Nothing by halves

If an adjudicator fails to take into account part of your defence, can you get their decision overturned? Frogmore Investments found out...

"The referring party cannot beat the system by referring only half the dispute. It must come with the whole dispute"

Answer this: If an Adjudicator makes a mistake and decides something that they weren't asked to, does the decision have any effect? The answer, according to the High Court, is that the decision on that part is of no effect. That was explained to us ages ago.

Now answer this: If an adjudicator makes a mistake by failing to deal with a matter that has been squarely placed before them, is that decision likewise of no effect? This is what was examined in case number 59 of our adjudication series, Farebrother Building Services Ltd vs Frogmore Investments Ltd.

Now then, be careful with this judgment. The contract was governed by the TECSA Adjudication Rules 1999, published by the Technology & Construction Solicitors Association. What follows therefore may not have general application, or be made to apply to "the scheme" rules.

This is the story. Farebrother argued with Frogmore about extensions of time. The contractor said it was entitled to 22 weeks and the consequent expense, together with disruption costs that ran to £900,000. Frogmore rejected that claim. So then the claim became a "dispute". Farebrother decided to call for an adjudicator. He was Peter Curtis.

Frogmore's defence was that it could defeat the 22 weeks claim and persuade the adjudicator that the contractor was in culpable delay. This meant it ought to be paid £300,000 damages for late completion. It's an ordinary story, but serious numbers were involved.

The contractor now complained that this defence was outside the scope of the dispute referred, and therefore Curtis had no jurisdiction to deal with it. I think the contractor was saying that it was a surprise defence. Curtis took counsel's opinion, thought carefully about the advice and announced that he had no jurisdiction to deal with the counterclaim. He then pressed on with the extensions of time argument.

In due course his opinion was published. He said the contractor was entitled to 22 weeks extension, together with £600,000 for prolongation and disruption. Frogmore wouldn't pay. So Farebrother went to court. Frogmore told the court that since the adjudicator had failed to deal with its defence, the court should not enforce.

It was, said counsel, a matter that went to jurisdiction. The judge thought it was more a matter that went to the conduct of the adjudication. And if it was an error of conduct, the decision would nevertheless be binding. This is especially so under the TECSA rules. They allow the adjudicator to decide what other matters must be included, beyond the "notice of intention to adjudicate", to make the adjudication meaningful. If Curtis thought the defence was frozen out, it was out. So the published opinion of the adjudicator was not to be interfered with by the court; it was summarily enforceable.

At the heart of adjudication is the simple idea that you must come to the table with something called a fully developed "dispute". That means that you include all the arguments canvassed in the toing and froing of pre-adjudication. The file closes when the notice of intention to adjudicate is given. The dispute is frozen, some say crystallised, at that point. If a responding party comes galloping along during the adjudication with a surprise defence, the adjudicator is likely to reject that contribution. If they didn't, the whole affair might turn into a different dispute.

But the referring party cannot beat the system by referring only half the dispute. It must come with the whole dispute and nothing but the dispute. It was open to Frogmore, I suppose, to argue that Farebrother knew all its arguments about the £300,000 counterblast, and that Farebrother had not referred the whole dispute. If the adjudicator had agreed, the adjudication would have stopped there and then.

The duty of the referring party is to refer the whole dispute, including the other side's position. As for any responding party thinking of springing a surprise defence, think on – you might be frozen out.

Readers are invited to forward recent judgments for reporting in this column (with full acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple, London EC4Y 7EU. DX:007I LDE

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