Lidl UK GmbH v R G Carter Colchester Ltd

An adjudicator’s jurisdiction is determined by construing the notice of adjudication, read with the referral notice. A reference to liquidated damages “as claimed” may encompass both entitlement and quantum. An adjudicator’s error of fact or law does not ordinarily prevent enforcement.

Where an adjudicator decides an additional question outside the referred dispute, that part of the decision may be severed if it is practically and logically independent and its reasoning has not tainted the decision as a whole. A breach of natural justice invalidates an adjudication only where it is sufficiently material to affect the decision. Under a contract providing for practical or qualified section completion, liquidated damages cease on section completion; partial possession instead preserves the entitlement subject to any contractual reduction.

The proceedings concerned two linked applications arising from an adjudicator’s second decision on liquidated damages under a design and build contract.

Lidl UK GmbH sought summary judgment to enforce the decision. R G Carter Colchester Ltd brought a Part 8 claim for a declaration concerning the accrual of liquidated damages after purported “Part Practical Completion”. RGC also argued that the adjudicator had exceeded his jurisdiction and had breached natural justice by adopting an approach on the contractual “lesser rate” without inviting further submissions.

The principal issues were the scope of the adjudication reference, the severability of the jurisdictionally invalid part of the decision, the alleged natural justice breach, and whether the Part 8 declaration should be made.

1. Scope of reference. The notice of adjudication and referral notice, construed together, referred not only to Lidl’s entitlement to pro-rata liquidated damages but also to their amount. The words referring to damages “as claimed” in Lidl’s letter were sufficient to widen the issue beyond entitlement in principle. An adjudicator’s mistake of fact or law does not, without more, make the decision unenforceable, applying Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] BLR 522 (paras [48]-[52]).
2. Excess of jurisdiction and severance. The adjudicator had exceeded his jurisdiction by deciding that Lidl was entitled to £125,000 at the full contractual rate, because the notice of adjudication had expressly excluded that claim. That finding could nevertheless be severed. The applicable approach was to identify the dispute or disputes referred, determine whether the invalid part was distinct, and ask whether the remainder was practically severable and untainted. The reasoning supporting the £125,000 finding had no bearing on the issues properly referred. The remainder of the decision was therefore enforceable, subject to natural justice (paras [53]-[61]).
3. Natural justice. The adjudicator’s reasoning on the lesser rate did not amount to a material breach. RGC had had a full opportunity to present its central case that the contractual provisions did not permit pro-rata liquidated damages after the certificates issued in June and July 2011. The adjudicator’s failure to invite further submissions on the precise route by which he reached his conclusion did not materially affect the result. A breach must be sufficiently significant to taint the decision as a whole, applying Primus Build Ltd v Pompey Centre [2009] BLR 437 and Herbosch-Kiere v Dover Harbour Board [2012] BLR 177 (paras [62]-[73]).
4. Contract construction and Part 8 claim. The contract contained no concept of “Part Practical Completion”. Clause 2.27 provided for practical or qualified section completion, on which entitlement to liquidated damages for non-completion of that section ceased. Partial possession under clauses 2.30-2.34 produced a different consequence: the entitlement remained, but the rate was reduced proportionately. Whether the events constituted section completion or partial possession was a disputed factual issue. The court therefore made no hypothetical declaration and considered that the Part 8 proceedings served no useful purpose. No further directions were made until counsel had been heard (paras [74]-[81]).

First-instance decision. The judgment itself records no earlier court decision in the same proceedings. It arose from two applications concerning the adjudicator’s second decision dated 14 September 2012.