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||Neutral Citation Number:  EWHC 1808 (TCC)
||Case No: HT-12-176
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION TECHNOLOGY AND CONSTRUCTION COURT
||Royal Courts of Justice
Strand, London, WC2A 2LL
||4th July 2012
B e f o r e :
MR JUSTICE AKENHEAD
|| BECK INTERIORS LIMITED
||- and -
||UK FLOORING CONTRACTORS LIMITED
Michael Wheater (instructed by SGH Martineau LLP) for the Claimant
Adam Temple (instructed by Battens Solictors Ltd) for the Defendant
Hearing date: 28 June 2012
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Akenhead:
- This is an adjudication enforcement and raises two issues, the first being whether all or part of a dispute or disputes had crystallised before the adjudication was commenced and the second being whether part of the adjudicator's decision can be severed leaving the rest to be enforced.
- These findings are based on the documentation and evidence put before the Court and are not intended to bind any final dispute resolution tribunal. On 9 December 2011 Beck Interiors Ltd ("Beck") and UK Flooring Contractors Ltd ("UKFCL") entered into a sub-contract by which UKFCL agreed to install specified floor coverings for renovation work at the Selfridges department store on Oxford Street, London, with a completion date of 5 February 2012; the carpets were to be obtained from specified suppliers, Tim Page Carpets and Altro Floors. This sub-contract was evidenced by Beck's order of the same date and on the face of the order it stated that any "late completion date beyond your Completion Date will result in the Sub-contractor being liable to the deduction/payment of liquidated and ascertained damages at the rates shown in the relevant terms of the Main Contract". A down payment was made by Beck to UKFCL in early January 2012.
- It appears that, although the main specified supplier had the carpets in stock, UKFCL did not place an order with the supplier; there is some issue as to whether the main specified supplier had exactly the right quantity of carpet. It may also be the case that a variation was issued in the last week of January 2012. On 10 February 2012, Beck e-mailed UKFCL calling for immediate action to place an order for the carpet with a different supplier saying: "…once this is installed and the project is complete we can discuss who pays what and how much etc…for the replacement carpet." The response on the same day from UKFCL asked for "confirmation that no charges will be placed against UK Flooring for any late fees, temporary carpet or any other counter charges. We have explained the situation to you regarding Tim Page carpets and are not willing to accept any charges due to their delays."
- Be that as it may, by 13 February 2012, no carpet had been supplied let alone laid by UKFCL. On that date, UKFCL stated in an email to Beck that it was withdrawing from the contract on the basis that the problems were down to the errors of Beck's named supplier. UKFCL's entitlement to do so is disputed by Beck who argue that this was a repudiation of the sub-contract.
- Also on 13 February 2012 Beck asked UKFCL to return the down payment but which are still not been returned by 15 March 2012.
- On 15 March 2012 after some other correspondence, Beck's solicitors on its behalf put forward a "Schedule of Costs Incurred" that it alleged were caused by a repudiatory breach of contract by UKFCL, which Beck purported to accept saying that UKFCL was "wholly liable for your failure to properly secure the permanent carpet by failing to make the required down claimant expeditiously or at all". It said that as a result of the "abandonment of the works, our client was left with no alternative but to progress the works by utilising alternative contractors." In relation to the schedule of losses they added that their client "reserves the right and to add to this schedule"; the listed costs amounted to £30,826.15 plus VAT; these losses included such heads as the purchase laying and taking out of temporary carpets. On 27 March 2012 an increased claim for losses in the sum of £31,148.97 was put forward by Beck. No breakdown was given of the small increase.
- Easton Bevins, surveyors acting on behalf of UKFCL, had been in touch with Beck's solicitors towards the end of March 2012. Those solicitors wrote on 27 March 2012 saying that Beck would refrain from issuing formal proceedings until 28 March 2012 pending a formal response. Unless UKFCL paid the sum of £31,148.97 by close of business on 28 March 2012, they were instructed to commence proceedings without further notice.
