Cases - Shimizu Europe Ltd v LBJ Fabrications Ltd

Record details

Name

Shimizu Europe Ltd v LBJ Fabrications Ltd

Date

[2003]

Citation

EWHC 1229

Legislation

TeCSA Adjudication Rules 1999

Keywords

Adjudication - adjudicator - unenforceable - jurisdiction - invalid decision - letter of intent - subcontract - set-off

Summary

Shimizu appointed LBJ as subcontractors in relation to the design, supply and installation of louvres and cladding on a project for which Shimizu were main contractors. Disputes arose, which LBJ referred to adjudication. The adjudicator decided that Shimizu should pay LBJ the sum of £47,718.39 plus VAT without set-off.

Following receipt of this decision, LBJ issued an invoice against which Shimizu sought to set-off various sums. Shimizu then commenced these proceedings seeking declarations:

1. that Shimizu are entitled to withhold the sums that they seek to set-off from the adjudicator's decision; and
2. that the adjudicator reached his decision on the basis of a subcontract that the parties did not purport to exist whereas he should have reached his decision on the basis of the letter of intent. As such, the adjudicator's decision is a nullity and/or unenforceable.

The subcontract contained a provision making the issue of a VAT invoice a condition precedent to an entitlement to payment. Shimizu therefore argued that the sums did not fall due until after the VAT invoice had been issued and that they were entitled to issue a withholding notice in respect of those sums provided that they did so before the required time before the final date for payment.

LBJ counter-argued that the adjudicator's decision required Shimizu to pay the stated sum without set-off and that therefore Shimizu's attempts to withhold sums from the invoiced amount must fail.

The judge, considering the contractual mechanism for payment, concluded that the adjudicator did what Shimizu should have done, which was to value the work properly. The performance of that function, however, did not deprive Shimizu of its subsequent rights to withhold sums from the invoiced amount.

Although the letter of intent referred to the subcontract conditions, the important issue so far as this matter was concerned was that the letter of intent had a cap on liability that was lower than the sum that LBJ applied for and the sum that the adjudicator decided was the correct value of the works.

The judge decided that as a matter of fact the parties had in their submissions to the adjudicator agreed that their contractual relationship was governed by the terms of the letter of intent. Therefore the adjudicator did not have jurisdiction to decide otherwise. Insofar as the adjudicator purported to decide otherwise, he was acting outside of his jurisdiction and that part of his decision would be invalid.