Gibraltar Residential Properties Ltd v Gibralcon 2004 SA

An adjudicator asked to determine the true value of variations may compare that value with sums already certified and paid, where the referral seeks such other sum as is due. The adjudicator may not award a negative amount, but must award nil where the certified sum exceeds the true value. A contractual termination notice is effective where the evidence proves actual delivery in accordance with the contract, even if it was also sent electronically. Where insolvency proceedings prevent payment, the English court may grant declaratory relief and stay the proceedings so that the declarations can be proved in the foreign insolvency.

The claimant employer brought proceedings concerning a major Gibraltar property development carried out by the defendant contractor. The defendant had entered voluntary insolvency proceedings in Madrid and took no part in the revived English proceedings. The claimant sought declarations concerning the contractor’s liability for delay, the validity of termination, the final account, sums due under the contract, and the correctness of an adjudicator’s decision in Adjudication No. 2.

The court also considered the appropriate interest rate and the form of relief, having previously indicated that payment would not be ordered while the Spanish insolvency proceedings continued.

1. Adjudication No. 2. The adjudicator had jurisdiction to determine the true value of the three variations and to compare that value with the amount already included in Interim Payment Certificate No. 51. The referral’s request for such other sum as the adjudicator considered due made this clear. The adjudicator was wrong to conclude that he could not set off the certified sum against the true valuation. However, he could not award a negative amount in favour of the employer. If the true valuation was lower than the amount already certified, the proper award was nil.
2. Termination. The evidence established that the architect’s default notice had been delivered in hard copy no later than 9 December 2009. The contractual 14-day period had therefore expired when the termination notice was served on 24 December 2009. The challenge to the validity of the notice failed, and termination under clause 27.2.2 was valid.
3. Contractual liability. The contractor was liable for liquidated and ascertained damages capped at 5% of the contract sum. The court accepted the claimant’s valuation of the completed works, overpayment and additional completion costs, but rejected the unsupported claim for additional management costs.
4. Relief. Interest was awarded at 1.5%, reflecting the lengthy period during which the claims had remained dormant. The court granted declarations for £9,582,877, together with interest and costs, but made no payment order. The actions were stayed so that the claimant could prove the declared debts in the Madrid insolvency proceedings.

First-instance decision. The court granted declaratory relief, awarded interest and costs, and stayed the actions pending further order.