Once again the TCC has been looking at the scope of the notice of adjudication and the consequences of an adjudicator’s decision to rule out parts of the evidence before him.
Earlier this year I commented on Edwards-Stuart J’s decision in Geoffrey Osborne v Atkins Rail, where the adjudicator made a “short but significant” error that cost the parties dearly. Then I read another judgment, this time by Coulson J, where an adjudicator was held to have erred in deciding not to consider the responding party’s set-off defence. Again the consequences for the parties were significant.
Coulson J described the adjudicator’s decision as a deliberate restriction on his jurisdiction, which was highly material (the defence was worth 71% of the sum claimed) and was a breach of the rules of natural justice. It was no surprise that the adjudicator’s decision was not enforced.
In his judgment, Coulson J listed a number of factors that I think are helpful reminders to adjudicators (and the parties) about the scope of the adjudication:
- A referring party’s notice of adjudication will be limited to the claim being advanced by the referring party.
- A referring party’s notice of adjudication will rarely refer to points that may be raised by the responding party in defence of the claim.
- A responding party is entitled to defend itself against a claim for money using any “legitimate available defence (including set-off)”. That defence will ordinarily be encompassed within the scope of the adjudication notice.
Given the way the case law has developed over the years, that all sounds like commonsense to me, but it is worth being reminded of these factors from time to time.
I can understand why a referring party may wish to limit the scope of the adjudication. Coulson J recognised that too. However, he suggested that adjudicators should think carefully before ruling out a defence because it has not been mentioned in the notice. In my view, it isn’t likely to be and, as he noted, it would be absurd if the referring party could use a “devious bit of drafting” to exclude the responding party’s defence to the claim.
Interestingly, although Coulson J held that the adjudicator’s decision was erroneous, he also concluded that the referring party was to blame for the situation: it was its “deliberate and risky strategy” to exclude the set-off defence, which backfired. It isn’t often that an adjudicator makes a mistake (that has significant consequences) and the court is more critical of the referring party’s behaviour.