Northern Developments (Cumbria) Ltd v J & J Nichol [2000] EWHC Technology 176

This summary was provided by CMS Cameron McKenna LLP.

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A matter that is not mentioned in a notice of intention to withhold payment is not something that the adjudicator can take into account as something necessarily connected with the dispute. The Scheme does not give the adjudicator power to award costs, but the parties can agree expressly or impliedly to give him the power.

HHJ Bowsher QC, Technology & Construction Court

24 January 2000

N appointed J as sub-contractor to carry out works under sub-contract conditions DOM/2. N issued what purported to be a notice to withhold payment on the basis of delay and defective work, and J withdrew from site. N treated this as repudiation and appointed an alternative contractor.

J issued an adjudication notice and the Scheme applied. N claimed that J's claim should be reduced by set-offs to take account of defective work, delays and damages arising out of the repudiation (which had not been included in the notice to withhold payment, as repudiation had not then occurred).

The adjudicator queried whether he could take all these matters into account as necessarily connected with the dispute. J believed the repudiation could not be taken into account because it was not a matter arising under the contract (this was later acknowledged to be wrong in law). The adjudicator awarded sums to J. He found that N's notice to withhold payment was invalid, but that J was behind programme and works were defective. He deducted a sum in respect of defective work (on the basis that the works ought to be valued on the basis that they were "properly" carried out) but not in respect of the delay, and did not deal with repudiation. He also ordered N to pay J's costs.

N claimed a declaration in court that there was an error in jurisdiction rendering the whole decision void as the adjudicator should have found that he could deal with repudiation, and that he had no jurisdiction to award costs. J applied for summary judgment.

The court found that the intention of the Act was that there was to be no dispute about matters not raised in a notice to withhold payment: an adjudicator would have no jurisdiction to consider matters not raised in a notice. The Act intended to exclude consideration of set-offs arising after the due date for payment. The adjudicator had no jurisdiction to consider the question of repudiation because it was not mentioned in the notice. He therefore came to the right answer when asking if he could consider this question, but for the wrong reasons. This meant that his decision could not be impeached.

The court disapproved of the reasoning in Cothliff. However, parties to a contract can agree to enlarge the power of an arbitrator, and this analogy also applied to adjudicators, as their jurisdiction derived from express or implied terms of the contract. Therefore parties could agree expressly or impliedly to give the adjudicator power to award costs. Parties would impliedly give the power where both parties asked the adjudicator to award costs and/or neither party submitted to the adjudicator that he did not have such jurisdiction. It would be open to a party both to ask for its costs but also to say that there was no jurisdiction to make such an award. J was therefore entitled to summary judgment.

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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