Kitt & Anor v The Laundry Building Ltd & Anor [2014] EWHC 4250 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-lawnow.com/adjudication

Judgment Date:  17.12.2014

SUMMARY

An adjudicator’s claim for fees and expenses associated with an adjudication were payable by the defendant as the adjudicator had acted within his jurisdiction and without breaching the

rules of natural justice.

Technology and Construction Court, Mr Justice Akenhead

BACKGROUND

In December 2011, The Laundry Building Limited (‘TLB’) engaged Etcetera Construction Services Ltd (‘ETC’) to carry out building works at a building in London. ETC issued its Final Account on 11 February 2013 which TLB disputed, alleging numerous cross claims.

On 25 June 2013, ETC served a Notice of Adjudication on TLB. The Notice of Adjudication requested: a decision be made on the final account due to ETC; that TLB should pay ETC the balance due on the final account as decided by the adjudicator; and that TLB pay for the adjudicator’s reasonable fees and expenses. The notice also particularised those final account items which ETC considered to be in dispute and which the adjudicator’s decision was sought in respect of.

On 2 July 2013, Mr Gary Kitt of EC Harris LLP was appointed as adjudicator and the parties signed a tripartite appointment letter which stated, amongst other things, that the parties would remain jointly and severally liable for all of the adjudicator’s fees and expenses.

Various letters were exchanged between the parties containing disagreements about which items of the final account should be considered in the adjudication.

On 15 August 2013, the adjudicator reached his decision. In order to determine the value of ETC’s final account, he found it necessary to consider all of the disputed items, including some which had not been particularised in the Notice of Adjudication. The adjudicator found in TLB’s favour for most of the items in dispute, and therefore ordered ETC to pay his fees and expenses of £11,800 plus VAT of £2,360.

On 28 October 2013, ETC wrote to the adjudicator refusing to pay his fees and expenses. ETC argued that the adjudicator’s decision was not binding and enforceable 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.

The adjudicator subsequently started court proceedings against TLB to recover his fees. In turn, TLB issued Part 20 proceedings against ETC on the basis that both TLB and ETC were joint and severally liable for the adjudicator’s fees and expenses.

ISSUES

The Court was asked to decide:

  1. Whether a Notice of Adjudication can circumscribe and delineate a dispute so as to exclude particular defences.
  2. Whether there was an agreement that the adjudicator should not look into the final account items listed in the Notice of Adjudication.
  3. Whether the adjudicator had breached the rules of natural justice by adjudicating on all items comprising the final account.
  4. Whether therefore the adjudicator’s fees and expenses were payable by the parties.

DECISION

The Court held that the adjudicator’s fees and expenses were payable and held that:

  1. In General, a Notice of Adjudication defines the dispute and the adjudicator takes his or her jurisdiction from the content. However, the Notice of Adjudication cannot circumscribe and delineate the dispute so as to exclude particular defences. It would be “illogical and untenable, if not ludicrous” if this was the case.
  2. The Notice of Adjudication was ambiguous because it purported to say that there should be no investigation into the final account items outside those particularised in the Notice of Adjudication, but nonetheless sought payment of the overall final account. Given an order for payment was sought, it must be left open to TLB to run any defences available to it to show that no sum was due on the final account, including by raising items outside those particularised in the Notice of Adjudication. The Notice of Adjudication was therefore sufficiently ambiguous so that it did not exclude the adjudicator from adjudicating on all of the items on the final account which were disputed.
  3. It would have been valid for the Notice of Adjudication to refer only those items particularised in the Notice for a decision without a request for payment and the scope of the adjudication could have been confined accordingly. However, the inclusion of a request for payment on the final account meant that TLB was entitled to raise any points which might provide a defence to such a claim.
  4. Natural justice requires that the parties to an adjudication must be given the opportunity to put their case or defence, but it is up to the parties whether they take that opportunity. The adjudicator was absolutely open with the parties and stated on 6 July 2013 that his jurisdiction covered valuation of all items comprising the final account, giving ETC ample opportunity to assert that what TLB had said about those items not particularised in the Notice of Adjudication was wrong. ETC was therefore given the opportunity to respond but chose not to.
  5. For the reasons expressed above, the court ordered that Mr Kitt’s fees and expenses were payable by TLB and ordered that ETC reimburse TLB. 

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-lawnow.com/adjudication

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