- On 2 April 2012 Easton Bevins stated that they had advised UKFCL to return the down payment previously paid by Beck to UKFCL for the procurement of the carpet. Otherwise, Easton Bevins stated that the lack of the Asis Carpet was caused by Beck's nominated sub-contractors and suggested that UKFCL was not liable for the same.
- On 5 April 2012 the Thursday before the Easter bank holiday weekend, Beck sent by an e-mail (timed at or shortly after 5 pm) a short letter to UKFCL in which it claimed liquidated and ascertained damages ("LADs") for the first time:
"…pursuant to clause 3.2 of the Sub-Contract, liquidated and ascertained damages in the sum of £20,000 per week (Main Contract rate) from the first day following the Completion Date, i.e. 6 February 2012 up to today's date and continuing thereafter until completion of your Sub-Contract works by others.
For the avoidance of doubt, this is in addition to the sum of £31,148.97 plus VAT previously claimed by us".
- On 10 April 2012, the first working day after Easter and a Tuesday (the first business day after 5 April 2012), at 16.48 pm the Claimant issued its notice of intention to refer the dispute, which was sent to RICS as the adjudicator nominating body, and thereafter Mr Jonathon Cope was nominated. That notice set out that UKFCL was liable for £36,000, alleging that the sub-contract works had been completed on 16 February 2012, in addition to the other sums also claimed. The Notice of Adjudication sets out many of the facts set out above. A total of £67,148.97 plus interest was claimed and declarations were sought in effect relating to liability and asking in Paragraph 30 that the adjudicator:
"(d) Decides that the sum of £31,148.97 plus VAT or such greater or lesser sum as the Adjudicator shall decide is due…in respect of losses incurred by Beck.
(e) in addition, decides that the sum of £36,000 plus VAT is due from UKFCL to Beck in respect of liquidated and ascertained damages."
- Mr Jonathan Cope was appointed as the adjudicator. Beck served its Referral Notice on 13 April 2012. On 23 April 2012, UKFCL served its Response, which submitted that Mr Cope did not have jurisdiction, as UKFCL had not had a chance to respond to Beck's claimed damages (in particular the LADs but also in relation to the updated claim sent on 27 March 2012). On 26 April 2012 after considering the parties' submissions on jurisdiction, Mr Cope sent the parties his non-binding decision that he did have jurisdiction. It is accepted that there was a valid reservation by UKFCL.
- On 17 May 2012 after further rounds of submissions including a Reply, Rejoinder (in which UKFCL expressly maintained its position as to Mr Cope's jurisdiction) and a Surrejoinder, Mr Cope produced his decision, which awarded Beck £19,763.41 for its alleged losses and £33,600 for alleged LADs, together with interest and the requirement that UKFCL, in the first place, pay his fees.
The Notice of Adjudication and the Adjudicator's Decision
- It is necessary to look in a little more detail at these two documents. The Notice of Adjudication first sets out details of the sub-contract and then the "The Dispute" between Paragraphs 5 and 29. Paragraph 5 describes that: "in brief terms, Beck claims from UKFCL sum of £67,148.97 plus VAT and interest following Beck's determination of the Sub-Contract…" saying that the detail was set out in the following paragraphs which from paragraphs 6 to 27 describes the history (largely as set out above) up to Easton Bevins' letter of 2 April 2012. Paragraph 28 then states:
"With regards to…("LADs"), Beck wrote to UKFCL on 5 April 2012 setting out its claim in respect of the same. Clause 3.2 of the Sub-Contract states that if UKFCL does not complete works by the Completion date then UKFCL shall be liable to Beck for LADs at the rate in the Order. The rate stipulated in the Order is that of the Main Contract, which is £20,000 per week or pro rata thereof. This equates to £4,000 per working day. Beck therefore claims from UKFCL, the following LADs:
(i) The sum of £24,000 for the period from the first working day following the Completion Date i.e. 6 February 2012 to the date of 13 February 2012 (6 working days) when UKFCL advised it would no longer perform its obligations under the Sub-Contract.
(ii) The sum of £12,000 for the period from 14 February 2012 up to the date of 16 February 2012 when UKFCL's works were completed by others (3 working days)."
