In a clarification of legitimate conduct for an adjudicator in a final account dispute, the court upheld the adjudicator’s decision to award interest
Technology and Construction Court (TCC) adjudication decisions are regular features in the Building pages, and for good reason. Of the many construction projects disputes that are determined by adjudication, only a small proportion are challenged by dissatisfied parties and consequently come before the TCC in enforcement proceedings. Something exceptional occurring during the course of the adjudication will trigger such a challenge. The majority of adjudication decisions the parties accept they are bound to follow.
The adjudicator’s interest calculations included interest on sums which had not been certified by the architect
The TCC will uphold a party’s challenge and find an adjudicator’s decision unenforceable if the adjudicator has (a) exceeded his jurisdiction, for example, by deciding an issue that was not part of the dispute referred to him and/or (b) contravened the rules of natural justice, for example, by failing to address or consider material issues in the dispute. Given that an adjudicator’s decision being challenged is unusual, the resultant (and publicly available) TCC judgment attracts attention across the industry. The TCC’s analysis of an adjudicator’s conduct and reasoning why a decision is enforceable, or more unusually, not enforceable, draw particular interest. Judgments will often re-establish acceptable parameters for adjudicators.
A recent TCC decision, Partner Projects Ltd v Corinthian Nominees Ltd, illustrates the court clarifying legitimate conduct for an adjudicator in a final account dispute. Corinthian appointed Partner Projects under a standard form building contract to construct a five bedroom house in St John’s Wood, London. The project ran over time and budget. Inevitably, there was a discrepancy between amounts claimed and amounts certified. Partner Projects referred a dispute over the final account to adjudication. The adjudicator decided that Partner Projects was entitled to recover c. £850,000, plus interest. The adjudicator’s interest calculations included interest on sums which had not been certified by the architect.
Corinthian challenged the decision on the basis that the adjudicator acted outside his jurisdiction in reaching the decision on interest
Relevantly, the payment provisions in the building contract entitled Partner Projects to only recover interest on certified sums (at a prescribed rate). The contract also made provision for an adjudicator’s discretion in relation to award interest if a dispute arose. These are common provision in standard form contracts. Here, not only did the adjudicator calculate interest on sums due which had not been certified but also applied a rate different to that specified in the contract. Corinthian challenged the decision on the basis that the adjudicator acted outside his jurisdiction in reaching the decision on interest.
The TCC rejected these arguments and enforced the adjudicator’s decision. The Judge found that the adjudicator was within his jurisdiction to award interest in the sum calculated for two principal reasons: first, the rate applied by the adjudicator was an adjustment of the contractual rate which the adjudicator’s discretion enabled him to make. Secondly, and critically, although the contract did not enable Partner Projects to recover interest in relation to sums that had not been certified, the Judge held that the architect’s certificates issued under the contract were not conclusive of Partner Projects’ entitlements. Therefore, the adjudicator was within his jurisdiction to open up and review the certificates and to substitute for sums actually certified the sum that he considered should have been certified and then award interest due under the corrected certificates.
The implications of this judgment are likely to be of considerable importance to many looking at the state of final accounts. The judgment provides a fairly clear indication about the adjudicator’s parameters when it comes to interest and the ability to revalue for this purpose, the certified sums. Unless the contract clearly provides that payment certificates are conclusive evidence of a party’s entitlement, the adjudicator would be within his jurisdiction to open up and review certificates in doing so to arrive at the appropriate principal and interest.
Digby Hebbard is a partner at Trowers & Hamlins