Adjudication Matters – “Speak now or forever hold your peace” – failing to raise your defence at adjudication

4th August 2017

Mailbox (Birmingham) Ltd V Galliford Try Building Ltd [2017] EWHC 1405

Introduction

When facing an adjudication claim for liquidated damages as a result of delay, a contractor did not raise certain parts of its extension of time claim in its defence.

In the Technology and Construction Court, Coulson J held that the adjudicator’s decision had established the contractor’s full entitlement to an extension of time.  This was only subject to challenge by subsequent court proceedings.  This meant the contractor could not refer to a second adjudication, the parts of its extension of time claim which it had failed to raise in the first adjudication

However, the court held that if the second adjudication involved questions as to the contractor’s performance of work, the contractor was able to rely on all relevant facts, even if those facts had already been raised in the previous adjudication.

Case Facts

Mailbox (Birmingham) Limited (Mailbox), the employer, engaged Galliford Try Building Ltd (GT), the contractor, in relation to a construction project in Birmingham.  During the works, GT made a number of applications for extensions of time.  On 6 November 2015, Mailbox, through its agent, served the first of a number of notices seeking liquidated damages in respect of delayed completion in relation to certain sections of the work.

On 19 August 2016, Mailbox commenced adjudication proceedings seeking a final determination as to its entitlement to the liquidated damages.

In GT’s defence to the adjudication proceedings, GT limited its extension of time claim to three issues out of a greater number of issues that could have been raised.  The adjudicator noted that by doing so, GT had restricted the scope of its defence. The adjudicator only considered the three issues raised by GT and no other events.  This is despite these other events being referred to in correspondence between the parties before the adjudication was commenced.  The adjudicator also rejected GT’s argument that the adjudicator’s decision would be ‘interim only’.

Suspecting GT would bring a second adjudication regarding issues of delay, Mailbox issued Part 8 proceedings for a declaration that the adjudicator’s decision had determined the totality of Mailbox’s entitlement to liquidated damages and GT’s entitlement to extensions of time.

On the same day, GT commenced a second adjudication.  This adjudication related to the lawfulness of the termination of the contract by Mailbox.  A further issue raised in this second adjudication was whether GT had proceeded regularly and diligently with the works at the time of Mailbox’s purported termination of the contract.

Decision

In considering the liquidated damages claim, Coulson J cited with approval the comments of Akenhead J in Working Environments Ltd v Greencoat Construction Ltd [2012] EWHC 1039 (TCC):

“if the crystallised dispute referred to adjudication encompasses a particular defence, the defending party cannot withdraw that defence during the adjudication to fight another day, so to speak, on that particular defence.”

Coulson J held that Mailbox was entitled to retain the liquidated damages awarded by the adjudicator.  This was unless and until the liquidated damages claim was challenged in court. This entitlement was not able to be reduced or modified in a subsequent adjudication.

Coulson J held:

“the crystallised dispute between the parties concerned responsibility for the entirety of the delays [and] it follows that GTB were not entitled to seek to defend themselves by reference to just a few of the potential relevant events, and keep others back for another day.”

The Judge described GT’s actions of limiting it extension of time claim to only three issues as “an odd (and potentially risky) approach.”  He went on to state that by doing so, GT had chosen “to stick to a high-risk policy of attempting to dictate which of their extension claims were in and which were not…[which] has proven an unwise course.”

In relation to Mailbox’s purported termination of the contract, Coulson J held that although GT was not able to argue further entitlement to extensions of time in the second adjudication, Mailbox could not argue that the dispute as to termination had been determined in the first adjudication.

For this reason, GT was able to raise in the second adjudication any points in respect of its regular and diligent performance of the works even if those same points had been considered in the first adjudication.

Practical Points

The contractor’s claim for an extension of time is determined when the employer’s entitlement to liquidated damages has become fixed by an adjudicator’s decision.  Therefore, a contractor should raise all parts of its claim for an extension of time in its defence. It cannot ‘save them for another day’.

The contractor’s extension of time arguments act as a defence to a claim from the employer for liquidated damages for delay.  Therefore, a contractor who decides not to raise certain parts of its extension of time claim to defend an adjudication cannot bring a subsequent adjudication relying on different issues and seek further extensions of time.

Contractors should be alive to the fact that they should be ready to meet a potential adjudication with a defence which includes all potential claims for extensions of time.

Where there is a binding decision in respect of an employer’s entitlement to liquidated damages, although the contractor is unable to adjudicate on any remaining parts of its extension of time claim, it can still rely on the same facts in an adjudication on a distinct and separate dispute.