St Austell Printing Company Ltd v Dawnus Construction Holdings Ltd

[2015] EWHC 96 (TCC)

St Austell relied on two grounds in support of their case that the adjudicator did not have the necessary jurisdiction. The first was the “well-worn suggestion” (the words of Mr Justice Coulson) that the dispute had not crystallised between the parties at the time of the notice of adjudication. The second was the “rather more novel” submission that, because the claim that was referred to adjudication related only to a part of Dawnus’ original interim application, and expressly excluded other elements of that application, the Adjudicator was not empowered to order the payment of any sums which he found due.

The Judge noted that the crystallisation argument is almost never successful and this point was promptly dismissed. For example, the Judge noted that here the detail of Dawnus’ outstanding claims had been the subject of discussion before they were formally advanced in application 19, which was the subject of the adjudication.

The Judge also noted that it was not uncommon for employers to say that no dispute has arisen because there were elements of the contractor’s claim that required further particularisation or explanation. He referred to the case of Gibson (Banbridge) Ltd v Fermanagh District Council (Issue 173) where Weatherup J had said that it was clear that the claim should have been assessed long before it eventually was, and that if supporting documentation was missing, that would no doubt be reflected in any subsequent assessment by the employer or his agent.

The second jurisdictional objection was that the Adjudicator did not have the power to order St Austell to make any payment, because the dispute that was referred was strictly limited to just one part of interim application 19. Here the Judge referred to the 2000 decision of HHJ Thornton QC in Fastrack Contractors Ltd v Morrison Construction Ltd where the Judge referred to the “pruning” that may be made by the referring party of any existing claim before it was referred to the adjudicator and said this:

“21. Fastrack suggested that the reference that I am concerned with consisted of a number of disputes, each of which was one of the individual heads of claim that had been referred. Fastrack also suggested that the dispute that could be referred to an adjudication pursuant to the HGCRA need not be identical to the pre-existing dispute, it need be no more than a dispute which was substantially the same as that pre-existing dispute.

22. Neither of these contentions of Fastrack is sustainable. The statutory language is clear. A “dispute”, and nothing but a “dispute”, may be referred. If two or more disputes are to be referred, each must be the subject of a separate reference. It would then be for the relevant adjudicator nominating body to decide whether it was appropriate to appoint the same adjudicator or different adjudicators to deal with each reference. Equally, what must be referred is a “dispute” rather than “most of a dispute” or “substantially the same dispute.”

23. In some cases, a referring party might decide to cut out of the reference some of the pre-existing matters in dispute and to confine the referred dispute to something less than the totality of the matters then in dispute. So long as that exercise does not transform the pre-existing dispute into a different dispute, such a pruning exercise is clearly permissible. However, a party cannot unilaterally tag onto the existing range of matters in dispute a further list of matters not yet in dispute and then seek to argue that the resulting “dispute” is substantially the same as the pre-existing dispute.”

Following Fastrack, the Judge considered that a referring party is entitled to prune his original claim for the purposes of his reference to adjudication. So if his interim application for payment is for measured work and loss and expense, he may decide that, because the loss and expense claim could be difficult to present in an adjudication, he will instead focus in those proceedings on just the straightforward claim for measured work. Indeed, Mr Justice Coulson said:

“That is not only permissible, but it is a process that is to be encouraged. Claims advanced in adjudication should be those claims which the referring party is confident of presenting properly within the confines of that particular jurisdiction. What if, in my example, the claim for loss and expense is recognised by the referring party as being very difficult to sustain. What if he in fact decides that he no longer intends to pursue it? It would be a nonsense if he had to include such a claim in his notice of adjudication merely because that claim formed part of his original interim application.”

Further, the adjudicator’s decision will therefore be a decision reflecting St Austell’s existing liability to pay. It manifestly does not create a liability to pay when none existed before.

The Judge also gave the following example. First one should assume, in St Austell’s favour, that they had some sort of crossclaim, whether by reference to a claim for overpayment, or a claim for liquidated damages, or a claim for damages for defects which arose for assessment at the same time as interim application 19. Second, assume that the cross-claim would have reduced or even extinguished the sum due by reference to the measured work element of the 115 changes. In the view of the Judge, the mere fact that Dawnus had limited their own claim to the measured work value of the 115 changes, did not and would not in any way limit or prevent St Austell from defending that claim, and raising their own cross-claim by way of set-off: “That would have been an entirely legitimate defence to the claim in the adjudication, whatever the notice of adjudication or the referral might have said.”