In Paragraph 29 Beck claimed the sum of £67,148.97 which was made up of the two sums, £31,148.97 for the costs of completion and £36,000 as set out above for liquidated damages. It claims for interest under the Late Payment of Commercial Debts (Interest) Act 1998.
- The decision of the adjudicator addresses the various issues in a logical order identifying the nature of the dispute(s) relating to Beck's claims for £31,148.97 for completion work and liquidated damages of £36,000 (see Paragraph 4). It sets out the "redress sought" as set out in the Notice of Adjudication and the Referral Notice and the issues which were whether Beck was entitled to determine UKFCL's employment, whether Beck was entitled to payment and, if so, how much and whether Beck was entitled to interest and compensation and, if so, how much. He has a chapter on jurisdiction and then moves on to consider the issues which he has described. Paragraphs 14 to 40 addressed the liability issue relating to termination and he found in favour of Beck. He then moved on to the second issue. Between Paragraphs 41 and 59, he analysed the Schedule of Costs and found that, against the £31,148 £97 claimed, £19,763.41 was due. He then moved on as a separate topic dealing with liquidated damages between Paragraph 60 and 66, finding that Beck was entitled to liquidated damages of £33,600 relating to 8.4 working days. The total of the two figures was £53,363.41 to which he found that Beck was entitled. At Paragraph 69 to 76 he dealt with interest finding that interest was due as well as £100 under the Late Payment of Commercial Debts (Interest) Act 1990 and then at Paragraph 78 he found that UKFCL should be "primarily liable" for the entirety of his fees and expenses.
- At the end of the decision he set out his "Declarations and Directions". In the first three directions he gave declarations about breaches of contract on the part of UKFCL and that Beck was entitled to terminate. In Direction 4 he stated that the sum of £19,763.41 plus VAT as applicable was due from UKFCL to Beck in respect of losses incurred by Beck. In Direction 5, he found that the sum of £33,600 plus VAT is applicable was due from UKFCL to Beck in respect of LADs. Directions 6 to 9 addressed interest and fees and ordered UKFCL to pay the sums stated within seven days of the decision.
- The primary issue is whether the claim to liquidated damages either formed part of any crystallised dispute referable to adjudication at the time of the Notice of Adjudication or whether the substance and the timing of the 5 April letter relating to liquidated damages so altered the existing dispute relating to the Schedule of Incurred Costs that there was no dispute by the time that the Notice of Adjudication was served. Issues are therefore raised about how and when disputes can be crystallised.
- In Cantillon Ltd v Urvasco Ltd  EWHC (TCC), the Court looked at how disputes can arise and said:
"55. There has been substantial authority, both in arbitration and adjudication, about what the meaning of the expression "dispute" is and what disputes or differences may arise on the facts of any given case. Cases such as Amec Civil Engineering Ltd -v- Secretary of State for Transport  BLR 227 and Collins (Contractors) Ltd -v- Baltic Quay Management (1994) Ltd  EWCA (Civ) 1757 address how and when a dispute can arise. I draw from such cases as those the following propositions:
(a) Courts (and indeed adjudicators and arbitrators) should not adopt an over legalistic analysis of what the dispute between the parties is.
(b) One does need to determine in broad terms what the disputed claim or assertion (being referred to adjudication or arbitration as the case may be) is.
(c) One cannot say that the disputed claim or assertion is necessarily defined or limited by the evidence or arguments submitted by either party to each other before the referral to adjudication or arbitration.
(d) The ambit of the reference to arbitration or adjudication may unavoidably be widened by the nature of the defence or defences put forward by the defending party in adjudication or arbitration…
In my view, one should look at the essential claim which has been made and the fact that it has been challenged as opposed to the precise grounds upon which that it has been rejected or not accepted. Thus, it is open to any defendant to raise any defence to the claim when it is referred to adjudication or arbitration. Similarly, the claiming party is not limited to the arguments, contentions and evidence put forward by it before the dispute crystallised. The adjudicator or arbitrator must then resolve the referred dispute, which is essentially the challenged claim or assertion but can consider any argument, evidence or other material for or against the disputed claim or assertion in resolving that dispute."
