Adjudication
Bickerton Construction Limited v Temple Windows Limited [2001] TCC

© Daniel Atkinson 21 August 2004

KEYWORDS: Housing Grants Construction and Regeneration Act 1996, jurisdiction, excess of jurisdiction, DOM/2, Determination of Contract, Final Account, Judge Frances Kirkham.

The judgment of Judge Frances Kirkham on 26 June 2001 in Bickerton Construction Limited v Temple Windows Limited [2001] TCC deals with the jurisdiction of an adjudicator to decide the final account following determination of a contract.  The judgment emphasises the importance of clearly defining the dispute and considering properly those matters which the Adjudicator must determine in order to make his decision.

The Facts

Bickerton and Temple contracted in March 2000 for Temple to carry out work at premises belonging to United Glass Ltd in Harlow. The sub-contract sum was about £125,000 plus VAT. Temple carried out preliminary work from about late February 2000 and began work on site in early March 2000.

The contract between Bickerton and Temple was a construction contract within the meaning of Part 2 of the Housing Grants Construction and Regeneration Act 1996.  The contract was based on the DOM/2 form.

During the course of the contract, Bickerton became concerned about progress and quality of materials and workmanship. By letter dated 22 June 2000, Bickerton gave notice of their intention to determine the sub-contract. By letter of 14 August 2000, Bickerton gave notice of determination. Temple left site.  Bickerton contended that it validly terminated the contract in August 2000 and had arranged for outstanding work to be completed and defects to be remedied.

On 29 January 2001 Bickerton issued its Notice of Adjudication which referred to Bickerton having issued notices under Clauses 21.3.2 and 21.3.3 of DOM/2 and in accordance with sections 110 and 111, respectively, of the 1996 Act.  Bickerton stated that the gross amount which Temple had applied for was £119,210.89 of which Bickerton had paid £78,034 less £3,901.30 retention.  Bickerton sought "recovery" of costs including those incurred in completing and carrying out remedial work in excess of the amount withheld.

An adjudicator was appointed on 31 January 2001 and Bickerton submitted its Referral Notice with a schedule showing each of the payments which Temple had applied for, together with the relevant payment due dates, final payment dates and the dates of the Withholding Notices.

Temple objected to the adjudicator's right to proceed, on the ground that no dispute existed between the parties. Alternatively, Temple suggested that if the adjudication proceedings were to continue, Temple's final account should be included within the adjudication. The adjudicator invited the parties to agree to broaden his jurisdiction to include Temple's final account. Bickerton opposed the inclusion of Temple's final account within the adjudication.

Nonetheless Temple produced a final account showing a gross sum of £137,993.56. Temple sent the final account to Bickerton and it appeared to have also been sent to the adjudicator.

In Temple's response, Temple did not accept that there was a dispute and contended that it was not appropriate for adjudication to take place at all. Temple contended that the purported determination was invalid. They made detailed comments on the allegations of defective workmanship and materials and of delay.  Temple did not disclose the total value of the work which they claimed to have completed and made it clear that there were taking part in the adjudication under protest.

Bickerton replied stating that Temple's submission of its final account included a number of items which were unacceptable for various reasons, mainly that they should have been allowed for in the tender or should have been omitted as work not carried out.

In his decision the Adjudicator summarised the account as follows:

The adjudicator decided and directed that Temple pay to Bickerton £12,386.32 plus such VAT as was properly chargeable on the total sum of £53,563.21 and apportioned his fees between the parties.

Temple refused to pay any of the sums ordered by the adjudicator. Accordingly, Bickerton sought Summary Judgment before Judge Kirkham in respect of the sums which the adjudicator determined Temple should pay.

The Issue

It was common ground that the adjudicator's decision stemmed from the Notice of Adjudication and that the parties had not agreed to give the adjudicator jurisdiction to deal with the final account between the parties.

Temple submitted that the adjudicator was wrong to have taken the £119,210.89 as a starting point from which to deduct sums claimed by Bickerton. Both parties had understood and proceeded on the basis that the adjudicator would not be dealing with the final account. In concluding as he did that the total value of work carried out by Temple was £119,210.89 (excluding VAT) the adjudicator in effect determined the final account position and thus stepped outside his jurisdiction. As that sum was the starting point for the deduction of the sums which Bickerton claimed, it followed that the adjudicator went outside his jurisdiction in deciding that a sum of money was payable to Bickerton.

Bickerton submitted that the adjudicator had jurisdiction because the Notice of Adjudication made it clear that Bickerton was seeking recovery of money spent and to be incurred. "Recovery" meant that payment was required. The Notice did allow the adjudicator to take an account; which was what he did in order to determine how much was payable to Bickerton. He was entitled to take the figure of £119,210.89 as the starting point and deduct from this the sums he concluded were due to Bickerton.

Jurisdiction

Judge Kirkham held that the adjudicator had jurisdiction to determine what sums could be validly withheld from sums otherwise due to Temple. The sum otherwise due to Temple was not agreed between the parties. Temple had put the gross figure in issue by the assertion in their submission that at the time of determination of the sub-contract, a sum approaching £70,000 was due to Temple. By simple arithmetic, one could see that Temple did not accept that the correct starting point was £119,210.89. Accordingly, the adjudicator was not entitled to take that figure as the unchallenged starting point.

Judge Kirkham found that the adjudicator knew that Temple contended for a higher final account figure not only because of the reference in Temple's own submission but also because the final account had been sent to him.

Judge Kirkham held that the adjudicator made a decision as to what the gross sum due to Bickerton was and concluded that Bickerton's figure of £119,210.89 was the correct total gross value of work. In doing so he decided the account figure. This was because the only possible account figure which could at that stage have been decided was the final account. However, determination of the final account had been expressly excluded from the scope of the adjudication.

To calculate any sum actually payable to Bickerton there had to be a starting figure from which to subtract the sums which the adjudicator decided Bickerton were entitled to withhold from Temple. There was no agreed starting figure. As the starting figure was challenged, the adjudicator was in a position where he had no alternative but to decide what the starting point should be. He determined that the gross amount of the last valuation was the correct starting point. Judge Kirkham held that because that involved a decision as to the final account figure, and because that had been excluded, the adjudicator did not have jurisdiction to determine that figure.

Use of the word "recovery" in the Notice of Adjudication entitled the adjudicator to award a sum of money to Bickerton. But what was lacking was the right to determine the gross valuation figure from which to deduct payments already made and sums which Bickerton were entitled to withhold. Accordingly, Judge Kirkham held that the adjudicator did not have jurisdiction to calculate that a sum of money was actually payable to Bickerton or to order that such sum be paid.

Conclusion

Judge Frances Kirkham concluded that the adjudicator exceeded his jurisdiction and that he was not entitled to direct that a sum of money be paid by Temple to Bickerton. Bickerton was therefore not entitled to summary judgment on its claim.

Commentary

The judgment is difficult to understand. 

The Adjudicator was requested to decide what cost Bickerton was entitled to "recover" and there appears to be no reason why his finding on that issue should not be within his jurisdiction.  The excess of jurisdiction appears to be the order of payment in the way determined by the Adjudicator.  If the Adjudicator did not have jurisdiction to decide the Final Account then it would appear that he had no jurisdiction to order any payment in the way he calculated it.

One wonders however what the view of Judge Kirkham might have been if the Adjudicator had taken the position that in order to decide the issue referred to him, he had to determine the Final Account as a necessary step in that process.  The injustice is that the Adjudicator assumed a Final Account sum without taking submissions or without taking into account Temple's submissions.  It is suggested that the excess of jurisdiction results from this breach of natural justice.