28/10/2014
Lidl -v- R G Carter Colchester
Summary
The judgment of the High Court in Lidl UK GmbH -v- R G Carter Colchester Limited [2012] EWHC 3138 (TCC) considers a challenge to an adjudicator’s decision on the grounds of jurisdiction. The adjudicator had made part of his decision on an aspect of the dispute that had not been referred to him by the parties. Although it severed that part of the decision, the court upheld the remainder.
Facts
Lidl UK GmbH (“Lidl”) contracted R G Carter Colchester Limited (“Carter”) to build a supermarket and housing units, and to be carried out in three separate sections. On 22 June 2011, Lidl issued two non-completion notices for sections 1 and 2 of the project. However, on 28 June 2011, Lidl certified “Part Practical Completion” of section 1 and, on 6 July 2011, certified completion for part of the work under section 2.
Following a letter from Carter, Lidl agreed that these certificates had no effect under the contract and withdrew them, along with the two notices of non-completion. Instead, they claimed damages for the delays. Carter claimed they were entitled to extensions of time, and referred the dispute for adjudication.
Adjudications
At the first adjudication, the adjudicator decided that the certificates issued by Lidl were, in fact, effective, although even the High Court judge confessed “I do not really understand [his reasons for reaching these conclusions].” Following the first adjudication, Lidl sent a letter to Carter claiming £535,650 in liquidated damages, prompting Carter make a second referral to an adjudicator. The damages claimed consisted of:
· £125,000 for delays to section 1 and 2 up to the dates the certificates were issued (22 June and 6 July 2011, respectively),
· Nearly £350,000 for delays to section 1 and 2 after the certificates were issued, and
· Around £70,000 in relation to section 3 of the building project.
The second adjudication concerned only the £350,000 sum; the issue was whether Lidl were entitled to damages for delays to section 1 and 2 after the certificates were issued. Carter made it clear that the £125,000 amount was disputed, but not an issue for the adjudicator. Nevertheless, the adjudicator decided that Lidl was entitled to the £125,000 sum. Carter refused to pay, and Lidl applied to the court for enforcement.
Issues
The parties agreed that the adjudicator had answered a question that was not referred to him and on which he had no jurisdiction to make a decision: whether Lidl were entitled to the £125,000 amount. Therefore, in the High Court, the issue was whether this part of the decision could be severed from the remainder, or whether the whole decision was unenforceable. Lidl argued for the former; Carter for the latter.
Judgment
Mr Justice Edwards-Stuart, following the judgment in Working Environments Limited -v- Greencoat Construction Limited (2012) 142 Con LR 149 (TCC), concluded that:
[T]he two items of liquidated damages that totalled £125,000 were clearly not part of or within the confines of the dispute. The reasoning which underpinned them (as advanced by Lidl) had no bearing on the issues before the adjudicator. I conclude, therefore, that the rest of the Decision can be severed from them so that… it remains enforceable.
Significance
The court applied the reasoning in Greencoat, where the judge asked whether the disputed parts of the decision were “part of or within the confines of the dispute”. However, in this case, the judge continued by commenting on whether this consideration conflicts with the general principle that a decision cannot be severed where only one dispute had been referred.
This principle would seem to be a sensible one since, if there is only one dispute, it would be difficult to show that the reasoning on the severed part had no impact on the rest of the decision. The judge concluded that there should be no issue “provided that the reasoning giving rise to it does not form an integral part of the decision as a whole.”
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