Adjudication
Farebrother Building Services Limited v Frogmore Investments Limited (April 2001) TCC

© Daniel Atkinson 2001 24 September 2001

The issue in Farebrother Building Services Limited v Frogmore Investments Limited (April 2001) TCC was whether the Courts should intervene when an Adjudicator had not apparently taken into account a defendant cross-claim closely connected with the issues.

The main dispute involved questions whether Farebrother was entitled to an extension of time, and, as a consequence, whether Farebrother was entitled to additional payment for loss and expense. The claim was for some £900,000. Frogmore alleged that Farebrother had been in critical delay itself in breach of contract and that Frogmore was entitled to set off in excess of £300,000.

The adjudicator upheld Farebrother’s claim and ordered payment of £601,000. He held that he had no jurisdiction to deal with Frogmore’s counterclaim.

Frogmore resisted summary enforcement of the award, essentially on the basis that the adjudicator failed to deal with Frogmore’s claim to set off the £300,000 arising from the alleged breach by Farebrother of its obligations under the contract to proceed and carry on diligently with the work.

His Honour Judge Gilliland decided that it was not clear whether or not the Adjudicator had dealt with Frogmore’s counterclaim. He may have considered it and rejected it. It was possible the claim could not be dealt with for reasons which had been submitted to the Adjudicator, namely the lack of notice.

Even assuming that the Adjudicator did not consider the counterclaim, could the court properly intervene in the circumstances of this case? Frogmore submitted that it had suffered substantial injustice, in that effectively the real reason why it was refusing to make any payment in respect of Farebrother’s claims was simply not dealt with by the adjudicator, and it would be quite wrong, it was submitted, to enforce the award in these circumstances where the adjudicator has failed to take account of or ignored an important matter of defence. Attention was drawn to the statement of Dyson J in Bouygues (UK) Limited v Dahl Jensen (UK) Ltd., [20001 BLR 49, 54, at first instance, where Dyson J said that if the mistake of the adjudicator was that he decided a dispute that was not referred to him, then his decision was outside his jurisdiction and of no effect. Frogmore submitted that the converse was also true. Thus if, by mistake, an adjudicator failed to deal with a matter which had been squarely placed before him, then that decision likewise should be of no effect, and the court could properly intervene under an application made under Part 24 and refuse to give effect to the decision insofar as the matter had not been dealt with.

Judge Gilliland reaffirmed that the approach of the court in relation to not enforcing the award had been to look not at the merits of the decision, but at the question of jurisdiction. If an adjudicator made an award which was outside his jurisdiction, then it was of no effect and would not be enforced by the court. If, on the other hand the award was within his jurisdiction, then the court would normally give effect to that award.

It was held that if an Adjudicator ignored or failed to take account of an issue of substance put forward by Frogmore that was not a matter which went to jurisdiction, rather it was a matter which went to the conduct of the proceedings. The adjudicator may have been wrong or he may have erred in what he did, but it was an error which was, in principle, within his jurisdiction. He has simply made a decision which was incorrect.

It was held that if the Adjudicator took the view that he had no power to deal with a particular claim, then that was not a matter which went to his jurisdiction. In this case the TECSA Adjudication Rules 1999 Version 1.3 applied and on the face of Rules I I and 12 it was a matter entirely for the adjudicator to decide which of the matters he will decide in the course of the adjudication. He had a complete discretion over the scope of the adjudication and could make a decision as to what was within the scope of the adjudication. He had obviously to have regard to the notice, but his decision as to what was comprised within the notice was a matter which was by contract given to him to decide.

Similarly, so far as jurisdiction is concerned, if he decided that something was within his jurisdiction, that was binding. The principle which Dyson J set out in Bouygues [20001 BLR 49, 54 did not apply to adjudications governed by the TECSA Rules. If, by mistake, he decided that something was within his jurisdiction when technically on the proper construction of the notice of referral it was not, then the Rules were quite clear when they provided that he may rule on his substantive jurisdiction.

It was held that the court ought to give effect to the statutory provision, and not seek to whittle it down by finding reasons for intervening and saying that the decision ought not to be regarded as binding. The approach taken by his Honour Judge Lloyd in KNS Industrial Services (Birmingham) Ltd. v Sindall Ltd was the approach which the court ought to adopt in such a case. The court should accept the award as it stands and not seek to vary it. It was not right for the court to try and dismantle or reconstruct a decision. A party could not pick and choose amongst the decisions given by an adjudicator, assert or characterise part as unjustified and then allege that the part objected to have been made without jurisdiction. That was not permissible under the TECSA Rules. Either the adjudicator has jurisdiction or he does not. If he had jurisdiction, his decision was binding even if he was wrong to reach the conclusion he did.

Judge Gilliland held that the award ought to be enforced in the sum found by the adjudicator and that it was not right to seek to set off the £300,000 which Frogmore sought to deduct from the award.