How the defence went up in smoke

Raby House in Cheshire used to be a country house hotel. Eric Baskind now owns it. He decided to do a makeover. It developed into a very heated row with his builder.

It was unfortunate indeed that a lightning strike destroyed Mr Baskind’s computer. But for that, it would have been the work of an instant to print out the written withholding of money notices he had sent to builder Speymill Contracts. What about the project files? Well, he accused two of Speymill’s chaps of stealing them and, oh dear, the copies of the withholding notices were also among the stolen material. Under these circumstances, the adjudication about what money could be withheld had an interesting twist.

The contract itself was the usual JCT98, and it was never signed. But the correspondence was enough to show that it was agreed. It contained the usual payment machinery. The architect issues the interim payment certificate; that gives the “amount due”. Then, if the employer quarrels with the amount, it has to send a withholding notice. Certificates 12, 13, 14 and 15 were all issued, the last one in October. But the employer didn’t pay the October certificate, nor the previous months’ certificates all the way back to April. Speymill began an adjudication. Its position was: no withholding notices, so no withholding. It wanted its cash forthwith.

How does an adjudicator deal with theft?

Mr Baskind said such a controversial issue of fact was too difficult to be decided in a high-speed adjudication. Speymill had its doubts, too. The adjudicator neatly answered that he was not there to decide whether a criminal offence had been committed. He was there to allow Mr Baskind to prove that he had issued the withholding notices. Asked to do so, the poor chap could only point to the charred remains of his PC. The adjudicator set a date for an oral hearing but, as he said in his award: “Mr Baskind refused to co-operate with my directions in relation to my requested meetings with the parties.” So the adjudicator decided Mr Baskind had not discharged the burden of proof. He had to pay. “Shan’t” was his response to the £370k award in Speymill’s favour. The court beckoned.

The first judge ordered the £370k to be paid into court and further ordered a more in-depth trial. Speymill appealed the need for any trial at all. The matter came to the three-man Court of Appeal, which gave very useful guidance.

First and foremost, said Lord Justice Jackson, it is not the function of any court in adjudication enforcement proceedings to investigate the underlying dispute between the parties. That has already been decided by the adjudicator. All that happened here was that the builder required payment of certified sums. The defence by the employer was that he had issued withholding notices. The adjudicator was told all about the lightning and theft allegations and “dealt with the issues in a measured way”. He concluded on the balance of probabilities that the employer had not served withholding notices. He considered the evidence of theft, and of the destroyed computer. He only had to ask if the scales containing the story tipped in favour of the employer. They didn’t.

The Court of Appeal approved the analysis in an earlier case, which decided that construction industry adjudicators and the process of a high-speed interim decision could deal with issues of fraud or deceit. Behaviour of that type had to be raised in the adjudication. And the adjudicator’s decision was binding. Enforcement could only be resisted if the circumstances came to light after the adjudication.

It is easy to see why both these parties had doubts about including a theft point in a mad dash dispute deciding process. The lawyers would prefer to get folk into the witness box for a chat, on oath, in front of a judge. The lawyers would be a bit edgy about running all this in front of an ordinary bloke from the building industry. Well, let’s get used to it.