Kitt & Anor v The Laundry Building Ltd & Anor

In these proceedings, there is a disputed claim by an adjudicator for his fees in connection with an adjudication. The Referring Party (the Part 20 Defendant) was ordered to pay the adjudicator's fees but has declined to do so. Consequently, the adjudicator seeks payment under his contract with the parties on a joint and several basis from the Responding Party to the adjudication, with the Referring Party being brought in as third party. The case arguably raises issues that were considered by the Court of Appeal in PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371. It is said that the adjudicator’s decision was unenforceable because he exceeded his jurisdiction.

In December 2011, The Laundry Building Limited (“TLB”), the Defendant and Part 20 Claimant, engaged Etcetera Construction Services Ltd (“ETC”) to carry out building work at an old laundry building in Warburton Road Hackney, London. A dispute arose between TLB and ETC in relation to payments. It seems that ETC issued its Final Account on 11 February 2013 and the Contract Administrator (“CA”) certified a payment for ETC on 15 March 2013 but, by letter dated 20 March 2013 to ETC, TLB indicated that it considered that substantially less was payable and that there were cross claims (for liquidated damages, defects and outstanding works, contra charges and work not done and failure to provide Operation and Maintenance Manuals) totalling £83,547; these were payment and payless notices under the legislation. TLB attached an A3 schedule listing every item on the final account, what was claimed, what was assessed by the CA, and, with comments, what TLB assessed was due. An example is Item 13 ("Replace glazing bead"), said to be a variation where the omission value was £2,295 but the addition value was £4,649.40; the CA agreed with these figures but TLB explained that, although it accepted the omission value, it valued the addition at £2,468.20 by reference to the "Provisional Sum rate”. On 20 May 2013 TLB wrote again to ETC apparently in the context that the CA had not issued a further money certificate but TLB considered it necessary for contractual purposes to issue revised figures which showed that there was only a balance due of £14,206.28, which was subject to the same types of cross claim in the sum of £76,360.19, there being therefore no sums due to ETC; a somewhat revised A3 schedule was attached.

On 25 June 2013, ETC served a Notice of Adjudication on TLB which between Paragraphs 2 and 8 gave some background about the contract such as the original contract completion date being 13 July 2012 and the fact that completion was delayed with an extension having been granted to 13 August 2012, partial possession being certified on 10 August 2012 and Practical Completion being achieved on 7 September 2012. ETC said:

“7…ETC accepts the… Extension of Time award against ETC’s first application for an extension (4 weeks and 3 days) and the weekly value for loss and expense. ETC does not give the adjudicator jurisdiction in this adjudication to open up the extension of time award or the agreed weekly value for loss and expense.

8.

TLB has not accepted the CA’s or ETC’s assessment of the delays and pursues ETC for liquidated damages.

9.

ETC considers that the Final Account for the Contract Works is £1,223,749.53. ETC has been paid the net sum of £936,000.00 which leaves £287,749.53 plus VAT at the appropriate rate for payment.

Matters to be decided

10.

ETC requires the following decisions:-

Issue 1

11.

A decision that ETC’s final account should be valued at £1,223,749.53. Or such other sum as the adjudicator may decide, plus VAT at the appropriate rate. Details of the various sums that make up the final account will be particularised in the Referral. Final account item Nos. 8, 10, 13, 15, 17, 17a, 27, 28, 30, 31, 34, 39, 41 to 48 inclusive, 52, 54, 59, 62, 66, 71, 82, 95, 96, 98, 100, 108, 109, 116, 117, 121, 142, 143, 149, 151, 152, 159, 164, & 178 are not required to be opened up by the adjudicator as ETC accepts the CA’s values for these items. Item No. 161 is not to [be] opened up for the extension of time already granted and item No. 163 is not to be opened up for the agreed weekly value for loss and expense.

Issue 2

12.

A decision that TLB shall forthwith pay ETC the balance due on its final account of £287,749.53 or such other sum is the adjudicator may decide plus VAT at the appropriate rate;

Issue 3

13….interest

Issue 4

14.

A decision that TLB shall pay the adjudicator’s reasonable fees and expenses.”

