Stellite Construction Limited v Vascroft Contractors Limited  EWHC 792 (TCC)
Published 23 June 2016
The Honourable Mrs Justice Carr upheld a number of elements of an Adjudicator's decision but severed others finding that the Adjudicator exceeded his jurisdiction; but there was no breach of natural justice. It reminds parties to consider carefully what issues to place within the Adjudicator's jurisdiction; once in the Court will rarely interfere.
A dispute arose following a claim by Stellite Construction Limited ("Stellite") that it was entitled to liquidated damages following Vascroft Contractors Limited's ("Vascroft") failure to complete. Stellite claimed LADs in the sum of £1,064,158.38. Vascroft failed to pay. Consequently, Stellite referred the dispute to Adjudication.
The Notice of Adjudication set out the background and sought a decision that "… Vascroft must pay Stellite £1,064,158.38 or such other amount that the Adjudicator deems appropriate". The Referral Notice went on to characterise the dispute as "…the failure by Vascroft to make any payment of liquidated damages".
In its Response, Vascroft raised several defences including that "Stellite had no entitlement to claim LAD's [sic] because the Contract mechanism has fallen down and time is at large". It also stated that "Vascroft is entitled to an extension of the Completion Date beyond the present date, or whatever extension the Adjudicator deems fair and reasonable".
The parties each made submissions regarding the contention that time was at large. In particular, Stellite made detailed reference to the case of Multiplex Constructions (UK) Limited v Honeywell Control Systems Limited (No 2) (2007) EHWC 447 which was quoted by the Adjudicator when making his decision. Neither party made submissions on what the relevant Completion Date should be if time was at large.
The Adjudicator decided that Stellite had no entitlement to liquidated damages because time had been set at large. He went on to decide that a reasonable time for completion was "no later than 5 March 2016".
Stellite issued Part 8 proceeding seeking a declaration that:
1. the Decision was unenforceable because the Adjudicator had breached the rules of natural justice by deciding that time was at large for the reasons he gave, without giving parties opportunity to comment ("Issue 1"); and
2. the Decision that a reasonable time for completion was 5 March 2016 was unenforceable because it was outside the Adjudicator's jurisdiction and/or the Adjudicator had breached the rules of natural justice ("Issue 2").
The Court held that:
1. In relation to Issue 1, there was no breach of the rules of natural justice. The Adjudicator applied the law debated in submissions to the material before him. He did so in circumstances where both parties were aware of the material and the issues to which it gave rise had been "fairly canvassed".
2. In relation to Issue 2, the Adjudicator acted outside his jurisdiction and that part of the Decision should be severed. The dispute referred was limited to a claim for liquidated damages. There was no Defence raised in the Response which extended it beyond this; particularly since the fact of time being at large would be a complete defence to the claim without more. It was therefore not necessary to consider whether the Adjudicator breached the rules of natural justice.
This Judgment contains a useful summary of the principles concerning jurisdiction and breach of natural justice. It provides a practical reminder to parties to consider carefully the scope of the dispute referred and any arguments raised in defence. This will control the matters which the Adjudicator can decide. Once the issues are in the arena, it is too late; the Court will be slow to interfere with the Adjudicator's decision based on material before him.