Neutral Citation Number: [2012] EWHC 1039 (TCC)

Case No: HT-12-91

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 24 April 2012

Before :

MR JUSTICE AKENHEAD

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Between :

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Mark Raeside QC (instructed by Prettys ) for the Claimant

Fionnuala McCredie (instructed by Freeth Cartwright LLP ) for the Defendant

Hearing date: 17 April 2012

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JUDGMENT

Mr Justice Akenhead:

1. This case raises issues about adjudication enforcement, crystallisation of disputes and the severability of parts of an adjudicator’s decision.

The Background Facts

2. The Defendant, Greencoat Construction Ltd ("Greencoat") was a main contractor employed to carry out substantial fitting out works at existing office accommodation at 130, Shaftesbury Avenue, London W1. By a sub-contract made in April 2011, Greencoat engaged Working Environments Ltd ("WE") to carry out the mechanical services installation for this project. The sub-contract incorporated the JCT SBCSub/A 2005 Standard Building Sub-Contract Agreement Revision 2 2009 terms. It is common ground that there was an adjudication clause which incorporated the statutory Scheme. Provision was made for WE to apply for payment on the second to last Friday of each month and for Greencoat to issue a payment certificate within one week thereafter; the final date for payment was to be 45 days after receipt of an invoice by WE.

3. On 24 November 2011, WE submitted to Greencoat its Interim Application No.10 in which it claimed the following gross sums:

Breakdowns of the first two figures were provided. Allowing for previous payments, a total sum of £488,153.45 was claimed.

4. Greencoat issued its tenth "Payment Certificate and Notice of Withholding Payment” in response to this Application on 2 December 2011. It certified as follows:

There were enclosed breakdowns of how these various sums were made up or calculated. £16,686.36 was said to be due for payment. In respect of the "items being withheld”, the breakdown was headed “Notification of items being withheld from this Valuation”, and it was summarised on the third page as follows:

5. Under the sub-contract, payment was due, it is accepted, by 14 January 2012. However on 8 December 2011, WE’s claims consultants, Knowles, wrote to Greencoat referring to this latter document saying that there was an undervaluation for work completed, "an attempt to make set off from our clients account for wrong and unsubstantiated charges by Greencoat” and that "there is now a clear dispute between the parties as to the value and set off sum due"; a notice of adjudication would follow.

The Adjudication

6. The Notice of Adjudication was issued on 14 December 2011 and drafted by Knowles. It refers to the sub-contract, Application No.10 and continues, sometimes with imperfect English:

“3. The Respondent has failed to value the properly executed works including variations and has found a lesser sum due of £16,686.36 in their summary of account dated 2 December 2011.

4. Further, variations properly completed are to the value of £318,362.90 whereas the Respondent has valued these at £-52.030.01…The account is thereby undervalued by £370,392.91 and paid short. This sum is due for payment at application No.10 on 14 January 2011 and interest will accrue on the underpayment from that date.

5. By their summary of account dated 2 December 2011 the Respondent also seeks to set off. The Referring Party avers that the sums [sic] £67,412.93 alleged by the Respondent to be owed to them by the Referring Party is[sic] not owed or payable in part or in whole and as such the Respondent has no right to set these monies off at interim application No. 10 or at all.

6. The Referring Party further avers that it is for the Respondent to show that their set off is lawful and they have an established right on the money claimed and taken. Further that in making such set off the burden of proof is on the Respondent as to liability of the Referring Party to pay and the sum which is to be paid.

7. The Referring Party aver [sic] that a right to set off either at common law, in equity or under the contract is not merely a matter of giving notice; the substantive sums must be payable or owed to the Respondent under the contract or at common law before any right to set off arises to which an effective notice can be given. The Referring Party avers that the Respondent has no such right and disputes both liability and quantum of the sums set off against application…No 10…

The nature and a brief description of the dispute

The dispute is over:

• Application No.10 and summary of account 2 December 2011 including:

• undervaluation of variations completed by £370,392.91

• Abatement of the contract sum work completed by £32,702.32

• Set off by the Respondent of £67,412.93

• The law of set off

Details of where and when the dispute has arisen

9. The dispute arose by the Respondent underpaying and deducting sums as set-off from interim payments application No. 10