The appropriate appointing institution, the RICS, appointed as the adjudicator the First Claimant, Mr Gary Kitt, of the well known quantity surveyor firm of EC Harris LLP. There is, rightly, no dispute that there was in effect a tripartite agreement between TLB, ETC and Mr Kitt whereby he was to be retained as adjudicator. That is evidenced by a letter dated to 2 July 2013 from him to the parties together with formal Terms of Appointment, TLB’s reply e-mail of the same date accepting those Terms and an e-mail to similar effect from ETC on 3 July 2013. The Terms were, so far as material:

“1.

Hourly rate of £295 per hour in respect of all time spent upon, or in connection with, the adjudication…

4.

Once I have reached my Decision, I will render an account for my fees and expenses, and this account will be due for payment upon presentation;

8.

All payments shall become due on presentation of invoice, thereafter interest shall be payable at 8% per annum above the Bank of England base rates every day the amount remains outstanding;

9.

The parties are and remain jointly and severally liable for all fees and expenses incurred.

10.

Notwithstanding that the appointment is a personal one of Gary Kitt, the invoice for payment shall be issued by, and payment shall be made to, EC Harris LLP…”.

On 27 June 2013, TLB had written to ETC referring to earlier correspondence saying that it had provided by mid April 2013 "a substantial amount of information…stating specifically why and how we have valued each item of your interim applications" and stating that there were "many items of outstanding and defective contract works for which we have received no proposals of how you intend to deal" with them.

On 5 July 2013, TLB wrote to the adjudicator explaining in detail the background (as it saw it) in relation to the final account, referring (amongst other things) to the CA payment certificate of 15 March 2013, TLB’s letter of 20 March 2013 (see above), various meetings and communications in or by which the parties had had or exchanged relating to differences on the final account and further information which had been provided, TLB’s letter of 20 May 2013 and the issue of a "revised final account" by ETC on 20 June 2013. It then moves on to the Notice of Adjudication:

“At first blush, the Notice refers for determination the full value of the ETC final account. However, that this is not so, is demonstrated by the following:

1.

Whilst ETC says that the adjudicator is required to decide whether its second application for an extension of time is justified (Notice, paragraph 7), it asserts that it "does not give the adjudicator jurisdiction in this adjudication to open up the extension of time award or the agreed weekly value for loss and expense". (TLB denies that it has made any binding agreement on weekly loss and expense and denies that any extension of time has been awarded or that any contractual application for any extension of time has been received); and

2.

Further, whilst ETC says that it requires a decision that it is entitled to the full value it claims for the final account (Notice, paragraph 11), it also asserts that the adjudicator must not open up numerous final account items in reaching his decision.

There are only 2 possible analysis [sic] of the Notice, as regards the scope of the dispute referred, as follows:

1.

As TLB considers to be the case, ETC has referred to questions of:

(a)

ETC’s entitlement to its alleged second extension of time [in which case the position and merits of the first extension [of] time will need to be considered in this adjudication - for the avoidance of doubt TLB confirm that it considers that no extension of time has been awarded and it considers that no contractual application has been received],

(b)

ETC’s related claim for loss and expense, and

(c)

the aspects of the ETC final account claims other than the Final Account items listed at paragraph 11 of the Notice.

If that is correct, there will be limits on the declarations and relief that can be sought in relation to such claims, including having regard to the payment and payless notices of 20^th May 2013.

2.

The merits of the entirety of the ETC’s claims to be paid its full most recently submitted final account value has been referred. In which case, there would need to be considered by you the merits of both parties’ positions on:

(a)

all aspects of the Final Account items submitted, and

(b)

each of the heads of claim of TLB that are set out in its payless notice dated 20^th May 2013.

This is because for you it arrived at a determination that the final account value is in the order of that claimed by ETC you would have to reach the conclusion, for example, that the substantial claims for the defects referenced in that payless notice are without merit. It is to be noted that ETC does not seek declarations that its claims for measured works, variations and loss and expense are at the values it attributed to those items in its final account. Rather, it seeks a declaration that, on a final account basis, it's claims total the aggregate of those submitted claim heads and that it should be decided that it be paid by reference to that value on a final account basis.

We would trust that you will agree that the scope of the adjudication is as per above paragraph 1. If, however, you were to consider that the scope is as per above paragraph 2, then we confirm that we would continue to participate in the adjudication and compile our Response accordingly. However, this would need to be on the basis that TLB does so under protest and strictly without prejudice to its position on the jurisdiction that the Notice confers been limited as per paragraph 1.

