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08 June 2020
This was an application by Platform to enforce an adjudicator's decision in the sum of £420k plus VAT. In the adjudication, ISG had challenged Platform's case that ISG had repudiated the subcontract, saying instead that Platform's own purported rescission of the subcontract was unlawful with the result that ISG's termination was itself valid. Both ISG and Platform set out their cases on the amounts said to be due. The adjudicator found in favour of ISG on termination and went on to decide the value of any sums payable as a result of that decision.
ISG replied to Platform's demand for payment, noting that they had received advice that the decision was unenforceable. ISG also wrote to the adjudicator saying that whilst they were arranging payment of her fee:
"For the avoidance of doubt payment of your invoice does not constitute agreement that your decision is correct nor does it constitute agreement or acceptance that your decision is valid or enforceable. Accordingly we fully reserve all rights available to us to challenge the validity and enforceability of your decision and all rights available to us to resist any attempt to enforce the same."
Before Deputy Judge ter Haar QC, Platform submitted that by paying the adjudicator's fees ISG had waived any right to challenge the validity of the Decision. In PT Building Services Ltd v ROK Build Ltd (see Issue 105), Mr Justice Ramsey had held that in the absence of any circumstances to the contrary, by making the payment of the fee, ROK elected to treat the decision as being valid. Here, the Judge considered that there was strong authority that payment of an adjudicator's fees may amount to an election to treat an adjudicator's decision as valid. However, here it would be wrong to do so. ISG's primary challenge to the Decision was on the basis that the adjudicator had made a "fundamental error" in the Decision. That complaint only arose after the adjudication process had ended with the issue of the Decision. Further, ISG's letters had made it clear that ISG regarded the Decision as invalid and reserved their position.
ISG's position was that in determining the sums that may be due, the adjudicator had decided to take into account the saving that ISG achieved by the termination. This was an error and, further, neither party in the adjudication had contended that that approach could be adopted. The Judge referred to the case of Roe Brickwork Ltd v Wates Construction Ltd (see Issue 163) where it had been held that there was:
"no rule that a judge, arbitrator or adjudicator must decide a case only by accepting the submissions of one party or the other. An adjudicator can reach a decision on a point of importance on the material before him on a basis for which neither party has contended, provided that the parties were aware of the relevant material and the issues to which it gave rise had been fairly canvassed before the adjudicator."
The adjudicator decided a point of importance on the basis of the material before her, but on a basis for which neither party had contended. The point was one of contractual construction and the adjudicator was perfectly entitled to reach the conclusion that she did. She was not bound to accept only one of the two alternatives put to her by the parties. Questions of contractual interpretation will often (if not usually) be capable of more than two possible answers, and so the correct answer may not have been expressly proposed by either party. Here, the parties were agreed on the way in which the adjudicator should approach valuation in the event that she determined that it was ISG, not Platform, that validly terminated the subcontract. The problem was that, in the view of the Judge, "the result of that approach produced a result which I suspect neither party had expected". This may have led to separate Part 8 proceedings, but did not mean that there had been a breach of natural justice.
For further information on this topic please contact Jeremy Glover at Fenwick Elliott Solicitors by telephone (+44 20 7421 1986) or email (email@example.com). The Fenwick Elliott Solicitors website can be accessed at www.fenwickelliott.com.
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