Thursday, 7 October 2021

CC Construction Ltd v Mincione

[2021] EWHC 2502 (TCC)

Mr Mincione engaged CCCL to design and build the shell and core of a new house. The contract was based on the JCT Design and Build Contract (2011 Edn). Mr Mincione refused to pay £485k which the CCCL said was due following the service of a Final Statement and an adjudication decision. Mr Mincione said that the Final Statement was not conclusive, a balance was owing to him, and the decision was not enforceable. One of the issues before the court was whether there had been a material breach of natural justice in the adjudicator’s treatment of Mr Mincione’s liquidated damages argument? The adjudicator had dealt “very briefly” with that saying:

“It is established law that an Adjudicator cannot open up a certificate considered to be conclusive, as such, once the due date has been determined, the Adjudicator will have no further power to open up the Final Statement. In respect of liquidated damages, I conclude that it is not a part of the dispute I have been asked to decide and therefore cannot be raised in set-off in these circumstances.”

The Judge applied the principles set out by Mrs Justice O’Farrell in the case of Global Switch Estates Ltd v Sudlows Ltd (Dispatch Issue 247). Not every failure to consider relevant points will amount to a breach of natural justice. The breach must be material and a finding of breach will only be made in plain and obvious cases. If there is a material breach of the rules of natural justice, the decision will not be enforced. HHJ Eyre QC said that, where there is a claim for payment, a defence of set-off can be raised and will necessarily be part of the dispute which an adjudicator addressing such a claim has to determine. That said, it was important to keep in mind the distinction between (a) considering an asserted defence and then concluding, as a result of that consideration, that it was not a tenable defence in the particular circumstances; and (b) declining to consider an asserted defence. It is the latter which is likely to be a breach.

CCCL said that the adjudicator did consider the liquidated damages defence concluding that Mr Mincione was not entitled to raise a claim for LADs in set-off against sums found due in respect of the Contract Sum. When the  adjudicator said that the absence of a Pay Less Notice meant that “the sum to be paid … is the sum stated as due in the Final Statement …” they were accepting the argument that the absence of a Pay Less Notice precluded the setting off of the liquidated damages. That was an adequate consideration of the set-off defence and so the adjudicator had addressed the defence. 

Here, it was clear that the adjudicator said that he had declined to consider the liquidated damages claim as a potential set-off. This was because he did not regard it as part of the scope of the dispute before him. That view was incorrect and meant that the adjudicator had failed to address a defence which was before him. The Judge noted that, in considering whether that defence should have been addressed, and the consequences of any failure to do so, it was important that CCCL had sought (and, indeed, it obtained) a decision that a particular sum was to be paid. It followed that this was a case where the Employer was “entitled to rely on all available defences”.

A conclusion that the absence of a Pay Less Notice prevented Mr Mincione advancing the liquidated damages claim as a set-off may or may not have been correct and would have been a decision within the adjudicator’s jurisdiction, but that was not the conclusion reached by the adjudicator. Instead, they declined to consider the set-off defence in its entirety. This amounted to a material breach of the rules of natural justice.

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