ETC is adopting a "cake and eat it" approach in its notice. On the one hand it wishes to have all claims determined and decisions as to their payment but on the other it seeks that in doing so TLB should be shut out from defending itself to its full availability in relation to those claims (whether by raising for your consideration defences as to the correct quantum of individual claim items and/or defences by way of cross and counter claims). That is not possible as a Responding party has an unfettered ability to elect how to defend itself in response to a notice and ETC "telling" the adjudicator that he must not consider legitimate defences is of no legal effect.

Indeed, the decision in Cantillon ltd v Urvasco Ltd [2008] EWHC 282 (TCC) makes clear that "whatever dispute is referred to the Adjudicator, it includes and allows for any ground open to the responding party which would amount in law or in fact to a defence of the claim with which it is dealing". It therefore follows that TLB shall be at liberty to raise such matters as it considers relevant, in law or in fact, to the assessment of whether the final account should be valued at £1,223,749.53…”

ETC’s e-mailed response to this on 5 July 2013 was that it was "seeking from the adjudicator…a fair valuation of just the specific final account items highlighted in ‘yellow’ on our document (Appendix 2) entitled FINAL ACCOUNT – ADJUDICATION DOCUMENT and agreement regarding the validity and acceptance of our Extension of Time claims", saying that it had "reserved which items we want opening up and not opening up as there is no reason to open up items already agreed by the CA who was appointed by the Employer to make such decisions under the contract." Mr Kitt replied by e-mail later that day to the parties, saying as follows:

“I am clear that ECS is seeking both the valuation of its final account and the payment of any sums that I find due. In my opinion, my jurisdiction therefore covers valuation of all of the items comprising ECS’ final account and I understand ECS’ position to be that in respect of those items referred to at paragraph 11 of the Notice of Adjudication ECS accepts the CA’s current valuation. It is not for me to comment as to how TLB wishes to respond to the Referral and I now direct that [TLB] provides its Response to the Referral together with a summary of the contentions on which it relies, a statement of the relief or remedy which is sought and any material it wishes me to consider…”

The Referral had been served on 3 July 2013 and provided little more information than was in the Notice of Adjudication, albeit it attached various Appendices which provided more detail of its claims; it did however make clear that it was proceeding on the basis that only the CA’s figures where ETC disagreed with them were to be considered anew by the adjudicator.

On 11 July 2013, TLB served its Response saying at Paragraph 15 that it was submitted "on the basis that the Adjudicator will hear and decide the value of all of the items contained within the ETC final account" and that "the adjudicator will hear and decide upon all of the items that are outlined within the TLB Payment Notices dated 20^th March and 20^th May and TLB Payless Notices dated 20^th March, 20^th May and 28^th of June, all included in Appendix No. 4 hereto". It provided information to support its position on the final account and the various cross claims and contra charges which had previously been highlighted.

ETC put in its Reply some time thereafter with a preface saying:

“For clarity ETC confirms that it does not give the Adjudicator jurisdiction to decide matters that the CA has valued when that valuation is accepted by ETC. If the Employer wishes to contest the valuations made by his own CA then he should do so in a separate adjudication."

It went on to address the cross claims and contra charges, denying them, albeit in some detail.

As seems to be the growing practice in adjudication, this was met by a "Rejoinder" from TLB on 26 July 2013 which repeated (at Paragraph 6) what it had said at Paragraph 15 of its Response. Much of this Rejoinder is concerned with the cross claims and contra charges.

On 26 July 2013, ETC wrote to Mr Kitt saying that "the Rejoinder deals almost entirely with their contra charges and other claims neither of which form part of this adjudication." Following a reply from TLB on 28 July 2013 which said that both parties were “perfectly aware of the ambit of the Adjudication" and that “ETC had been provided with ample opportunity to present its full case…and have had adequate opportunity and direction from yourself to formulate a complete Reply which sets out their entire position within the ambit of this Adjudication", ETC served a "Surrejoinder". This was prefaced with and Introduction which amongst other things said:

“…We thank TLB for introducing these items [in the Rejoinder] and giving us the opportunity to put our position on these to the Adjudicator.

With regard to [TLB’s] continual reference to snagging, defects, outstanding items and contra charges, ETC remind TLB that the defects liability period has not yet expired and that ETC has confirmed on many occasions that we are prepared to attend to genuine defects and complete any agreed an outstanding works once they have been identified by the CA.

We confirm that we have not responded at this stage in detail to TLB’s claims and contra charges as we do not feel that they should be included within this adjudication."

