicator went on to hold that a reasonable date for completion was 5 March 2015.
In seeking to have the Decision set aside, Stellite submitted to the Technology and Construction Court that the Adjudicator had breached the rules of natural justice by failing to give the parties a fair opportunity to comment on whether time for completion was at large. In rejecting those arguments, Mrs Justice Carr confirmed that the Adjudicator had jurisdiction to decide whether the time for completion was at large, given that that question was central to his ultimate conclusion and the issues arising from it had been “fully and fairly canvassed” by the parties. The parties had put in issue and argued before the Adjudicator the question of whether or not the works undertaken pursuant to the Letter of Intent had caused delay, the parties had the opportunity to and did make submissions on this issue. The Adjudicator reached his Decision taking account of but without expressly accepting the precise submissions of either party. He clearly understood those materials and which allowed him to proceed fairly and properly to reach the conclusions that he did. The Adjudicator had not relied on some new authority or external information, fact or expertise which he had not shared with the parties. As a result, the Adjudicator did not “go off on a frolic of his own” in coming to his decision that time was at large and so he was not in breach of the rules of natural justice.
The Adjudicator’s decision that time was at large was therefore enforced. The Judgment therefore demonstrates the difficulties that a party faces when it seeks to argue that there has been a material breach of the rules of natural justice. To succeed with such an argument, it is necessary to show that an Adjudicator has strayed significantly outside the ambit of the matters referred to adjudication and without giving the parties an opportunity to comment on the authority, information or facts intended to be relied upon in coming to any decision.
In a secondary, subsidiary issue, it was decided that the Adjudicator had acted outside his jurisdiction in holding that a reasonable time for completion was 5 March 2016 and that part of the Adjudicator’s Decision was therefore severed from the remainder of the Decision. Whilst that finding followed from the Adjudicator’s conclusion that time was at large, it was relevant only in relation to a claim for unliquidated damages and such a claim had not been made by the Notice of Adjudication. That Notice did not give the Adjudicator jurisdiction to consider claims other than for liquidated damages. Furthermore, the right to argue, in defence to a claim for liquidated damages, entitlement to an extension of time is very separate and distinct from the question of what would be a reasonable date for completion if time was at large.
David Rintoul, Head of the Construction and Engineering Group at Clarkslegal said:
“With our many years experience of undertaking adjudication and related enforcement work, we have been very pleased to be able to help Vascroft in enforcing the Adjudicator’s Decision that time for completion of the contract works was at large.”