Barry M Cosmetics Limited v Merit Holdings Limited

Case reference: 
[2019] EWHC 136 (TCC)
Tuesday, January 29, 2019

Key terms: 
Adjudication – Construction contracts – Enforcement – Natural Justice

This was an adjudication enforcement case. The Claimant, Barry M Cosmetics Limited (“Barry M”), was the employer and Merit Holdings Limited (“Merit”) the contractor. Merit presented its final account on 20 December 2017, some nine months after practical completion. The Claimant referred the dispute to adjudication on 27 July 2018. The ‘dispute’ was identified as the correct value of the Defendant’s final account. The final account had raised a claim for £810,375.16 in addition to the contract sum for variations and £317,569.87 in respect of loss and expense arising out of an extension of time of 35.5 weeks. Barry M asserted that Merit has failed to adjust the contract sum to take account of omissions and took issue with the final account. No delay report was provided.

As to whether there was a dispute, Merit’s position was that there was no dispute capable of being referred to the Adjudicator because there was no entitlement to payment. Paragraph 1 of the Scheme for Construction Contracts set out in the 1998 Regulations that “any party to a construction contract (the “referring party”) may give written notice (the “notice of adjudication”) at any time to refer any dispute arising under the contract, to adjudication.” There is nothing in the language of the scheme which suggests that a dispute may only be referred to adjudication once an entitlement to payment has arisen. For them, there was a clear dispute between the parties as to the correct value of the final account and it was entirely appropriate to refer the matter to adjudication. 

The concept of natural justice also arose in this case. Barry M served its Reply on 28 August 2018, which described Merit’s delay report as “the first time [the Claimant] have had sight of any real explanation from Merit in relation to their extension of time claims.” Merit had served a delay analysis as part of their Response. Barry M then served their own delay analysis by way of Reply. Barry M said that Merit’s report had “ignored what actually happened on site at the time” and was “based on theoretical events”. The Adjudicator had allowed Merit the opportunity to serve a rejoinder but limited to 12 pages and to dealing with the concessions they felt the claimant had tried to “fudge”. Merit stated the Adjudicator’s stance was in effect a refusal to allow a rebuttal of the Claimant’s points made in the Reply, and therefore was unfair and “in breach of the principles of natural justice.” Merit duly served a Rejoinder which went beyond the Adjudicator’s direction and a brief Surrejoinder was allowed. 

The need to give each party an opportunity to meet the case made against him is not an unlimited right. The Judge in this case referred to Amec v Thames Water (2010) where Coulson J (as he then was) noted that there is no right to respond to every submission made by the other party. Properly interpreted, the Judge held, the rule simply ensures that the Adjudicator understood the position of each party and did not need further rounds or submission by way of refinement. The Adjudicator’s decision that the rejoinder should be limited was perfectly fair and proper. 

The Judge found no basis upon which it can be properly said the Adjudicator’s decision was reached otherwise than in accordance with the principles of natural justice. Subsequently, summary judgement was granted to the Claimant. 

This case further demonstrates that there is a high bar for parties to meet if they want to resist enforcement on the basis of natural justice.  The case law is clear and unless very obviously against natural justice, the court will not interfere.

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