This dictum was more concerned with the ramifications of defences being raised after a reference to adjudication and the need for a broad approach to what the defence to it may be.
- Of more relevance to this case were conclusions drawn on the law in the TCC case of Witney Town Council v Beam Construction (Cheltenham) Limited  EWHC 2332 (TCC) at Paragraph 38 of the judgement:
"(i) A dispute arises generally when and in circumstances in which a claim or assertion is made by one party and expressly or implicitly challenged or not accepted.
(ii) A dispute in existence at one time can in time metamorphose in to something different to that which it was originally.
(iii) A dispute can comprise a single issue or any number of issues within it. However, a dispute between parties does not necessarily comprise everything which is in issue between them at the time that one party initiates adjudication; put another way, everything in issue at that time does not necessarily comprise one dispute, although it may do so.
(iv) What a dispute in any given case is will be a question of fact albeit that the facts may require to be interpreted. Courts should not adopt an over legalistic analysis of what the dispute between the parties is, bearing in mind that almost every construction contract is a commercial transaction and parties can not broadly have contemplated that every issue between the parties would necessarily have to attract a separate reference to adjudication.
(v) The Notice of Adjudication and the Referral Notice are not necessarily determinative of what the true dispute is or as to whether there is more than one dispute. One looks at them but also at the background facts.
(vi) Where on a proper analysis, there are two separate and distinct disputes, only one can be referred to one adjudicator unless the parties agree otherwise. An adjudicator who has two disputes referred to him or her does not have jurisdiction to deal with the two disputes.
(vii) Whether there are one or more disputes again involves a consideration of the facts. It may well be that, if there is a clear link between two or more arguably separate claims or assertions, that may well point to there being one dispute. A useful if not invariable rule of thumb is that, if disputed claim No 1 can not be decided without deciding all or parts of disputed claim No 2, that establishes such a clear link and points to there being only one dispute."
- As was said in Amec Civil Engineering Limited v Secretary of Transport  EWCA 291 (Civ), where the dispute resolution clause refers to a "dispute or difference", the term "difference" is somewhat less hard edged than "dispute". As was said in the same case at first instance ( EWHC 2339 (TCC) at Paragraph 68), the mere fact of a claim does not automatically give rise to a dispute and it must be clear that a claim is not admitted. This was quoted with approval in the Court of Appeal and relevant extracts from the judgement of Mr Justice Jackson (as he then was) are:
"1. The word "dispute" which occurs in many arbitration clauses and also in section 108 of the Housing Grants Act should be given its normal meaning. It does not have some special or unusual meaning conferred upon it by lawyers.
2. Despite the simple meaning of the word "dispute", there has been much litigation over the years as to whether or not disputes existed in particular situations. This litigation has not generated any hard-edged legal rules as to what is or is not a dispute. However, the accumulating judicial decisions have produced helpful guidance.
3. The mere fact that one party (whom I shall call "the claimant") notifies the other party (whom I shall call "the respondent") of a claim does not automatically and immediately give rise to a dispute. It is clear, both as a matter of language and from judicial decisions, that a dispute does not arise unless and until it emerges that the claim is not admitted.
4. The circumstances from which it may emerge that a claim is not admitted are Protean. For example, there may be an express rejection of the claim. There may be discussions between the parties from which objectively it is to be inferred that the claim is not admitted. The respondent may prevaricate, thus giving rise to the inference that he does not admit the claim. The respondent may simply remain silent for a period of time, thus giving rise to the same inference.
5. The period of time for which a respondent may remain silent before a dispute is to be inferred depends heavily upon the facts of the case and the contractual structure. Where the gist of the claim is well known and it is obviously controversial, a very short period of silence may suffice to give rise to this inference. Where the claim is notified to some agent of the respondent who has a legal duty to consider the claim independently and then give a considered response, a longer period of time may be required before it can be inferred that mere silence gives rise to a dispute.
6. If the claimant imposes upon the respondent a deadline for responding to the claim, that deadline does not have the automatic effect of curtailing what would otherwise be a reasonable time for responding. On the other hand, a stated deadline and the reasons for its imposition may be relevant factors when the court comes to consider what is a reasonable time for responding.
