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Construction Disputes: Settlement, Part 36 and Adjudication

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Wes Future Limited v Allen Wilson Construction Limited – Revisited

MJD Solicitors were instructed by a main contractor client who was defending a construction dispute commenced by an insolvency practitioner. The insolvency practitioner was acting in his capacity as liquidator to a former supplier of our client.

MJD Solicitors were asked to review the claim and re-draft the defence. Our main contractor client had suffered delay at the site as a consequence of its supplier’s actions. The delay caused to our client’s works had manifested into losses. Our client said its supplier was liable for the losses and had previously deducted, by issuance of a Pay Less notice, what it said its losses were.

It was immediately apparent to us that the liquidator had made a generous proposal for settlement several months earlier. The liquidator had agreed that our client could withhold a large sum of money, but not all that had been withheld.

In our experience the offer of the liquidator was not unusual. Possibly, the liquidator had forgotten about the offer. The way the case had developed meant that our client had the potential for a substantial liability if the matter went to trial. It was not inconceivable that the judge would agree to the extent of the deduction applied.

The advice we gave our client was to accept the Part 36 Offer that had been made several months previously. Costs follow the event when a Part 36 Offer is accepted. But in this case the concern was that, if the liquidator was reminded that his Part 36 Offer was still available for acceptance, the liquidator would revoke it. There was no good reason for the Part 36 Offer to remain open. Part 36 offers remain open for acceptance (even if they have been rejected) until such time as they are revoked.

What had occurred in our present instruction was a repeat of the issues in Wes Future Limited v Allen Wilson Construction Limited,  which can be read here.

In February, Wes Futures had made a Part 36 Offer to accept £65,000.00 in full and final settlement of its claim against Allen Wilson (‘the Offer’). In correspondence the same day, court proceedings were threatened, but actually Wes Futures commenced an Adjudication (much later).  It was the second adjudication, because, in the first adjudication, the adjudicator had resigned being of the opinion that more than one dispute had been referred to adjudication.

In the second Adjudication, Wes Futures recovered a sum of approximately £90,000 after interest was considered. Wes Futures should at this point have revoked the February Part 36 Offer, but failed to do so. Allen Wilson incurred a liability of c.£90K in the adjudication but were able to mitigate their liability by accepting the February offer of £65,000. Indeed, as solicitors to the Defendant, that is what we advised. So, 9 months later, in November, Allen Wilson communicated acceptance of the Part 36 offer.

The parties agreed that the claim of Wes Futures had been compromised by the acceptance of the much earlier offer. Wes Futures were no doubt shocked that their adjudication award had been discounted by a Part 36 offer. Instead of receiving c£90,000, Wes Futures received c£65,000.

There was comment at the time on Wes Future Limited v Allen Wilson Construction Limited. The comments were concerned with the case confirming that costs could not be recovered in adjudication. The real issue, which was only commented upon by a minority of construction law experts, was to keep Part 36 offers under review and, if circumstances change, to revoke them.

The work that MJD undertook for our current client is a reminder to keep Part 36 offers under review. Part 36 offers are not typical of the laws of offer and acceptance and may need to be amended as a dispute progresses through litigation.

Matthew Dillon, MJD Solicitors

10 July 2023.

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