Las 5´s en el lugar de trabajo

The majority of disputes referred to adjudication relate to pay-ments. The logical consequence of most adjudicators' decisions therefore is that some money should be paid by one party to another, unless the claim has completely failed. It would be unsatisfactory for the adjudicator to decide, for example, that the proper value of work carried out under the contract is £100,000, being £20,000 more than had already been paid, without going on to say that the balance should be paid. Paragraph 20(b) therefore provides that the adjudicator can decide that a party is liable to make a payment under the contract. He can also go on to say when that payment is due and the final date for payment.

These two points are important for the operation of the provisions of the Act regarding payment. If the adjudicator merely stated that a

sum of money was due on the date of the decision, the contractual provisions for payment would then apply. In particular the contract (or the Scheme operating in default) would provide a final date for payment. The paying party might then be able to give a notice of intention to withhold a sum from the money to be paid, possibly requiring another adjudication.

The final date for payment has another significance. If the pay-ment is not made by the final date, the person to whom the money is due can give notice of intention to suspend and seven days later, if not paid, he can suspend work.

It is up to the adjudicator to decide when the money is due and when the final date for payment arises. Depending on the circum-stances of the case, it may be appropriate for the adjudicator to state that the money became due on the date when he considers it should have become due under the contract in the normal course. In other words the value of a variation carried out during November became due on the same date as the value of the rest of the work carried out in November. The final date for payment then follows in accordance with the contract, or the Scheme if there is no provision.

This is all subject to section 111(4) of the Act which provides:

`Where an effective notice of intention to withhold payment is given, but on the matter being referred to adjudication it is decided that the whole or part of the amount should be paid, the decision shall be construed as requiring payment not later than ±

(a) seven days from the date of the decision, or

(b) the day which apart from the notice would have been the final date for payment, whichever is the later.'

There would seem to be nothing objectionable in the adjudicator deciding that the wrongly deducted money became due on a date earlier than the disputed notice of intention to withhold, and that the final date for payment under the contract was `the day which apart from the notice would have been the final date for payment', both dates being in the past. Such a decision would therefore be construed as requiring payment seven days from the date of the decision.

None of the other published rules for adjudication deal with the power of the adjudicator to decide that one party is liable to make a payment to another party. It seems that the authors of those rules considered that it was obvious that an adjudicator would include such matters in his decision without being told that it was open to him to do so. The other published rules also fail to mention the need The Adjudicator's Decision 137

to state when a payment became (or is to become) due, and what is or was the final date for payment. It is however helpful for these details to be stated in all cases when an adjudicator is dealing with payments to be made under the contract.

Some forms of subcontract conditions used by main contractors provide that if the adjudicator should decide that a sum of money is payable to the subcontractor by the main contractor, he should require that sum to be paid into a stakeholder account, or alter-natively state that he may require the payment to be made to a stakeholder account at his discretion. This is an echo of the proce-dure that used to be available in adjudication before the Act in DOM/1 and other subcontracts used in conjunction with the JCT forms of main contract. It is introduced into main contractors' own forms in an attempt to avoid the risk of money being paid to a subcontractor who becomes insolvent before the main contractor has had an opportunity to take the matter to arbitration or litigation and effectively have the decision reversed. In those circumstances the money would be secure and could be repaid to the main con-tractor.

Such a provision would appear to be contrary to the intention of the Act, in that the subcontractor would not obtain any tangible benefit of the adjudication for potentially a very long time. Never-theless there is nothing obvious in the Act that seems to prevent such a clause being effective.

The wording of the clause differs from one main contractor's form to another, and the subcontractor's argument against the operation of the clause will of course have to deal with the specific wording. Subcontractors may wish to adopt the following argu-ments:

(1) To impose a requirement on the adjudicator to order payment to a stakeholder account is an effective restriction on the ability of the adjudicator to make his decision. Because it is a limitation on the adjudication process that is not expressly permitted by the Act, it prevents the adjudication provision of the sub-contract from complying with the Act, and therefore renders the adjudication provision non-compliant. The Scheme therefore applies, which gives the adjudicator an unfettered ability to order a payment to be made to a party (under paragraph 20(b)).

(2) Alternatively the adjudicator cannot order the payment to a stakeholder account until he has decided that a sum is due to the subcontractor. Having made that decision, he is functus officio, and is no longer able to order anything at all.

(3) The intention of Parliament was clearly to provide for prompt payment of sums found due by an adjudicator. Following the decision of the House of Lords in Pepper v. Hart (1993) the courts are able to consider Parliamentary materials in estab-lishing the true intent of legislation where the statutory pro-vision is thought by the court to be ambiguous or obscure or where its literal meaning would lead to an absurdity. This purposive approach would be fatal to a stakeholder require-ment, but it is by no means certain that the court would con-sider that the Act is ambiguous or obscure or that to give force to a stakeholder provision would lead to an absurdity.