Redress sought by the Referring Party

The Referring Party requests that the adjudicator:

A. Give a declaration that in the Respondent’s summary of account dated 2 December 2011, the contract works properly completed are undervalued in the sum £32,702.32 or such sum as the adjudicator finds;

B. Give a declaration that in the Respondent’s summary of account dated 2 December 2011 variations properly completed are undervalued in the sum of £370,392.91 or such sum as the Adjudicator finds;

C. Give a declaration that in the Respondent’s summary of account dated 2 December 2011 they have wrongfully made a set off in the sum of £67,412.93 or such sums as the Adjudicator finds;

D. Decide that the Referring Party is to be paid:

the additional sum of £32,702.32 for undervalued contract work properly completed

the additional sum of £370,392.91 for variations properly completed or such sum as the Adjudicator decide

E. decide that the Respondent repay the sum wrongfully set off in the sum of £67,412.93 or such sum as the Adjudicator decide

F. Decide that the Respondent is to pay the sums decided by the Adjudicator within 3 days of his decision.

G. Decide or otherwise direct that the Respondent pays the Adjudicator’s fees and costs in the undertaking of this Adjudication…”

7. Mr Tony Bingham was appointed as the adjudicator and on 20 December 2011 Greencoat’s solicitors wrote to Knowles stating that the adjudicator effectively had no jurisdiction. This was put forward on the basis that no or no material dispute had crystallised because the date for payment had not yet accrued, and because relief for payment was sought which the adjudicator could not award because the obligation to pay had not arisen. They wrote in similar terms but in more detail to the adjudicator on 22 December 2011; they additionally argued that no dispute can have crystallised on 2 December 2011 because WE had not communicated a dissatisfaction with the Certificate by that date and because Greencoat had been deprived of a reasonable opportunity to review and respond to a claim. The adjudicator replied by e-mail dated 22 December 2011 effectively rejecting the jurisdictional challenge saying "I also doubt that the fact that payment is not yet due is a good point".

8. The Notice of Referral was served on 21 December 2011 which largely reiterated, with some expansion, the Notice of Adjudication and attached two witness statements together with various files. WE asserted that in the 2 December 2011 certificate Greencoat had without any justification reduced sums previously paid for variations and wrongly reduced the sum for measured works. The burden, it asserted, was on Greencoat to establish any entitlement to set off the and argued that under Section 111 of the Housing Grants, Construction and Regeneration Act 1996 notice given on 2 December 2011 was not compliant as it lacked sufficient detail. The relief claimed at Paragraphs A to F in the Notice of Adjudication was repeated verbatim.

9. On 28 December 2011, Knowles wrote to the adjudicator (with copy to Greencoat’s solicitors) referring to the jurisdictional challenge contained in the letter dated 22 December 2011 and accepted that there was "a small though valid point made regarding the relief sought in the Notice of Referral at ‘F’"; they withdrew that head of claim. The adjudicator responded on the same day saying that he had "edited out item f”.

10. On 5 January 2012, Greencoat served its Response to the Referral and attached, amongst others, were what was called "Tab 2 The Withholding Notice (as defined below)" and "Tab 6 Substantiation in support of the Certificate (as defined below)". The jurisdictional challenges were maintained. At Paragraphs 31 to 33, Greencoat asserted:

“31. Pursuant to clause 4.10.3 of the Sub-Contract, the Respondent has until 6 January 2012 in which to serve a withholding notice against the sums applied for by the Referring Party in the Application. The Respondent issued a withholding notice on 5 January 2012, a copy of which is appended at Tab 2 (“the Withholding Notice") together with a copy of the accompanying covering letter from the Respondent to the Referring Party of the same date. The Adjudicator will note from the Withholding Notice that the Respondent has deducted the sum of £199,944.23.

32. As the Withholding Notice does not form part of the purported dispute referred in this adjudication (because the adjudication was prematurely referred before the Withholding Notice was issued) the Adjudicator is unable to consider the effect of the same on any sum that might be due to/from the Referring Party by the final date of payment. Furthermore, the Respondent does not confer any such jurisdiction on the Adjudicator. The Respondent wishes to clarify that the Withholding Notice and the accompanying covering letter are appended simply to evidence the existence of the Withholding Notice and to establish that the same has been served within the time limits set out in the Sub-Contract. The inclusion of the Withholding Notice is not and should not be constructed as a waiver of any of the Respondent’s jurisdictional objections.

