Mailbox (Birmingham) Limited v Galliford Try Building Limited (formerly known as Galliford Try Construction Limited) [2017] EWHC 1405 (TCC)

• United Kingdom

• Construction and engineering - Articles
• Litigation and dispute management

21-06-2017

Summary

This case considers whether a Contractor can bring further extension of time claims in subsequent adjudication where it has previously put forward limited extension of time claims by way of a defence to a claim for liquidated damages in an earlier adjudication.  The court decided that the Contractor could not bring further extension of time claims beyond those awarded in the earlier adjudication unless and until the decision of the earlier adjudication is modified or altered by the court.

The key facts

Mailbox employed GTB by way of a JCT Design and Build Contract 2011 as amended by a bespoke schedule of amendments (“Building Contract”) to carry out refurbishment works at a multiuse development in Birmingham.  There were significant delays to the completion of 7 of the 10 sections.  Mailbox terminated the Building Contract in March 2016 ahead of completion of Section 3; the remaining Sections were complete before the date of termination.

GTB submitted a number of extension of time claims between May 2015 and September 2016.

Mailbox commenced an adjudication in August 2016 for liquidated damages (“First Adjudication”).  GTB in its response to the First Adjudication asserted that there were a number of relevant events for which it was entitled to extensions of time and was preparing its full extension of time claim; however, for the purposes of the response, GTB only put forward three relevant events for which it claimed extensions of time. 

On 27 September 2016, GTB served its full extension of time claim which included additional relevant events than those given in its response.  For reasons unexplained, GTC chose not to run its full extension of time claim as its defence in the First Adjudication.

The adjudicator’s decision in November 2016 stated that the adjudicator had only considered the three relevant events put forward by GTB in deciding Mailbox’s claim for liquidated damages.  Mailbox was awarded liquidated damages.

On 13 April 2017, Mailbox commenced Part 8 proceedings against GTB for a number of declarations.  These declarations sought to prevent GTB from bringing further extension of time claims for the reason that GTB’s entitlement to extensions of time had been decided in the First Adjudication. 

On the same day as Mailbox commenced the Part 8 proceedings, GTB gave notice of commencing a second adjudication which related to the lawfulness of the termination of the Building Contract (“Second Adjudication”).  One element of the Second Adjudication considered the completion date for Section 3 in which GTB contended that it was entitled to an extension of time. A consequence of amending a completion date in the Second Adjudication was that it upset the calculation of the liquidated damages awarded in the First Adjudication.

The decision

Mr Justice Coulson decided in favour of Mailbox in that GTB was not entitled to bring further extension of time claims beyond those awarded in the First Adjudication unless and until the decision of the First Adjudication is modified or altered by the court. 

Key principles of Mr Justice Coulson’s judgment include -

1)    Mailbox’s entitlement to liquidated damages in the First Adjudication was final and binding and not interim and could only be modified or altered by court and not in subsequent adjudication.  

2)    If in any subsequent adjudication, Mailbox’s entitlement to liquidated damages is altered, the subsequent adjudication would be a breach of section 9(2) of the Scheme for Construction Contracts (England and Wales) Regulations 1998 in that the dispute would be the same or substantially the same as one which had previously been referred.

3)    A contractor’s claim for extension of time only ever acts as a defence to an employer’s claim for liquidated damages.       

4)    A contractor’s claim for extensions of time are not separate from an employer’s claim for liquidated damages, such that where Mailbox’s entitlement to liquidated damages has been fixed, a claim for extensions of time by GTB has become redundant.

5)    In the correspondence between the parties prior to commencement of the First Adjudication, GTB generally discussed its entitlement to extensions of time – it had not restricted such correspondence to certain sections nor certain relevant events as it had done in its response.  Thus GTB ought to have included its entire extensions of time claims as its defence to the claim for liquidated damages in the First Adjudication.

6)    An adjudicator cannot sensibly decide an entitlement for liquidated damages without first deciding the contractor’s extension of time entitlement.

7)    The contractor’s substantive rights are not affected by it not being entitled to raise further extension of time claims in adjudication because it still maintains the opportunity for its extensions of time to be finally determined by way of court proceedings.  

Practical implications

The practical implication of the decision is that a contractor should raise its entire extension of time claims within an adjudication determining the totality of the employer’s liquidated damages claim.  A contractor will not be entitled to bring further adjudications for claims for extensions of time which it did not raise in an earlier liquidated damages adjudication. 

The further implication is that where an adjudication determines the employer’s liquidated damages (and consequently the contractor’s extension of time claim), the liquidated damages figure should be used in the overall calculation of the final account.

The judgment raises the point that a contractor could be disadvantaged by an employer commencing an adjudication for liquidated damages where the contractor has not fully prepared its extension of time claim.  Mr Justice Coulson noted that this could be true but is derived from the adjudication process.  To circumvent this, contractors need to ensure that during the live project it submits its substantive claims for extensions of time quickly and at the time should it be required to respond to a liquidated damages adjudication.

Mr Justice Coulson was sure to note that the in the case the Building Contract had terminated and the position concerning liquidated damages and extension of time would not alter as a result of ongoing or future events on site.  This leaves open the possibility of in a live project where the position on liquidated damages and / or extensions of time may alter over time for the contractor to bring further extension of time claims in the event they had not occurred before an earlier liquidated damages adjudication.