The case of Vertase F.L.I. Ltd and Squibb Group Ltd dealt with the issue of an adjudicator making a decision on a matter in a first adjudication only to reverse his position on the same matter in the second adjudication.

The Facts

By a sub-contract Vertase employed Squibb to provide plant, labour and temporary works resources for the removal of asbestos and the demolition of all existing structures at a former foundry.  The sub-contract was a credit contract.  Squibb was to pay Vertase a sum in return for its entitlement to retain, sell and keep the proceeds of sale in respect of materials taken from the site following demolition.  The contract period was 18 weeks and liquidated damages were payable at the rate of £15,000 per week.

The contract over-ran. In Adjudication No. 1 Squibb claimed an extension of time (EOT) and payment of consequential loss and damage.  In its response to the Referral Notice, Vertase claimed liquidated damages.  Squibb took two points in response to Vertase's claim for liquidated damages.  First that Vertase must have actually incurred the liquidated damages, which it had failed to prove.  Secondly, that Vertase had failed to provide an appropriate notice of its intention to withhold liquidated damages.  Vertase argued that it could not issue a notice of withholding showing sums withheld from the payment due, as the contract did not provide for any payments to be made by them. 

In Adjudication 1, Squibb were awarded damages and an EOT.  The Adjudicator held that Vertase had no entitlement to take liquidated damages from any amount he decided was due to be paid to Squibb. 

In Adjudication 2, Vertase were still chasing the liquidated damages and after some deliberation the Adjudicator changed his mind and ordered Squibb to pay liquidated damages.  By that point, Vertase had issued their Notice of Intention to Withhold Payment but had still not shown that liquidated damages had been applied in the main contract. However, in this adjudication this did not appear to matter.  The Adjudicator concluded in Adjudication 2 that the liquidated damage provision in the contract was enforceable and awarded payment of the liquidated damages to Vertase. 

Vertase sought to enforce the award of liquidated damages in the Technology and Construction Court in November 2012.  The Court took the view that the Adjudicator in Adjudication 2 purported to change his mind about a finding made in his first decision.  It also stated that the initial finding was final and binding on the parties until finally determined by litigation or arbitration, and as such it was not open to the Adjudicator to change it. 

Comment

This is a classic case of the same matter being adjudicated upon twice. The Adjudicator may have got it right second time round, but as he had already addressed the issue in the first Adjudication he could not revisit his decision.