7. If the claim as presented by the claimant is so nebulous and ill-defined that the respondent cannot sensibly respond to it, neither silence by the respondent nor even an express non-admission is likely to give rise to a dispute for the purposes of arbitration or adjudication."
I can not improve on this wording, which is germane in this case.
- The next legal issue is whether or not the Court can enforce part of an adjudicator's decision. In the Cantillon case, the Court looked at this "severability" issue and concluded:
"65. On the severability issue, I conclude, albeit obiter in the result, as follows:
(a) The first step must be to ascertain what dispute or disputes has or have been referred to adjudication. One needs to see whether in fact or in effect there is in substance only one dispute or two and what any such dispute comprises.
(b) It is open to a party to an adjudication agreement as here to seek to refer more than one dispute or difference to an adjudicator. If there is no objection to that by the other party or if the contract permits it, the adjudicator will have to resolve all referred disputes and differences. If there is objection, the adjudicator can only proceed with resolving more than one dispute or difference if the contract permits him to do so.
(c) If the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on that part of the decision which deals with one such dispute or difference will not undermine the validity and enforceability of that part of the decision which deals with the other(s).
(d) The same in logic must apply to the case where there is a non-compliance with the rules of natural justice which only affects the disposal of one dispute or difference.
(e) There is a proviso to (c) and (d) above which is that, if the decision as drafted is simply not severable in practice, for instance on the wording, or if the breach of the rules of natural justice is so severe or all pervading that the remainder of the decision is tainted, the decision will not be enforced.
(f) In all cases where there is a decision on one dispute or difference, and the adjudicator acts, materially, in excess of jurisdiction or in breach of the rules of natural justice, the decision will not be enforced by the Court."
- The Court needs to bear in mind that there are many different types of jurisdictional challenge. They include issues as to whether a dispute has crystallised, whether two disputes have been referred to adjudication, whether the adjudicator has been properly appointed, whether there is an effective adjudication provision, whether there is a contract at all between the parties, whether the subject matter of the contract is exempt from the statutory provisions for adjudication and numerous others. Different considerations as to severability may arise in relation to different jurisdictional challenges.
- In Fastrack Contractors Ltd v Morrison Construction Ltd  EWHC 177 (TCC), HHJ Thornton QC said at Paragraphs 23 and 26:
"23. In some cases, a referring party might decide to cut out of the reference some of the pre-existing matters in dispute and to confine the referred dispute to something less than the totality of the matters then in dispute. So long as that exercise does not transform the pre-existing dispute into a different dispute, such a pruning exercise is clearly permissible. However, a party cannot unilaterally tag onto the existing range of matters in dispute a further list of matters not yet in dispute and then seek to argue that the resulting "dispute" is substantially the same as the pre-existing dispute.
26. Thus, whether or not the reference is wholly or partly lacking in jurisdiction will depend on the nature and extent of the dispute that has purportedly been referred to adjudication by the referring party. A particular dispute may be correctly characterised as being in this form: "what sum is due for a particular interim payment?" or "what sum is due for a particular item of work?" or "what sum is due at the Final Account stage?" without any particular or finalised sum being included as part of that claim. Alternatively, the dispute may be correctly characterised as being one concerning the question of whether or not a particular specified sum is due. In the first type of dispute, it would not necessarily follow, if a larger sum had been included in the notice of adjudication than the sum previously claimed in the relevant application, that no dispute had yet arisen. There would be three alternative possibilities in such a situation: that the whole sum referred could be adjudicated upon (the dispute being a general one as to what sum is due and the sums contained in the notification of the dispute and the notice of adjudication being no more than particulars of the overall dispute); that the sum referred should be split by the adjudicator and only the sum previously claimed adjudicated upon (the dispute being as to whether that particular sum was due); or that no part of the sum referred could be adjudicated upon (since the nature and extent of the subject-matter of the reference had transformed it into something different from the pre-existing claim)."
