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Can adjudicators award interest on uncertified sums?

Citation: Partner Projects Limited v Corinthian Nominees Limited [2011] EWHC 2989 (TCC)

Keywords: Adjudication, jurisdiction, interest, stay of enforcement

The Facts

Corinthian entered into a JCT Standard Form of Building Contract, Private Without Quantities with Contractor’s Design Portion, 1998 edition with PPL for the construction of a five bedroom house.  The contract did not proceed smoothly and PPL made claims for variations, delay and increased costs resulting from alleged delays and design changes.   There were six adjudications in total, in the last of which PPL was awarded £850,509.35.  PPL sought to enforce this award by way of summary judgment. Corinthian opposed the application on the ground that an element of the decision relating to the award of interest was not severable and was made without jurisdiction, as PPL had not sought interest in the referral and only included the claim in the reply.  In addition, Corinthian claimed that the adjudicator did not have jurisdiction to award interest on sums which had not been certified, pursuant to clause the contract.  Alternatively, Corinthian sought to stay enforcement pending the determination of its counterclaim on the basis that PPL would not be able to repay any sums subsequently found due to Corinthian. 

Held (Edwards-Stewart J)

Clause did not confer power to award interest on sums which have not been certified.  However, the adjudicator was able to award sums greater than those certified by the architect because the contract gave him the power to open up and review certificates.  The judge found that what the adjudicator must be taken to have done was to have opened up, reviewed and revised the architect’s certificates and to substitute for the sums actually certified the sum that he considered should have been certified. Therefore, the effect of the adjudicator's decision was to substitute for the sums certified by the architect in the certificates the sums found due by the adjudicator on which the adjudicator was then entitled to award interest.  The judge referred to Dyson LJ’s judgment in Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] EWCA Civ 814 in support of his analysis with regard to opening up certificates and awarding the appropriate sum.  Edwards-Stewart J. did not follow paragraph 7-065 in Hudson’s Building and Engineering Contracts, which states that an employer will not be liable for interest where he has paid in full pursuant to a bona fide, albeit under-certified, certificate, as this view could not prevail over the proper construction of the provisions of the contract. 

The judge found that the question of interest had been referred to the adjudicator, as PPL had asked the adjudicator to determine whether it was entitled to interest pursuant to clause in the referral and, therefore, the adjudicator was not acting outside of his jurisdiction in determining that issue.  If the adjudicator had erred in determining whether or not on a proper construction of clause PPL were entitled to interest, that would be answering the right question, but in the wrong way, and would not, therefore be a ground for challenging the adjudicator’s decision.

The judge refused the application for a stay after setting out the relevant principles from Wimbledon Construction v Vago [2005] BLR 374, on the basis that PPL’s poor financial state had been brought about by Corinthian’s failure to pay the sums awarded by the adjudicator and that, although PPL would not be able to repay the whole of the awarded by the adjudicator when it fell due, it would be able to repay a major part of it.