The Surrejoinder then went on to look at three items in some detail relating to the Kitchen Extracts, O&M Manuals and the Panel Board, attaching a number of contemporaneous documents.

On 15 August 2013, the adjudicator issued his decision. He addressed the jurisdictional challenge at Paragraphs 6 to 19. He said at Paragraph 11 that he was of the view that "in order to determine the value of ETC’s final account, or more properly the value of the adjusted Contract Sum, it would be necessary for me to consider TLB’s position on any of the Variation items in respect of which it disputed the value", going on at Paragraph 12 to say:

“In addition, ETC sought an order for payment and interest based on my valuation of its final account and I have formed the view that to order of payment I could not simply decide upon and declare the value of certain Variations only. I have therefore approached this adjudication by reviewing the value of each other Variation items where the parties are not in agreement."

In relation to TLB’s set off for defective and outstanding works and contra charges, he referred to the fact that ETC had not commented on a number of the items raised by TLB or provided alternative valuations (Paragraph 16) continuing at Paragraph 17:

“It is my understanding of the law that it is open to a defendant to raise any defence to a claim when it is referred to Adjudication. In the same way, the claiming party is not limited to the arguments, contentions and evidence put forward before the dispute crystallised. I, as Adjudicator, have to resolve the referred dispute which is essentially the challenged claim but I'm able to consider any argument, evidence or other material for or against the claim in resolving the dispute. For this reason I believe that it is necessary for me to decide on TLB’s defences of set off for liquidated damages and outstanding defective works. As regards works not carried out I believe it to be uncontroversial that I need to deal with these issues in resolving what is essentially a final account dispute."

He then went on to review all the disputed items on the final account and the contra charges. He set out in his Appendix 1 in effect a Scott Schedule which listed every item on the Final Account as relied upon by ETC (187 items plus), listing what was claimed by ETC, what was allowed by CA, what was put forward by TLB and what he allowed in terms of omissions and additions together with his "Comments". For instance, on Item 13 (referred to above), he accepted ETC’s evidence and allowed exactly what it and the CA had said was the value. On other items, and in particular most of those upon which ETC had not put in any evidence, he allowed only what TLB had put forward. An example is Item 8 entitled "Omit steps to shop front Add back repairs" for which both ETC and CA had apparently valued the omission at £1,680 and the addition at £1,255.75 but TLB had valued this at £1,680 and £0 respectively. The adjudicator agreed with TLB commenting:

“The value of the omission is agreed to be £1.680.00 and as regards the addition ETC has not provided me with any evidence to persuade me to depart from TLB’s £nil valuation."

This comment was repeated in effect in respect of most of the 45 items which ETC had sought to prevent the adjudicator looking at and where it had put in no evidence. There were some other items where the adjudicator accepted either what TLB or ETC had been asserting. His valuation of the final account was £1,014,407.70.

In relation to extension of time, he found that, although no proper extension of time had been granted, an extension of four weeks was due in relation to a postponement and certain variations but he accepted that only about half of the associated loss and expense as claimed was due, agreeing in effect with the CA’s valuation. He found that no further extension had been proved. He refused the ETC claim for interest on late payments on the basis that the interest provisions in the contract only allowed for late payment of certified sums as opposed to claims of undervaluation.

In relation to liquidated damages, the adjudicator allowed £11,200 to the credit of TLB, this following on from his finding that no extension of time was due beyond the four weeks which he had allowed. In relation to defects and outstanding works, he set out in Appendix 2 to his decision, also in Scott Schedule form, his findings on 73 items raised and allowed in favour of TLB £40,923.01. He rejected TLB’s claim for O&M Manuals finding that ETC’s evidence, particularly in the Surrejoinder, convincing. Allowing for retention, which was not then due for release, and the various credits and debits, he found that the net amount due to ETC was £924.50. To that he added interest of £21.31. In relation to its fees and expenses, he decided that, because TLB had substantially succeeded, "ETC should be primarily liable for my fees and expenses and shall pay me forthwith the sum of £11,800 plus VAT of £2,360”.

The adjudicator (or EC Harris) submitted his invoice to ETC in late August 2013 and following a reminder in October 2013 ETC in a letter dated 28 October 2013 made it clear that it was not prepared to pay because, it asserted, the decision was "unenforceable" broadly on the basis that he was bound to but had failed to ignore anything which TLB put up in the adjudication which was contrary to what the CA had said. It asserted that TLB had agreed that his jurisdiction was limited in effect in its letter of 5 July 2013 (see above). There then followed some correspondence with both parties with TLB urging him to commence proceedings against ETC.

