Total M&E Services v ABB Technologies [2002] EWHC 248 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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A party's costs of an adjudication cannot be recovered as damages for breach of contract.

Risk of failure to pay in the event that the court, in full litigation, disagrees with the adjudicator's decision can be taken into account in determining whether a stay of enforcement of the decision should be granted, but the party seeking the stay must produce compelling and uncontradicted evidence of that risk.

HHJ David Wilcox, Technology and Construction Court

26 February 2002

AB entered into a sub-contract for electrical installation works with T. There were no provisions in the contract for any work beyond that described in the contract or payment for such work. Substantial works beyond the original scope of the works were performed by T. AB accepted that the additional work should be paid for and some additional payment was made. Nevertheless T issued a notice of adjudication regarding the additional payments due arising from the contract with AB. As the contract did not provide for an adjudication scheme, the statutory scheme under the HGCR Act applied. The adjudicator decided that £462,788 was payable to T. T sought summary judgment in its favour in respect of the sum awarded and a further sum (of approx £90,000) being its costs of the adjudication.

T submitted that the costs of the adjudication were recoverable as a damages claim as it would be foreseeable that a claimant would seek adjudication (and incur costs) if there was a payment dispute between the parties. The judge held that as the Act does not provide for the recovery of costs the claim was misconceived. As the Act envisages both parties may go to adjudication and incur costs which they cannot, under the Act, recover from the other side, such costs could not therefore arise as damages for breach.

In relation to the claim by T for payment for the additional works, AB submitted that the adjudicator had no jurisdiction to make an award as the additional works could not be a variation to the original sub-contract as there was no mechanism for variation within the sub-contract.

The judge disagreed and held that the additional work performed by T was of the same type as in the original sub-contract and therefore the only inference that could be drawn was that the scope of the work was enlarged. He also held that the contact as varied did come within the provisions of section 107 even though it was a contract evidenced partly in writing and partly orally. The judge found that the adjudicator made his decision on the basis of a dispute arising out of a single written construction contract as varied orally by the parties and accordingly had jurisdiction to take into account the additional work.

The judge refused to take the alleged set-offs raised by AB and granted summary judgment for T for the amount awarded by the adjudicator (but not its costs of the adjudication).

The judge considered whether a stay should be granted on the basis of special circumstances rendering enforcement of the judgment inexpedient (CPR 50.2(a)) – the inexpediency being the possibility that T might not be able to repay the monies awarded if the matter was litigated and the court disagreed with the adjudicator's decision. The judge referred to the decisions in Rainford v. Cadogan, Herschell v. Breen and Absolute Rentals v. Gencor and decided the risk of non-payment could be taken into account. However, the evidence produced by AB was not compelling and uncontradicted and the judge therefore refused to grant a stay. However, the judge found that there had been no adjudication on the merits of T's claim for some £120,000 (as this was affected by AB's set-off which the adjudicator had refused to consider as there was no withholding notice), and this sum should therefore be paid into court pending further hearing or order.

A party's costs of an adjudication cannot be recovered as damages for breach of contract.

Risk of failure to pay in the event that the court, in full litigation, disagrees with the adjudicator's decision can be taken into account in determining whether a stay of enforcement of the decision should be granted, but the party seeking the stay must produce compelling and uncontradicted evidence of that risk.

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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