Essential Living (Greenwich) Limited v Elements (Europe) Limited  EWHC 1400 (TCC)
The recent decision in Essential Living (Greenwich) Limited v Elements (Europe) Limited considers the effect of a previous adjudication decision (“the Adjudication Decision”) on the parties’ ongoing final account dispute. The court had to determine whether, and to what extent, the Adjudication Decision was binding on the parties for the purpose of the ongoing final account process under the contract.
By way of factual background, in 2016 the parties entered into an amended JCT Construction Management Trade Contract 2011 (“the Contract”), under which the Defendant was engaged to carry out the design and construction of the modular units for a mixed-use development in London. Completion was due in May 2019, but was delayed. The contractor commenced adjudication for various declarations on time, money and exposure to liquidated damages pursuant to an interim valuation cycle. The adjudicator decided such issues, and the parties agreed a consent order in lieu of enforcement proceedings.
However, the Defendant sought to reopen and argue various variation and delay matters (dealt with in the Adjudication Decision) in the final accounting process. In anticipation of potential further adjudications on the matter, the Claimant applied to the court for a Part 8 declaration. The issues before the court concerned the binding effect of the Adjudication Decision and its subsequent impact on contractual processes – in particular;
- The impact of the Adjudication Decision on claims for extension of time, liquidated damages and delay damages;
- The impact of the Adjudication Decision on evaluation of the ‘Final’ Contract Sum, including variations and loss and / or expense; and
- The impact of the Adjudication Decision on any subsequent adjudication that may take place.
Unsurprisingly, the court held that the parties were bound by the Adjudication Decision until it is finally determined by the court or by subsequent settlement.
However, given the terms of the contract, the Adjudication Decision was not binding on the parties for the purpose of the Construction Manager’s final determination of the Completion Period under clause 2.27.5 of the JCT contract, or for the parties determining the Contract Sum. This was because the contract provided for a post-completion mechanism whereby the Construction Manager could review and revise a date for completion (including reviewing a previous decision of an adjudicator). That review had not been determined by the Adjudication Decision.
This case provides some useful guidance on the binding effect of adjudication decisions on interim accounts and the subsequent effect such decisions have on final account assessments following this. The starting point is and remains that a decision of an adjudicator is valid and binding unless and until it is determined by a tribunal (usually the court). However, it is important to consider the terms of the contract and how they interact with a preceding adjudication. No doubt, this case was decided on its facts, however, it demonstrates the careful balancing act that may be required between giving effect to an adjudicator’s decision and the parties ongoing contractual obligations.
The full judgment can be found here.
This case report was written by Richard Adams, Oliver Macrae and Orlaith Mallen.