Beck Interiors Ltd v UK Flooring Contractors Ltd [2012] EWHC 1808 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-lawnow.com/adjudication

Judgement date: 4.07.2012

SUMMARY

Where only one working day (five calendar days spanning the Easter bank holiday weekend) was given for the respondent to consider and respond to a claim, a dispute regarding that claim was held not to have crystallised before the commencement of adjudication proceedings and an adjudicator did not have jurisdiction to decide on it.

Where an adjudicator made an award in respect of a claim that was made up essentially of two parts and there was no difficulty in identifying clearly what the adjudicator had decided in relation to each part, the Court severed the award and enforced only that part of it which the adjudicator had jurisdiction to decide.

Technology and Construction Court, Mr Justice Akenhead

BACKGROUND

Beck Interiors Ltd (“Beck”) was contracted to perform renovation work at the Selfridges department store on Oxford Street, London. In December 2011 Beck entered into a sub-contract with UK Flooring Contractors Ltd (“UKFCL”). UKFCL agreed to install floor coverings, to be obtained from suppliers specified by Beck, by 5 February 2012. The sub-contract stated that any “late completion date beyond [the agreed] 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… Main Contract”.

By 13 February 2012 no floor covering had been installed. On that date UKFCL stated in an email to Beck that this was due to problems with the supplier named by Beck, and that because of this it was withdrawing from the contract.

On 15 March 2012, solicitors acting on Beck’s behalf put forward a “Schedule of Costs Incurred”, stating that these costs were a result of UKFCL’s repudiation of the contract, which Beck purported to accept. Beck claimed c. £31,000 plus VAT for using alternative contractors to complete the works.

On 2 April 2012, surveyors acting on UKFCL’s behalf stated that the lack of carpets was caused by Beck’s nominated sub-contractors and suggested that UKFCL was not liable for the same.

By an email sent to UKFCL at or shortly after 17:00 on 5 April 2012 (the Thursday before the Easter bank holiday weekend), Beck for the first time claimed liquidated and ascertained damages (“LADs”). The LADs were claimed at the rate of £20,000 per week (the main contract rate) from the first day following the contractual completion date (i.e. 6 February 2012) until 5 April 2012 and continuing thereafter until completion of the works by the alternative contractors. Beck stated that the claim to LADs was in addition to the sums claimed previously.

At 16.48 on the first working day after 5 April 2012 (10 April), Beck issued its notice of intention to refer the dispute to adjudication, claiming the c. £31,000 for use of alternative contractors, and £36,000 for LADs for the period from 6 February 2012 until completion of the works by alternative contractors on the 16 February.

UKFCL submitted that the Adjudicator did not have jurisdiction as UKFCL had not had chance to respond to Beck’s claim. It raised this objection in particular in respect of the LADs. The Adjudicator decided that he did have jurisdiction, and in May awarded Beck £19,763.41 for losses incurred using an alternative contractor and £33,600 in LADs together with interest on both sums. He directed that UKFCL should pay his fees. UKFCL refused to pay and Beck issued proceedings to enforce the Adjudicator’s award.

ISSUES

The Court was asked to address:

Whether the Adjudicator had jurisdiction to decide on Beck’s LADs, or whether the dispute regarding that claim had in fact not crystallised before the adjudication commenced.
If the Adjudicator did not have jurisdiction regarding the LADs, whether that part of his decision could be severed leaving the rest to be enforced.

DECISION

The Court held that:

Having regard to previous decisions, one has to consider whether and when it could be said that whatever was put forward in the letter of 5 April 2012 was disputed.
In this case, the five day period between Beck’s email claim and the notice of adjudication was effectively one working day which was insufficient to permit the inference that UKFCL intended to dispute the claim.
Given the time at which the email was sent on the last working day before the four day holiday weekend, the Court inferred that Beck knew UKFCL would not have sufficient time to consider and respond to the claim before 16.48 on the next working day, when the notice of adjudication was served.
Beck’s claim for LADs in the adjudication was distinct from its claim for LADs initiated in its email of 5 April 2012. The claim in the adjudication was based on the works having been completed by alternative contractors by 16 February 2012, whereas the email claim was based on the works not having yet been completed at the date of the email (a much larger sum). Even if it could be said that inferentially the claim in the email was disputed by 10 April 2012, the claim put forward in the adjudication was materially different from that in the email and no dispute could have crystallised in respect of it.
Since on any view a dispute regarding LADs had not crystallised when the adjudication notice was submitted, and the Adjudicator had no jurisdiction in respect of it.
This was a case in which the Court could and should sever the decision. The Adjudicator’s decision could be cleanly split. The award to Beck for its costs in using alternative contractors was enforced, while the award for LADs was not. The award regarding interest was split and severed in the same way. The award as to the Adjudicator’s fees could not however be severed and the Court declined to enforce this part of the award at all.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-lawnow.com/adjudication

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