- Ultimately, and rightly so, Counsel for both parties accepted that there was a crystallised dispute as at 2 April 2012 in relation to Beck's claim for the Schedule of Costs Incurred flowing from the alleged accepted repudiatory breach. It is clear that by 13 February 2012, the parties were at odds as to the fault or responsibility of UKFLC in relation to the non-order or non-delivery of the carpet by UKFLC. By 15 March 2012, there was a claim or assertion by Beck that UKFLC had been guilty of a repudiatory breach, that it was accepted and that it was entitled in effect to damages for the increased cost of completing the works, namely some £31,000, the heads of which were set out in the Schedule of Costs Incurred (as later slightly amended). In the context of what had gone before and the fact that there was time for UKFLC to respond, the 15 March 2012 claim was either disputed by the failure on the part of UKFLC or its advisers to accept the claim or by the letter of Easton Bevins of 2 April 2012 which clearly and positively did not accept liability; it argued that the problem was attributable to the supplier "nominated" by Beck and that their client was "not responsible for the lack of product by your nominated subcontractor".
- The real issue on the specific facts of this case relates to the impact of Beck's letter of 5 April 2012 sent after close of business on the last day before the Good Friday Bank Holiday on the earlier (15 March 2012) claim and whether it was disputed in effect by silence over the bank holiday weekend. The letter is itself rather odd because it suggests an entitlement on its face to liquidated damages from 6 February 2012 (the original completion date) up to 5 April 2012 "and continuing thereafter until completion of your Sub-Contract works by others". Unknown apparently to UKFLC but known to Beck, UKFLC's work had been completed by others (judged by the Notice of Adjudication) on 16 February 2012. The letter suggests an entitlement to over eight weeks' worth of liquidated damages at £20,000 per week (over £160,000) and continuing. There is nothing on the face of the letter of 5 April 2012 that this claim was supplementing or changing the earlier claim. Although it does say that the liquidated damages claim is "in addition" to the earlier claim, it does not ask the reader to treat it as an amendment to that claim.
- The reality, looking at the Notice of Adjudication which was to emerge less than one working day later, is that the claim for LADs pursued in adjudication was not really the claim intimated in the letter of 5 April 2012. The adjudication claim was predicated on the work having already been completed by others some seven weeks before whilst the 5 April 2012 letter was predicated upon completion by others having not occurred. The later claim turned out to be for £36,000 and the earlier claim on 5 April 2012 was for nearly 5 times as much and continuing at the rate of £20,000 per week.
- Having regard to decisions such as the Amec case, one then needs to consider whether and when it could be said that whatever was put forward in the letter of 5 April 2012 was disputed. It is, rightly, common ground for the purpose of this case that a material dispute had to have arisen before the Notice of Adjudication was dispatched, that is at 16.48 on 10 April 2012. In normal circumstances, a gap of five days from the time that a claim or assertion is put forward will often be sufficient to give rise to an inference that it is disputed, particularly, as here, where there had been previous claims and where liability was obviously in dispute for some two months before.
- The complication here is that the letter of 5 April 2012 (leaving aside what it was intended to convey) was sent after close of business on the last working day before a four day holiday weekend (Good Friday, Saturday, Easter Sunday and the Easter Monday bank holiday). This period of time in these particular circumstances in my judgement was not sufficient to give rise to an inference that whatever the letter of 5 April 2012 meant it was disputed. There had been no real hint before the letter of 5 April 2012 that, against a contract sum of a little over £10,000 and the laying of what was originally only 55 m² the carpet, there was to be any material claim for delay let alone one which ran to £160,000 plus. This involved a (relatively) massive ratcheting up of what had been intimated before by Beck. It appears that the letter written by Beck, albeit that it had instructed solicitors already, was an afterthought and, as indicated above, it was not well drafted. Sent knowingly by Beck after close of business immediately before for a holiday weekend, Beck must by inference be taken to have known that UKFCL would have no opportunity in working hours before the following Tuesday (10 April 2012) to consider it or have any realistic chance of producing any response.
- In any event, I do not consider that the claim intimated in the letter of 5 April 2012 related sufficiently closely to what was put forward in the Notice of Adjudication. Even if it could be said that inferentially that claim was disputed by 10 April 2012, the claim put forward in relation to liquidated damages was materially different from that which was put forward in the letter of 5 April 2012; the latter was predicated upon the carpet work not having been completed by anyone by 5 April 2012 and the liquidated damages due being for more than £160,000 whilst the former was predicated upon the carpet work having been completed weeks before with a maximum liquidated damages due being £36,000.
