107772.001 SH Construction Case Booklet

6. Natural Justice BSW Building Services Ltd v Adur District Council 10 The applicant BSW Building Services Ltd (“BSW”) sought summary judgment against Adur District Council (“Adur”) to enforce an adjudicator’s decision in its favour. Adur had engaged BSW to carry out installation, maintenance and servicing works to heating and plumbing systems in local authority properties pursuant to a JCT Measured Term Contract. The works undertaken by BSW were to be valued by reference to a schedule of rates in the contract. The contract stated that where the contract particulars set out that clause 5.6.1 did not apply the rates given in the schedule of rates, which were current at the commencement of the contract period, would remain fixed for all orders. Paragraph 11.3 of the contract particulars stated that clause 5.6.1 did not apply. BSW presented invoices and had been paid on the basis that it was entitled to annual incremental increases to reflect inflation. In 2017, BSW claimed that the annual increment had not been correctly calculated, and it was entitled to additional sums on the proper application of the RPI mechanism in the contract. BSW referred this issue to adjudication. At adjudication, it was Adur’s case that therewas no contractual entitlement to incremental increases and that the parties had agreed alternative rates. The adjudicator considered that the issues to be determined were BSW’s entitlement to annual incremental increases and whether the parties had agreed alternative rates so that BSW were estopped from claiming additional sums. The adjudicator decided that the contract terms meant that the prices were fixed for the duration of the contract but that Adur had recognised the principle of inflationary increases and had waived its right to fixed prices. He decided that BSW was entitled to the sums claimed by way of additional incremental increases. Adur argued that there had been a plain breach of natural justice since the adjudicator had reached his decision on a ground that had not been put forward by either party and which it had no opportunity to meet. It was held that BSW’s case was that it was entitled to the annual increments as a matter of construction of the contract, which had not been varied. Adur’s case was that BSW was not so entitled and that the parties had agreed alternative rates and that BSW were estopped from denying it had agreed to alternative rates. Those were the issues before the adjudicator and neither side had put forward or dealt with waiver. The basis of the decision had not been argued by either side. The adjudicator had gone on a frolic of his own. There was a clear beach of natural justice such that the adjudicator’s award would not be enforced ( Cantillon Ltd v Urvasco Ltd 11 applied). The application for enforcement of the adjudicator’s decision was refused.

7. Natural Justice – Setting off Synergy Gas Services Limited v Northern Gas Heating Limited 12 The Claimant (“Synergy”) applied for summary judgment against the Defendant (“Northern”) in respect of enforcing an adjudicator’s decision. Synergy and Northern had entered into a sub-contract and a dispute arose as to Northern’s alleged failures to pay invoices. Synergy referred the dispute to adjudication where Northern claimed a set-off as a result of Synergy’s alleged failure to rectify defects. Synergy denied the allegations and submitted Scott schedules responding to alleged defects and noting it had not been given the opportunity to make good the defects. The adjudicator considered the interpretation of the sub-contract and found that a notification of defects was a pre-condition to setting off. As Northern had not notified Synergy of the alleged defects, it could not claim a set-off. The adjudicator decided that Northern were to pay Synergy over £74,000. On the day of the trial, Synergy received a cheque for payment of £45,000 and so it continued with the application to enforce with respect to the balance. Northern argued that the adjudicator’s decision breached the rules of natural justice as Synergy had not argued that the sub-contract contained a pre-condition to set-off and the adjudicator had not raised it with the parties so that Northern had the opportunity to address it. The Court held that it was rare for it to intervene where breaches of natural justice arguments were raised unless it was plain that the adjudicator had decided a different question to that referred to him or had gone about the task in an obviously unfair manner. Although Synergy’s submissions to the adjudicator did not expressly plead that he should consider the pre-condition clause of the subcontract, the Scott schedule were full of references to Northern’s failure to give Synergy opportunity to inspect or rectify the alleged defects. Therefore the adjudicator’s decision was based on the arguments raised in the adjudication and there was no obvious unfairness and no breach of natural justice. Summary judgment was granted to enforce the unpaid part of the adjudicator’s decision.


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