History does not relate why it took the adjudicator and EC Harris until September 2014 to issue their claim for adjudicator's fees. The Claim Form and Particulars of Claim set out details about Mr Kitt’s retainer and his performance of the contract leading to the decision. The claim was in line with the invoice that was increased to reflect interest at the rate of 8% above base rate since August 2013.

The Defence is, broadly, in the form of a non-admission, referring to the contents of ETC’s letter dated 28 October 2013 and indicating that it would join in ETC as a third party to the proceedings saying that in effect it would rely on ETC’s case if it was successful in its contention that Mr Kitt had exceeded his jurisdiction or acted in breach of the rules of natural justice.

TLB issued Part 20 proceedings against ETC on the basis that each was jointly and severally liable, that otherwise ETC would be unjustly enriched by not having to pay what it was obliged to pay and alternatively pursuant to the Civil Liability (Contribution) Act 1978.

ETC’s Defence was that the decision was not binding and enforceable and because, by addressing the matters which the Notice of Adjudication sought to exclude, the adjudicator had acted in breach of the rules of natural justice and had exceeded his jurisdiction and acted in breach of an implied term of his appointment to the effect that he would decide the dispute referred to him in accordance with the jurisdiction granted by the parties, in accordance with the rules of natural justice and by producing a decision that was binding on the parties. In relation to any outstanding amounts found to be due to TLB from ETC in these third-party proceedings, ETC sought to set off the outstanding amounts due to it from TLB “for work carried out under the Building Contract", this claim being "currently the subject of an Arbitration". No details of this work were provided in the pleading or by way of any witness statement on the summary judgement application before the Court.

In broad terms, the argument, which was primarily between Mr Kitt’s Counsel and ETC’s Counsel, came down to an argument about the adjudicator’s jurisdiction. On analysis, Mr Sliwinski argued that in effect the items which were reviewed by the adjudicator downwards from what the CA had allowed and which had been identified as being in effect excluded from the adjudicator’s jurisdiction in the Notice of Adjudication were not in dispute. He relied upon the terms of TLB’s letter of 5 July 2013 saying that in effect TLB had agreed that the adjudicator’s jurisdiction was limited. He also relied upon a number of miscellaneous points, saying that TLB should not be allowed to approbate and reprobate; insofar as it is a separate point from TLB’s suggested agreement that the adjudicator’s jurisdiction was limited, this was not pleaded. He argues that the Part 20 claim does not plead properly “the basis of the claimed joint and several liability". He does suggest that the adjudicator was in breach of the rules of natural justice because he did not accept "the parties’ joint position that he did not have jurisdiction to open up the items" listed on the Notice of Adjudication". He has some other arguments about costs which I do not have to go into at this stage. It should be pointed out that ETC did not submit any evidence on the summary judgement application.

Mr Crangle’s position was, he said, relatively neutral, he being in the middle: if it was established that the decision was unenforceable, then both TLB and ETC would succeed. If the decision was enforceable, Mr Kitt and/or EC Harris would succeed against TLB who would succeed against ETC.

Mr Finn’s primary argument was that the adjudicator acted within jurisdiction and wholly properly; he argued that the adjudicator’s reasoning as to why he properly had to consider all matters on the final account raised by both parties as well as the set-offs was totally right. In any event, this was not a case of breach of the rules of natural justice because the adjudicator gave notice of his approach early on and in effect gave ETC the clearest opportunity to put in any evidence or argument which it wished on any item in the final account and indeed in relation to the set-offs; indeed, he says, ETC took some advantage of this, particularly in the Surrejoinder. He also took a pleading point, saying that technically TLB had not advanced any or any sufficient defence and irrespective of the outcome of the issue about enforceability that his client was entitled to payment against TLB even if failed on its Part 20 proceedings against ETC.

It has been said that the Notice of Adjudication defines the dispute and the adjudicator takes his or her jurisdiction from the content. Whilst that is generally a good rule of thumb, it is of course not always the case. An example is the referral of something which is explained in the Notice of Adjudication as being a dispute when it has never been disputed beforehand; for instance, an entirely new claim which has never been put to the other party cannot become a dispute unless and until it has been notified to the other party and it does not become a dispute simply because it is set out in the Notice of Adjudication. One also must look at the supposedly disputed claim set out in the Notice of Adjudication in its context and that context will usually involve a consideration of acts and communications between the parties over the preceding weeks if not months.

