| Date | 1 November 2000 |
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| Judgment | Edmund Nuttall Limited -v- Sevenoaks District Council |
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| The Issue | Deduction of delay damages against the decision of an adjudicator concerning payment to the contractor. |
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| Implication |
The notice requirements within the contract for the deduction of delay damages must be complied with whether deduction is to be made against amounts or against sums potentially to be awarded by an adjudicator. |
printIt is not at all clear how engineers, architects or contract administrators should apply the decisions of an adjudicator. For example, the standard JCT forms of contract make no express provision for the payment of a sum awarded by an adjudicator. The payment obligation derives directly from the written decision of the adjudicator and it does not appear to be the case that the decision should be treated as if it were an interim payment certificate. Whilst therefore the parties to the contract will be temporarily bound to comply with the decision of the adjudicator, the contract administrator may decide that he remains in disagreement with the findings of the adjudicator and may therefore elect not to include within his interim certification sums corresponding to the decision of the adjudicator. Contract administrators should tread warily here. Whilst they may not wish to endorse the decision of the adjudicator in interim certificates by including amounts decided by the adjudicator in respect of measured works, variations and loss and/or expense, the contract administrator should nevertheless include reference to the sums awarded by the adjudicator in his recommendations for payment otherwise confusion will reign. Similar if not more complex issues arise in respect of interim awards for extension of time by an adjudicator. Once again, the standard form of contracts generally do not require the contract administrator to revise the date for completion in accordance with the decision of an adjudicator. Indeed, this may be unwise given that the extension of time decided by the adjudicator may be only of interim standing. The contract administrator is generally not entitled to reduce any extensions of time previously granted. Perhaps the parties will apply the contract provisions taking account of the adjudicator's decision for additional time (eg. in the calculation of liquidated and ascertained damages),whilst the contract administrator continues to sit on the fence, as it were, at least until final review following practical completion. Though not providing answers to these questions the decision in the case of Edmund Nuttall v Sevenoaks District Council earlier this year had to consider similar problems in relation to the purported deduction of liquidated and ascertained damages. Sevenoaks engaged Nuttall for the carrying out of works for the environmental improvement of Swanley town centre. Disputes arose concerning extension of time, loss and expense and variations and in January of this year Nuttall commenced adjudication by claiming a sum of approximately £700,000 plus VAT. In deciding the matter the adjudicator awarded that Sevenoaks should pay Nuttall the sum of £403,000 approximately "subject only to such retention and liquidated and ascertained damages as may be properly deductible under the contract". Sevenoaks took this as an invitation to pay a sum less than £403,000 by applying liquidated damages which it calculated in the sum of £43,000. Having been paid that lesser amount, Nuttall was obliged to refer the matter to the court for enforcement of the balance it argued was due under the adjudicator's decision. Nuttall disputed the employer's entitlement to liquidated and ascertained damages, but recognised that that argument would be for another day. For the purpose of the enforcement proceedings, Nuttall restricted its argument to the effect that Sevenoaks had failed to apply the contract mechanisms for the notification of the deduction of such damages. Sevenoaks conceded that a letter written after the adjudicator's decision showing an intention to deduct damages did not satisfy the requirements of the contract and the Act, both as regards its content and timing. Counsel for Sevenoaks however, argued differently. He pointed out that the contract made no provision for the payment of a sum awarded by an adjudicator and argued therefore that the notice provisions in respect of payment and withholding against such a sum were not relevant. Accordingly he argued that a term of the contract should be implied that where an adjudicator had made an award in favour of the contractor, the employer should be able to deduct liquidated and ascertained damages from the amount of that award. Mr Justice Dyson could not accept this submission. He considered that it might be appropriate for the standard form of contract to be amended to enlarge the scope of the clauses dealing with payment notices, so as to provide for the deduction of liquidated and ascertained damages from sums awarded by adjudicators. However, the contract worked perfectly satisfactorily without such a term. He concluded that the delay damages were not properly deductible under the contract at the time of the adjudicator's decision and nor were they properly deductible against the enforcement of the adjudicator's decision.
CJ-0043
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