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Squeezing Yourself Out of a Remedy?

Pilon Limited, a specialist refurbishment contractor, had carried out work on various projects for Breyer Group Plc. One of these projects known as the Ealing Project was divided into batches 1-25 and 26-62.  After a number of disputes between Pilon and Breyer during the summer of 2008, Pilon eventually left the Ealing Project site in October 2008. 

On 8th September 2009, Pilon issued an interim application for payment in relation to work on batches 26-62.  Breyer refused to pay this and Pilon referred the matter to adjudication. The adjudication notice made it clear that it was limited to the interim application in respect of particular batches of work. Pilon’s case was that it was entitled to the sum claimed without any deduction as Breyer had failed to serve either a payment or a withholding notice. Breyer argued that it was not obliged to serve such notices, but their principal defence was that they were entitled to set off around £148,000 previously overpaid to Pilon for batches 1-25. 

The adjudicator held that he did not have jurisdiction to consider Breyer’s defence since the adjudication notice made it clear that the dispute was limited to the latter batches of work.  The adjudicator found in favour of Pilon awarding them a total of £206,617.74 plus VAT and interest.  Breyer once again refused to pay and so Pilon commenced an application for summary judgment to enforce the adjudicator’s decision.

The Honourable Mr Justice Coulson was faced with a number of issues, the first being whether the decision of the adjudicator as to the extent of his own jurisdiction was temporarily binding upon the parties involved. Ms Gough, on behalf of Pilon, stated that the adjudicator had made a decision on the question of jurisdiction and, whether he was correct or otherwise, the decision was temporarily binding on both the court and all parties concerned. Mr Justice Coulson disagreed:  “The law on this topic is clear…unless the parties have also agreed to be bound by the result of the adjudicator’s investigation into his own jurisdiction, his ruling on that issue will not be determinative, and the challenger can defeat any subsequent enforcement proceedings by showing a respectable case that the adjudicator had reached an erroneous conclusion as to jurisdiction”.

This view led to the second issue for consideration; namely, whether the adjudicator had taken an erroneously restrictive view of his own jurisdiction and the consequences of doing so.

It was held that the decision of the adjudicator had the potential to be unenforceable on the grounds of jurisdiction or, alternatively, natural justice if the adjudicator has taken an erroneously restrictive view of his own jurisdiction and subsequently failed to address the question referred to him. The second limb of this being that such failure must be deliberate and material also. The judge concluded that the adjudicator had failed to take Breyer’s defence of overpayment on batches 1-25 into consideration and dismissed the application to enforce the adjudicator’s decision. 

Pilon had attempted to limit the jurisdiction of the adjudicator in its Notice of Adjudication and whilst it was correct to have regard to this, the court felt that the adjudicator had failed to appreciate that Pilon sought both an interim valuation of batches 26-62 and further, an interim payment of any sum of monies owed to them. The adjudicator should therefore have given some thought towards Breyer’s argument that it had overpaid Pilon for batches 1-25 in order to determine whether the amount could be set-off against the payment contended by Pilon.

The Honourable Mr Justice Coulson continued, “an adjudicator should think very carefully… it would be absurd if the claiming party could, through some devious bit of drafting, put beyond the scope of the adjudication the defending party’s otherwise legitimate defence to the claim”. 

There is no denying that in this instance, Pilon’s attempt at limiting jurisdiction was a double-edged sword; what would first appear to assist their position actually caused greater harm in the end.

 

The information provided in this article is not a comprehensive analysis of the law and must not be treated as a substitute for legal or professional advice.  To the extent permitted by law, Kerrigans will not accept or otherwise be held liable for any loss or damage incurred in relying upon the contents of this article. Should you require any legal or professional advice about any of the topics covered in this article we recommend that you contact Kerrigans.

 

07/12

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