Executive Summary

The TCC overturned an adjudicator’s decision on appeal. The successful party applied for the adjudicator’s fees and the interest to be refunded. The TCC discusses when adjudicator’s fee are recoverable (if recoverable) and confirms that the TCC will, at its discretion, adjust interest rates where contractual terms fail to provide a substantial remedy. 

The judgment highlights the importance of clear contractual drafting, particularly regarding remedies for interest rates, and the need for parties to demonstrate how they believe the interest rate amounts to a substantial remedy.

Introduction

Claimant: A & V Building Solution Limited (A&V)    
Defendant: J & B Hopkins Limited (JBH)
Previous Adjudicator: Mr. Blizzard
Current Judge: Roger ter Haar KC

For context, Bouygues UK Ltd was the main contractor, JBH the sub-contractor, and A&V the sub-subcontractor. A&V were carrying out mechanical and electrical works (the Works) at the University of Brighton’s new student accommodation project at the Moulsecoomb Campus (the Project). 

A&V walked off-site in March 2021, their works were incomplete at the time. 

There have been four disputes between the parties and this appeal case related to enforcement of an adjudicator’s award. During the initial adjudication, JBH was successful, and A&V paid the award and all associated interest and fees. On appeal, the TCC overturned the adjudicator’s decision. A&V sought the repayment of those sums along with interest on its measured works claim, the loss of profits damages award, and the fees of the adjudicator.

Overall the TCC found that JBH committed a repudiatory breach by preventing A&V from completing the Works on the Project as they had imposed labour on A&V and removed them from the IAuditor system, which meant they could not complete the Works and fulfil the contract and A&V were entitled to accept this as a repudiatory breach and walk off site. 

The TCC also considered A&V’s claim for measured works and variations and found that although there were some variations, A&V’s largest claims for delay-related losses and business losses failed. 

Key Take Aways

The case addressed two important legal issues:

1. Recovery of Adjudicator’s Fees following an ‘Incorrect’ Decision

2. Interest Rates Under Contractual Terms vs. The Late Payment of Commercial Debts (Interest) Act 1998

Recovery of Adjudicator’s Fees

The TCC considered whether the adjudicator’s fees could be recovered when a decision is later found to be ‘incorrect.’ 

The TCC was asked to consider the fees of Mr Blizzard and Mr Smith, the two previous adjudicator’s.

To provide some context for Mr Blizzard’s fee (£34,800) in the original pleading in this court. The TCC’s judgment dated 16 June 2023 concluded that A&V could only recover £17,400 of this fee. A&V did not appeal this decision. A&V were awarded this sum. 

Mr Smith’s decision had mostly found in JBH’s favour in the adjudication, and therefore A&V were directed to pay Mr Smith’s fees of £13,962. However, the TCC’s judgment found in the favour of A&V therefore A&V argued that they should also be awarded Mr Smith’s fee. The TCC found that A&V had not included the recovery of A&V’s fee in the pleadings and ultimately it is an adjudicator's decision on fee liability is final and cannot be revisited in subsequent arbitration or litigation. This principle is also supported by Castle Inns (Stirling) Ltd v Clark Contracts Ltd and D McLaughlin & Sons Ltd v East Ayrshire Council which affirmed that fees are typically non-recoverable. The TCC’s judgment explores the guidance set out in Coulsons on Construction Adjudication. 

The TCC found that only fees directly associated with valid adjudicated claims (being made or being reversed) could be recovered and rejected A&V’s attempt to recover wider adjudicator fees for claims for fees including those dismissed or unrelated claims. 

Interest Rates

The rate of interest under the contract between the parties was 2% over the Base Rate of the Bank of England current at the date of JBH’s default (the Contractual Interest Rate). The contract goes further to state that such rate is a substantial remedy for late payment (as defined in the Late Payment of Commercial Debts (Interest) Act 1998) (the Act). 

A&V argued that the interest rate applicable to the sums set out in the judgement is the interest rate under the Act (which is 8%) plus the Bank of England’s base rate which is currently 5.25%. This would total 13.25% interest (the Act’s Interest Rate). For context, this would add up to approximately £56k worth of interest. 

JBH challenged this application on the basis there was a Contractual Interest Rate. Noting that some of the sums subject to A&V’s claims would not attract the Act’s Interest Rate.

The TCC considered that they had principally awarded A&V the following sums: 

1. Measured Works Claim - £95,446.61  
JBH accepted that this sum could be subject to the Act’s Interest Rate if the Contractual Interest Rate was not in place; 

2. Loss of profits damages claim - £6,096.64  
JBH contends that the Act would not apply; and 

3. Mr Blizzard’s fee - £17,400 
JBH contends that the Act would not apply.

The TCC found that the Contractual Interest Rate did not provide a substantial remedy. While the TCC recognised that 1/2/3% over the base rate as a contractual interest rate was common and there was a substantially lower Bank of England rate of interest at the time the parties entered into the contract, it did not find it a substantial remedy as JBH had significantly more bargaining power when the interest rate was agreed, and A&V were left with ‘take it or leave it terms’. 

The TCC went on to award the following interest rates:

1. Measured Works claim accrues the Act’s interest rate; 

2. Loss of profits damages claim accrues 4% interest rate; and 

3. Mr Blizzards Fee accrues 4% interest rate.