AMD Environmental Ltd v Cumberland Construction Company Ltd [2016]

The background to this Technology and Construction Court (TCC) decision is that Cumberland engaged AMD to carry out mechanical and electrical sub-contract works at the Hilton Hotel on Park Lane in London. In March 2015, AMD claimed a final account sum of £527,770.33. Cumberland did not agree with the amount claimed and after several months of correspondence about the claim, AMD issued a notice of adjudication on 2 September 2015.

AMD was largely successful in its claim – the adjudicator determined the value of the sub-contract works was £464,448.34 and that Cumberland was required to make payment to AMD for the outstanding balance plus interest. As these sums were not then paid by Cumberland, AMD applied to the TCC for enforcement of the adjudicator’s decision.

In the TCC, Cumberland argued that the dispute had not “crystallised” before the adjudication notice was issued and raised a further jurisdictional point contending that the adjudicator had failed in his decision to address certain important matters.

The TCC gave Cumberland’s arguments short shrift describing both challenges as “hopeless”.

Significant points

On crystallisation of the dispute:

  • Cumberland had made no attempt to reserve its rights on this point in correspondence with AMD or the adjudicator.
  • Months of correspondence between the parties concerning the final account sum provided “ample evidence” that a dispute had crystallised.
  • For a dispute to have crystallised, it is not necessary for “every last particular of every last element of the claim” to have been provided – in the TCC’s view, this was very far from being a nebulous claim.

On the alleged failure by the adjudicator to address certain matters in issue:

  • In the view of the TCC, the adjudicator had not failed to address the issues and even if this was wrong, there was no material breach of natural justice.
  • Cumberland’s attempt to challenge the reasoning of the adjudicator was contrary to established case law.

TCC’s decision – in addition to enforcement of the adjudicator’s award:

  • Interest was ordered to be paid to AMD at 6% under the Late Payment of Commercial Debts (Interest) Act 1998, higher than the typical award of 4-5%. The TCC stated that this was on the basis that the adjudication decision should have been honoured some time before and to reflect a concern that too many adjudication decisions are being disputed despite the grounds of challenge being “without merit”.
  • Indemnity costs were awarded for the same reason.

The decision highlights the need to consider the weaknesses of any defence to adjudication enforcement and, if possible, take an early view on prospects and settlement. Otherwise, you risk being ordered to pay a high rate of interest and indemnity costs.

This article was written by Sue Ryan of Gowling WLG and published on the internet on 11/04/16.

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