Westwood Structural Services Ltd v Blyth Wood Park Management Company Ltd [2008] EWHC 3138 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

summary

The Court has suggested that an employer may not be able to avoid payment under an adjudicator’s award on the basis of a later determination of contract.

Mr Justice Coulson, Queen’s Bench Division, Technology and Construction Court

 BACKGROUND

Blyth Wood Park Management Company (“Blyth Wood”) engaged Westwood Structural Services (“WSS”) under a JCT Minor Works Form 1998 (“the contract”) to carry out works at Blyth Wood Park.  Clause D7 of the contract required the parties to comply with a decision of the Adjudicator.  Clause 7.2.3 provided that upon determination of the contract Blyth Wood would not be bound to make any further payment that may be due under the contract until after completion of the works and making good of any defects. 

On 15 January 2008 WSS contended that the works were practically complete.  On 17 January the Contract Administrator advised that there were concerns about the efficacy of the works and instructed WSS not to carry out any further works pending an investigation.  WSS took this as repudiation and left the site.  On 16 April WSS commenced Adjudication 1 seeking declarations that practical completion had been achieved on 15 January and Blyth Wood’s instruction had been a repudiatory breach of contract. 

On 25 April Blyth Wood purported to determine the contract, and then defended WSS’s adjudication claim in reliance on clause 7.2.3, arguing that no further sum could be due to WSS until WSS had made good all defects.  The Adjudicator (rightly) decided he did not have jurisdiction to consider that defence since the determination had occurred after the commencement of the adjudication.  He concluded that practical completion had been achieved on 15 January and that WSS was entitled to approximately £40,000 in further payment (to be paid by 13 June) and simple interest from the date on which payment of the sum awarded had become overdue (which the Adjudicator concluded was 13 February).  He concluded that Blyth Wood’s instruction did not amount to a repudiation.
 
Blyth Wood commenced Adjudication 2 seeking a decision that it was not obliged to make any further payment to WSS (including of the sum due under Adjudication 1) until the works had been completed by an alternative contractor.  The Adjudicator found that Blyth Wood had validly determined the contract on 25 April but that it remained liable to pay the sum awarded under Adjudication 1 as clause 7.2.3 related to future payments, not payments due prior to the determination.  Blyth Wood refused to make payment and WSS sought enforcement by summary judgment.

 ISSUES

Blyth Wood argued that the decision in Adjudication 1 was not a decision that sums were due to WSS prior to 13 June (the deadline set by the Adjudicator for payment of the award).  As Blyth Wood had validly determined the contract by 13 June, it contended that clause 7.2.3 applied to the sum awarded under Adjudication 1.

DECISION

The Court held that the decision under Adjudication 1 was a decision that the sum awarded should have been paid by 12 February, not a decision that it should have been paid by 13 June.  Whether this decision was right or wrong, the Court was bound to uphold it in the absence of jurisdictional error or breach of natural justice (in accordance with well-known principles on enforcement of adjudicators’ decisions).  Accordingly clause 7.2.3 was irrelevant.  In any event, the Court held that the decision in Adjudication 2 that clause 7.2.3 had no effect on the sum due and payable under Adjudication 1 was determinative of the matter, as it was a decision on a question properly referred to the Adjudicator and even if wrong in fact or law, should itself be upheld in accordance with the principles of enforcement.  As Blyth Wood had provided no other reason for its failure to pay the sum awarded by the Adjudicator, the Court granted summary judgment.

Although not necessary to decide, the Court also indicated approval of:

  • the Adjudicator’s conclusion that the decision in Adjudication 1 overrode clause 7.2.3, on the basis of authority that suggested that (depending on the terms of the contract and the surrounding facts) an adjudicator’s decision may have a different status to a certificate or obligation to pay a specified sum under the contract; and
  • the Adjudicator’s conclusion that clause 7.2.3 was irrelevant on the facts of the case, on the basis that it would be contrary to the JCT form and the Housing Grants, Construction and Regeneration Act to conclude that an employer was entitled to defeat a claim for sums due under the contract by reference to an event (here, the determination) which occurred two and a half months after the money should have been paid.

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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