Mailbox (Birmingham) Ltd v Galliford Try Building Ltd

[2017] EWHC 1405 (TCC)

This Part 8 case followed an adjudicator’s decision which decided the extent of Mailbox’s entitlement to an extension of time. Mailbox said that the decision finally established (subject to any subsequent challenge at court) Mailbox’s entitlement to liquidated damages. In other words Galliford could not commence another adjudication about extensions of time in relation to a part of the works.  

As Mr Justice Coulson explained, the case involved a clash of two principles. Once a crystallised dispute has arisen, a defending party in adjudication cannot seek to limit the defence previously advanced and in particular cannot save parts of that defence for another day. However, in a second adjudication, a contractor is entitled to defend themselves against a claim for liquidated damages by relying on a full extension of time claim, even though they have already made a limited extension claim in an earlier adjudication.

During 2015, Galliford made a number of applications for an interim extension of time across all the sections of the project.  Whilst the Judge accepted that the issues raised in claims and correspondence referred “particularly” to section 1, the “whole tenor” of Galliford’s claims went to delays and damages for delay generally.

Mailbox served notice that Galliford were not proceeding regularly and diligently, terminated the contract and claimed liquidated damages (LADs) in excess of £5 million. In August 2016, Mailbox served notice of adjudication framing the dispute as being about “Mailbox’s entitlement to liquidated damages”. The Notice made reference to all the sections of the project.  Galliford said in their adjudication reply that they would shortly be submitting a full extension of time submission and if Mailbox did not recognise their full entitlement, then separate dispute resolution proceedings would follow. Galliford then asked the adjudicator to take account of three events in order to determine Galliford’s entitlements to extension of time for them and to highlight Mailbox’s “wrongful approach” to claiming LADs. No other relevant events were relied on by GTB. Mr Justice Coulson said this:

“In my view, this was an odd (and potentially risky) approach for GTB to adopt. None of the pre-adjudication correspondence had sought to limit their response to the claim for liquidated damages in this way: on the contrary…”

The Galliford approach failed to acknowledge that the detailed claims for extensions of time had been provided to Mailbox well before the termination and so were part of the crystallised dispute.

Mailbox said that Galliford were not entitled to cherry-pick various Relevant Events for the purposes of the current adjudication but then submit further applications for extension of time as and when they chose in separate proceedings or subsequent adjudication. Mailbox said that the adjudicator had been asked to decide Mailbox’s entire entitlement in respect of the totality of the liquidated damages. Galliford could not limit the adjudicator’s jurisdiction to determine the dispute referred by limiting the defence which it put forward in the adjudication. If Galliford brought further adjudication proceedings seeking further extensions of time based on additional Relevant Events, then that would be an attempt to reopen the adjudicator’s final and binding decision on responsibility for the entirety of the liquidated damages and consequential responsibility for delay.

Galliford said that as the adjudication response did not put before the adjudicator all the entitlements they had to adjust the Contract completion date, Mailbox were wrong to assert that the disputes submitted to the adjudication encompassed “a decision on the responsibility for the totality of pre-termination delays”.

The adjudicator said that the dispute concerned Mailbox’s claim for the payment of LADs from Galliford.  As to jurisdiction, the adjudicator decided that the scope of the adjudication was determined by the matter stated in the notice and referral, and Galliford could not unilaterally restrict the scope merely by limiting the issues upon which they chose to run their defence. The adjudicator’s decision that Galliford pay liquidated damages was enforced at the TCC. Mailbox then brought this case before Mr Justice Coulson. They did so because they suspected that Galliford were about to bring a second adjudication, which is what happened.

The second adjudication was about whether or not Galliford were proceeding regularly and diligently and was in part related to whether there was any entitlement to an extension of time. The extension of time sought would go well beyond that which was considered and granted by the adjudicator in the first adjudication.  The adjudicator said that he was of the view that the first decision was only on the basis of the three relevant events. Therefore he could go on to consider the entirety of the Galliford claim.

The Judge considered the issues between the parties by examining first the claim for LADs, then the claims for extensions of time, and then the claim for wrongful termination. In terms of LADs, Mailbox were entitled to retain the entirety of the liquidated damages awarded by the adjudicator (and the subject of the enforcement judgment), unless and until the liquidated damages claim was challenged in court and the court reached a contrary view on the detailed claims. An adjudicator cannot sensibly decide an entitlement to liquidated damages without first deciding the contractor’s entitlement to an extension of time.  In a case as here, where an employer’s entitlement to liquidated damages has been fixed, a claim for an extension of time has become redundant.

In the pre-adjudication correspondence, Galliford talked generally about their entitlement to extensions of time. The Judge recognised that at the time of the adjudication, Galliford’s detailed claims for an extension of time were more advanced on some sections than others. That was not uncommon. But this did not mean that the crystallised dispute did not encompass all aspects of delay, across all the sections of the work. This was the key point here.

Given that the crystallised dispute between the parties concerned responsibility for the entirety of the delays, Galliford were not entitled to seek to defend themselves by reference to just a few of the potential relevant events, and keep others back for another day. The Judge noted that Galliford could have put forward more than the three events, even if they might not have been finalised. Instead Galliford chose to stick with what the Judge called “a high-risk policy” of attempting to dictate which of their extension claims were in and which were not. In the event, that proved to be an unwise course.

Accordingly, Galliford were not entitled to seek any further extensions of time in the second adjudication. However, that left the question of whether Galliford were proceeding regularly and diligently with the work or not. Here Mailbox were wrong to suggest that because an extension of time had been fixed, the issue of the regular and diligent performance of the work could only be considered by reference to that finding. Galliford ought to be entitled to take whatever points they choose about their regular and diligent performance of the work because these were not matters which the adjudicator had to or could consider in the first adjudication. In respect of the termination dispute, Galliford were entitled to rely on all the facts and matters available to them to demonstrate that they were proceeding regularly and diligently with the work at the time of the termination.

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