The respondent contractor undertook works under a number of contracts and claimed payment under four of them, giving notice of its intention to refer the disputes to adjudication under the Housing Grants, Construction and Regeneration Act 1996 s.108.
An adjudicator was appointed in respect of these disputes, titled, A, B, C and D, and he issued decisions on 13 May 1999. In each case, the adjudicator ordered the petitioner to pay sums to the contractor within 14 days, plus interest. The petitioners argued that they were not due to make payments because the contractorís claims were extinguished by virtue of the Compensation Act 1592. In particular, the petitioner counterclaimed for damages in respect of three of the contracts and claimed an overpayment in respect of the fourth. This was rejected by the adjudicator, who concluded:
"I find that the Compensation Act cannot be invoked to extinguish, as at the date they came into existence, those claims which are the subject of this adjudication.
"My reasons for this finding are as follows:
"The Compensation Act applies only to liquid claims which do not require investigation and proof. In the case of the sums asserted by the respondent ... investigation of the circumstances surrounding each claim would be required. The applicant intimated that these claims would be disputed. For the purposes of the operation of compensation, such claims cannot therefore validly be used to extinguish the claims which are the subject of this adjudication.
"Furthermore the Compensation Act requires each party to be debtor and creditor in the same capacity. The Hamiltonhill Estates contract was not between Riverbrae Construction Limited and Allied London & Scottish Properties plc, but between Riverbrae Construction Limited and Hamiltonhill Estates Limited."
The petitioners challenged the adjudicatorís decision, but accepted that these were not errors of law which had caused the adjudicator to exceed his jurisdiction. Instead, the argument focused on the decisions to order payment within 14 days. As a subsidiary point, it was argued that the adjudicator should order that the petitioners should be allowed to put any sums due in a deposit account in the partiesí joint names, pending resolution of all the disputes between them. In addition to the claims already propounded, the petitioners indicated that they intended to claim that the respondents had failed to fulfill their contractual obligations in respect of a number of other projects and had failed to provide health and safety information. Against that background, what was said by the petitioners in their Defences was:
"In light of the numerous foregoing failures of the applicant to fulfil contractual obligations owed by it to the respondent, the respondent is apprehensive that the applicant is financially unable to meet is obligations. In the circumstances the respondent requests that, should the adjudicator be minded to make any order for immediate payment of the sums claimed by the applicant, that the respondent be allowed to place any such monies on deposit in the joint names of the parties pending resolution of all disputes between them."
The adjudicator found that he was not empowered by the Scheme or the Act to make an order that monies should be placed in a joint deposit account.
"I have come to the clear view that the submissions of the respondents are to be preferred.
"In the first place I consider it wrong to read the decisions of the adjudicator as if the only point at which he addressed the question of whether it was appropriate to make a finding that the respondents were entitled to immediate payment (or to make an order to that effect) was in relation to the question of potential joint deposit receipt. Instead, in my view, it is clear, having rejected the claim that the respondentsí claims were extinguished, and there being no suggestion that he should assess the merits of the petitionersí claims, that his consideration of whether the petitioners could exercise a right of retention was in the context of assessment of whether there was any reason not to find the respondents immediately entitled to the sums they claimed or make an order upon the petitioners to that effect. The question of whether the petitioners had given Notice under section III of the Act was also apparently, at least in part, an earlier step in that process. Indeed, it seems to me further that it is not even clear that the submission about possible joint deposit receipt was made in the context of whether an order for payment should be immediate. Instead, the language in which that submission was first made was that "should the adjudicator be minded to make any order for immediate payment for the sums claimed by the applicant the petitioners should be allowed to place such monies on deposit in the joint names of the parties etc., (i.e. the suggestion appeared to be made if for other reasons - no doubt related inter alia to the question of retention - the adjudicator decided to make an order for immediate payment).
"In any event, although it is clear that the adjudicator was given wide powers as to how to decide the disputes referred to him (and indeed in an appropriate adjudication that an adjudicator could, as commented by Dyson J. in Macob Civil Engineering Ltd , conduct an entirely inquisitorial process) and while it is also clear both that he had a discretion as to whether to order immediate payment and that he could have addressed himself competently to a number of potential alternatives, it does not follow that he was bound to consider alternatives when the only submissions made to him for his consideration in that context, by the party with the interest to make them, were those related to the joint deposit receipt. This, it seems to me, is particularly, but not only, true having regard to the apparent way in which these adjudications were carried out -that is by means of written submissions, followed by a hearing at which the partiesí legal representatives presented arguments; a hearing at which it was not suggested that the adjudicator should proceed in any other way. It seems to me that the submission made on behalf of the petitioner would run counter to the purpose of the Act, which was, as indicated by Dyson J. in Macob Civil Engineering Ltd.;
"to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis and requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement".
"Further, having decided that the respondents were entitled to payment of the sums they claimed, and that the petitioners could not retain the sums they claimed, and in addition the adjudicator having no duty, and no apparent right, to investigate and assess these latter claims, I consider that he could not logically, or lawfully, have made an order of the type suggested as a possibility - that is postponing payment standing the existence of the petitionersí claims. No legal basis for such an approach at any rate was suggested in argument before me. This is most clearly seen in relation to the primary suggestion apparently made that the adjudicator could have made an order deferring payment pending resolution of the petitionersí liquidated and ascertained damages claims. Such an order would plainly, in effect, have been to sustain the petitionersí claims to retention which the adjudicator had just rejected. Whatever wide powers may be given to adjudicators to facilitate speedy resolution of the disputes before them, no power is given to make decisions contrary to the rights or obligations of the parties arising as a matter of law. Further, although it is unnecessary to go this far, I consider the respondents were right to argue that if the adjudicator had applied his mind further to the question, he would not have had information before him which could reasonably have supported the view that the apprehensions of the petitioners as to the financial standing of the respondents were reasonably based.
"In these circumstances I consider that it cannot be suggested that the adjudicator failed to take into account matters which he was bound to take into account or that he made any error of law going to the root of his jurisdiction. I, therefore, refuse to make any of the orders sought by the petitioners."|Case Summary Copyright BLISS Books 2012