There is a settled body of authority for the proposition that an adjudicator has to consider and indeed adjudicate on defences put forward by a defending party in adjudication, even if a specific defence has not been raised before. Some of them were set out in the case of Jacques v Ensign Contractors Ltd [2009] EWHC 3383:

“23.

In Cantillon Ltd v Urvasco Ltd [2008] BLR 250, the Court recognised the following:

"54.

It is, I believe, accepted by both parties, correctly in my view, that whatever dispute is referred to the Adjudicator, it includes and allows for any ground open to the responding party which would amount in law or in fact to a defence of the claim with which it is dealing. Authority for that proposition includes KNS Industrial Services (Birmingham) Ltd -v- Sindall Ltd 75 Con LR 71."

24.

In Quartzelec Ltd v Honeywell Control Systems Ltd [2009] BLR 328, HHJ Stephen Davies addressed a case in which the adjudicator refused to consider a particular defence. Materially so far as the current case is concerned, he said, having referred to Paragraphs 54 and 55 of my judgement in the Cantillon case as follows:

"30.

I respectfully agree with what is said by Akenhead J. Where the dispute referred to adjudication by a claimant is one which involves a claim to be paid money, it is difficult to see why a respondent should not be entitled to raise any defence open to him to defend himself against that claim, regardless of whether or not it was raised as a discrete ground of defence in the run-up to the adjudication, and subject to any considerations of natural justice. The adjudicator has jurisdiction to, and should, consider any such defence. That may result in him accepting or rejecting the defence, in whole or in part. It may be the case that one ground for rejecting a defence not previously raised is that it cannot properly be advanced in the absence of a withholding notice. It may be the case that another ground for rejecting a defence not previously raised is that the failure to raise it at an earlier stage is fatal to the adjudicator's assessment of the genuineness of that defence. But it does not seem to me that a decision to either such effect is a decision by the adjudicator as to his jurisdiction to consider the defence; instead it is a decision within his jurisdiction about the merits of that defence.

31.

I consider, therefore, that Ms. McCredie was right to submit that if the adjudicator had considered the defence and decided, even if wrongly, that it could not succeed in the absence of a withholding notice, that would be a decision within his jurisdiction and would not be one which this court could review on an enforcement hearing. This is consistent with the judgment of Lord MacFayden in SL Timber Systems Limited v Carillion Construction Limited [2001] BLR 516, to which she referred me, at paragraph 23. However the corollary of that, in my judgment, is that since the adjudicator has jurisdiction to consider such defences, he ought to do so, and if he does not do so then he does not properly perform the task which he has been appointed to do. In those circumstances, he also does not in my judgment act in accordance with natural justice, because he has not heard the respondent on all of the defences which he seeks and is entitled to put forward.

32.

Ms. McCredie submitted that in paragraph 54 of his judgment Akenhead J. was saying no more than that where a defence was properly open to a respondent, then the adjudicator ought to consider it. I do not accept this. Apart from the objection that such a reading would deprive the paragraph of any meaningful content, it is wholly inconsistent with paragraph 55, where Akenhead J. says in terms that 'it is open to any defendant to raise any defence to the claim when it is referred to adjudication or arbitration' (emphasis added)…”

25.

Ms Rawley for the Contractor in this case also argued that it was open to the Court to infer from what was put before the Adjudicator and what was said or not said in the Adjudicator's decision that the Adjudicator had not considered or addressed the defences properly put forward by a defending party. I agree that the Court can so infer; indeed, it may be a rare case (CJP Builders Ltd v William Verry Ltd [2008] BLR 545 being one) that the Adjudicator will admit that he or she has not considered a proper defence. Accordingly, where the breach of natural justice complained of is a failure to consider defences properly put forward, the Court will often have to infer whether there has been such a failure.

26.

In the context of this case, I draw the following conclusions:

(a)

The Adjudicator must consider defences properly put forward by a defending party in adjudication.

(b)

However, it is within an adjudicator's jurisdiction to decide what evidence is admissible and, indeed, what evidence is helpful and unhelpful in the determination of the dispute or disputes referred to that adjudicator. If, within jurisdiction, the adjudicator decides that certain evidence is inadmissible, that will rarely (if ever) amount to a breach of the rules of natural justice. The position is analogous to a court case in which the Court decides that certain evidence is either inadmissible or of such little weight and value that it can effectively be ignored: it would be difficult for a challenge to such a decision on fairness grounds to be mounted.

