The decision in A&D
Maintenance and Construction Ltd v Pagehurst Construction Services Ltd (June 99) TCC
gives additional guidance on how to deal with the issue of the jurisdiction of the
Adjudicator under HGCR Act 1996 and late attempts to open up applications for payment or
open up an Adjudicator’s decision. An important part of the decision is whether the
adjudication provisions survived the determination of the contract.
A&D was a subcontractor carrying out building works on a school
for Pagehurst as main contractor. The main contract was determined and on the same day
Pagehurst purported to determine the subcontract. Adjudication was commenced by A&D
and a decision given in its favour for the payment of A&D’s outstanding invoices.
Pagehurst failed to comply with the Adjudicator’s decision and A&D applied for
summary judgment under Court Procedure Rule 24.
It was held that if the subcontract was terminated that the matters
referred to the adjudicator remained disputes under the contract. The adjudication
provisions remained operative in the same way as an arbitration clause remained operative
by analogy with the decision in Heyman v Darwin (1942). Whereas Parliament had
provided precise time limits for the appointment of adjudicators and the timetable for the
process, there were no such limits on the time when a party could give notice of an
intention to refer a matter to adjudication. Section 108(1) of the Act allowed a party to
refer a matter at any time and the position with regard to arbitration was clearly in the
minds of the legislators when Section 108 was enacted.
Pagehurst then argued that certain of the invoices raised by A&D
did not become payable and should not form part of the Adjudicator’s decision. In
addition Pagehurst had consistently taken the position in the adjudication that it was not
appropriate for the issue referred to adjudication to be decided in isolation of
Pagehurst's claims for losses allegedly caused by A&D. Although Pagehurst had
threatened to challenge the Adjudicator they did not do so, but had instead participated
in the Adjudication. They could have sought an immediate ruling by the Adjudicator as to
his jurisdiction which could have been the subject of an immediate challenge. They did not
do so.
It was held that the Scheme for Construction Contracts applied and
by paragraph 20 of the Scheme the Adjudicator had the power to deal with matters such as
set-off or abatement and the types of issues raised by Pagehurst. The Court would not
review the Adjudicator’s decision. The correctness of the Adjudicator’s decision
was not a matter to be considered in deciding whether the decision was enforceable.
Matters of abatement and claims for damages for breach of contract could have been
canvassed before the Adjudicator, and it seems they were, but they were matters to be
dealt with in subsequent arbitration proceedings or legal proceedings or by agreement.
Reference was made to the decision in Outwing Construction Ltd v H Randell & Son Ltd (1999) TCC in which it was held that
the decision of the Adjudicator has to be complied with, pending final determination.
There was no provision for a "stay of execution".
The Court therefore gave judgment for A&D for the full amount
with costs.
The decision makes clear that any objection to jurisdiction must be
given at the earliest stage of the Adjudication proceedings since otherwise a party will
be treated as having submitted to the process. In The
Project Consultancy Group v The Trustees of the Gray Trust (July 1999) TCC it was
held that this was a matter of fact. In that case the defendants had stated at the
beginning that the Notice of Reference to Adjudication was invalid and that if the
adjudication continued they would dispute the Adjudicator’s jurisdiction and put
these issues before the Court in any enforcement proceedings. They continued to refer to
the issue of jurisdiction in all communications.
The decision also makes clear that any issues of set-off or
abatement need to be raised in the proceedings since they will usually be within the power
of the Adjudicator to decide. The appropriate time to raise these matters is of course by
notices before the final date for payment. Once a decision is made on payment the Court
will not open up review or revise the decision of an Adjudicator, since these are matters
for subsequent proceedings. It is important therefore to fully argue the case in
adjudication.
