Beck Interiors Ltd v UK Flooring Contractors Ltd

A dispute for adjudication must have crystallised before the notice of adjudication is served. A general reservation to add to a claim does not automatically encompass a later and substantially different head of loss. The court must identify the substance of the earlier disputed claim and compare it with the claim referred. A short period of silence will not necessarily establish a dispute where a new and unexpectedly large claim is sent immediately before a bank-holiday weekend. Where an adjudicator decides separate claims and only one was within jurisdiction, the court may sever and enforce the valid part if the decision, evidence and reasoning are practically separable and the jurisdictional defect does not taint the remainder.

The claimant engaged the defendant under a sub-contract to install floor coverings. After the defendant withdrew from the contract, the claimant claimed the increased costs of completing the works and later, by a letter sent after business hours before the Easter bank holiday, claimed liquidated damages for delay.

The claimant referred both claims to adjudication shortly afterwards. The adjudicator awarded sums for both heads. The defendant challenged enforcement, contending that the liquidated damages claim had not crystallised and had been improperly added to the earlier dispute. The central issues were whether the referred liquidated damages claim was a dispute within the adjudicator’s jurisdiction and, if not, whether the decision could be severed.

1. Crystallisation. A claim does not become a dispute merely because it has been made. The court must consider whether it has been expressly or implicitly challenged or not accepted, allowing a reasonable period for response in the circumstances. The relevant period depends on the facts, including the nature of the claim, the parties’ prior dealings and any contractual or practical context.
2. The claim for increased completion costs had crystallised by 2 April 2012. The defendant’s position was then clear: it denied responsibility and attributed the problem to Beck’s nominated supplier.
3. The liquidated damages claim in the 5 April letter had not crystallised by 10 April. It was sent after close of business immediately before a four-day holiday weekend. The claim was unexpected, very substantial, poorly expressed and materially different from the earlier claim. The time available did not justify inferring rejection by silence.
4. The liquidated damages claim referred to adjudication was also materially different from the claim in the 5 April letter. The letter contemplated continuing liquidated damages exceeding £160,000, whereas the adjudication claim was based on completion by others on 16 February and sought £36,000. The earlier reservation of a right to add to the schedule did not encompass this substantial new head of loss. The adjudicator therefore had no jurisdiction over the liquidated damages claim.
5. The decision could nevertheless be severed. The completion-cost claim and liquidated damages claim were presented as separate parts, supported by separable evidence, and the adjudicator’s awards for each were clearly identifiable. The court enforced the award of £19,763.41 for increased completion costs, together with interest. The £100 claim under the Late Payment of Commercial Debts (Interest) Act 1998 was not enforced because it related to the invalid liquidated damages element. The adjudicator’s fees were not apportioned because the court could not determine what allocation the adjudicator would have made.

UKFCL was ordered to pay half of Beck’s costs, summarily assessed at £2,750.