HS Works Limited v Enterprise Managed Services Limited [2009] EWHC 729 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes


Where a Court is asked to deal simultaneously with two adjudication enforcements between the same parties which decide different things but which might or do impact on each other, the court, may subject to specified steps, set off one decision against another.

Technology and Construction Court, Mr Justice Akenhead


HS Works Limited (“HSW”) is a civil engineering contractor within the utilities sector and was employed by Enterprise Managed Services Limited (“Enterprise”), a utilities contractor, as a sub-contractor to assist with clean water, network repair and maintenance services for Thames Water.  The sub-contract works included the repair, reinstatement and re-surfacing of highways in and around Greater London.  The works were completed or terminated in late 2007/early 2008, and issues arose with regards to the final account and the contra-charges to be applied to it.  Two adjudications ensued, presided over by two different adjudicators. 

The first referral was by HSW and related to a dispute on the amount to be deducted by Enterprise by way of contra-charges.  HSW argued that no withholding notices had been properly served after the final account had been issued, and therefore that Enterprise was unable to withhold the contra-charges.  Enterprise responded that no withholding notice was required after the final account had been issued as the amounts had been withheld from the interim certificates and they provided detailed evidence for the reasoning behind the contra-charges.  The first adjudicator decided that a valid withholding notice in respect of the final account was required.  Such a notice was not issued and, therefore, Enterprise owed HSW c.£1.8m plus interest and VAT. 

The second adjudication was commenced by Enterprise on the same day that the adjudicator issued his decision in the first adjudication.  The second adjudication concerned the proper valuation of the works carried out, rather than dealing with the contra-charges.  HSW objected to the jurisdiction of the second adjudicator, alleging that the dispute had not crystallised and that the adjudication was in breach of the rules of natural justice because Enterprise were relying on an expert’s report that it had not previously sent to HSW, which HSW argued was too late for them to defend themselves or for the second adjudicator to make ‘the necessary contractual ascertainment’.  The second adjudicator concluded that he could continue to act.  His valuation meant that the sum payable under the first adjudication should be returned either in whole or in part.  Each party argued that the decision adverse to their interest was invalid on grounds of natural justice or jurisdiction.


The Court addressed the following issues:

  • Whether the first adjudicator had exceeded or failed to fulfil his jurisdiction or failed to comply with natural justice in not addressing the merits and quantum of the contra-charges.
  • Whether dispute that was referred to the second adjudication had crystallised beforehand so that the second adjudicator had jurisdiction to issue his decision.
  • Whether the second adjudicator had failed to fulfil his jurisdiction or failed to comply with natural justice by not addressing each and every difference in the accounting position between the parties but by carrying out spot checks in places to see how credible each party’s underlying evidence was.
  • Whether the second adjudicator should have resigned, on the basis that the second adjudication was a so-called “kitchen sink” adjudication (i.e. where the dispute referred is so extensive that an adjudicator or the defending party cannot readily deal with it in the standard period for adjudication).
  • Whether the Court could simultaneously deal with two adjudication enforcements which decide different things but which might impact on each other, and if so, how.


The Court held:

  • The first adjudicator’s jurisdiction was defined by the Notice of Adjudication and the nature of the dispute referred to him.  That dispute involved a primary assertion that, as there were no or no effective withholding notices, the amount withheld for the contra charges was not properly withheld.  Since he had upheld that primary case, there was no need for the adjudicator to consider the merits and quantum of the contra-charges.
  • On the facts, by the time that the Notice of Adjudication in the second adjudication was served, there was a clear dispute between the parties as to the value of the final account.  The fact that the first time that Enterprise provided its expert's report was in the adjudication did not in logic impact upon what dispute had crystallised beforehand.  At most, that report could merely support Enterprise's claim in the adjudication.
  • The “spot check” approach which the second adjudicator deployed at places in his decision could not be said to be unfair or to have amounted to his failing to address the dispute referred to him.
  • In considering whether a “kitchen sink” adjudication should be enforced, the Court should have regard to (a) whether and if so upon what basis the adjudicator felt able to reach his decision in the time available, (b) the opportunities available to the defending party before the adjudication started to address the subject matter of the adjudication and (c) what that party was able to and did do in the time available in the adjudication to address the material provided to it and the adjudicator.  
  • The present case was not one of those exceptionally rare cases in which the adjudicator can only have acted fairly by resigning.  The evidence showed that the second adjudicator did not, ultimately, consider that he needed more time to produce his decision and he did a thorough and conscientious job.  The material provided to the second adjudicator was marginally different to that previously circulated between the parties, but it was material with which HSW was very familiar.  The information contained in Enterprise’s expert’s report was not radically different from what must have been apparent beforehand.
  • One should not equate necessarily an adjudicator's approach over 28 days with that of a judge or arbitrator who tries the final version of the dispute after exchange of pleadings, evidence and reports over a period of often 6 to 18 months. One has to judge what an adjudicator does against the context of the period provided by the statute or the contract.
  • The following steps need to be considered before considering whether to permit a set-off between decisions:
    • it is necessary to first determine whether both decisions are valid;
    • if both are valid, it is necessary to consider whether both can be enforced or given effect;
    • if it is clear that both are capable of enforcement, the Court should enforce or give effect to them both, provided that separate proceedings have been brought to enforce each decision by the parties. The Court has no reason to favour either side;
    • how each decision is enforced is a matter for the Court.
  • In this case both adjudicators’ decisions were enforceable.  In the exercise of its discretion the Court ordered that one decision should be set-off against the other, but taking into account and reflecting the dates when the respective adjudicator’s decisions should have been implemented.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes



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