CREDIT: Jason Farnell, Commercial Risk Management
The recent High Court appeal judgement handed down by the Hon. Mr Justice Coulson in Mailbox (Birmingham) Ltd and Galliford Try Building Limited ( EWHC1405) serves as a reminder about the structure and purpose of certain contract clauses; a warning against the potential pitfalls of procrastination; and perhaps most importantly sets guidelines for adjudicators and party representatives concerning the scope for defining an adjudicator’s jurisdiction in adjudication proceedings.
The over-riding obligation of a contractor is to carry out and complete the contract works by the date for completion stated in the contract. If the contractor fails to meet its obligation then the employer is entitled to deduct liquidated and ascertained damages (LAD’s) for the period from when the works should have been completed up until they are actually completed. The whole purpose of the extension of time (EOT) provisions is to serve as a defence to an employer’s right to claim LAD’s. In other words the purpose of the EOT clauses is to keep the LAD’s provisions alive; LAD’s and EOT clauses are not separate or distinct from each other, they are inextricably linked, like two sides of the same coin.
In the Mailbox case the contractor chose to defend the employer’s claim for LAD’s with a partial extension of time relying on only three heads of claim although in correspondence before the first adjudication proceedings other causes of delay had been notified. Initially, the contractor relied on only three heads of claim because it had not prepared its other claims in sufficient detail; subsequently it elected not to advance the other claims, which is had now developed, believing it would be able to advance then in a subsequent adjudication. The Judge was unsympathetic to the contractor’s unpreparedness on the grounds that it had had sufficient time to prepare its claims and had chosen not to do so exposing itself to the risk that the employer might exercise its right to adjudication ‘at any time’. The Judge did not find that there was any depravation of rights since ultimately the opportunity to run the claims for final determination in litigation was still available.
The main finding and what I believe is the most significant, was the Judge’s analysis on the determination of the adjudicator’s jurisdiction. A party to an adjudication cannot seek to limit the adjudicator’s jurisdiction by cherry picking entitlements with a view to bringing a subsequent adjudication relaying on claims it has not previously advanced. The adjudicator is required to decide the dispute which has been referred and if the responding party seeks to only rely on a partial defence then it will run the risk that it fails in its defence and is also prevented from improving its position subsequently, outside of litigation.
A key consideration in the judgement was that the works had come to an end and it was not therefore a situation where issues such as to LAD’s and EOTs would change as a result of on-going or future events. Although this case turns on its own facts, as do other cases analysed by The Hon. Mr Justice Coulson in the judgement, it is likely that this will have implications for contractors and employers alike.