Adjudication "Responses" - Mailbox (Birmingham) Limtied v Galliford Try Building Limited 2017

Published 5 September 2017

Executive summary

This case acts as a warning to Responding Parties that the Adjudicator's jurisdiction cannot be restricted by limiting the issues addressed in the Response; a Responding Party cannot argue some items and save others for "another day". In this case, GTB was not entitled to bring a subsequent Adjudication to determine its entitlement to an extension of time where a former Adjudication had determined Mailbox's right to liquidated damages.

The facts

Mailbox employed GTB to construct a development in Birmingham pursuant to a JCT Standard Form of Contract (as amended). There were significant delays to 7 of the 10 sections. GTB submitted a number of claims for an extension of time between May 2015 and March 2016.

In March 2016, Mailbox terminated the contract before the final sections were complete on the grounds that GTB was failing to proceed "regularly and diligently" with the works.

In August 2016, Mailbox commenced an Adjudication in relation to its "entitlement to liquidated damages". In its Response, GTB contested Mailbox's claim on the basis of its entitlement to an extension of time. It stated that GTB was in the process of preparing its "full extension of time submission" but, in the meantime, GTB relied only on three Relevant Events for the purposes of the Adjudication.

Mailbox's Reply disputed GTB's case "that it is entitled to cherry-pick various Relevant Events for the purposes of this Adjudication and then submit further applications for extensions of time".

On 27 September 2016 GTB served its full extension of time claim. For reasons which are not explained, it did not pursue this to form part of its defence to the Adjudication.

The Adjudicator subsequently reached his Decision. This was on the basis of the matters raised in the Response, i.e. the three Relevant Events referred to. The Adjudicator decided that Mailbox was entitled to liquidated damages.

On 13 April 2017 Mailbox commenced Part 8 proceedings for declarations to prevent GTB from bringing a subsequent Adjudication seeking an extension of time.

Decision

The Decision required consideration of two (potentially competing) issues:

1. The extent to which a Responding Party can limit a defence advanced previously and save it for another day (Working Environments¹ states that this is not permissible); and
2. The ability of a Responding Party to assert any available defence in a subsequent Adjudication (Quietfield² being an example of where the Contractor was entitled to defend itself against a claim for liquidated damages by relying on a "full" extension of time claim notwithstanding the fact that it had relied on a "limited" claim in a previous Adjudication);

Ultimately, HHJ Coulson decided that GTB was not entitled to bring a subsequent Adjudication to determine its entitlement to an extension of time because this had already been decided in the first Adjudication. This was based on the following:

1. The contract had come to an end. Consequently, this was not a situation where issues as to liquidated damages and extensions of time would change or alter as a result of ongoing or future events.
2. GTB made various requests for extensions of time in the period up to March 2016 prior to termination of the contract. It therefore followed that all arguments in relation to GTB's entitlement to an extension of time had "crystallised" prior to the first Adjudication.
3. It was "beyond argument" that Mailbox was entitled to retain the liquidated damages awarded in the first Adjudication, unless and until challenged in Court. This was notwithstanding the fact that there was a final account process under the contract which had not yet taken place.
4. A claim for an extension of time is "defensive" to a claim for liquidated damages. The two claims are inextricably linked. Therefore, where Mailbox's entitlement to liquidated damages had been fixed; GTB's entitlement to an extension of time was similarly fixed.
5. Quietfield was not authority for the fact that a Contractor had an unfettered right to run different claims for an extension of time in different Adjudications. An earlier (unsuccessful) claim could not limit the defence that it could run in response to a later claim.
6. It was no answer to suggest it was "unfair" because a Referring Party could commence an Adjudication before the Responding Party was ready. This is the nature of Adjudication. In any event, in this case, GTB had five months following termination to prepare its claim.

GTB's substantive rights were unaffected: it could still issue Court Proceedings for a final determination in the usual way.

Comment

This case acts as a reminder to Responding Parties that it is not possible to defer the argument for another day. This is particularly important guidance in claims involving an entitlement to liquidated damages. If faced with an Adjudication for liquidated damages, the Response needs to address fully any claim or entitlement to an extension of time that exists at that time.

¹ [2012] EWHC 1039 (TCC)

² [2007] BLR 67