33. As the Adjudicator cannot consider the effects of the Withholding Notice in this adjudication, the Adjudicator cannot direct as to payment as he cannot properly determine what sums might be due to/from Referring Party under the terms of the Sub-Contract by the final date for payment without considering the effect of the Withholding Notice. All he can do (subject to the foregoing) is to decide the value of the Certificate, not what should be paid by whom and to whom by the final date for payment. Such is the impossible position that the Adjudicator is placed in by the Referring Party; he cannot properly decide what sums might be due to/from the Referring Party without considering the effect of the Withholding Notice and this is beyond his jurisdiction. It cannot be the intention of Parliament that a party can seek payment in adjudication before the other party has had the opportunity to issue a withholding notice and/or before the final date for payment has lapsed.”

11. The Response went on then to deal with the value of the measured work and the variations in some detail; an independent report from experts was attached providing what was said to be "an independent valuation of" the variation account. In relation to withholding, abatement and set off, this was addressed in Paragraphs 51 to 55 and largely the jurisdictional point was taken, albeit that the Withholding Notice(s) were said to be valid. That said, Tab 6 was referred to which was said to be "validating and substantiating reductions in the Certificate relied upon”. It was made clear at paragraphs 66 to 67 that the Adjudicator did not have jurisdiction “to direct as to payment in this adjudication".

12. Tab 6 was an amended reiteration of the “Notification of items being withheld from this Valuation" attached to the 2 December 2011 certificate with an additional column added, entitled "Assessment” and in summary this changed the figures up or down as the case may be:

13. Tab 2, said in Paragraph 31 to be the Withholding Notice, was in the form of a letter dated 5 January 2012 from Greencoat to WE. The letter purported to supersede "the costs withheld in Payment Certificate 10”. It identified 12 items in respect of which there was to be withholding. The first nine were the same items as before although for no obvious good reason the quantum against items 1 (£13,163), 7 (£8,925) and 8 (£2,600) were different to Tab 6 (see above). The further three items were as follows:

“10. Liquidated Damages £120,000.00

Further to our notice of Non-Completion dated the 2 ^nd November the costs of liquidated and ascertain damages applicable to [WE].

11. Defective Works – Pumps £9,629.00

The cost of replacing the undersized pumps.

12. Lack of co-ordination and BREEAM £11,520.00

An omission due to the fact [WE] did not co-ordinate all the services or expend resource on the BREEAM obligations."

The total for withholding was £199,944.23.

14. A document said to have been given by Greencoat to WE on 5 January 2012 was entitled "Evaluation of Contra Charges" and it identified in summary terms that WE had failed to carry out the works in accordance with the agreed sub-contract programme and that there was a possibility that the Employer could levy liquidated damages for delay against Greencoat. Greencoat went on to state that should such damages be levied against Greencoat, "we may levy them against” WE but "at present it is not possible to ascertain the value of this item”. The note in the valuation was to identify the possibility of" liquidated damages to WE”. This document however was handed in by Counsel for WE at the hearing and Counsel for Greencoat was not in a position to take instructions on it.

15. The parties met with the adjudicator on 11 January 2012 at the site and there was an extensive discussion about the variations and other charges being made by the parties. There is some disagreement as to whether there was a clear reservation made by Greencoat as to the latest Withholding Notice (as suggested by Greencoat) or whether matters were just “left in the air”. A Reply and Rejoinder were served later and the adjudicator was given extra time to produce his decision.

16. There was an exchange of e-mails in February 2012 with the adjudicator elliptically e-mailing the parties on 27 February 2012 as follows:

“Of Greencoat "withholding” letter" 5 ^th Jan to WEL (Response to Referral tab 2) which of the 12 heads does Greencoat intend to set off from monies otherwise due on 14 ^th January?"

