William Verry Ltd v North West London Communal Mikvah

Under section 108(1)(b) of the Housing Grants, Construction and Regeneration Act 1996, a construction contract must enable referral of a dispute within seven days of an adjudication notice. It may also permit the adjudicator to extend that period. A later interim valuation must reassess the value of work properly executed at the relevant valuation date, including downward adjustments for defects discovered after an earlier valuation. An adjudicator who excludes a core issue within the referred dispute may make a jurisdictional error and deny a fair hearing. Nevertheless, an erroneous answer to the right question remains enforceable unless the error means that the referred dispute was not determined.

William Verry Ltd sought summary judgment to enforce an adjudicator’s decision requiring North West London Communal Mikvah to pay £67,055.97 plus interest under a building contract. The adjudication concerned the release of half the retention following practical completion and an interim certificate which reduced the gross value of the works to reflect alleged defects.

NWLCM challenged enforcement on three grounds: late service of the referral notice, absence of a crystallised dispute, and the adjudicator’s failure to determine whether defects existed and their value. The court had to decide whether the adjudication was valid and enforceable, and whether the adjudicator had answered the referred dispute or a different question.

1. Referral period. Section 108(1)(b) of the Housing Grants, Construction and Regeneration Act 1996 imposed a minimum contractual requirement that the machinery should enable referral within seven days of the adjudication notice. It did not prohibit contractual machinery allowing the adjudicator to extend that period. The adjudicator’s direction that the referral notice be served on 11 December 2003 was therefore effective, and the referral was in time.
2. Dispute. The adjudication notice, construed against the parties’ known dealings, referred not merely to release of retention but to whether interim certificate no 34 had correctly valued the works, including the alleged defects and their effect on the amount due. That dispute had crystallised before the notice was served.
3. Errors in the adjudication. The adjudicator had wrongly concluded that defects were outside the reference. He should have considered the existence and value of the alleged defects. Each interim valuation under the contract required the value of work properly executed to be reassessed at the relevant date. A later valuation could therefore reduce an earlier valuation where newly supplied information showed that previously valued work was defective. The earlier and later valuations were compatible. The adjudicator had also wrongly treated Ferson Contractors Ltd v Levolux AT Ltd [2003] TCLR 5 as preventing such a revaluation.
4. Jurisdiction and outcome. Applying the distinction identified in Joinery Plus Ltd (in administration) v Laing Ltd [2003] TCLR 4, an adjudicator’s erroneous answer to the right question remains valid, whereas answering a different question produces a nullity. The errors were probably within jurisdiction, but the failure to consider the core defects issue potentially denied NWLCM a fair hearing. The adjudicator’s decision was nevertheless held valid and enforceable. Judgment was ordered in favour of NWLCM, but drawing up of the judgment was deferred for 42 days to allow a fresh adjudication or agreement on the defects, with permission to apply so that any sums could be set off.