| Date | 3 August 2005 |
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| Judgment | Geris Handelsgesellschaft GmbH v Les Construction Industrielles de la Mediterrannee SA, 11 February 2005 |
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| The Issue | Structuring adjudication referrals to achieve payment. |
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| Implication |
An
adjudication which results only in a statement of amounts due on parts
of the claims advanced by each party, may not be capable of enforcement
as a money award. |
printThe recent case of Geris Handelsgesellschaft GmbH and Les Construction Industrielles de la Mediterrannee SA (CNIM) highlights the difficulties that may arise when adjudicators fail to decide the overall amount to be paid from one party to the other. CNIM was the main contractor for the construction of a waste incineration plant at Marchwood in Hampshire. Geris was a subcontractor appointed to design, supply and erect the geodesic dome which covers the incineration plant. The subcontract was in the form of the Institute of Chemical Engineers Model Form for Process Plant ("the Brown Book"). The adjudication procedure contained within the model form was replaced by bespoke special conditions which both CNIM and Geris agreed met the requirements of s.108 of the Housing Grants Construction and Regeneration Act. During the course of Geris' work disputes arose over delays to the subcontract works. Before Geris had completed its work CNIM terminated the subcontract under the provisions of the contract for failure to proceed regularly and diligently with the works. Geris treated this action as a repudiation of the subcontract and sought damages from CNIM. CNIM withheld payments due to Geris and as a result Geris issued a notice of adjudication. An adjudicator was appointed and Geris sought decisions on two points. Firstly whether it should receive payment for the work it had carried out prior to the alleged repudiation of the subcontract together with costs associated with its extension of time. Secondly, Geris sought a decision as to whether it was able to recover the damages and loss arising from CNIM's alleged repudiation of the subcontract. The adjudication procedure, as amended by the special conditions, contained a clause which stated that "in deciding any dispute referred to him, the Adjudicator shall determine and take into account any matter ("Cross-claim") raised by the respondent to the notice to refer by way of defence or set-off or counterclaim". CNIM, maintaining that the termination was lawful, submitted a counterclaim seeking liquidated damages for Geris' delay and additional costs relating to the completion of Geris' work and other associated claims. The adjudication procedure did not require the Adjudicator to give reasons for his decision, and nor was he asked to by the parties. However he did venture, in the body of his decision, to set down his thoughts on the particular issues referred. The adjudicator held that the delays on the project were in part CNIM's responsibility and in part Geris' responsibility. It therefore followed that Geris was entitled to part of its prolongation costs and CNIM was entitled to a proportion of liquidated damages. The adjudicator agreed that certain sums were also due for Geris' works carried out prior to the termination. He then went on to consider the validity of CNIM's termination. He found the termination lawful and in doing so rejected Geris' claims relating to the repudiation. He found that CNIM was entitled to liquidated damages for Geris' delay during their time on site, as well as CNIM's claim for back charges. The adjudicator also found that CNIM was entitled to exercise its right to set off and those rights were protected under clause 38.12 of the subcontract. However, Geris' claim for loss and expense arising from delay to the subcontract works and for disruption caused to the subcontract works was not dealt with by the adjudicator on the grounds that the dispute, in respect of those individual elements, had not crystallised and hence the adjudicator had no jurisdiction to deal with those issues. The adjudicator was also unable to reach firm decisions on some of the other CNIM counterclaims including the cost to completion, lack of productivity, prolongation and loss of overheads. Accordingly, although the adjudicator was able to make certain specific directions in respect of his own fees he did not summarise the claims and counterclaims beyond the comments made in respect of what may be due. More significantly he did not express an overall sum of money owing by one party to the other. Refusing to make any payment under the decision CNIM claimed that, irrespective of what the adjudicator was asked to decide, he did not decide that any amount had now to be paid by CNIM to Geris. CNIM claimed that the Adjudicator had only decided amounts that might be payable subject to CNIM's rights to set-off. Geris did not accept that reading of the decision and sought summary judgement in the Technology and Construction Court to enforce the decision of the adjudicator. His Honour Judge Humphrey Lloyd QC was asked to interpret the adjudicator's decision and confined his deliberations to the question of "what did this adjudicator decide?". He acknowledged that, when the court is asked to interpret adjudicator's decisions, a practical approach should be adopted. He also pointed out that when a defendant resists enforcement it must do so on the basis that it has a reasonable prospect of sustaining its defence. He found that CNIM had realistic prospects of success in maintaining that the decision should not be read as giving rise to an immediate right to payment of the amounts for which the claimant sought payment. Geris' application for enforcement of the adjudicator's decision was therefore dismissed.
CJ-0530
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