The response from Greencoat’s solicitor was on 28 February 2012:

“As you will recall, the Respondent has raised issues concerning your jurisdiction in the Response relating to, inter alia, the 5 January 2012 letter and the consequences thereof. The Respondent reserves its right to rely on any and all the jurisdiction matters it has raised before and during this adjudication should it become necessary for it to do so.

In light of the above, the Respondent relies on 1-9 of the set off/counterclaim items as set out in the Response and the Respondent otherwise repeats its previous submissions on jurisdiction. The Respondent also repeats that no discourtesy is meant to you by it raising these issues on jurisdiction. Such issues have arisen because of the way that the Referring Party has conducted itself before and during this adjudication, not because of the way that you have conducted the same."

The adjudicator replied on the same date:

“Thankyou. I have understood this to mean that Greencoat will not attempt to set off heads 10, 11, 12 in the 5 ^th Jan Notice of Withholding".

Greencoat’s solicitors replied 30 minutes later:

"It is the Respondent’s position that you do not have jurisdiction to decide items 10, 11 and 12 for the detailed reasons stated in the Response. The Respondent does, however, reserve its position in respect of these items come enforcement should it become necessary for it to do so."

The brief and elliptical response was:

“I am clear as to jurisdiction. I have no power to deal with items 10 11 12 If [sic] there is no intention to set off. Intention is not clear and I will bring them in.”

17. The decision was issued the following day albeit that it was subject to a "slip rule" amendment about a week later. In Paragraph 3 he repeated verbatim the Notice of Adjudication and Paragraph 4 set out the timetable of the adjudication process. He referred at Paragraph 5 to the meeting of 11 January 2012. At Paragraph 6 he addressed the jurisdictional argument and concluded at pages 7 to 9 that a dispute had crystallised by 14 December 2011 and that on 2 December 2011 "a dispute arose" and the "act of certifying a lesser sum creates a dispute. So too the set-off”. He went on to say that WE was "entitled to adjudicate notwithstanding the date of payment has not yet arisen."

18. He then went on to deal at Paragraph 9 with the work done evaluation and found that some minor items required attention but "the reductions by Greencoat to reflect that appear steep". He found that £24,659 should reflect the reduction to be made for the work done. He then moved on to the Contra charges, namely the nine items featured in the earlier and later Withholding Notices referring to the revised figures, totalling £54,353. He said that he should and would address items 10, 11 and 12 because “the scope of this Adjudication is not only what sums are due on 14 January via Works done and Variations, but is about the intended set-off." He was satisfied that the latest (5 January 2012) Withholding Notice was “a good notice for a set-off for all 12 heads”. He went on that "it is only if the 3 heads are not intended to be a set off from monies otherwise due 14 January 2012 that they fall out of scope/jurisdiction”. Effectively, he rejected most of the items on the basis of a lack of evidence except for Items 3 and 8 which he believed were substantiated. He summarily rejected Items 10, 11 and 12 on the basis that "no supporting evidence was adduced” and therefore the set-off failed.

19. He then considered the variation part of the claim by reference to each variation, partly by reference to the meeting on site and what was said. He decided that in total variations to the value of £119,391.90 were established.

20. He then addressed the "Redress" or the relief sought in the Notice of Adjudication and in relation to the specific declaratory relief sought in A, B and C, he found respectively that the reduction in the works properly completed was "adjudicated to be £24,659", that the net undervalue on the variations was £171,420.91, and the that Greencoat was "entitled to set off £24,659 from monies otherwise due 14 January 2012". In relation to the relief claimed at D in the Notice of Adjudication, he decided: "Greencoat in error by £8,043.00”. In relation to E "the amount of set-off allowed against sums otherwise due at E is £3,760.00". At Paragraph 13, which is headed "Adjudicator’s Note” he set out a breakdown based on WE’s Application No. 10 which, allowing for reduction of £24,659 for the Works Done, the value of variations found (£119,399) and the set-off allowed of £3,760, and found that "the amount due for payment on 14 January 2012 (excluding VAT) equals £277,378”. This latter figure was amended downwards to £250,860. No interest was ordered but Greencoat was required to pay 65% of the adjudicator’s fee.

