REUTERS | Pillar Lee

When the adjudicator gets it right

So often over the last few years I’ve found myself commenting on judgments where the adjudicator has done something wrong, whether that is a breach of the rules of natural justice or some other procedural error that has rendered his decision unenforceable. Therefore, I have rather enjoyed reading two recent judgments where, for a change, it seems the adjudicators (Mr Smith and Mr Mouzer) were right.

Specialist Insulation Ltd v Pro-Duct (Fife) Ltd

In Specialist Insulation Ltd v Pro-Duct (Fife) Ltd, the adjudicator, Mr JD Smith, was asked to resign because, said the responding party, even though there was a contractual adjudication clause, the contract did not relate to construction operations under section 105 of the Construction Act 1996. Therefore, the adjudicator did not have jurisdiction to deal with the dispute.

Another issue, which only came out in the court proceedings before Lord Malcolm in the Court of Session, was whether there was a contractual adjudication clause at all. It seems the responding party changed its mind about the legal basis of its claim, and decided there wasn’t. It dropped the section 105 point and decided to run a “battle of the forms” argument, alleging that the agreement containing the adjudication clause was not part of the parties’ agreement because it was never executed by both parties (the referring party hadn’t, so it had rejected those terms).

The court may have agreed with the responding party on the battle of the forms arguments, and found that the adjudicator did not have jurisdiction, but I think that at the time the adjudicator made the decision that he did have jurisdiction, I would have reached the same conclusion. After all, both parties were arguing that the same contractual terms applied, even if those terms seemed more relevant to a construction contract than a supply contract. In that context, it would be very difficult for the adjudicator to say both parties were wrong, that they didn’t have an adjudication clause in their contract.

The judgment is an example of different arguments being put in front of adjudicator and judge at enforcement stage. It just goes to show that even when an adjudicator doesn’t do anything wrong, his decision may still not be enforceable.

R and C Electrical Engineers Ltd v Shaylor Construction Ltd

In R and C v Shaylor, the adjudicator, Mr Mouzer, found that the referring party was due a final sum of £197,000 under the terms of its sub-sub-contract, but the final date for payment had not arrived. This meant that the responding party could rely on HHJ Francis Kirkham’s judgment in Shimizu Europe Ltd v LBJ Fabrications Ltd, and set off against those sums “any sum that it would have been entitled to set off” by issuing a withholding notice.

The referring party was less than impressed with this, and asked the TCC for declarations under CPR Part 8, arguing (among other things) that the contractual machinery for determining the final date for payment had broken down, and so it was entitled to the £197,000 immediately.

Edwards-Stuart J in the TCC looked in detail at the adjudicator’s findings and certain parts of his decision. Again, the adjudicator was exonerated and his conclusions found to be correct. This time the court expressly confirmed that the judgment did not affect the binding nature of the adjudicator’s decision on the final sum due. As such, the responding party could issue a withholding notice against those sums.

The adjudicators were right

As I said at the start, I enjoyed reading these two judgments. Long may it continue.

Leave a Reply

Your email address will not be published. Required fields are marked *

Share this post on: