Damages for wrongful termination of a construction contract

Termination – repudiation dispute: referred to adjudication

Summary

A subcontractor’s employment was wrongfully terminated by a main contractor, who also refused to pay the money due for the work completed. Lakeside were appointed by the subcontractor to provide legal and commercial advice and dispute resolution services.

The Problem

Our client’s employment under a construction contract was determined by a main contractor. The main contractor was also refusing to pay the subcontractor for work completed. Our client considered its employment had been wrongfully terminated and believed it should be paid for the work completed.

Appointment and Action

Lakeside Construction Dispute Resolution Consultants were appointed to provide legal and commercial advice and dispute resolution services.

On a review of the documentation, we considered the subcontractor’s employment had been wrongfully terminated by the main contractor. We also noted the subcontractor had not correctly identified all the sums of money properly due to them, following the main contractor’s repudiatory (serious) breach of contract.

We advised the subcontractor the best approach would be for Lakeside to prepare a construction claim and submit it to the main contractor, to encourage a negotiation.  We also considered this would be the most cost-effective method for our client, as the fees paid to us could be recovered as damages.

Working closely with our client’s project and commercial team, we produced a construction claim which included claims for sums of money not previously considered by our client.

The construction claim produced by Lakeside (which comprised legal arguments, detailed narrative documents and supporting evidence) was presented to the main contractor. The main contractor rejected the claim entirely and responded with numerous unsubstantiated contra charges. The main contractor also claimed for the cost of employing another subcontractor to complete the works.

Lakeside advised the subcontractor the best course of action would be to refer the dispute to construction adjudication. Lakeside Construction Adjudication Consultants prepared the adjudication documents and referred the dispute to a Royal Institution of Chartered Surveyors (‘RICS’) nominated adjudicator.

The main contractor was represented by a well-known firm of solicitors, who raised lots of legal arguments in numerous documents submitted in the adjudication. Working closely with the subcontractor’s project team, we produced a Reply, Surrejoinder and Surrebutter in response to the solicitors’ submissions.

Ultimately, the adjudicator was persuaded by the facts presented by Lakeside.

Result

The adjudicator decided that the subcontractor’s employment was wrongfully determined by the main contractor, which amounted to a repudiatory breach of contract, and the subcontractor was entitled to payment for work completed, materials left on site and damages.

The adjudicator ordered the main contractor to pay a sum of £118,000 to our client and to pay the adjudicator’s fees and expenses in full. The sum ordered by the adjudicator included the fees paid to Lakeside for preparing the construction claim, which were claimed as damages. 

The main contractor paid the sums ordered by the adjudicator in full. Our client was extremely pleased to say the least.

Construction adjudication is a low cost and efficient method of resolving disputes, in comparison to court proceedings.  Generally, an adjudicator will decide the dispute within 28 days from receipt of the referral. As each party is responsible for their own legal costs it makes this form of construction dispute resolution extremely cost effective. Please have a read of our quick guide for contractors and subcontractors on construction adjudication which you may find to be a useful overview.

In this case, as Lakeside had identified some heads of claim not considered by our client’s commercial team and the adjudicator had ordered payment of most of the damages claimed, the fees paid to us by our client for resolving the dispute were effectively zero.

If you are a main contractor or subcontractor and would like further information concerning Construction Adjudication or any of our services, then please call us now on 0330 133 6176 or via email at advice@lakeside.consulting for a free, no-obligation discussion with a construction dispute specialist.