Vertase FLI Ltd v Squibb Group Ltd

An adjudicator may not reconsider an issue already decided in an earlier adjudication. The binding effect of an adjudication extends to a proposition effectively established by the reasoning, even where the later referral is framed as a different dispute. The decision remains binding until finally determined by litigation or arbitration, whether right or wrong. A decision permitting an adjudicator to address liquidated damages as a consequence of an extension-of-time decision concerns jurisdiction and procedure; it does not create a substantive entitlement to liquidated damages under the contract.

Vertase applied for summary judgment to enforce the second decision of an adjudicator. In the first adjudication, the same adjudicator had rejected Vertase’s claim for liquidated damages, finding that there was no compliant withholding notice and, on the court’s interpretation, that Vertase had not demonstrated equivalent loss under the main contract.

In the second adjudication, Vertase had served a withholding notice and sought liquidated damages. The adjudicator reconsidered the absence-of-loss issue and found that the liquidated damages provision was enforceable. The central issue was whether the second decision purported to reopen an issue already determined in the first adjudication.

1. The applicable procedure. The 2011 ICE Adjudication Procedure governed the second adjudication because it was in force before the notice of adjudication was served. The difference between the references to “another adjudicator” and “an adjudicator” did not affect the issue, since the same adjudicator acted on both occasions.
2. Meaning of the first decision. Read as a whole, the first decision found that Vertase was not entitled to claim or deduct liquidated damages both because no compliant withholding notice had been issued and because no equivalent loss under the main contract had been demonstrated. The adjudicator’s statement in the second decision that he was changing the view taken in the first decision confirmed that the absence-of-loss point had formed part of the earlier decision.
3. Binding effect. Once a dispute has been determined by adjudication, the same dispute cannot be referred to another adjudication. The binding effect also extends to a decision or proposition effectively established by the adjudicator’s reasoning, even where the later dispute is materially differently formulated. The decision remains binding until finally determined by litigation or arbitration, regardless of whether it is legally correct.
4. Liquidated damages authorities. Balfour Beatty Construction Ltd v Serco Ltd [2004] EWHC 3336 concerned the jurisdiction to consider a liquidated-damages claim flowing logically from an extension-of-time decision. It did not create a contractual right to liquidated damages. The principles in Quietfield Ltd v Vascroft Construction Ltd [2006] EWCA Civ 1737, Benfield Construction Ltd v Trudson (Hatton) Ltd [2008] EWHC 2333 and Redwing Construction Ltd v Charles Wishart [2010] EWHC 3366 supported that conclusion.
5. Vertase’s application to enforce the second decision insofar as it related to £105,000 was dismissed. Costs and the form of the order were left for further consideration if not agreed.

The judgment was a first-instance decision of the High Court. It records that the decision in the first adjudication had previously been enforced by Coulson J.