Where a contract is not governed by the HGCR Act 1996, it is important to distinguish between submitting to the Adjudicator's jurisdiction under the terms of the contract and submitting to the Adjudicator's jurisdiction on the same terms as the 1996 Act and the Scheme or as if the 1996 Act and the Scheme applied
Her Honour Judge Kirkham, Technology and Construction Court
13 August 2001
The Claimant ('PP') agreed to provide odour abatement equipment to the Defendant ('Purac') for a waste water treatment works project on which Purac was main contractor. The sub-contract was based on the FCEC Blue Book standard form with bespoke amendments.
The following order of events occurred:
- PP applied for a milestone payment under the sub-contract. Purac served a withholding notice under the sub-contract stating that it would not be paying because, it said, PP had failed to meet its contractual obligations.
- Purac notified PP that they were terminating the sub-contract and taking over the remaining sub-contract works.
- PP referred the dispute regarding the milestone payment to adjudication. The Adjudicator decided that Purac's withholding notice was invalid and awarded PP a sum of money.
- Purac served another withholding notice on PP seeking to set-off against the sum awarded by the Adjudicator an amount in excess of it (being the cost of completing the works following termination of the sub-contract).
PP applied for summary judgment in respect of the Adjudicator's decision. It was common ground that the sub-contract was not a construction contract.
The adjudication lacked the statutory backing of the HGCR Act 1996. Purac had submitted to the jurisdiction of the Adjudicator under the terms of the sub-contract, which provided for adjudication. The Judge distinguished this from the parties to an adjudication agreeing that it takes place on the same terms as the HGCR Act 1996 and the Scheme or as if the HGCR Act 1996 and the Scheme applied. In that case the Adjudicator's decision would be enforceable as if the Act applied, i.e. with statutory backing (see the unreported decision of HHJ Toulmin QC in Maymac Environmental Services v Faraday Building Services, 16 October 2000).
Thus, in the first situation the right to withhold would be governed by the terms of the contract (as happened here), whereas in the latter situations there would be limited circumstances in which the paying party could withhold against the Adjudicator's decision (see, for example, the Court of Appeal's judgment in Levolux A.T. Limited v Ferson Contractors Limited at page 138).
The Judge held that under the particular provisions of the sub-contract Purac was entitled to withhold payment of the sum awarded by the Adjudicator. A clause providing for the Adjudicator's decision to be final and binding was qualified by another clause permitting set off against any sum due. 'Any sum due' included sums awarded by Adjudicators.
PP unsuccessfully appealed against the Judge's decision (see page 117).
Where a contract is not governed by the HGCR Act 1996, it is important to distinguish between submitting to the Adjudicator's jurisdiction under the terms of the contract and submitting to the Adjudicator's jurisdiction on the same terms as the 1996 Act and the Scheme or as if the 1996 Act and the Scheme applied.
For more information please contact Victoria Peckett via email at [email protected].
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