FENICE INVESTMENTS INC V JERRAM FALKUS CONSTRUCTION LTD

The employer should pay the costs of the Part 8 proceedings brought by it for declarations as to the true construction of the contracts payment mechanisms on the standard basis and the costs of the contractors Part 7 proceedings to enforce the adjudicators on an indemnity basis
 
 

Technology and Construction Court
Coulson J
7 December 2009

 
Coulson J held that the adjudicator was correct in deciding that the employer’s withholding notice was served too late by reason of his rejection of the employer’s contention as to the contract’s true construction. He therefore refused the employer’s application for declarations that it was correct in its contention as to the true interpretation of the contract’s payment provisions. He also enforced the adjudicator’s decision awarding the contractor the amount of its interim payment application in the absence of any effective withholding notice. Coulson J went on to order the employer to pay the costs of its Part 8 proceedings for declarations on the standard basis because the employer’s point of law as to the true construction of the contract’s payment mechanisms was bona fide, even if wrong. He also ordered the employer to pay the costs of the contractor’s Part 7 proceedings to enforce the decision on an indemnity basis because it should have paid the sum awarded by the adjudicator regardless of the eventual outcome of those proceedings.
 
Coulson J stated that it was not uncommon for a party whose defence to the claim in the adjudication was based on a point of construction or a point of law to refuse to pay the sum awarded by the adjudicator and to commence proceedings for declarations confident in the knowledge that the TCC would endeavour to get the matter on as quickly as possible. However, an adjudicator's decision was binding on the parties and, save in exceptional circumstances, had to be complied with, no matter how quick or slow the Part 8 procedure to challenge that decision. Whilst a losing party could challenge a decision by using the CPR Part 8 procedure, he had to pay the sum found to be due in the meantime. If a party did not comply with the decision, he should expect to be penalised for its default by way of and costs whatever the result of the Part 8 proceedings. This was because it might well be appropriate for the court to make orders for costs, including costs on the indemnity basis, to make up for the failure to comply with the agreed contractual régime.
 
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