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AGB Scotland Ltd v Darren McDermott

What constitutes the basis of calculation in an Adjudication?


The parties entered into a contract under the SBCC Standard Building Contract with Quantities for use in Scotland for the carrying out of alterations and extensions to Mr McDermott’s home.

AGB sought enforcement of an adjudicator’s decision, while Mr McDermott sought an order that the adjudicator’s decision was a nullity and should be set aside because, Mr McDermott said that the adjudicator had failed to exhaust his jurisdiction by not considering a defense raised by Mr McDermott.

Works under the Contract commenced in January 2017. On 14th October 2022 AGB submitted an Interim Payment Notice to Mr McDermott’s quantity surveyor in the sum of £367,808.84. The payment notice referred to a letter dated 14th March 2022, which had been sent to the Contract Administrator, and which outlined AGB’s claim for loss and expense.

On 21st October 2022 a Pay Less notice was served upon AGB, following which AGB started an adjudication against Mr McDermott seeking payment in full of the amount of its application as it said the Pay Less notice was late and so invalid.

The initial adjudicator’s decision was that he was satisfied that the letter dated 14th March was validly included by reference in the Interim Payment Notice and so the sum sought by AGB was due in full.

Mr McDermott argued that the decision did not properly address one of his defences that proper specification of the sums claimed in the Notice had not been given.

AGB’s position was that it was clear from the Adjudicator’s decision that he had adequately considered and dealt with the arguments put forward by McDermott, including that he had adequately examined and addressed Mr McDermott’s claims including that the Interim Payment Notice didn’t provide a basis for calculation of the sums said to be due. The Adjudicator reached his conclusion accepting AGB’s claim after rejecting Mr McDermott’s arguments.

The Decision

Notably, in his decision, Lord Sandison began: “… the Court will be slow to refuse to enforce an adjudicator’s decision. However, if the adjudicator’s decision plainly indicates that he failed in arriving at his conclusions to consider and deal with a line of defence advanced before him, then that may (not necessarily will) lead to the conclusion that he failed to exhaust his jurisdiction and that his decision should be set aside.”

The Judge did not accept this view and submitted that:

“It is not possible to read the decision other than as the adjudicator deciding that the letter of 14 March 2022 was validly included by reference in the Interim Payment Notice sent to the Quantity Surveyor in October. Whether any of that can be criticised as a conclusion ill-founded in fact or law is of no consequence; the objection that the defender made, and which he maintains that the adjudicator failed to address, was plainly fully dealt with by the decision.”

Lord Sandison concluded:

“The question was fully answered and the reasoning exceeds the low bar of intelligibility which is required. The defender’s criticism amounts merely to the suggestion that the adjudicator’s reasoning was flawed and the resultant decision wrong. That is an irrelevant assertion in this context. It follows that the defence to the action is irrelevant.”

The Court therefore enforced the adjudicator’s decision in AGB’s favour.

Key Takeaways

The reference in a pay less notice to a letter and appendix which was already in the hands of the payer or its certifier was deemed to contain sufficient detail in providing the basis for calculation of the sums due.

The Courts have yet again confirmed that they will be hesitant to refuse to enforce an adjudicator’s decision unless it can be proven that they did not consider the arguments placed before them.

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