A & V Building Solution Limited v J & B Hopkins Limited

An adjudicator’s allocation of liability for his own fees is ancillary to the adjudication and may be treated differently from the substantive decision. The court declined to reconsider the allocation because no pleaded claim had been made and the proposed amendment came too late.

Under the Late Payment of Commercial Debts (Interest) Act 1998, damages for loss of profit and sums awarded for adjudicator’s fees were not qualifying debts. A contractual interest clause ousts statutory interest only if it provides a substantial remedy. A clause fixing interest at 2% over base rate was not substantial in the circumstances, having regard to bargaining inequality, its one-way operation and the risk that its rate would become inadequate during rising interest rates.

The judgment determined outstanding issues following the court’s merits judgment of 18 June 2024, which awarded A & V £101,543.17 before interest and adjudicators’ fees.

The issues were whether J & B Hopkins should bear or reimburse adjudicators’ fees, and what interest was recoverable on the sums awarded. The court considered authorities concerning the finality of an adjudicator’s allocation of his fees, the scope of qualifying debts under the Late Payment of Commercial Debts (Interest) Act 1998, and whether the subcontract’s interest clause provided a substantial remedy.

1. Adjudicators’ fees. The claim for Mr Blizzard’s fees was limited to £17,400 by the earlier judgment and could not be resurrected at £34,800. Judgment was entered for A & V for £17,400.
2. The court declined to reconsider Mr Smith’s allocation of his own fees. The authorities, including Castle Inns, supported the view that an adjudicator’s allocation of his fees is ancillary to the substantive dispute. More importantly, no claim concerning those fees had been pleaded. Introducing one would require a late amendment and would only succeed if the court departed from the cited authorities. No order was therefore made in respect of Mr Smith’s fees.
3. Qualifying debts. Applying the reasoning in Board of Trustees of National Museums and Galleries on Merseyside v AEW Architects and Designers Ltd, damages for loss of profit were not debts created by an obligation to pay the contract price. The award relating to Mr Blizzard’s fees was likewise created by the judgment, rather than by a contractual obligation to pay the contract price. Neither sum attracted statutory interest under section 3(1).
4. Contractual interest. The subcontract’s clause 12 did not provide a substantial remedy within sections 8 and 9. Although low rates, commercial certainty and the statutory factors favoured J & B Hopkins, its substantially stronger bargaining position, standard-form terms, lack of inducement, one-way operation and fixed rate during rising interest rates meant that the clause did not fairly compensate for, or deter, late payment.
5. Statutory interest was therefore recoverable on the measured works claim from 5 May 2021 at 8% over the Bank of England base rate as it varied. Interest on the loss-of-profit award and Mr Blizzard’s fees ran from the dates accepted by the court at 4% over base rate. Interest due to J & B Hopkins on Mr Smith’s fees and enforcement costs remained payable under the earlier judgment.

The judgment records earlier judgments in the same proceedings, including the merits judgment dated 18 June 2024: [2024] EWHC 1510 (TCC). No appeal had been brought against the earlier decisions concerning Mr Blizzard’s fees or enforcement.