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Cherry picking defence was “odd (and potentially risky)” approach

Earlier this year, I wrote about O’Farrell J’s judgment in Mailbox (Birmingham) Ltd v Galliford Try Construction Ltd. That case was all about legal and equitable assignment.

The parties have now been back before the court, this time in front of Coulson J, and have been arguing about the scope of two adjudications. The first concerned Mailbox’s claim for liquidated damages (which O’Farrell J had previously considered and I wrote about), the second was about Galliford Try’s subsequent extension of time claim.

As I’m sure you are thinking, it all boiled down to a question of what the crystallised dispute was and whether the second adjudicator had jurisdiction.

Mailbox (Birmingham) Ltd v Galliford Try Building Ltd

I set out some of the background to the project last time. In addition, it is worth noting that O’Farrell held that the first adjudicator (Mr Curtis) had jurisdiction and his decision, awarding the claimant some £2.4 million in liquidated damages, was enforced. That adjudicator’s decision was dated 6 November 2016.

Fast-forward six months.

Galliford Try started its adjudication on 13 April 2017. The same adjudicator (Mr Curtis) was appointed. While the principal focus of this adjudication was the termination of Galliford Try’s contract, “one element of the debate” related to whether it had proceeded regularly and diligently with the works. In turn, that argument required the adjudicator to consider the contractual completion date and any extension to that date. This went well beyond the extension of time that the first adjudicator had been asked to consider.

On the same day, Mailbox applied to the court under Part 8 for a number of declarations to the effect that, because of the first adjudicator’s decision on liquidated damages, no subsequent adjudicator could have jurisdiction to consider any of Galliford Try’s further extension of time claims.

This issue arose because of the way that Galliford Try had presented its defence to the liquidated damages claim in the first adjudication. Quite understandably, it sought an extension of time but, rather than submitting a full extension of time claim in the adjudication (which it said in the response it was going to do “shortly”), it relied on three relevant events. As Coulson J noted at the Part 8 hearing, that was an “odd (and potentially risky) approach” for Galliford Try to adopt.

At the time, Mailbox also challenged Galliford Try’s entitlement to cherry pick its defence in this way. Eventually, the first adjudicator confirmed that his decision would be “reached upon the totality of the matters referred” to him and would not be “limited in scope by GTB’s submissions”. (Incidentally, Galliford Try’s full extension of time claim was submitted to Mailbox during the adjudication, but it did not submit it as part of the formal process.)

Back to the second adjudication and the Part 8 proceedings

The second adjudicator faced a difficult question, common in many serial adjudications: how far was he bound by his own decision on the question of delay? In other words, in the second adjudication, could he go above and beyond his findings in relation to the three relevant events?

Ultimately, Coulson J held that the adjudicator was bound entirely and that Galliford Try was not

“… entitled to any extensions of time beyond those awarded by the adjudicator in the first adjudication unless and until those are modified or altered by the court.”

However, that would not stop Galliford Try from relying on that material to persuade the second adjudicator that it was proceeding regularly and diligently at the time its contract was terminated. This was to:

“… ensure a full debate about the termination in the second adjudication, without artificial and possibly unjust restrictions.”

It was irrelevant that Galliford Try may use this material to persuade a court that it was entitled to a longer extension of time.

In reaching this conclusion, Coulson J carried out a review of the relevant case law, reminding us that:

  • In determining the nature, scope and extent of any dispute referred to adjudication, the court does not just look at the notice of adjudication in isolation. It is necessary to consider the notice in the context of the background facts and that, when addressing the issue of what was previously decided, the court must have regard to what the first adjudicator actually decided, because that determines how much or how little remains available for consideration by the second adjudicator (Harding v Paice).
  • A responding party can raise any defence to the claim (Cantillon Ltd v Urvasco Ltd), and this can include a set-off (Pilon Ltd v Breyer Group plc). Further, if a crystallised dispute encompasses a particular defence, the responding party cannot withdraw that defence during the adjudication (Working Environments Ltd v Greencoat Construction Ltd).
  • With regard to serial adjudication, if a party refers a limited dispute to the first adjudicator, it is entitled to refer a broader dispute subsequently (Quietfield Ltd v Vascroft Construction Ltd).
  • Similarly, if a dispute is referred to adjudication and not dealt with by the adjudicator, it can be referred to a subsequent adjudicator (Harding v Paice) or, put another way, was the dispute that had previously been resolved the same or substantially the same as the dispute in the subsequent adjudication (Brown v Complete Building Solutions Ltd).

Relying on Cantillon and Working Environments, Coulson J concluded that the crystallised dispute involved the whole of Mailbox’s entitlement to liquidated damages and the whole of Galliford Try’s entitlement to an extension of time. This was a commercial common sense view. Galliford Try was not entitled to defend itself by relying on a limited number of relevant events, keeping the others back for another day (because a party cannot withdraw part of its defence during the adjudication to rely on it another day). Such a “high-risk policy” had proved to be an “unwise course”. Further, as Dyson LJ had said in Quietfield, Mailbox should be protected from having to:

“… face the expense and trouble of successive adjudications on the same of [sic] substantially the same dispute.”

and finally…

I noted with a wry smile when Coulson J said “I have not found this dispute easy to resolve”. Indeed. Imagine how adjudicators feel when they are faced with these issues, and don’t have the luxury of time to go away and cogitate (the hearing was on 22 May, the judgment was handed down on 21 June). Just saying… 😉

MCMS Ltd Matt Molloy

One thought on “Cherry picking defence was “odd (and potentially risky)” approach

  1. This is why building contractors should always have a clear contract with their clients stating everything they need to know before going ahead with the construction.

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