Edmund Nuttall Ltd v Sevenoaks District Council [2002] HT 00 119

This summary was provided by CMS Cameron McKenna LLP.

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An employer who does not give the requisite notice of withholding before deducting liquidated damages cannot rely on its claim for them as a reason not to pay an adjudicator's award. Since the adjudicator's power to correct his award was arguable, the claimant could not automatically benefit from an error in the adjudicator's calculations and summary judgment was refused

Dyson J, Technology and Construction Court

14 April 2000

E issued an application for summary judgment of the unpaid balance of an adjudicator's award. The award was for £403,120, subject to "retention and LADs as may be properly deductible under the contract." The original award issued by the adjudicator did not take into account sums paid by S to date on interim payments, and therefore awarded £48,000 too much. The adjudicator acknowledged that he had made an error, and advised the parties of this, but did not correct his decision, believing that he had no jurisdiction to do so.

S calculated the amount of liquidated damages due after taking into account the extension of time awarded by the adjudicator, and it deducted these and the amount awarded in error from the award, paying the balance to E. E issued proceedings for the remainder.

E relied upon Bouygues, saying that this case could not be distinguished from it. The Court did not accept that the nature of the mistake distinguished the case, but noted that it was clear that the adjudicator would have corrected his decision if he had the power to do so. It was at least arguable that he did have the power, and arguable that S would succeed in such an argument at trial. Therefore, summary judgment was not given for the £48,000.

In relation to liquidated damages, S accepted that it had not complied with the contractual requirements relating to deduction of liquidated damages, including service of a notice 5 days before the final date for payment of interim certificates. However, S argued that where an adjudicator had made an interim award in favour of the contractor, a term should be implied into the contract to allow the employer to deduct LADs from the award. S said this term was necessary to give business efficacy to the contract.

The Court could not accept this submission. The contract worked without such a term, and it was inappropriate to imply it where the contract contained detailed express provisions dealing with the same issue. If S wished to recover such LADs, it could ask E to pay them under this contract, and apply to an adjudicator if E refused, or it could withhold sums from future payment certificates (if any). Therefore, E was entitled to summary judgment in respect of the amount withheld for LADs.

An employer who does not give the requisite notice of withholding before deducting liquidated damages cannot rely on its claim for them as a reason not to pay an adjudicator's award. Since the adjudicator's power to correct his award was arguable, the claimant could not automatically benefit from an error in the adjudicator's calculations and summary judgment was refused.

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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