Solland v Daraydan Holdings [2002] EWHC 220HT 01/481

This summary was provided by CMS Cameron McKenna LLP.

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Generally, an adjudicator's decision will be enforced and summary judgment will not be withheld on the basis that the defendant has a cross claim equalling or exceeding the amount awarded by the adjudicator

Judge Seymour QC, Technology and Construction Court

15 February 2002

The contractor S agreed to undertake the design, construction and refurbishment of a property for D on the terms of Conditions attached to the Building Contract. The Conditions incorporated the Scheme for Construction Contracts and provided that "the Adjudicator's decision is binding until the dispute is finally determined by the Courts." The Conditions also stated that there would be liquidated damages of £15,000 per week. In a separate furnishing contract, S agreed to supply and install various items of furniture at the property. This agreement also provided for liquidated damages to be payable at the rate of £15,000 per week. However the aggregate of liquidated damages for both contracts was not to exceed £15,000 per week.

The works were completed late and D demanded £810,000 for liquidated damages under the Building Contract. S issued an invoice under the Building Contract for payment of £658,9444.72. This sum was not paid within the time stipulated by the Building Contract, namely 10 days. S referred the non-payment dispute to adjudication. The adjudicator held that D's letters demanding payment for liquidated damages were not good withholding notices for the purposes of section 111 of HGCR Act and therefore D had to pay the amount of the invoice.

D did not pay the amount of the invoice, therefore S sought summary judgment for the sums awarded by the adjudicator. D then claimed £810,000 in liquidated damages under the Furnishing Contract (on the basis that the liquidated damages claimed under the Building Contract were a matter of dispute and had not been paid). S did not pay the sum requested. D opposed the application for summary judgment on the grounds that its claim against S exceeded the amount of S's claim in the action and on the basis that S had not completed the works properly and therefore D was entitled to an abatement in respect of the defective/incomplete work.

The court held that where a dispute as to the amount due to be paid has been referred to adjudication in accordance with the express terms of the relevant contract, or in accordance with the Scheme incorporated into the relevant contract by an express term, or as a result of the operation of section 114(4) of the 1996 Act, the consequences of the adjudicator making a decision fell to be determined as a matter of construction of the contract in question, including if necessary, the Scheme. The judge held that if the contract provided for the parties to the contract to comply with the decision of an adjudicator, then the sum that the adjudicator has deemed due would become payable under the contract. The contract here provided both that the adjudicator's decision was binding and also (by virtue of the incorporation of the Scheme) that the parties must comply with it.

The Judge distinguished the decision in David McLean v. Swansea Housing on the basis that the necessary implication from the adjudicator's decision in that case was that the contractor was not entitled to an extension of time for the full period of delay and therefore it was perfectly proper for the employer to issue a withholding notice for liquidated damages against the adjudicator's decision for the period of contractor culpable delay. Those facts were however very different from those in the present case. The Judge found that, generally, as there will be no notice of intention to withhold payment of some amount awarded by an adjudicator, the amount awarded by the adjudicator will be payable in full.

S was entitled to summary judgment for the sum claimed.

Generally, an adjudicator's decision will be enforced and summary judgment will not be withheld on the basis that the defendant has a cross claim equalling or exceeding the amount awarded by the adjudicator.

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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