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 Farebrothers claim and ordered payment of
601,000. He held that he had no jurisdiction to deal with Frogmores
counterclaim.
Frogmore resisted summary enforcement of the award, essentially on the
basis that the adjudicator failed to deal with Frogmores 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 Frogmores 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 Farebrothers 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.
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