All things considered

Pilon is a specialist refurbishment contractor carrying out work for Breyer Group, the well-known new-build and regeneration plc. The two appear to have done a lot of work together over the years. One such project is in Ealing where they are at odds with each other. So Pilon began an adjudication. It went in their favour. Breyer baulked at paying up and the High Court has agreed with it. This is unusual because the court mostly insists that adjudicators’ awards are paid. It’s one of those cases where the adjudicator refused to allow in part of Breyer’s defence. Mistake, said Breyer, as did the judge; so the money is not payable. The result of the adjudication is set aside.

Now then, the adjudicator on this one is experienced and highly regarded. The “mistake” comes because 12-year-old adjudication is still a shifting set of rules; or rather, we are still fathoming the intention of the rules laid down by parliament.

Since day one of adjudication, it has been drummed into adjudicators that their job is to decide the dispute in the “notice of adjudication”. That’s the letter that informs the other party of the dispute what is being argued and the redress being asked for. It’s the box that everyone climbs into for the

28-day argy bargy. And once upon a time most of us thought that since we were all on a brutal 28-day deadline, we were in the box to decide the arguments canvassed prior to getting into it. Dear me, that’s a mistake. The parties can, we learn, send out runners for refreshments – new arguments, if you please. That’s because the notice of adjudication may well, once understood and interpreted, invite any argument new or old.

The notice in Pilon’s adjudication asked the adjudicator to decide a quarrel about the valuation of a phase of the Ealing contract called batches 26-62. The snag came when Breyer’s response not only argued for its valuation of 26-62 but also argued the valuation of phase 1-25. “No jurisdiction!” yelled Pilon. “Outside the box!” Pilon reminded the adjudicator that he was authorised in the notice to agree with them that 26-62 had a gross value of £1.7m and it had only been paid £1.35m. “Tish-tosh,” said Breyer, “batches 1-26 show an overpayment, so set that off in the valuation.” “No, no,” said the adjudicator, “I can only play to the rules in the notice.” So he would not allow Breyer’s arguments about batches 1-25. I suspect that he could see how easy it would be for Breyer to bring its own adjudication in a separate box. And if that separate adjudication decided that an adjustment had to be made, well, so be it. That’s how easy we once thought it would be. Silly, really.

The adjudicator said, and this must be correct: “My jurisdiction is governed by a number of factors. These include the terms of the parties’ contract and the details of the notice of adjudication and the referral. I am, thus, constrained by the matters referred to me and to stray outside those matters would constitute dereliction of my jurisdiction.” “That,” said the court, “is quite correct.” Then comes the mistake. The judge could see that what Pilon was seeking in its notice was not only an interim valuation of batches 26-62 and a declaration that 26-62 was valued at £1.7m gross, but also an interim payment. So the adjudicator was authorised to do two things: (1) value batches 26-62 and (2) award the amount due in an interim payment. That means the door was opened by Pilon to let the runners come in from Breyer to argue any other reasons why money was not due. As the judge said: “The notice of adjudication gave the adjudicator the jurisdiction to consider what, if any, further sum should be paid by way of interim payment from Breyer to Pilon and that issue of necessity involved a consideration of Breyer’s defence based on the alleged overpayment on batches 1-25.”

The court gave this guidance: “It is not uncommon for adjudicators to decide the scope of their jurisdiction solely by reference to the words used in the notice without having regard to their implications.” Put another way, there is every chance that the referring party will omit to mention points that might be raised by the other side as a defence to that claim … but a claim for money entitles a defence of any legitimate kind. It was a mistake not to let it in.