- Mr Wheater argued forcefully that the claim for liquidated damages should and could in effect be considered as having already been made. He said that the reservation made in the letter of 15 March 2012 (the Claimant reserving "the right and to add to this schedule") meant in effect that any further claim or financial entitlement that flowed from the repudiatory breach relied upon (which was or was to be disputed) could be considered as part of any later dispute. I disagree at least in this case. It is of course always a matter of fact and degree (as both Counsel properly accepted) as to whether amendments to a disputed claim fall within the umbrella of the original dispute. Thus, it will usually be open to a claiming party to reduce its quantum or if there are minor or sequential amendments (such as a continuing interest or financing charge entitlement) in the following adjudication proceedings. In this case, however, the addition of a substantial liquidated damages claim would change the original claim substantially and significantly; even on the claim advanced by Beck in the adjudication, the liquidated damages claim increased the original claim by more than 100%. There is no hint or suggestion in the letter of 15 March or the attached schedule that any claim for delay losses (as opposed to the increased cost of completing) was contemplated, let alone encompassed. Indeed, the letter of 15 March 2012 was predicated upon a repudiatory breach which was accepted by that letter. The liquidated damages claim was, on analysis, not a claim which flowed from an accepted repudiation as such but it related simply to a failure to complete as between the original date for completion and the date when Beck had others finish the work.
- It is at least possible that, if a sufficient time had elapsed from the dispatch of the letter of 5 April 2012, and a dispute on it could be said to have arisen, the original 15 March 2012 schedule related dispute could have metamorphosed into a dispute which included the later claim. However, that did not happen before the Notice of Adjudication was sent out on 10 April 2012.
- What did happen however was that Beck "tagged on" the new claim for liquidated damages to its genuinely disputed claim arising out of the (slightly amended) contents of its solicitors letter of 15 March 2012. This new claim was not even the one that was intimated in the letter of 5 April 2012. It is clear therefore that the adjudicator could have no jurisdiction in relation to this new claim.
- The next question which arises is therefore whether it is legitimate for the Court to sever the decision and in effect enforce that part of the decision which relates to that which was generally in dispute before the Notice of Adjudication was dispatched. In my judgement, this is a case in which the Court can and should do that. In reality, there was only one crystallised dispute which was referable to adjudication and that related only to the claim (as slightly adjusted) for £31,148.97 for the increased costs of completing the carpeting work. It is clear from the body of the Notice of Adjudication that the presented claim is made up essentially of two parts, £31,148.97 and the £36,000 for the new liquidated damages claim. They are presented in effect as two separate arguments with separable evidence supporting them, albeit that the losses flow from the failure to complete on time or indeed at all.
- There is no difficulty in identifying clearly what the adjudicator decided in relation to each claim: £19,763.41 for the increased costs of completion and £33,600 for liquidated damages. It was rightly accepted that the claim for the fixed sum of £100 under the Commercial Late Payment of Debts (Interest) Act could not be enforced because it related most obviously to the liquidated damages claim which is the only element which could be said to give rise to a debt, the other claim relating simply to common law damages. It is also difficult for the Court to apportion the adjudicator's fee which he ordered (primarily) UKFCL to pay; this is because, although one could arithmetically apportion it in relation to sums recovered and others not jurisdictionally recoverable, one can not second guess what the adjudicator would have done. For instance, he might have said that each party should pay half or that Beck should pay the costs of his time relating to the jurisdictional issue and some different proportion of his costs for the balance.
- It follows that this is a case in which "severance" can take place and the adjudicator's decision in relation to that for which he did have jurisdiction (£19,763.41 for increased costs of completion) should be enforced to that extent. Interest referable to that sum should also be allowed as should discretionary interests from the date of the handing down of the judgement. I have already intimated this decision to Counsel in Court and have ordered UKFCL to pay half of Beck's costs, summarily assessed net at £2,750.
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