Layngross
T: +44(0) 1932 856463
E: derek@layngross.com
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Derek is a member of the FIDIC President’s List of Adjudicators and the Irish Government's Panel of Construction Contract Adjudicators, in addition to several UK adjudication, arbitration and mediation panels. He is a Chartered Arbitrator, Accredited Mediator & Conciliator, Registered Adjudicator and Dispute Board Member, who accepts domestic and international appointments as the neutral person in each of these construction dispute resolution disciplines. He is also a Past Master of the Worshipful Company of Arbitrators and a Chartered Civil Engineer, well versed in resolving technical, contractual and quantum disputes in the construction industry.

If you feel Dr Ross can assist you, please call him for a no obligation discussion on +44 1932 856463, or simply reply to this email with your details.

Below is an article he has written, which he hopes you will find of interest.

 

SUPREMACY OF JURISDICTION

 

Until the middle of last month, the insertion of subsection 5A(2A) into the Late Payment of Commercial Debts (Interest) Act 1998 frequently created a problem for construction adjudicators involved in cases in which that Act applied. The problem usually arose because the subsection just mentioned gives a successful claimant an entitlement to its costs of recovery, whereas section 108A of the amended Housing Grants, Construction and Regeneration At 1996 ('the Construction Act') denies a successful claimant, or referring party, such entitlement unless the parties have expressly agreed in writing to the contrary after the notice of adjudication has been issued, which rarely if ever occurs.

 

Until last month, it was widely argued by referring parties in cases in which the Late Payments Act applied that, because that Act had its origins in an EU Directive, it takes precedence over the home-spun Construction Act. Accordingly, in the absence of judicial guidance on the point, referring parties would invariably argue that their party costs were recoverable under the Late Payments Act even in the absence of the agreement in writing required by section 108A of the Construction Act. This was occasionally accepted and acted as an additional detriment to paying parties who were silent or miserly in their contracts about the interest rate payable in the event of late payment, which lack of generosity and insight usually opens the door to the application of the Late Payments Act.

 

Happily we now have judicial guidance on the point as a result of Mrs Justice O'Farrell's judgment in Enviroflow Management Limited v. Redhill Works (Nottingham) Limited. She has decided that the crucial point turns, not on the supremacy of so-called EU legislation, but rather on the supremacy of the jurisdiction of the Adjudicator.

 

In the Enviroflow case, which was subject to the Late Payments Act, but lacked any agreement in writing pursuant to section 108A of the Construction Act, the Adjudicator had awarded Enviroflow its party costs of £14,900 in addition to a principal sum of £81,000 plus interest plus the Adjudicator's charges to be paid by Redhill. Whilst the judge accepted that Enviroflow was entitled to its recovery costs under the Late Payments Act, in the absence of the agreement in writing required by section 108A of the Construction Act, the Adjudicator had no jurisdiction to make such an award, and this took precedence over all else. This is clearly right, and becomes obvious when explained, as a decision made without jurisdiction is clearly unenforceable. Nevertheless, I suspect that many construction adjudicators will be grateful, as I am, for the clarity of legal thinking that the judge has provided. Accordingly, to complete this particular story, the judge severed the party costs element of the Adjudicator's Decision and enforced the remainder.

Dr Derek Ross

18 September 2017

 

Please Note: The foregoing article has been prepared by Dr Derek Ross for the general interest and benefit of readers. It is not intended to be a definitive analysis of the law or of other matters discussed. Neither does it create a client relationship between the recipient and Dr Ross. Thus no liability is accepted in respect of any reliance placed on any statements made in the foregoing article. Proper advice ought always to be taken before deciding to take, or not to take, action in respect of a specific issue.

 

© 2017 Dr Derek Ross & Layng Ross Construction Disputes Resolution.

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