Tera Construction Ltd v Yung Ton Lam [2005] EWHC B1 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

This case illustrates the fact that the courts are usually reluctant to (a) refuse enforcement of adjudication decisions for lack of jurisdiction on the part of the adjudicator or (b) exercise their discretion to order a stay of execution on the grounds that the employer has a claim in respect of defective works and/or that the contractor is in financial difficulties.

Christopher Clarke J – Queen’s Bench Division, Technology and Construction Court

Background

Mr Lam employed Tera to demolish a house and construct two new houses under a JCT Minor Works Agreement.  Various issues arose between the parties, including the extension of time that was due to Tera, the valuation of the works, the sum due on the penultimate certificate toward payment, the extent of defects/snagging works not made good, the provision of access by the employer and the grounds for withholding sums due to be paid on the penultimate certificate for payment.

Issues

Tera referred the dispute to adjudication in August 2005.  In October 2005, the adjudicator issued his decision.  Mr Lam resisted enforcement of the adjudicator’s decision on three grounds:

1) want of jurisdiction the part of the adjudicator;

2) the existence of a claim for outstanding and defective works; coupled with

3) the alleged impecuniosity of Tera.

Decision

Issue 1

Mr Lam argued that the adjudicator had gone beyond his jurisdiction in three respects: namely by deciding (i) that the notice of determination was invalid, (ii) that the contract had been breached by the failure to release retention monies on 4th October 2004 and that a payment should have been made on that date, and (iii) by considering the value of the outstanding work.  Christopher Clarke J rejected each of these arguments, finding in each case that the adjudicator had acted within the jurisdiction accorded to him in the notice of adjudication.

Issues 2 & 3

Mr Lam submitted that he had a claim against Tera for outstanding and defective works and that, given the apparent impecuniosity of Tera, the court should exercise its discretion and order a stay of execution, so that the claim could be pursued.  Christopher Clarke J held that this was not a case in which it would be appropriate to grant a stay.  The adjudication system was designed to provide a means by which the contractor could obtain prompt payment of the sums due under the contract.  Practical completion had taken place over a year before and payment against the certificate still remained outstanding.  Further, there was considerable doubt as to both liability and quantum on Mr Lam’s claim against Tera. 

Although Tera did not appear to be in good financial shape, it was not shown to be insolvent and its financial difficulties had in part been caused by the non-payment of the amounts which were the subject of the adjudication.  In conclusion, the court found in favour of the claimant and ordered summary judgment of the sum claimed.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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