5.Natural justice RGB P&C Ltd v Victory House General Partner 10
On that basis the Defendants said it would not be just to enforce the adjudicator’s decision as this would undermine the proper operation of cl.7, noting that the adjudicator had not considered their cross-claims in the adjudication. Unlike previously decided cases, the Court noted that the CVA in the instant case was entered into after the adjudicator’s decision and the application to enforce it. The Court held it was also relevant that the adjudicator’s decision did not deal with the merits of the payment application and neither was it a valuation of the work carried out by the Claimant, or an assessment of the account between the parties. It was a decision based solely on the failure to serve a pay less notice. If that decision had been complied with, the effect in a subsequent resolution of the entire dispute by arbitration or litigation would have been that the payment would have been treated as an interim payment on account. Since the payment had not been made, and the adjudicator’s decision was not a determination of a sum due in respect of any particular work, it would have no effect on the result of the account taken by the CVA supervisors. The supervisors would simply note the existence of the decision and move on to an assessment of the parties’ claims and cross-claims. However, if the sum were paid after the commencement of the CVA, it would be a recovery that would go into the general fund available for distribution amongst the creditors when the time came, in accordance with the Insolvency (England and Wales) Rules 2016; it would not be taken into account in arriving at the balance due either way on consideration of the mutual dealings between the Claimant and the Defendants, as it would have been if paid prior to the CVA. An order to pay the sum found due by the adjudicator would therefore work harshly against the Defendants. It would distort the process of accounting required under the CVA because the money would not be applied for the sole benefit of the Defendants but instead for the benefit of the creditors generally. If the adjudicator had decided all the claims and cross-claims between the parties, it might have been different. It would be wrong in principle to enforce the adjudicator’s decision by ordering the Defendants to pay the Claimant the sum found due. The Court considered two previous decisions 9 . Even if that was incorrect, the effect of ordering payment of the sum found due by the adjudicator would amount to special circumstances within the meaning of CPR r.83.7(4) (a) such as to justify staying enforcement of the full amount (paras 27-36, 53-57 of the judgment).
Victory House (“VH”) employed RGB as contractor under a JCT DB 2011 to convert an office building in Leicester Square into an 8 floor hotel. Works were delayed from the completion date of 16 May 2016 until practical completion on 1 September 2017. This application arose from the 4th adjudication between the parties in which VH sought a declaration as to the proper assessment of the final statement. RGB’s final statement (including claims for loss and expense) gave an adjusted Contract Sum of over £11m and was supported by a report from Helen Turner of The Vinden Partnership, compared to VH’s assessment of less than £6m. The Turner report identified 4 relevant events leading RGB to seek an extension of time (“EOT”) of 67 weeks and 4 days. VH relied on a report of Nik Sekulic of Navigant and claimed to be entitled to deduct liquidated damages (“LDs”) for the period of delay. It was therefore necessary for the adjudicator to form a view on “the correct adjustment to the Completion Date”. During the course of the adjudication further experts’ reports were adduced and submissions made on them. The adjudicator decided the adjusted Contract Sum to be included in the Final Statement was £9,762,141.63 (including loss and expense) less LDs of £62,142.86 to be deducted and that VH was to pay RGB £1,161,123.57 plus VAT. That sum was not paid. VH’s defence was twofold: (1) to arrive at the LDs payable, the adjudicator had undertaken his own analysis of RGB’s extension of time claim without reference to the parties or affording them the opportunity of to advance their own cases as to the course he intended to take; and (2) he had failed to take account of key aspects of VH’s defence as to claims made by subcontractors and included in RGB’s claim; in each case in breach of the rules of natural justice. Jefford J referred to the principles to be applied 11 . On the first issue Jefford J. concluded that the adjudicator had been asked to determine the issue of EOT. Part of the issue concerned the validity of changes to logic links in the baseline programme made by Ms Turner, and criticised by Mr Sekulic. The adjudicator did not embark upon some unrelated delay analysis of his own, but had, in the judge’s view, properly reached his own views on the logic links, the programme and the critical path and then ascertained the impact of the relevant events (as he found them). He was entitled to do so. The second issue involved four subcontractors’ claims amounting to £827,320 and included in RGB’s claim. The adjudicator had decided that some money, but a significantly lesser sum, was due to in each case. VH argued that he failed in so doing to take into account their case that the claims were so suspiciously similar, that they had been manufactured and were not genuine. It was said he did not deal with the
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