Construction – Adjudication – Adjudicator’s fees – Disputes over construction contract being referred to adjudication – Claimant adjudicator deciding disputes in favour of defendant and ordering contractor to pay adjudication fees – Adjudicator claiming fees from defendant on joint and several basis – Defendant bringing part 20 proceedings against contractor – Whether adjudicator acting outside jurisdiction — Whether decisions being unenforceable for breach of rules of natural justice – Claim allowed – Part 20 claim allowed
The defendant engaged a contractor to carry out building work at an old laundry building in Warburton Road, Hackney, London. A dispute arose between the defendant and the contractor over payment for the work. The contractor served a notice of adjudication on the defendant. The Royal Institute of Chartered Surveyors (RICS) appointed as the adjudicator the first claimant, of the well known quantity surveyor firm EC Harris LLP (the second claimant). There was in effect a tripartite agreement between the defendant, the contractor and the first claimant whereby he was retained as adjudicator.
The adjudicator issued his decision and submitted his invoice. The contractor had been ordered to pay the adjudicator’s fees. The contractor refused to pay because, it asserted, the decision was unenforceable broadly on the basis that the adjudicator was bound, but had failed, to ignore anything which the contractor had put up in the adjudication which was contrary to what the contract administrator had said.
The claimants issued proceedings seeking payment under the contract on a joint and several basis from the defendant as responding party to the adjudication with the contractor (as referring party) being bought in as third party. It was said that the adjudicator’s decision was unenforceable because he had exceeded his jurisdiction.
The defendant (as part 20 claimant) issued part 20 proceedings against the contractor (as part 20 defendant) on the basis that each was jointly and severally liable, that otherwise the contractor wold be unjustly enriched by not having to pay what it was obliged to pay and, alternatively, pursuant to the Civil Liability (Contribution) Act 1978.
Held: The claim was allowed. The part 20 claim was allowed.
(1) Although, generally, the notice of adjudication defined the dispute and the adjudicator took his or her jurisdiction from the content, one also had to look at the supposedly disputed claim set out in the notice of adjudication in its context, which would usually involve a consideration of acts and communications between the parties over the preceding weeks if not months. An adjudicator had to consider and adjudicate on defences put forward by a defending party in adjudication, even if a specific defence had not been raised before: Jacques v Ensign Contractors Ltd [2009] EWHC 3383 (TCC) and Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC); [2008] PLSCS 58 considered.
(2) However, it was within an adjudicator’s jurisdiction to decide what evidence was admissible and what evidence was helpful and unhelpful in the determination of the dispute referred to that adjudicator. If, within jurisdiction, the adjudicator decided that certain evidence was inadmissible, it would rarely, if ever, amount to a breach of the rules of natural justice. Even if the adjudicator’s decision to disregard evidence as inadmissible or of little or no weight was wrong in fact or law, that decision was not in consequence impugnable as a breach of the rules of natural justice. One would need in most natural justice cases to distinguish between a failure by an adjudicator in the decision to consider and address a substantive factual or legal defence and an actual or apparent failure or omission to address all aspects of the evidence which went to support that defence. It was usually not practicable for every aspect of the evidence to be meticulously considered, weighed up and rejected or accepted in whole or in part. The adjudicator was not to be considered to be in breach of the rules of natural justice if the decision did no address each aspect of the evidence adduced by the parties.
(3) The notice of adjudication could not circumscribe and delineate the dispute set out in or purportedly defined in it within it so as to exclude particular defences. It would be illogical and untenable if that was the case. It was not possible in adjudication to limit an adjudicator’s jurisdiction in that way. To seek to refer a payment claim and say, at the same time, that the referring party was not referring parts of the claim which might be challenged by the defending party was illogical, unmeritorious and wrong. It was a device which could not and should not work.
(4) In the present case, the adjudicator had been open with both parties, saying that his jurisdiction covered valuation of all items comprising the final account. A rule of natural justice was that parties to an adjudication had to be given the opportunity to put their case or their defence but it was up to the parties whether they took up that opportunity. The doctrine of approbation and reprobation did not come into play. The defendant had not taken an inconsistent line in the adjudication or before the court.
(5) It followed that there was no defence by the defendant or by the contractor to the claim and part 20 claim respectively. The Court of Appeal decision in PC Harrington Contractors Ltd v Systech International Ltd [2013] 1 EGLR 9; [2013] 03 EG 88 was therefore not engaged as the adjudicator had acted within jurisdiction and in accordance with the rules of natural justice.
Matthew Finn (instructed by Birketts LLP) appeared for the claimants; Thomas Crangle (instructed by Weightmans LLP) appeared for the defendant and Part 20 claimant; Robert Sliwinski (instructed by CJ Hough & Co Ltd, of Horsham) appeared for the part 20 defendant.
Eileen O’Grady, barrister