(c)

Even if the adjudicator's decision (within jurisdiction) to disregard evidence as inadmissible or of little or no weight was wrong in fact or in law, that decision is not in consequence impugnable as a breach of the rules of natural justice.

(d)

One will need in most and possibly all "natural justice" cases to distinguish between a failure by an adjudicator in the decision to consider and address a substantive (factual or legal) defence and an actual or apparent failure or omission to address all aspects of the evidence which go to support that defence. It is necessary to bear in mind that adjudication involves, usually, the exchange of evidence and argument over a short period of time and the production of a decision within a short time span thereafter. It is simply not practicable, usually, for every aspect of the evidence to be meticulously considered, weighed up and rejected or accepted in whole or in part. Primarily, the adjudicator, needs to address the substantive issues, whether factual or legal, but does not need (as a matter of fairness) to address each and every aspect of the evidence. The adjudicator should not be considered to be in breach of the rules of natural justice if the decision does not address each aspect of the evidence adduced by the parties.”

The next question to consider is whether the Notice of Adjudication can so circumscribe and delineate the dispute set out in or purportedly defined within it so as to exclude particular defences. In my judgment, it can not. It would be illogical and untenable, if not ludicrous, if this was the case. One needs only to take this case to see that this can not be logical or fair:

If this scenario was attempted in court proceedings, it would rightly be treated as completely wrong and unjustified. The Court would never feel constrained by artificial attempts to limit its jurisdiction, although of course it would only address (usually) the arguments in defences actually mounted by a defendant.

I am wholly satisfied that it is not possible in adjudication to limit an adjudicator’s jurisdiction in this way. One can not refer to adjudication a disputed claim to payment and dress up the definition of the dispute in such a way as jurisdictionally to prevent a defending party from raising any defence, whether good or bad, in the adjudication. A distinction is to be drawn between a potential evidential weakness in a defence, which can be highlighted in the Notice of Adjudication; an example would be that a money claim is based exactly on what the defending party's own architect has certified or approved such that this represents, so to speak, strong evidence in the referring party’s favour. To seek, however, to refer a payment claim and say, at the same time, that the referring party is not referring parts of the claim which might be challenged by the defending party is illogical, unmeritorious and wrong. It is a device which cannot and should not work.

Moving on to a related point, which is as to whether there was agreement that the adjudicator should not look into the final account items listed in the Notice of Adjudication, this is, simply, a matter of interpretation. The Notice of Adjudication is consciously or otherwise an ambivalent if not ambiguous document because it seeks to tell the adjudicator and TLB that there can be no investigation into or challenge of those items but nonetheless seeks payment on the overall final account, less what has been paid. This is ambivalent because it is asking the reader to make the assumption that those items are unchallengeable because in some way they are not being referred to the adjudicator or they are being referred to the adjudicator on the basis that they represent, so to speak, money in the bank for the referring party. I accept that it would have been open to ETC to refer to adjudication a dispute as to what the true values of individual items in the final account were but, when it then seeks to procure a decision from the adjudicator requiring payment to it, it must be left open to TLB to run defences that no sum is due because the CA and ETC have overvalued the final account and by reason of various set-offs. The position is even clearer here in relation to the set-offs where there is no attempt in the Notice of Adjudication to seek to limit the adjudicator’s jurisdiction. I therefore consider that the Notice of Adjudication is sufficiently ambivalent and ambiguous that it did not exclude the adjudicator from adjudicating upon all items on the final account which were in fact disputed in the adjudication and upon whether and if so to what extent that were any justifiable set-offs.

In any event, one can not read TLB’s letter of 5 July 2013 as agreeing to limit the adjudicator’s jurisdiction and right to adjudicate upon all such items. What TLB was doing in the extracts quoted above was, firstly, an attempt to analyse what the Notice of Adjudication was purporting to do. In effect, TLB interpreted the Notice as doing no more than it actually superficially purported to do. However, it went on in the following "cake and eat it" paragraph to say that it had and in effect should have the right to raise whatever defences it could legitimately raise, including defences as to the correct quantum of individual items in the final account for defences by way of set off. There can be no doubt that TLB was saying to the adjudicator that he could and should consider all such legitimate defences. It can not therefore begin to be said that TLB was in some way agreeing to any course of action by which the adjudicator's investigation into the final account and the overall state of the account as between the party was limited as the Notice of Adjudication purportedly suggested.

