Claim first time or lose the right to claim
One question that is often asked, when a client ends up in adjudication, is do I have to run all of my defences in the adjudication? In the recent case of Mailbox (Birmingham) Limited v Galliford Try Building Limited (formerly known as Galliford Try Construction Limited) the court had to consider this very issue. The court also went on to reconfirm a well held principle of adjudication that a decision is interimly binding on the parties until such time as it is modified or changed by the court.
Mailbox employed Galliford under a JCT Design and Build Contract 2011 as amended by a Schedule of Amendment (the Building Contract) to carry out the refurbishment of a multiuse development in Birmingham. The works were split into 10 sections of which 7 were seriously delayed. Mailbox terminated the Building Contract before section 3 was completed. Galliford submitted a number of applications for extensions of time between May 2015 and September 2016.
Mailbox commenced an adjudication in August 2016 for liquidated damages. Galliford confirmed that it had claims for extensions of time, but, only relied on 3 relevant events. On 27 September Galliford submitted its full claim for an extension of time.
In November 2016, the adjudicator gave his decision and made it clear that he had only considered the three relevant events. Mailbox was awarded liquidated damages.
On 13 April 2017 Mailbox commenced Part 8 proceedings against Galliford and on the same day Galliford commenced a second adjudication for an extension of time. One element included a review of the completion date of section 3, which would change the calculation of liquidated damages.
The judge in the case was Mr Justice Coulson who decided in favour of Mailbox that Galliford was not entitled to bring further extensions of time claims beyond those awarded in the first adjudication unless and until the decision of the first adjudication was modified or altered by the court.
The key principles of Mr Justice Coulson’s judgment included the following:
- Mailbox’s entitlement to liquidated damages was binding on the parties;
- In a subsequent adjudication the decision cannot be changed;
- A contractor’s claim for an extension of time is only ever a defence to a claim for liquidated damages;
- The two claims are intertwined;
- As Galliford had mentioned its full claim in correspondence it should have put it forward in the adjudication;
- An adjudicator cannot sensibly decide an entitlement for liquidated damages without deciding the contractor’s extension of time; and
- The contractor’s rights are not affected as they can be finally determined by court proceedings.
The lessons of the case
While it may appear that this is a discrete issue with potentially very little impact, outside of claims for extensions of time, it is an important restatement of long standing law. Adjudication was first introduced nearly 20 years ago becoming part of the laws of the United Kingdom on 1 May 1998. Ever since the courts began enforcing adjudicators decisions it has been accepted that an adjudicators decision is, unless held unenforceable, interimly binding on the parties.
The real lesson from this case is that if you go into an adjudication where an adjudicator is being asked to determine an issue of wide ranging importance to the contract then you have to put your full case forward. If you do not run all of the arguments that you have and then lose you will be bound by the decision and not able to run another adjudication on the same issue. You can of course use the arguments again in adjudication and the adjudicator, to the extent it is not the same issue, can make a different decision.
This case is also an important reminder to anyone involved in an adjudication that while you may be the unhappy recipient of a notice of adjudication you have to be prepared for the worst in construction as you never know when someone will adjudicate against you. A timely reminder that the ambush adjudication has not gone away.
  EWHC 1405 (TCC)
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.