William Verry Ltd. v North West London Communal Mikvah [2004] 1 BLISS 24

This summary was provided by CMS Cameron McKenna LLP.

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Where an adjudicator makes an error in his decision that is within his jurisdiction but potentially vitiates his decision, the Courts may order a stay of enforcement of that decision pending the outcome of a future adjudication on the same issues.

Judge Anthony Thornton QC, Technology and Construction Court

11 June 2004

William Verry (“Verry”) was engaged by North West London Communal Mikvah (North West) to carry out certain building works on the JCT standard form of contract, private with quantities, 1998 edition. A dispute arose between the parties as to the valuation of works and an adjudicator assessed the sum that would be due under a certain Interim Certificate. After the adjudicator issued his decision in that adjudication, North West submitted a list of snagging and incomplete items which Verry had already been asked to resolve but which had not been considered in the first adjudication.

Upon practical completion North West was contractually required to release half of the retention following the issue of an interim certificate issued within a month of practical completion. North West issued the interim certificate, the first to be issued since the adjudicator’s decision, in respect of the release of retention and deducted from that sum the reduction in the value of the works due to the defects and incomplete items. Verry commenced adjudication proceedings for the withheld amounts. The same adjudicator was appointed for this second dispute and he held that, in light of his earlier decision, he could not re-value the work to take into account any defects. The adjudicator also refused to allow Verry to set-off the value of any alleged defects against the retention sums due (the “abatement claim”). The adjudicator made an award in favour of Verry, who applied for summary judgment to enforce the decision.

The Court held that, although the adjudicator had been wrong in concluding that he was precluded from re-valuing the work in question and had misunderstood the abatement claim, he had answered the question put to him. Accordingly, the error was within the adjudicator’s jurisdiction, even if “only just”, and the adjudicator’s decision would therefore be enforced. However, the court also found that the adjudicator’s error in not addressing the defects issue was such that it “potentially vitiated” his decision and, because of this, the fact that North West could have the defects dispute resolved in a fresh adjudication within six weeks, and having regard to the overriding objective, enforcement of the adjudicator’s decision would also be stayed also for six weeks. Further, the court gave leave to apply for any adjudication decision found in favour of North West within the six weeks to be set-off against the judgment.

In another point of note, the court addressed adjudication referral periods. Clause 41A of the contract between the parties provided that, if an adjudicator was appointed within “seven days of the notice” of intention to refer a dispute to adjudication, then the referring party “shall refer the dispute … to the adjudicator … within seven days of the notice”. Additionally, Clause 41A.5.5 allowed the adjudicator to set his own procedure in reaching his decision and provided that any non-compliance with Clause 41A would not invalidate the decision of the adjudicator. Verry issued the adjudication notice on 3 December, the adjudicator was appointed and faxed the parties on 5 December advising that Verry should issue the referral notice by 11 December.  Verry complied with this decision. North West argued that the referral notice should have been issued by 10 December and, as it had been submitted one day after this, the adjudicator had no jurisdiction to determine the dispute.

The court held “that the referral period for an adjudication runs from the date the adjudication notice is issued and not from the date of service where that date is a later date”. Further, the court held that s.108(2)(b) of the HGCRA requires contractual machinery which enables the referring party to refer the dispute within seven days of the adjudication notice. S.108(2)(b) sets a minimum requirement for the contract and does not prohibit additional contractual provisions that allow the referring party to refer the dispute outside a seven-day timescale. As Verry had complied with the adjudicator’s direction for service of the referral notice, that notice had been served in time.

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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