[2009] EWHC 408 (TCC)

We looked previously at the question of an adjudicator having to give reasons, in the CSC Braehead case in Issue 99. Here, Thermal was engaged as a sub-contractor by AE&E to carry out mechanical services on a power station project. Thermal alleged that AE&E had failed to pay it for certain works and referred the dispute to adjudication. The sub-contract incorporated the TeCSA adjudication rules. In accordance with paragraph 31, the parties requested the adjudicator to give reasons for his decision.  

AE&E raised a defence by way of set-off and/or counterclaim seeking £3.75million arising from Thermal's alleged failure to achieve completion by the agreed date. The adjudicator, in a 23- page decision, found in favour of Thermal in the sum of £905k. AE&E failed to pay, which lead to enforcement proceedings before HHJ Davies QC. AE&E claimed that the adjudicator had failed to give reasons for his decision in relation to its set-off/counterclaim defence. Following the Carillion v Devonport case, the Judge noted that the correct test was that AE&E would need to show both that the reasons were absent or unintelligible and that as a result it had suffered substantial prejudice. The Judge said that:  

“An adjudicator is obliged to give reasons so as to make it clear that he has decided all of the essential issues which he must decide as being issues properly put before him by the parties, and so that the parties can understand, in the context of the adjudication procedure, what it is that the adjudicator has decided and why.”  

Here the Judge noted that there was simply no express reference at all to the set-off defence being one of the issues which the adjudicator recognised he had to decide. This left the question of prejudice. AE&E said that it was unclear whether or not the adjudicator had considered the set-off defence on its merits. Thus it had lost the opportunity of having that defence dealt with, and had lost the prospect of the adjudicator deciding that point in its favour. If AE&E had to start a further adjudication to seek to recover its losses, first it would have have to comply with this decision and second there was a risk that a second adjudicator might decline to act on the basis that the point had already been decided. Therefore there was a substantial injustice and the decision was not enforced.