Practical Law

Earlier this year I looked at claiming interest in adjudication proceedings under the Late Payment of Commercial (Interest) Act 1998, in particular the exercise of my discretion under section 5. Recently the TCC was asked (in Partner Projects v Corinthian Nominees) a similar question about whether an adjudicator had jurisdiction to award interest under the LPA.

Partner Projects Ltd v Corinthian Nominees

In Partner Projects Ltd v Corinthian Nominees, Edwards-Stuart J held that by including the claim for interest in the notice and referral, the referring party (the contractor) had given the adjudicator jurisdiction to deal with its claim for interest. As the contractor was entitled to claim interest under the LPA (which it did in its reply), the contractor was entitled to interest under the LPA. In the alternative, the court held that the contractor was entitled to interest under clause 30.1.1.1 of its contract (a JCT standard form of building contract, 1998 edition) because the sums the adjudicator considered were due should have been certified and paid pursuant to that clause.

Adjudicator’s decision on interest

I found the judgment interesting to read, especially as it sets out (in paragraph 26) extracts from the adjudicator’s decision. It is not often that we get to see how other adjudicators deal with issues that commonly arise, like claims for interest. So, in this case, we know that the adjudicator decided that:

• He had jurisdiction because the interest claim was contained in the notice and the referral, and the LPA claim was in the reply.
• The sums due to the contractor should have been certified under clause 30.1.1.1, and so attracted interest. Alternatively, interest was due under the LPA on the sums the contractor was entitled to.
• Interest should run from 1 January 2008, which was after the contractor submitted its final account (in December 2007).
• An interest rate of 8.5% applied from 1 January 2008. (The contract rate was 5% over base rate, the LPA rate was 8%. The adjudicator carried out a calculation and exercised his discretion to come up with 8.5%.)
• The contractor was entitled to about £203,000 in interest.

I also thought that it was noteworthy that the court held that even if the adjudicator was wrong to decide that the contractor was entitled to interest under clause 30.1.1.1, that would only have been an error of law when he determined the question that was referred to him. Relying on Bouygues v Dahl Jensen, the court held that the adjudicator’s decision would still have been enforceable because he’d have answered the right question, albeit incorrectly.

Does this effectively give a green light for adjudicators on interest claims?

Assuming that an adjudicator has jurisdiction to award interest, it strikes me that if this judgment is followed, the adjudicator’s decision will not be invalidated if he awards interest on:

• A different basis to that claimed.
• On the wrong basis.

In recognition of the requirement for a party to have made a claim for interest in the first place, I would probably categorise it as more of an amber light. However, it will be interesting to see what would happen if a party did not have an underlying contractual or statutory right to interest but nevertheless claimed and was awarded interest by an adjudicator. Following Edwards-Stuart J’s rationale that may “just” be a case of the adjudicator asking himself the right question, but answering it incorrectly.