Some main contractors' legitimate concerns about paying sub-stantial sums to subcontractors pursuant to adjudicators' deci-sions, with the risk that the subcontractor may be insolvent or at least impecunious and unable to repay when the decision is reversed, may have been reduced by the comments of Sir John Dyson in Herschel Engineering Ltd v. Breen Property Ltd (April 2000) and the Court of Appeal's decision in Bouygues UK Ltd v. Dahl-Jensen UK Ltd (July 2000). The comments in Herschel suggest that the impecuniosity of the receiving party may influence the court to give a stay of execution of a summary judgment based on an adjudicator's decision, and in Bouygues it was said that insolvency set-off rules may apply. These decisions are discussed further in Chapter 9.

If the contract makes no mention of the possibility of an order by the adjudicator that money should be paid into a stakeholder account, it is not open to the adjudicator to make such an order. In Allied London and Scottish Properties plc v. Riverbrae Construction Ltd (Lord Kingarth, July 1999), an employer resisted enforcement of an adjudicator's decision. It argued that in the light of various claims that it was making against the contractor in other proceedings and had also advanced in the adjudication, the money found due to the contractor should be placed in a secure account. The adjudicator rejected that and said that he had no power to do so. The court agreed:

`Such an order would plainly, in effect, have been to sustain the petitioners' claims to retention which the adjudicator had just rejected. Whatever wide powers may be given to adjudicators to facilitate speedy resolution of the disputes before them, no power is given to make decision contrary to the rights of the parties arising as a matter of law.'

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Particular care must be taken by the adjudicator deciding that a payment is to be made by a party to ensure that he deals with VAT.

It is a common feature of disputes in the construction industry that the parties express their claims and negotiate settlements in figures net of VAT, and then argue about whether the figures are to be taken as being subject to the addition of VAT or not. Composite claims often include items on which VAT is chargeable, such as the valuation of work, and items on which VAT is not chargeable, such as damages or loss and expense. Unless the adjudicator states that the sum ordered to be paid is to have VAT added to it and paid in addition, the figure set out in the decision will be effectively a gross sum, and no additional VAT will be claimable. The party receiving the payment may still be treated by HM Customs and Excise as having received an element of VAT and will have to account for it.

7.5 Interest

Paragraph 20(c) of the Scheme deals with interest. It states that the adjudicator may:

`having regard to any term of the contract relating to the payment of interest decide the circumstances in which, and the rates at which, and the periods for which simple or compound rates of interest shall be paid.'

This paragraph has led to some confusion and debate. Some believe that the adjudicator is empowered by these words to award interest in any adjudication under the Scheme. The paragraph is read as if it said, `The adjudicator can decide that one party pay interest to the other providing he takes account of any term of the contract relating to interest'. This would suggest that the adjudicator has complete discretion in such matters unless there is a relevant contractual provision.

This is not correct. There is no automatic right to interest on any debt or other entitlement. The courts can award interest only because of statutory authority given to them, and arbitrators take their power to award interest from the Arbitration Act 1996. The Housing Grants, Construction and Regeneration Act does not confer any similar power on adjudicators.

An adjudicator can therefore only decide that interest should be paid if there is a term of the relevant construction contract giving an entitlement to interest. That term might be express, or it might be

implied by virtue of the Late Payment of Commercial Debts (Interest) Act 1998. In applying the term of the contract he must of course have proper regard to that term, and if the rate or period or formula for compounding the interest are prescribed by the con-tract, the adjudicator has no discretion.

The Late Payment of Commercial Debts (Interest) Act 1998 (LPCDA) provides at section 1(1):

`It is an implied term in a contract to which this Act applies that any qualifying debt created by the contract carries simple interest subject to and in accordance with this Part [of the Act].'

The LPCDA applies to all construction contracts providing that the employer and contractor (or equivalent) are each acting in the course of a business. `Business' includes the activities of a govern-ment departgovern-ment or local or public authority. The statutory right cannot be excluded unless the contract expressly provides an alternative substantial contractual remedy for late payment of the debt.

Although the LPCDA was passed in 1998 it is not yet fully in force. From 1 November 1998 it applied to contracts for the supply of goods or services (including construction services) if the supplier of the goods or services was a small business, and the purchaser of those services was a large business or a UK public authority. `Small business' and `large business' are defined in the Late Payment of Commercial Debts (Interest) Act 1998 (Commencement No. 1) Order 1998. A small business is one that employs 50 or fewer employees, and a large business is one with more than 50 employees. These definitions are subject to complexcalculations to take account of the varying status of those who might be considered to be employees, and part-time workers. In any case where the size of business is in doubt, detailed reference must be made to the schedules to the commencement order. By further regulations (the Late Payment of Commercial Debts (Interest) Act 1998 (Transitional Provisions) Regulations 1998, a business is presumed to be large unless the contrary is proved. Interest is payable at the rate of 8%

over the official dealing rate of the Bank of England (otherwise known as base rate).

There have been two further commencement orders bringing the LPCDA into force in contracts between small businesses and an extended list of public authorities, but contracts between large businesses, or contracts involving supply from large businesses to small businesses are not yet included.

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