Claiming Interest under the Scheme
If you have ever found yourself in an adjudication the chances are that either you or your opposing party will have asked the Adjudicator to decide that interest is paid on overdue payments.
"20. The adjudicator shall decide the matters in dispute. He may take into account any other matters which the parties to the dispute agree should be within the scope of the adjudication or which are matters under the contract which he considers are necessarily connected with the dispute. In particular, he may -
c. having regard to any term of the contract relating to the payment of interest, decide the circumstances in which, and the rates at which, and the periods for which simple or compound rates of interest shall be paid."
- As a matter of impression, this seems to me to be the more natural meaning of subparagraph (c), when read in the context of the whole of paragraph 20 of the Scheme.
- In my view it is reading too much into the second and third sentences of paragraph 20 to hold that everything in subparagraphs (a), (b) and (c) must arise from some other express term of the contract.
- It makes obvious commercial sense for an adjudicator to have the power to award interest. The Scheme takes effect as a set of implied terms in many construction contracts pursuant to section 114(4) of the 1996 Act. I would certainly expect the Scheme to include a power to award interest.
- In my view, the phrase in paragraph 20(c) "having regard to any term of the contract relating to the payment of interest ..." means that if there is any such term, the adjudicator must have regard to it. In other words, the freestanding right conferred by paragraph 20(c) does not override any express term of the contract dealing with interest.
- If paragraph 20(c) had the meaning for which [DML] contends, it would be unnecessary. The clause would be saying that which was self-evident."
The judgment of Mr Justice Jackson was reviewed in the Court of Appeal in November 2005 and the Court disagreed with that part of the decision relating to interest.
- those questions are “matters in dispute” which have been properly referred to him, or
- those are questions which the parties to the dispute have agreed should be within the scope of the adjudication, or
- those are questions which the adjudicator considers to be “necessarily connected with the dispute”.
Questions which do not fall within one or other of those categories are not within the scope of paragraph 20(c) of the Scheme. There is no freestanding power to award interest.”