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Contract Administrators Must Be Impartial – High Court Cautionary Tale

Employing an impartial contract administrator to oversee major construction projects is vital. In one High Court case where that did not happen, a company was left with an incomplete housing development and an adjudication bill for almost £870,000.

CraneThe company had engaged a contractor to build 33 flats and three houses. The contract administrator who was appointed to supervise the project worked for a subsidiary of the company and an adjudicator was later to find that he lacked the necessary or appropriate impartiality properly to fulfil that important function.

The project was characterised by problems in the supply of design information to the contractor and, as notices and counter-notices flew, work on the site ceased. By the time the matter came before the adjudicator, there was a £2.5 million difference between the company’s and the contractor’s valuation of the work done.

The adjudicator found the company in repudiatory breach of the contract and ordered it to pay the contactor £868,728, together with interest, fees and costs. The company’s attempt to deduct substantial sums from the amount due to the contractor by way of liquidated damages in respect of delays fell on fallow ground. The contractor launched enforcement proceedings after no part of the award was paid.

The company, which went into liquidation in the midst of the proceedings, argued that the adjudicator exceeded his jurisdiction by purporting to decide certain issues that had not been placed before him. However, the Court found those arguments hopeless and entered judgment for the contractor for the full amount of the adjudicator’s award.