How far can you limit what’s included in the scope of an adjudication?
It is well known that the courts will support the enforcement of an adjudication decision even if the decision is incorrect and resulted from errors of fact or law. The case of Global Switch Estates 1 Ltd v Sudlows Ltd, however, gives an example of when the courts will intervene where a decision has been reached by the adjudicator in a manner that is obviously unfair and a breach of natural justice.
In this case Global had sought a determination of the true value of certain parts of an interim application, but explicitly excluded certain other parts from the scope of the adjudication. Sudlows thought this was a bid to prevent it from raising a defence based on its additional claims for loss and expense and extensions of time. As Sudlows anticipated, the adjudicator decided that he did not have jurisdiction to deal with the matters expressly excluded by the referring party and found in Global’s favour, awarding the sum of £5,019,120. Global commenced enforcement proceedings in the TCC when Sudlows did not pay.
The judge, having considered the legal principles in the authorities[1] and set out a number of observations, found that Sudlows’ loss and expense claims were “clearly relevant to the valuation” of the interim application as “[t]hey raised a potential defence to [Global’s] claim for payment in the adjudication”. She determined that the adjudicator had failed to appreciate that Global was claiming payment of the net sum considered due (in addition to a valuation of certain parts of the application) and was wrong to assume that he did not have jurisdiction to consider Sudlows’ arguments in defence. His failure to do so was a “plain and obvious” material breach of the rules of natural justice. This breach, arising from Global’s attempt to limit the scope of the adjudication, rendered the decision unenforceable.
This judgment acts as a warning to those who may be seeking to exclude or limit a responding party’s possible defences by the careful framing of their claim; responding parties are entitled to raise any defences they consider properly arguable to rebut the claim and adjudicators are required to decide whether these amount to valid defences in law and on the facts. A failure by an adjudicator to ask and consider the relevant questions may amount to a material breach of the rules of natural justice and, in such circumstances, the courts are prepared to refuse to enforce decisions. It is worth highlighting that the courts may factor in whether the adjudicator’s error was brought about by the claiming party as a misguided attempt to seek a tactical advantage, of which the courts take a particularly dim view.
[1] Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWHC 778 (TCC); Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA 1358; Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC); Pilon Ltd v Breyer Group plc [2010] EWHC 837 (TCC); Kitt v The Laundry Building Ltd [2014] EWHC 4250 (TCC); Bresco Electrical Services (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25.
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this article, please contact us today by telephone or email enquiries@sharpepritchard.co.uk.
