An adjudicator’s decision in the context of the final account process

The Technology and Construction Court (TCC) in England and Wales has recently given judgment in Essential Living (Greenwich) Limited v Elements (Europe) Limited[1] in relation the extent to which an adjudicator's decision is binding on the parties for the purpose of an ongoing final account process. The judgment may be of interest in an Irish context.

Background

Essential Living engaged Elements to design and construct modular units for a mixed use development.

The contract contained a provision whereby the construction manager could, within 12 weeks after practical completion, fix a completion period which was 'fair and reasonable.' A dispute arose between the parties regarding adjustments to the contract sum, variations, extensions of time, loss and expense and liquidated damages. An adjudicator's decision dealt with those issues and valued the works up to March 2019. The adjudicator's decision found in favour of Essential Living.

Subsequently, after practical completion was certified in May 2019, Elements submitted its documentation for the final account process as set out in the contract. The submission included increased sums for variations, an extension of time claim, and additional prolongation costs with no allowance for liquidated damages.

Elements contended that the adjudicator's decision was limited to an interim payment application and did not affect the final account process as it was conceptually different to the interim valuation decided by the adjudicator. Essential Living maintained that the adjudicator's decision was binding in relation to those items until determined otherwise in arbitration or litigation and that Elements, under the guise of the final account process, was essentially reopening matters decided by the adjudicator.

Decision

Plenty of case law is available on the issue of whether a subsequent adjudication is 'the same or substantially the same' as an earlier adjudication, but there is little case law on the extent to which an adjudicator's decision concerning an interim valuation binds the subsequent final account process.

At paragraph 84 of the judgment in this matter, O'Farrell J held that:

'...iii) the Adjudication Decision is not binding on the parties for the purpose of the Construction Manager’s final determination of the Completion Period … from which would flow any liability on the part of Elements for liquidated damages and finance charges;

iv) the Adjudication Decision is not binding on the parties for the purpose of determining the … Contract Sum;

v) the Adjudication Decision is binding in respect of variations considered and assessed by the adjudicator, unless and until the Adjudication Decision is overturned, modified or altered by the court, or unless either party identifies a fresh basis of claim that permits such variation claim to be opened up and  reviewed under the terms of the Contract...'

Commentary

This is an important decision as it provides guidance on the circumstances in which an adjudicator's decision may or may not be binding in a subsequent final account process carried out under the provisions of the contract.

Central to the decision in this case was the fact that the contract included a provision whereby the construction manager (contract administrator / employer's representative) had, after practical completion, an overarching power to assess the time for completing the works on a fair and reasonable basis. Such a provision is contained in many standard forms of construction contract. It appears from this judgment that where a contract includes such a provision, then the adjudicator's decision on extension of time claims will not be binding in the final account process under the contract. However, where an adjudicator has assessed the value of variations that assessment is binding in the final account process until such time as the adjudicator's decision is altered by the court. In an Irish context, a degree of caution may be required as Simons J has warned about the potential dangers of reading across judgments from the TCC.

For further information in relation to this topic, please contact Conor Owens, partner, Enda O'Keeffe, partner, Paul Hughes, senior associate or any member of ALG's Construction & Engineering team.

Date published: 4 October 2022