False statement in application for adjudicator can bring down appointment

The Royal Institution of Chartered Surveyors (RICS) form for requesting nomination of a construction adjudicator asks for the names of adjudicators who would have a conflict of interest. In response to this question, a subcontractor's representative listed a number of adjudicators whom he did not want appointed, but none had a conflict of interest. Did this false statement invalidate the RICS's appointment of an adjudicator and render the eventual adjudicator's decision unenforceable?

In refusing an application for summary judgment to enforce the decision, the court in Eurocom Ltd v Siemens Plc decided that there was a sufficiently strong case that it did. Where a material fraudulent misrepresentation is made in applying to the adjudication nominating body, the application for nomination of an adjudicator is invalid, as if no application had been made; it does not matter whether the RICS was deceived. Alternatively, there was a breach of an implied term providing that a party applying for nomination of an adjudicator by the RICS under a subcontract should not act dishonestly. If a party in breach of contract fails to follow the correct adjudication process in a way which goes to the heart of the appointment, the adjudicator does not have jurisdiction.

Interpreting exclusion and limitation clauses – how do they do that?

Polypearl Ltd v E.On Energy Solutions Ltd involved a dispute about a cavity wall insulation contract with conflicting interpretations of clauses excluding liability for indirect loss and limiting liability for direct loss. The modern judicial approach to these issues is summarised in Fujitsu v IBM, in which the court held that:

  • a party seeking to rely on an exemption or limitation clause must generally show that the clause covers the relevant obligation or liability;
  • in every case it is a question of construction of the instrument as a whole; and
  • an exemption or limitation clause is construed in the same way as any other contract term.

In the case at hand, the court had to decide whether a loss-of-profit claim was caught by the indirect loss exclusion clause. According to the court, a claim for loss of profits will be a direct loss if, when the contract is made, it is likely to result from the relevant breach. However, it will be indirect if there are special circumstances known to the contract breaker at the time of the contract so that a breach would be liable to cause more loss. The exclusion clause in question was ambiguous, but the court ruled that it did not apply to the claim for loss of profits, which was direct loss. If loss of profits was intended to be an indirect loss and excluded from recovery, it would have been relatively easy to say so. Clear, express wording must be used to rebut the presumption that neither party intends to abandon any remedies for a breach of contract arising by operation of law. The clause wording did not clearly indicate that the parties intended to abandon a claim for direct loss of profits.

No pay less notice – goodbye to challenging the amount due – ever?

A contractor under an amended Joint Contracts Tribunal intermediate form of contract served notice of termination. It was then entitled to – and did – submit its account and the employer had to pay "the amount properly due in respect of the account" within 28 days. An adjudicator found that the employer's pay less notice was non-compliant, mainly because it did not specify the basis of calculation, and said that the contractor was then automatically entitled (under the Construction Act default setting) to the notified sum. In enforcement proceedings (Harding (t/a M J Harding Contractors) v Paice) the contractor argued that the adjudicator had therefore determined "the amount properly due".

The court disagreed. The employer had not forever lost its right to challenge the contractor's account. It was open to the employer to have determined, by adjudication or litigation, what sum was properly due in respect of the contractor's account. However, that right did not detract from its obligation to comply with the adjudicator's decision in the meantime by paying the sum ordered.

The court also ruled that an adjudicator's decision on a party's primary case does not prevent a second adjudicator from determining, if necessary, an alternative case put in the first adjudication.

New RIBA building contracts

The Royal Institute of British Architects (RIBA) has unveiled two new forms of building contract:

  • the RIBA Domestic Building Contract, for all types of non-commercial work, including renovations, extensions, maintenance and new buildings; and
  • the RIBA Concise Building Contract, for small-scale commercial building projects of a standard and straightforward nature.

The RIBA is also updating the RIBA Agreements, which are available online.

Chris Fellowes 

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