The adjudicator was absolutely open with both parties, saying as early as 5 July 2013 that his jurisdiction covered valuation of all items comprising the final account. He gave ETC every opportunity to assert by argument or evidence that what TLB said was wrong in relation to the CA items which it made clear that it disagreed with and to the various set-off heads of cross- claim put forward by it. It is clear from the background history that, as the valuations put forward (rightly or wrongly on the facts) by TLB in the adjudication had been put forward a good few weeks before the adjudication was instituted, it can not have come as a great surprise to ETC what TLB was saying and ETC had had the time and opportunity to respond. It appears however not to have had the inclination. In any event, it did take the opportunity at least to respond, indeed in some detail, on some of the set-off points, with partial success in the adjudication. I therefore reject any assertion that the adjudicator acted in breach of the rules of natural justice. ETC had and was given the opportunity to respond but it chose not to; whether it was advised wrongly or not is immaterial. A rule of natural justice is that parties to an adjudication must be given the opportunity to put their case or their defence but it is up to the parties whether they take up that opportunity.

I do not consider that the doctrine of approbation and reprobation comes into play at all, in the light of my findings in relation to the obvious meaning of TLB’s letter of 5 July 2013. TLB has not taken an inconsistent line in the adjudication and before the Court; indeed it had taken an absolutely consistent line.

Mr Finn’s pleading point does not have to be decided in the circumstances. However, I would have found that it was a bad point because it has always been clear what TLB’s position in the proceedings was: it was not accepting, and thus it was putting in issue the point, that the decision was enforceable but it was putting forward no positive case as such but relying upon what ETC might and indeed did argue, albeit unsuccessfully. It would be an extraordinary state of affairs if, by way of this pleading point, Mr Kitt could succeed against TLB, albeit that it had been established in the Part 20 proceedings that the decision was unenforceable. It is certainly a highly unmeritorious point.

There remain a number of miscellaneous points on the Part 20 proceedings and I can deal with them in fairly short order:

It follows that there is no defence either by TLB or by ETC to the Claim and Part 20 Claim respectively. The Court of Appeal decision in PC Harrington Contractors Ltd v Systech International Ltd is therefore not engaged as the adjudicator acted within jurisdiction and in accordance with the rules of natural justice.

There will be judgment for Mr Kitt and EC Harris against TLB and for TLB against ETC for the amount claimed.

I have received the parties’ written submissions on costs. In simple terms, the Claimants have succeeded against TLB whilst TLB has succeeded on its third party proceedings against ETC. The Claimants’ costs bill is relatively modest in the total sum of £10,893 whilst TLB’s is £10,970.40. ETC argues that it would be wrong for it to have to shoulder both the Claimants and TLB’s costs and that the TCC Protocol Process should have been followed.

I have formed the view that the Claimants cannot be criticised for directly pursuing TLB as TLB was jointly and severally liable together with ETC and the Claimants had a perfectly good cause of action against TLB. Indeed, TLB had effectively encouraged the adjudicator by its letter of 5 July 2013 to adopt the approach which he did but which was later challenged by ETC. It was legitimate for TLB to adopt a neutral position having joined in ETC as third party; I consider that it is not an unfair or incorrect inference that in reality TLB’s position, albeit neutral in pleading terms, was more sympathetic to the Claimants than to ETC.

It follows, but with one variant, that Claimants should have its costs paid for by TLB and that ETC should reimburse TLB therefor. The variant is this that TLB should only have 60% of its own costs, the reason being that the incurrence of nearly £11,000 for in effect sitting on the fence is and was disproportionate, albeit it was of course legitimate to bring in ETC as a third party.

So far as the argument that the Claimants did not go through the TCC Protocol process, it is abundantly clear that such a course would not have produced a resolution for this modest claim as ETC was determined not to pay the adjudicator. It would of course have added to the costs.

So far as the summary assessment is concerned, I have no doubt that a detailed costs assessment would reduce the Claimants’ and TLB’s bill down to about £9,000. I therefore summarily assess each bill overall at that figure. TLB will pay therefore £9,000 to the Claimants and ETC will pay that sum and £5,400 in respect of TLB’s costs.