A lovely bit of judging

Here’s a story with a satisfactory ending. William Verry Limited vs North West London Communal Mikrah had some of the traits of that process that we have all come to know – and love – yes, adjudication. First of all, the adjudicator, sadly, got the decision wrong and the error he made was within the Bouygues principle: he asked the right question but gave the wrong answer. It was a mistake he was entitled to make.

Verry sought enforcement of the decision. The unfortunate party at the wrong end of this wrong decision, as one might expect, raised some jurisdictional arguments as to why it should not be enforced. None of these succeeded. His Honour Judge Thornton felt he had to give judgment in favour of Verry. But by some nifty judicial footwork, which I shall come to later, he managed to engineer a just result.

The dispute was about an interim certificate at the end of a building contract. There had already been two earlier adjudications. The earlier disputes had been about the build-up of Verry’s applications for payment. In the second decision, the adjudicator had determined the gross value of Verry’s work and the net sum payable. This was paid although no certificate was issued. Mikrah’s architect then issued a list of defects and a further interim certificate was issued with £67,000 deducted for defects. The gross valuation was now lower than that determined in the first adjudication, which prevented Verry being paid its retention. Verry objected and referred this new dispute to adjudication. The same adjudicator was appointed a second time.

He found for Verry and directed Mikrah to pay the deducted £67,000. The basis for his decision seems to have been his belief that there could be no reduction in the gross value that he had found in his previous adjudication until that decision had been changed by an arbitration.

As Judge Thornton pointed out, this was clearly an error. The certificates in question were interim. The value of work for a certificate relates to work done at the date of the certificate, and if the perceived state of the work has changed, a fresh valuation is called for.

The judge neatly avoided the potentially unfair impact of what was clearly a wrong decision by the adjudicator

As a result of the adjudicator’s erroneous decision Mikrah was faced with the prospect of paying £67,000 despite its defects claim. Unsurprisingly it set about looking for jurisdictional objections. One of these was of some interest – an arguably late referral notice.

The Construction Act requires the referral of a dispute within seven days of the adjudication notice. The contract in question required a referral notice within seven days of the adjudication notice but also provided that the adjudicator should set his own procedure. The adjudicator had directed that Verry should serve him with a referral notice on 11 December 2003. This Verry did – but the adjudication notice had been served on 3 December. Mikrah said the failure to serve within seven days was fatal. Judge Thornton disagreed. He said that the statutory provision was that seven days was a minimum and that a contract could enable the adjudicator to extend that time, as he did in this case.

Poor Mikrah! Its other jurisdiction points also failed, including that chestnut of no dispute at the time of the adjudication notice. Judgment was given. However Judge Thornton directed that it should not be drawn up for 42 days – a clever move. It would give Mikrah the chance to start and finish a new adjudication about the defects that the current adjudicator had not taken into account. If Mikrah failed to start a fresh adjudication, it would suggest that there was not much substance in its defects claim. In this way the judge neatly avoided the potentially unfair impact of a wrong decision by the adjudicator. The means were a little unusual but the ends wholly laudable.