Severability of an Adjudicator’s Decision - Update
The Technology and Construction Court has recently been asked to again consider the issue of whether an Adjudicator’s Decision may be severed. Our Summer 2012 newsletter considered the Court’s decision in Working Environments Ltd –v- Greencoat Construction Ltd  EWHC 1039 (TCC) in which an Adjudicator’s decision was severed.
In Beck Interiors Limited –v- UK Flooring Contractors Limited  EWHC 1808 (TCC) the Claimant, Beck Interiors Limited, sub-contracted works to install carpet at the Selfridges Department Store on Oxford Street, London to the Defendant, UK Flooring Contractors Limited. Pursuant to the Sub-Contract the carpets were to be obtained from specified suppliers, however, the specified suppliers were unable to supply the necessary carpets to the Defendant and the Defendant sought to withdraw from the Sub-Contract due to this.
The Claimant asserted that this was a repudiatory breach of Contract entitling it to recover from the Defendant the cost of having the works carried out by an alternative Sub-Contractor. The Sub-Contract also contained a clause relating to liquidated damages for delay at a rate of £20,000.00 per week.
Correspondence passed between the parties culminating in the Claimant’s Solicitors letter dated 15 March 2012 in which the Claimant asserted that it was due the sum of £31,148.97 plus VAT pursuant to the Defendant’s repudiatory breach of Contract. The Defendant wholly rejected that claim. The letter dated 15 March 2012 made no reference to liquidated damages.
Subsequently on 5 April 2012 (ie. the Thursday before the Easter bank holiday weekend), the Claimant sent an e-mail timed at or shortly after 5.00 pm by which it claimed liquidated damages in an unspecified sum. On 10 April 2012 (ie. the first working day after Easter) the Claimant issued its Notice of Intention to Refer the dispute to Adjudication. The Notice asked the Adjudicator to decide the repudiation issue and also asserted a right to liquidated damages in the sum of £36,000.00 plus VAT. The Defendant argued that the Adjudicator had no jurisdiction to consider liquidated damages as the dispute as to liquidated damages had not crystallised as the Defendant had not been afforded a proper opportunity to consider the Claimant’s letter dated 5 April 2012. The Adjudicator however decided that he had jurisdiction in respect of the dispute on the subject of liquidated damages.
Mr Justice Akenhead decided that the Adjudicator did not have jurisdiction to consider the issue of liquidated damages as that dispute had not crystallised. Mr Justice Akenhead then turned to consider whether the Adjudicator’s Decision on repudiatory breach in which he found in favour of the Claimant in the sum of £19,763.41 could be severed from his decision on liquidated damages in which he also found that the Defendant was liable to the Claimant in the sum of £33,600.00 plus VAT. Mr Justice Akenhead considered that this was both a case in which the Court could sever the Adjudicator’s Decision and in which it should do so. Accordingly the Decision was upheld in respect of the finding on repudiatory breach and enforced to that extent.
This case gives some interesting insight into the principles that will be applied when the Court is asked to consider the severability of Adjudicator’s Decisions.
If you would like any more information on this topic, please contact Philip Vickers.