These Proceedings

21. WE issued proceedings claiming the sum of £250,860 plus VAT. A summary judgement application was issued and witness evidence was exchanged, much of which is summarised above. Essentially, Greencoat maintains its jurisdictional challenge as it did before the adjudicator: either no dispute had crystallised or no crystallised dispute could enable the adjudicator to require payment and at best there could be a declaratory decision. It emphatically argues that, as it was entitled to lodge a further Withholding Notice as it did on 5 January 2012, the adjudicator had no jurisdiction to deal with any of the 12 items referred to within it; at the very least he had no jurisdiction to deal with the last three items because they were not part of any crystallised dispute. WE argues that there was a crystallised dispute relating to what was due to be paid on or by 14 January 2012 and the adjudicator had jurisdiction to address all 12 items in the 5 January 2012 Withholding Notice, alternatively the first 10 as they were part of the crystallised dispute. WE goes on to argue that in this latter case, the Court can sever those parts of the decision upon which he had no jurisdiction and enforce the rest.

The Law

22. Paragraph 23(2) of the Scheme of Construction Contracts is germane:

“The decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration or by agreement) between the parties”

Since a dispute may involve only declaratory as opposed to directive relief, it is therefore within the confines of this paragraph that, if there is a declaration as to rights, the parties must respect and comply with that decision as if it was right even though final dispute resolution has not yet occurred; they must do so until such final resolution occurs and the decision is conformed, varied or set aside.

23. It is well established that a dispute may relate to one issue alone or to a series of sub-issues. Thus a whole final or interim account may be the subject matter of a dispute or just one item within it. It must be open to a party to seek only declaratory relief in connection with a dispute referred to adjudication; for instance, there could be a dispute about whether there had been a repudiation or contractual determination or whether there was an entitlement to an extension of time. In Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC), the Court said:

“ 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 [2001] 75 Con LR 71.

55. There has been substantial authority, both in arbitration and adjudication, about what the meaning of the expression "dispute" is and what disputes or differences may arise on the facts of any given case. Cases such as Amec Civil Engineering Ltd -v- Secretary of State for Transport [2005] BLR 227 and Collins (Contractors) Ltd -v- Baltic Quay Management (1994) Ltd [2004] EWCA (Civ) 1757 address how and when a dispute can arise. I draw from such cases as those the following propositions:

(a) Courts (and indeed adjudicators and arbitrators) should not adopt an over legalistic analysis of what the dispute between the parties is.

(b) One does need to determine in broad terms what the disputed claim or assertion (being referred to adjudication or arbitration as the case may be) is.

(c) One cannot say that the disputed claim or assertion is necessarily defined or limited by the evidence or arguments submitted by either party to each other before the referral to adjudication or arbitration.

(d) The ambit of the reference to arbitration or adjudication may unavoidably be widened by the nature of the defence or defences put forward by the defending party in adjudication or arbitration…

In my view, one should look at the essential claim which has been made and the fact that it has been challenged as opposed to the precise grounds upon which that it has been rejected or not accepted. Thus, it is open to any defendant to raise any defence to the claim when it is referred to adjudication or arbitration. Similarly, the claiming party is not limited to the arguments, contentions and evidence put forward by it before the dispute crystallised. The adjudicator or arbitrator must then resolve the referred dispute, which is essentially the challenged claim or assertion but can consider any argument, evidence or other material for or against the disputed claim or assertion in resolving that dispute.”

24. The corollary of this is that, if a defending party has not prior to the adjudication and does not put forward a particular defence, the adjudicator does not have jurisdiction to address such a defence even if it seems a sensible thing to do to save time and cost later. However, if the crystallised dispute referred to adjudication encompasses a particular defence, the defending party can not withdraw that defence during the adjudication to fight another day, so to speak, on that particular defence.

25. In relation to severance, that is whether parts of an adjudicator’s decision may be enforced and others not, the Court in Cantilllon v Urvasco , gave some guidance:

“65 . On the severability issue, I conclude, albeit obiter in the result, as follows:

(a) The first step must be to ascertain what dispute or disputes has or have been referred to adjudication. One needs to see whether in fact or in effect there is in substance only one dispute or two and what any such dispute comprises.

