Be careful what you wish for....

Pilon, a sub-contractor entered into a contract with Breyer, the contractor, to carry out refurbishment works for a housing project in Ealing. The properties were broken down into numbered batches. Pilon made an application for payment regarding work done on batches 26 to 62 (the final batches for the project). Breyer disputed the value of the application and did not pay.

Pilon referred the matter to adjudication seeking payment of the full value of the application in relation to properties 26 to 62 as Breyer had not issued a withholding notice.

Breyer asserted that no withholding notice was required as the sum was not due under the contract - just because Pilon submitted a valuation to which Breyer did not respond did not make the sum applied for "due" under the contract, therefore the question of a withholding notice fell away. Breyer also raised issues regarding defective and incomplete works on properties within batches 1 to 25 and claimed the consequential overpayment.

The adjudicator made an award in favour of Pilon. In his decision, the adjudicator stated that he had not at all considered Breyer's defence pertaining to the properties in batches 1 to 25 as this was not within his jurisdiction. He concluded that his jurisdiction only related to matters in relation to batches 46 to 62 as per the Adjudication Notice. He accepted Pilon's argument that he was prevented from looking at any issues relating to batches 1 to 25 because of the way the Notice of Adjudication had been drafted.

The TCC held that the adjudicator's decision was unenforceable and made the following findings:

• The adjudicator had erroneously restricted his jurisdiction by deliberately failing to consider a valid defence raised by Breyer. Pilon was asking for payment of a sum which meant that Breyer were entitled to raised any legitmate defence to that claim for payment it had. The adjudicator's ignoring of the defences based upon batches 1 to 25 was a breach of natural justice. If the adjudication had been restricted to ascertaining the value of the works in batches 26 to 62 instead of requiring a payment then that would have been a different story.
• In order for the decision to be unenforceable the error had to be "material". As Breyer's defence on paper amounted to some 70% of the award this was found to be the case.
• That the 'incorrect' part of the decision could not be severed as failure to consider Breyer's defence impacted upon and 'tainted' the rest of the Decision. Therefore the whole Decision was unenforceable.

Conclusion

Parties should be careful in seeking to restrict the jurisdiction of the adjudicator when referring a dispute to adjudication. By deliberately seeking to gain an advantage by leading an adjudicator down a particular jurisdictional path, this could potentially cause the adjudicator to err and render a decision in its favour unenforceable.

Steven Carey

+44 (0)20 7427 1062

steven.carey@speechlys.com

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