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Payments under and in respect of a contract – a real difference?
It is perhaps surprising that the issue as to whether an adjudicator can award damages for breach of contract has been the subject of as much debate as it has.
When the Act came into force, one of its aims was to provide remedies for the recovery of payments under a construction contract.2 Where an amount of money is claimed by one party, section 48 requires the adjudicator to determine whether or not any parties to the adjudication are liable to make a payment under the contract and to determine any questions in dispute about the rights and obligations of the parties under the contract.3 Before the 2015 amendments to the Act, determinations under as to payments under the contract could be enforced under section 59 of the Act, but determinations as to rights and obligations could not.4
In M Van Der Wal Builders & Contractors Limited v Dunphy the High Court considered that a claim for contractual damages was not a claim for payment under the contract, but a determination as to rights and obligations. As a result, contractual damages claims could not be the subject of an enforceable binding determination:5
…a liability to pay damages for a “breach of contract” is not a liability to “make a payment under” that contract. The differentiation between liability to pay a debt and liability for damages is a well-established one. …for a damages for breach of contract determination to come within s 48(1)(a) one would either need to treat an award of damages as being an obligation to pay money under the contract (which could not be the case) or to treat “under the contract” as meaning “arising out of”, which would be contrary to the distinction between matters “under” and “arising out of” an agreement.
Therefore a claim for damages falls within the scope of a “rights and obligations determination” and is not a claim for payment under a construction contract and as such is not a s 48(1)(a) determination nor is enforceable pursuant to s 59.
Although the case was distinguished, the reasoning in M Van der Wal was viewed as readily reconcilable in Clark v Central Lakes Homes Limited.
This result was unsatisfactory, if adjudication was to be an effective clearing house for disputes concerning the performance of construction contracts.
When the Commerce Committee reported back on the Construction Contracts Amendment Bill 2015, it recommended amending the requirements for enforcement of an adjudicator’s ‘judgment’ to remove the distinction between payment and other types of determination. This amendment was proposed as being in line with the Act’s purpose. Parliament accepted the recommendation and amended the Act to provide that all determinations made by an adjudicator, including those relating to payments under the contract and those relating to rights and obligations, are enforceable by entry as a judgment of the Court.
Damages for breach of contract under the CCA: a welcome clarification
By Laura Bawden-Hindle
The recent High Court judgment in Haskell Construction Limited v Robert Francis Ashcroft lays to rest any residual doubt as to whether an adjudicator can award damages for breach of contract.1 It is a welcome clarification of the position.
This article will outline the background to the issues that have emerged in relation to the extent of an adjudicator’s power to award damages under the Construction Contracts Act 2002 (the Act) prior to Haskell, and summarise the remedies available to an adjudicator in light of this development.
Aside from securing the trophy of an “indemnity” in your construction contract, what extra does an indemnity get you and is it worth the fight?
BuildLaw | Apr 2020