(b) It is open to a party to an adjudication agreement as here to seek to refer more than one dispute or difference to an adjudicator. If there is no objection to that by the other party or if the contract permits it, the adjudicator will have to resolve all referred disputes and differences. If there is objection, the adjudicator can only proceed with resolving more than one dispute or difference if the contract permits him to do so.

(c) If the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on that part of the decision which deals with one such dispute or difference will not undermine the validity and enforceability of that part of the decision which deals with the other(s).

(d) The same in logic must apply to the case where there is a non-compliance with the rules of natural justice which only affects the disposal of one dispute or difference.

(e) There is a proviso to (c) and (d) above which is that, if the decision as drafted is simply not severable in practice, for instance on the wording, or if the breach of the rules of natural justice is so severe or all pervading that the remainder of the decision is tainted, the decision will not be enforced.”

(f) In all cases where there is a decision on one dispute or difference, and the adjudicator acts, materially, in excess of jurisdiction or in breach of the rules of natural justice, the decision will not be enforced by the Court.

In my view, this reflects the policy of the 1996 Act in that adjudication decisions are to be binding on the parties pending final resolution of the given disputes.

Discussion

26. The first issue is what if anything was the crystallised dispute at the time of the Notice of Adjudication. WE had put in its Application No 10 for payment on 24 November 2011 for a net sum of £488,153.45, with breakdowns provided as to how that figure was reached. Greencoat largely rejected that application and certified that only a net sum of £16,686.36 was due, providing breakdowns against various heads of work done, variations and withheld items. On 8 December 2011, WE’s consultants effectively confirmed that they did not accept that assessment. It therefore absolutely clear that there was a dispute as to whether £488,153.45 was due or £16,686.36 or something in between. The certificate effectively certified what was due for payment albeit some weeks later but there was a dispute as to whether the certified value was correct. It is illogical to say that there can not be a dispute about an interim valuation of work unless, until and after the valuation falls due for payment; there is a dispute about the interim valuation and that is referable to adjudication. There is some practical advantage in seeking adjudication before the due date for payment so that the dispute can be resolved in time before payment is due or shortly thereafter. The dispute clearly encompassed all the points put forward by both parties as to why a greater or lesser sum, as the case may be, was payable; it would therefore cover the items put forward for withholding as effectively Greencoat was arguing that the items and quantum then claimed could and should be deducted whilst WE was arguing that they could and should not be deducted.

27. The next issue is in effect whether and to what extent the Notice of Adjudication and indeed the later Referral Notice sought in effect an order or direction from the adjudicator for payment as against Greencoat. There can be no doubt that the relief claimed in A, B and C of the Notice was expressly declaratory in nature; indeed it was not strenuously argued if at all by Counsel for Greencoat that this relief as claimed was unexceptionable. Her argument was that the perhaps infelicitous wording used in D and F of the relief claimed could not be the subject matter of adjudication because the time for payment have not yet fallen due. The wording of D and E is imperfect but at least D is tolerably clear in that it is seeking a decision that the Referring Party “is to be paid” what WE had asserted was the full value of contract work and the full value of variations; it is in context not seeking a direction from the adjudicator that Greencoat actually pay the sums so claimed but it is essentially seeking a further declaration that the sums are to be paid, obviously only when they fall due. The relief claimed in E is superficially nonsensical in context because it seeks repayment of the "withheld items" in circumstances in which WE have never actually paid the sum in question. That at least must have been clear to everybody concerned. What it clearly meant was that a decision was sought that Greencoat “do pay” the sums otherwise withheld, namely those then totalling £67,412.93. Looked at in that light, what is being claimed is effectively a declaration that this sum is not to be withheld against what is to be payable.

28. This is at least to some extent supported by the relief claimed in F, albeit that it was later dropped. That relief was that Greencoat actually pay all the sums within three days of his decision. There would have been no need for that relief if D and E were actually seeking a direction from the adjudicator that the sums in question actually be paid by Greencoat.

