Why an adjudicator can't change his mind

It’s not surprising when a demolition contractor refuses to take any money at all from the main contractor. Squibb Group Demolition said that to Vertase. In fact, Squibb said it would pay £45,000 for the pleasure of taking on the subcontract and the pleasure of taking the stuff away from site. Vertase FLI is a major remediation and ground reclamation contractor. For its part, it said to Squibb it would be very pleased to give the demolition firm 18 weeks’ possession of the site and then thump it for £15,000 per week liquidated damages for each week it remained on site.

Happily they all got on with it. But Squibb didn’t get done in the 18 weeks. It claimed it was delayed for reasons entitling it to an extension of time. On top of that, and because of that, Squibb sent a bill for £550,000 delay costs. The ball came back over the net from Vertase. It said Squibb could have a tiddler of an extension of time, no compensation and demanded liquidated and ascertained damages (LADs) of £180,000. Game on!

The adjudicator did his adjudicating. This was adjudication no.1. He decided Vertase had no right to deduct the damages for delay. One of the reasons, “among other things”, said the adjudicator, “was that no withholding notice had been served on Squibb” and that’s a sin. As for extension of time, he gave Squibb six weeks. But what on earth did he mean by saying “among other things”? That’s rather important especially since three months later Vertase began its own adjudication against Squibb with its guns blazing with other reasons for its £180,000 delay damages previously denied by the adjudicator. The same adjudicator was appointed. The row at the heart of this affair is that an adjudicator, whether the same fellow or A N Other, can’t “re-decide” a previous set of decisions. In short, what does adjudication no.1 decide?

The adjudicator said Vertase had no right to deduct damages for the delay as no withholding notice had been served - and that’s a sin

Vertase said in adjudication no.2 that it was entitled to seek the LADs of £180,000 because it had a reason other than that dealt with in adjudication no.1. It maintained that the adjudicator denied such a claim simply and only because no withholding notice was served. And if the first adjudication was decided on that basis, it left the door open to advance other reasons to set off, withhold, deduct or claim the £180,000. In any case by now Vertase had issued a good and effective withholding notice. It had learned its lesson. The adjudicator was well placed to know what he meant when he denied Vertase the LADs in round one. He announced in adjudication no.2 what the reasoning was in no.1. He said it was the failure to issue the withholding notice and that Vertase had “no right to demand payment of liquidated damages without demonstrating an equivalent loss through the main contract and Vertase had not done that”. Seemingly there was no evidence to that effect under the main contract. Now came another announcement by the adjudicator; he said in short: “I have changed my mind between adjudication no.1 and this no.2.” Ouch!

Seemingly Vertase argued that it had a right under the Squibb subcontract to be paid LADs whether or not a similar loss has been suffered under the main contract. The adjudicator accepted no loss had been demonstrated by Vertase, but then said: “I am persuaded by Vertase’s arguments on the legal position sufficiently to change the view I took in my decision in the first adjudication.” So he ordered that Squibb pay Vertase £180,000.

True, several adjudications are ordinary between the same parties about the same project. but you can’t touch what a previous adjudicator cast in stone

Squibb refused. So Vertase came to the Technology & Construction Court seeking enforcement. The law on this is well known. Once a dispute has been determined by adjudication, there cannot be another adjudication about the same dispute. True, several adjudications are ordinary between the same parties about the same project. But you can’t touch what a previous adjudicator cast in stone. Any decision that goes to deciding the dispute as referred is binding and cannot be adjudicated upon in any later adjudication.

Look closely at what the adjudicator did here. In adjudication no. 1 he said one thing about claiming LADs then in no.2 he simply changed his opinion to the opposite view about the right to make a claim. The High Court judge was able to conclude that the adjudicator was
“re-deciding” a point he had decided already. Not on. Vertase could not have its damages.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple