Back in September, I wrote about set-off against an adjudicator’s decision following two TCC judgments: Squibb Group v Vertase FLI Ltd and Beck Interiors v Classic.
It seems the parties in the first case are still arguing over time and money, and have been back before the court (Vertase FLI Ltd v Squibb Group). This time the question for Edwards-Stuart J to address was whether the adjudicator decided the same issue in the second adjudication as he’d decided in the first adjudication. If he had, he’d lack jurisdiction and his decision would be unenforceable.
Squibb v Vertase and Vertase v Squibb
In the enforcement proceedings that followed the first adjudication, the court held that because the contractor (Vertase) had not served a withholding notice, it was not entitled to deduct its cross-claim for liquidated damages from the adjudicator’s decision. The question of what exactly the adjudicator had decided about liquidated damages was not really a feature of the judgment.
However, the precise nature of what had been decided the first time around was in issue in the enforcement proceedings that followed the second adjudication. This was because, the sub-contractor (Squibb) argued, the adjudicator had considered the contractor’s liquidated damages claim in both adjudications, something he was not entitled to do.
What did the adjudicator decide?
First time around, the adjudicator’s decision contained the following wording:
“Squibb also assert that Vertase have no entitlement to liquidated damages on the ground that no liquidated damages have been withheld from them or claimed from them under the main contract… Vertase do not have a right to claim liquidated damages under the sub-contract unless they can demonstrate an equivalent loss under the main contract.
I find that Vertase have no entitlement to take liquidated damages from any amount that I might decide is due to be paid to Squibb.”
In the second decision, the adjudicator said:
“[Previously] I found that Squibb should not be liable for liquidated damages because Vertase had not issued a valid notice of withholding… I also considered whether Vertase had any right to demand payment of liquidated damages without demonstrating an equivalent loss through the main contract. Vertase have not done this, and the evidence suggests that no liquidated damages have been taken from Vertase under the main contract.
…In this case, no loss has been demonstrated by Vertase, but I am persuaded by Vertase’s arguments on the legal position sufficiently to change the view that I took in my Decision in the first adjudication.
I find that Squibb have not established that the liquidated damages provision in the contract is unenforceable on the ground that Vertase have not demonstrated a loss under the main contract or from any other reason.” (my emphasis)
Can an adjudicator change his mind?
In short, no he can’t. The court agreed with the sub-contractor and applied the well-established principle that a party cannot ask a subsequent adjudicator to decide the same issue as a previous adjudicator has already decided. Since he shouldn’t have been asked the question, it’s even more difficult to understand why the adjudicator here thought that he could change his mind about it.
Be clear about what you are saying
The other thought I had about this judgment was the fact that it demonstrates the importance of clarity in an adjudicator’s decision and the fine distinction parties and the courts try to put on those bits they think are the decision, and those bits that they argue are the reasoning in support of the decision (and I’m thinking of the Scottish judgment in WH Malcolm Ltd, which I blogged about).
Here, the fact that the adjudicator used language like “I find that…” in some parts of his decision suggests he was alert to the issues that may arise. However, if the adjudicator had used less ambiguous words throughout, and had clearly said that no loss under the main contract meant the contractor had no right to deduct liquidated damages under the sub-contract, perhaps some of what followed in the second adjudication (and beyond) may have been avoided.