29. Ultimately, the adjudicator did not in any directive way order Greencoat to pay any sums as such. This is clear from Paragraph 12 of his decision. At sub-paragraphs (a) to (c), he expressly in effect declares that only £24,659 can be deducted from the sum claimed for the contract works, that the net “undervalue” in relation to variations is £171,420.91 and that £24,659 can be set off from monies otherwise due; this latter figure is clearly not the figure relating to the withheld items. In sub-paragraphs (d) and (e), he simply and perhaps elliptically says that Greencoat was in error by £8,043 in relation to the undervalue of contract works (which is simply the corollary of the redress granted in sub-paragraphs (a) and (c)) and that the amount of set off (in effect against the withheld items) is to be £3,760. In Paragraph 13 in what he called his "Note" he identifies that "the amount due for payment on 14 January 2012 (excluding VAT)” is £250,860 plus VAT (as amended). I do not read that as being directive, that is in effect ordering Greencoat actually to pay on 14 January 2012; he is simply saying what the amounts due for payment on 14 January 2012 was.

30. The ambit of the dispute included at the very least the first nine quantified items within the withheld items referred to in the 2 December 2011 certificate. The fact that they were re-quantified, in part, by Tabs 2 and 6 did not, in my judgement, take them out of the ambit of the referred dispute. It must be open to the parties within reason to adjust the quantum of disputed items; it would be extraordinary for instance if a claiming or defending party could not, jurisdictionally, reduce its claim or cross claim within a referred dispute. The extent to which a party could increase such a claim or cross claim after the dispute has been referred would be a matter of degree and reason; for instance, if it was so increased such that it was no longer the same claim, it may well be that the adjudicator would have no jurisdiction to deal with the increased claim. So far as the nine items are concerned, there can be no jurisdictional objection to the reduction in the claims and the three increases were relatively minor such that there could be no jurisdictional objection to the adjudicator dealing with them. Greencoat could not in some way withdraw these nine items from the jurisdiction of the adjudicator as they were clearly part of the crystallised dispute referred to adjudication.

31. The tenth item falls into a somewhat different category. Certainly, within the certificate and the list of withheld items, there can be no doubt that Greencoat was saying in effect that Liquidated Damages would or could be deducted effectively in an amount to be confirmed. That presupposes that as at 2 December 2011 Greencoat believed and was asserting that WE was sufficiently in culpable delay of its sub-contract works such that Greencoat was delayed so that it was liable to its employer for liquidated damages. This is at least partly confirmed by the reference in Greencoat’s Withholding Notice letter of 5 January 2012 to the Notice of Non-Completion dated 2 November 2011 issued by it to WE. The £120,000 cross claim eventually identified for liquidated damages equates to 2 weeks and two days of main contract delay, given that the main contract liquidated damages rate was £50,000 per week or part thereof. In effect, what Greencoat was doing in its 5 January 2012 letter was confirming what liquidated damages it was proposing to set off against the sums otherwise due to WE, this having been presaged over a month before. In my judgement, the liability for liquidated damages was something which Greencoat had identified as a cross claim to be set off against what would otherwise have been payable and was part of the crystallised dispute albeit that the quantum had not been identified. Again, Greencoat could not withdraw the issues relating to liquidated damages as they were part of the crystallised dispute referred to adjudication.

32. However, although the scope of any liability to liquidated damages was within the jurisdiction of the adjudicator, items 11 and 12 were not in my view. These two items were not part or within the confines of the dispute as it had crystallised as they had not been mentioned before they emerged 22 days into the adjudication process. It was made clear in the Response at Paragraphs 31 to 33 that the adjudicator did not have and was not being given jurisdiction in relation to all the items in the latest Withholding Notice. Whilst Greencoat could not withdraw from the jurisdiction of the adjudicator the issues relating to items 1 to 10 of the original or later Withholding Notice, it was a perfectly valid reservation in relation to Items 11 and 12 because they had not featured within the crystallised dispute before. The adjudicator therefore had no right to adjudicate upon those two items because he had no jurisdiction to do so.

33. The question therefore arises as to whether the remainder of his decision can be enforced. Items 11 and 12 were put forward in the sums of £9,629 and £11,520, which total £21,149, to which, based on the adjudicator’s accounting approach, VAT of 20% should be added, bringing the final total to £25,378.80.

