Knapman R J Ltd. v Richards [2006] EWHC 2518 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

It seems that non-compliance with part of an adjudicator’s decision will not preclude a party from obtaining a court order for enforcement of other parts of the decision that were decided by the adjudicator in its favour.

Furthermore, the court will not, as a general rule, assume that the parties have abandoned any part of the existing contract pursuant to an adjudication order unless it can be demonstrated that the adjudicator was expressly asked to do something, or decide something, which under the contract would be the responsibility of either one of the parties or the contract administrator.

His Honour Judge Coulson QC – Queen’s Bench Division, Technology and Construction Court

Background

Richards engaged Knapman to build two detached houses.  There were a number of delays and the completion date stipulated in the contract was not met, therefore Richards deducted liquidated damages pursuant to the contract.  Knapman referred the dispute to adjudication, seeking a declaration that:

a) Richards were responsible for the supply of doors and windows;
b) Practical completion was achieved on 29 April 2006;
c) Knapman was entitled to an extension of time of 30 weeks from 16 September 2005 (contractual completion date) and 29 April 2006; and
d) Knapman was entitled to the repayment of the liquidated damages deducted by Richards.

The adjudicator rejected most of the claim, finding that Knapman was responsible for the supply of doors and windows; significant works remained outstanding and therefore practical completion had not yet been achieved; Knapman was only entitled to an extension of time of 13 weeks and therefore the sum which Richards had to pay was reduced accordingly.

Knapman disputed the adjudicator’s findings save in respect of the entitlement to a repayment of the liquidated damages, whereas Richards sought to set off the monies that the adjudicator had ordered to be repaid against the liquidated damages which were still accruing as a result of the fact that practical completion had not yet been achieved.
Knapman applied to the court for summary judgment to enforce the decision of the adjudicator in respect of the sums payable to them by Richards.

Present Proceedings

Judge Coulson QC had to decide two issues, namely:
1) whether Knapman was seeking to enforce the parts of the adjudicator’s decision that it liked, whilst at the same time seeking to repudiate other parts that it did not like and, if so, whether that was a reason not to enforce the adjudicator’s decision; and
2) whether it followed logically from the adjudicator’s decision that Richards was entitled to a particular sum by way of liquidated damages which could then be set-off against the sums found by the adjudicator to be due to Knapman.

In relation to the first issue, the judge found that this was not the type of case where the approbation/reprobation principle was relevant or applicable.  If Knapman was in breach of its contractual obligation to comply with the Adjudicator’s decision, then Richards had an immediate remedy, namely it could take legal proceedings to secure compliance pending any final determination.  It was not appropriate to deprive Knapman of their entitlement (pursuant to the same adjudicator’s decision) to repayment of sums by way of liquidated damages which the adjudicator had found to have been wrongfully deducted.  The possible failure by a party to comply with one part of the adjudicator’s decision does not affect both parties’ obligation to comply with all parts of the decision, including, in this instance, the award of money. 

Turning to the second issue, the judge found that:

1) The 13 weeks’ extension of time awarded was in respect of three specific delays.  The adjudicator had not carried out an exhaustive review of delaying factors and the overall entitlement on the part of Knapman to an extension of time.  For this reason, it did not follow that because Knapman had only been awarded 13 weeks, Richards would be entitled to liquidated damages for the whole of the remaining period.

2) In Knapman’s application to the adjudicator for an extension of time, it had been assumed that practical completion had been achieved on 30 April 2006.  Knapman had not contemplated that the adjudicator might find that practical completion had not yet occurred, therefore it did not advance an alternative claim to the effect that, if they were wrong about the practical completion date, they were entitled to an extension of time beyond that date.  For this reason also, the adjudicator was not dealing with any full extension claim in the adjudication.

3) Richards’ entitlement to liquidated damages was, in accordance with the contract, dependant on issuance of a “clause 2.6 certificate” by the contract administrator.  He had not done so.  Although Richards argued that the adjudicator had taken all relevant factors into account therefore this certificate was not necessary, the judge disagreed.  Judge Coulson noted that the interplay between adjudicators’ decisions and the existing contract machinery was not always easy and could give rise to difficulties.  The Court, as a rule, should not assume that the parties have abandoned any part of the existing contract unless it could be demonstrated that the adjudicator had expressly been asked to do something, or decide something, which, under the contract, would normally be the responsibility of either one of the parties or the contract administrator.

In other words, the adjudicator had not reached any definitive conclusion as to the full extension of time due to Knapman.  Therefore, no specific entitlement to liquidated damages followed logically from the adjudicator’s decision.  Knapman was entitled to judgment for the sum sought.

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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