PC Harrington Contractors v Tyroddy Construction [2011] EWHC 813 (TCC)

Harrington engaged Tyroddy as a sub-contractor on three projects. This case dealt with one project and in so doing disposed of the other issues on the other two cases.

Tyroddy claimed the release of retention. There was no express term dealing with its release under the sub-contract.  It went to adjudication seeking the release of that retention. 

Harrington response in the adjudication was that the entire valuation of Tyroddy's work was presently no more than an 'on account' assessment. Until the final account had been ascertained any amount that was owed to Tyroddy by way of retention had not therefore been established and could not become due. Harrington said that it had established that Tyroddy had been overpaid to the tune of £225,085.97.  Within its calculations it included a cross-claim. 

Harrington said that if, as a matter of taking proper account between the parties, retention (or the amount of retention apparently withheld under earlier certificates) was not due because there had been an overvaluation of Tyroddy's account during the course of the contract, then as a matter of fact, that amount could not have been withheld and was not therefore due for repayment.

The adjudicator decided that Tyroddy was entitled to the release of retention. He reasoned that the final account produced by Harrington in the adjudication was not agreed and, along with its counter-claims, was a new claim which had not crystallised as a dispute. Accordingly it was outwith the dispute referred to him.

Harrrington started Part 8 proceedings for declarations which related to the enforceability of the adjudicator's decisions.

Harrington sought declarations;

1) that the release of retention was dependant upon first ascertaining the total sum properly due to Tyroddy and that it could legitimately be met by relying on any cross-claim amounting to a set-off permissible under the sub-contract;

2) that in refusing to consider the question of the final account and its ascertainment and in refusing to consider the defence of set-off the adjudicator had committed a material breach of natural justice which rendered the adjudicator's decisions unenforceable.

Justice Akenhead came to the view that the adjudicator unwittingly fell below the standards which were required to enable the decision/s to be enforced.  It was incumbent on the adjudicator to adjudicate on Harrington's case that the true value of the work done was less than the gross sums previously certified. 

 The adjudicator was wholly wrong in deciding that the true value of the final account was a matter outside his jurisdiction as it was a viable defence to Tyroddy's claim. The fact that he took it upon himself to deal with the final; account exclusion as a matter of jurisdiction without giving either of the parties the opportunity to be heard on that point was a further ground which would mean that the decisions would not be enforceable.

Those points were material and more than peripheral breaches of the rules of natural justice.  They were technical breaches, albeit important, and did not involve any personal condemnation of the adjudicator because he clearly acted honestly and transparently.

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