Counter-intelligence

If you're unlucky enough to be on the wrong end of an adjudicator's award and the winner owes you money, can you take that off the amount due?

"So, I ask you, is a quarrel about extensions of time and loss and expense and the value of variations and provisional sums one or several disputes?"

Snowballs and hell come to mind when assessing one's chances of overturning an adjudicator's decision. We might put a stop to the process if there was gross unfairness or someone was trying to run a mere claim instead of a crystallised dispute, or trying to squeeze an adjudication out of a non-construction contract. But most cases result in the decision, however daft, being enforced. Case number 80 in our series, David McLean Housing Contractors Ltd vs Swansea Housing Association, signposts one way to stop a decision taking effect.

Let me tell you what happened on this contract. Swansea decided to convert the old post office in Wind Street into housing. McLean won the job. Practical completion was delayed and the builder claimed an extension of time, and for loss and expense, variations and so on. The adjudicator's decision was that Swansea owed McLean £613k. Pause here for a moment; why, oh why, was such a huge lump of money kept from the builder? No matter how straight Swansea is – and it is – it just looks so bad. Anyway, where was I? Swansea wouldn't obey the decision; it only coughed up £420k. It said that it could set-off the balance because liquidated damages were due.

Now just a minute; the law of the land says an adjudicator's decision is binding. It will be obeyed. But if Swansea has a complaint that was not dealt with in the adjudication, there is no reason why it can't litigate or bring an adjudication of its own and set whatever it gets against the sums due in the original adjudication – provided the win is in time.

In fact, Swansea were quick off the blocks with a counterclaim in court for liquidated damages. Swansea said McLean could whistle for the balance of the adjudicator's award because it, Swansea, was going to win in court, which would oust McLean's claim. McLean sued for its balance anyway, and was met by a request for summary judgment on the counterclaim.

When it came to the High Court, the experienced judge who took it agreed that Swansea had an obvious case for liquidated damages and gave summary judgment in its favour. In other words, the court said that Swansea was right to withhold a lump of money.

Nobody needs feel uncomfortable with this result. McLean waved a piece of paper saying cash was due, but Swansea waved a separate piece of paper saying it wasn't, or if it was, it was repayable, which amounts to the same thing.

But there is a point that is a tad discomforting. If summary judgment had not been given, the judge would have sent the matter for trial – and meanwhile, the money would not be paid. That point will excite the lawyers and occupy the courts for another 10 cases. It is – how shall we say? – very interesting.

There's a second useful point, too. It is all about the number of disputes in one adjudication. This is important because The Scheme for Construction Contracts (the frequently used procedural machinery for doing adjudications) only permits the adjudicator to deal with one dispute at a time under the contract. So, I ask you, is a quarrel about extensions of time and loss and expense and the value of variations and provisional sums one or several disputes? This is an important point that crops up time and again. Trouble is that the poor adjudicator gets this topic hurled at him and is often flustered into a rushed decision. Worse still, if he presses on and a court later decides that he dealt with more than one dispute, his decision will be a waste of time and money. Adjudicators must take this point of jurisdiction more seriously.

So what's your bet? Did McLean come with one or more dispute? The judge examined the notice of intention to adjudicate, and asked if the individual quarrels were part of one dispute or several. He said one, because they all boiled down to this issue: "How much should I be paid?" Crucially, the judge reminded us that if it were two disputes, the adjudicator's appointment would be invalid – unless the parties pressed on without throwing a snowball.

I am obliged to the practice manager at barristers' chambers Two Temple Gardens for bringing this judgment to my attention.

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

Top