KNS Industrial Services Ltd v Sindall Ltd [2000] HT 00/164

This summary was provided by CMS Cameron McKenna LLP.

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A party has to accept or challenge a decision in full; it cannot pick and choose and say that some parts were without jurisdiction and rely upon the rest. An adjudicator may make an error in deducting sums where no notice to withhold has been served, but will not exceed his jurisdiction in so doing.

HHJ Humphrey LLoyd QC, Technology & Construction Court

17 July 2000

K was S's sub-contractor, under a contract incorporating the DOM/1 standard terms, including an adjudication clause. There was also a right to determine the contract, and payment of valuations was due 28 days after receipt of the main contract payment certificate.

Disputes arose between the parties over two of K's applications. K believed that it should have been paid by a certain date, and gave notice to suspend its works for non-payment, followed by suspension. S had served a notice to withhold payment of £44,158, and believed that it had overpaid K. When K suspended its works, S terminated the contract. A month later, K referred the dispute to adjudication, including the proper measurement and valuation of varied works.

The adjudicator found that the notice to suspend works was premature. S's notice to withhold did comply with the Act, but it still had to prove that it had incurred loss. The adjudicator calculated the sum due, deducting sums for "non-compliant work". S paid the amount awarded by the adjudicator. K applied to the court, claiming that the adjudicator had no jurisdiction to deduct sums for non-compliant work, since no notice to withhold had been served for that reason. K did not challenge other findings by the adjudicator.

The Court rejected K's application for summary judgment and struck out its claim. The dispute referred to adjudication included whatever claims and contentions in dispute at the time the dispute was referred. K's notice of adjudication had been in general terms. This gave the adjudicator his jurisdiction. The notice of referral could not enlarge or restrict that jurisdiction. The dispute thus included S's defence that the contract had been lawfully determined and that no further monies were due until completion (hence no notice in respect of the sums allowed by the adjudicator was due). The Court noted that notwithstanding comments in Northern Developments, an adjudicator did have jurisdiction to deduct sums even if there had not been a valid notice to withhold. This might be an error, but not one in excess of jurisdiction.

The Court would not allow K to pick and choose from the adjudicator's decision. It either had to reject it or accept it in full. If it wished to challenge it, the appropriate forum was under the contractual arbitration clause. The Court also held that a clause stating that the parties would comply with the adjudicator's decision "without prejudice to their other rights under the contract" meant that other contractual rights which were not the subject of the adjudication could still be exercised. Thus, if by the time the adjudicator has made his decision, the contract has been lawfully determined (or the party has real prospects of success in supporting the termination), or some other event occurs which entitles the party not to pay, then the payment under an adjudicator's decision does not have to be made.

A party has to accept or challenge a decision in full; it cannot pick and choose and say that some parts were without jurisdiction and rely upon the rest. An adjudicator may make an error in deducting sums where no notice to withhold has been served, but will not exceed his jurisdiction in so doing.

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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