34. I see no good reason why the substance of the adjudicator’s decision should not be enforced albeit that the amended decision relating to the sum of £250,860 plus VAT should be reduced by £21,149 plus VAT which would produce a net sum of £229,711 plus VAT which remains as the figure due at 14 January 2012. Since he did not have jurisdiction to reject or accept Items 11 and 12, he had no jurisdiction to produce a decision which adjudicated upon them. It follows that in principle Greencoat was entitled to put forward as at 14 January 2012 set offs in respect of Items 11 and 12. Effectively, what the adjudicator did was, doubtless with good intentions, to decide upon two further disputes (Items 11 and 12) which were not within his jurisdiction. The Court is therefore enforcing the large bulk of the adjudicator’s decision; to do so is consistent with the authorities set out in the Cantillon v Urvasco case

35. Given the impact of Paragraph 23 (2) of the Scheme, accepted to be applicable here, the decision of the adjudicator effectively declaring what was payable as at 14 January 2012 was binding on the parties as from 29 February 2012 and Greencoat was therefore required to comply with that decision by paying all such amounts as were within the jurisdiction of the adjudicator to decide. It follows therefore that Greencoat is required now to pay £229,711 plus VAT, totalling £275,653.20 plus 65% of the adjudicator's fee, namely £15,678. This totals £291,331.20.

Decision

36. There will be judgement in favour of WE against Greencoat in the sum of £291,331.20. If WE wishes to pursue the balance of its claim, namely in relation to the sums retained against Items 11 and 12, it can do so but Greencoat should be given 21 days to file and serve any further written evidence upon which it relies in relation to these two items. As for interest, I will consider any representations which the parties have but it may be that interest can arguably only run from the date of the adjudication decision, as opposed to 14 January 2012, from which later date the parties were required to comply with such decision.

Costs and Interest

37. Since in accordance with the usual practice the legal teams have had a copy of the draft judgment, they have exchanged written submissions on costs and interest. So far as interest is concerned, as a matter of discretion I consider that interest should run from the date of the adjudicator’s decision, namely as from and including 1 March 2012; I select this date because it was the day after the decision was issued and, although it was amended about a week later, there was still a substantial amount of money said to have been due as from 14 January 2012; the Defendant could not be criticised for not paying until the adjudicator had produced his decision and the amendments did not alter the fact that significant amounts were due. As for the rate, I do not consider that it should be at the judgement rate, because there is only judgement formally as from today. In my view interest at the contractual rate of 3% is fair and reasonable. Therefore, interest will be awarded from and including 1 March 2012 to and including 24 April 2012 at the rate of 3%.

38. So far as costs are concerned, essentially the Claimant has succeeded, substantially, in these proceedings, having recovered just over 90% of its claim. Whilst it is true that there was substantial argument in relation to jurisdiction relating to the Withholding Notice dated 5 January 2012 and in particular Items 10, 11 and 12, the jurisdictional argument also extended to the first nine items and, in relation to them and to Item 10 the Defendant "lost"; put another way, even if Items 11 and 12 had been conceded by the Claimant, the essential jurisdictional argument would have had to have been investigated in any event. I do not see that this is a case for reducing by a percentage the Claimant’s entitlement to costs for this reason and also the fact that the Defendant through its solicitor’s witness statement raised a number of other challenges which were not pursued. Accordingly it follows that the Claimant should be entitled to all its costs, albeit subject to summary assessment.

The amended summary bill put forward is £23,009.60, including VAT of £3,526.60. I assume that the Claimant is registered for VAT and accordingly the VAT should not be allowed. The net amount is £19,483. A substantial number of challenges to this bill have been made in the written submissions of Counsel dated 23 April 2012. There has, rightly, been no suggestion that this is a case for indemnity costs and I therefore proceed on the basis that it would be subject to a standard assessment. I have formed the view that a summary assessment in the sum of £14,000 is a proper one. I do bear in mind that the Claimant legitimately instructed solicitors, no lawyers previously having been involved in the adjudication. However the amount of hours required for "attendances on others" (16½) and "work done on documents" (over16½) are too high for the Defendant to be expected to pay in full. The deployment of Leading Counsel was doubtless reasonable as between his client and him but I do not consider that it is reasonable to expect the Defendant to have to pay for the full cost of that; this was a case of under £300,000 and, although it raised interesting issues, it did not merit Leading Counsel. A reduction of just under £5,500 is a reasonable one in all the circumstances.