High Court Remedies Contract Adjudicator’s Curate’s Egg Decision

Contract adjudicators work under pressure and their decisions can sometimes bring to mind a curate’s egg. However, as a case concerning a £33.5 million construction project showed, judges have the power to sever the good from the bad, thus ensuring that swift and cost-effective justice is achieved.

Hotel corridorThe developer of a 150-bedroom hotel and the company that it engaged to design and build it fell out in respect of defects, delays and unexpected cost overruns that blighted the project. Following an adjudication, the developer was ordered to pay the company almost £1.2 million.

That sum represented the balance due to the company under the contract, after deduction of its liability to the developer in respect of defects, professional fees and lost profits. The company launched proceedings, seeking summary judgment in the amount of the award, but the developer responded with arguments that the adjudicator’s decision was unenforceable.

The developer submitted that the adjudication had been conducted at such a hectic pace as to amount to a breach of natural justice. Despite complex arguments being put forward on both sides, just over a month had passed between the dispute being referred to the adjudicator and the date of his decision.

In ruling on the matter, the High Court accepted that the timetable of the adjudication was very tight. However, in rejecting the developer’s complaints in that respect, it noted that it was a rare case where a court will decline to enforce an adjudicator’s award on the basis of an alleged inadequacy in the time allowed. The timetable had not been so compressed as to compromise the developer’s ability to meet the company’s case or to put forward its own.

The Court went on to find that the adjudicator erred in his interpretation of a written agreement between the parties by which the date for practical completion of the project had been deferred. That mistake had resulted in his refusal to award the developer liquidated damages in respect of a delay in completion of over two months.

The Court, however, ruled that the adjudicator’s error in that one respect did not infect the rest of his decision and could be remedied by excising that part of his award that was bad in law. To that end, the developer was given credit for the £715,000 it should have received in liquidated damages. The company was granted summary judgment in respect of the balance of its award.