UK: Diffident Display Of Finding An Adjudicator's Decision Concerning Defects To Be Defective

Synergy Gas Services Ltd v Northern Gas Heating Ltd [2018] EWHC 3060 (TCC)

Background:

The claimant and defendant had entered into a sub-contract, clause 14.4 of which stated that if the defendant decided any works done by the claimant were defective, it had to notify the claimant of the defects and specify details. If the claimant failed to make good the defects, the defendant could rectify them itself and recover the costs from the claimant.

A dispute arose over the defendant's alleged failure to pay invoices, and the claimant referred the dispute to adjudication. The defendant's response alleged a breach of clause 14.4, namely the claimant's failure to rectify defects, and claimed a set-off. The claimant denied that allegation and submitted detailed schedules responding to each alleged defect and noting that it had not been given the opportunity to make them good.

The adjudicator's decision:

The adjudicator considered that the interpretation of clause 14.4 was in issue, and found that a notification of defects was a precondition to setting off. As the defendant had not notified the claimant of the alleged defects, it could not claim a set-off. The adjudicator ordered the defendant to pay the claimant over £74,000.

The defendant sent a cheque for around £45,700, so the claimant brought the instant application to enforce the decision in respect of the remaining amount of the adjudicator's award. The defendant submitted that the decision breached natural justice as the claimant had not argued that clause 14.4 was a precondition to set-off, and the adjudicator had not raised it with the parties, so the defendant had not been given the opportunity to address it.

Court judgment:

The Application to enforce the adjudicator's award was granted on the basis that where a breach of natural justice is argued, it is rare for courts to interfere with an adjudicator's decision unless a different question was decided or the adjudication proceedings warrant such intervention.

Here, the adjudicator was of the view that he ought to interpret clause 14.4 and establish whether there was sufficient material to conclude that the parties had considered it an issue and whether they had profusely referred to it in the written material put before him.

The claimant's submissions to the adjudicator had not expressly pleaded that a clause 14.4 notice was a precondition to set-off but it had simply denied the allegation that, in breach of that clause, it had failed to rectify defects.

However, the schedules were full of references to the defendant's failure to give the claimant any opportunity to inspect or rectify alleged defects. That imported the allegation that it had been a requirement that the claimant be given that opportunity. Therefore, the adjudicator's decision was covered by the arguments raised, and there was no obvious unfairness and no breach of natural justice.

Comments:

This case illustrates the high threshold to overcome when proving an adjudicator's decision to be in breach of natural justice. It also suggests an overall reluctance by courts to find adjudicator's decisions to be incorrect when considering claims for defects and rectification costs, especially when refuting items which ought to have been bought forward during the adjudication itself.

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