7. The authorities made clear that the doctrine of bankruptcy set off (at that date under the 1986 Rules, not the 2016 Rules) was not undermined, changed or watered down by the passing of the Act. That meant that Lonsdale, under either version of the Insolvency Rules, was entitled to the benefit of that doctrine. In consequence there was but a single claim in existence so far as enforcement by either party was concerned. How much that was, and in which direction, must be – indeed, could only be – ascertained after taking the account of the mutual dealings required by the Insolvency Rules. 8. The adjudicator did not have jurisdiction to determine the dispute referred to him. Injunction granted. Comment This is an important decision. In a careful and convincing judgment His Lordship makes clear that once the so called “bankruptcy rules” apply, the only sum due over which there can be a dispute, is the sum due either way after the taking of an account of the mutual dealings between the parties. Whilst the effect is to reduce the circumstances in which an insolvent company can adjudicate, this is consistent with the protection which the insolvency laws confer on creditors. The more interesting issue is whether an adjudicator might ever have the power to take the account required under the Insolvency Rules, assuming that the claims and cross claims arise under the same single construction contract and genuinely comprise a single dispute. The reasons for the finding on the facts of this case, though compelling, will not necessarily apply to every other sets of circumstances. 6. Jurisdiction—waiver Beach Homes Ltd v Stephen Hazell and Helen Hazell 16 Mr & Mrs Hazell appointed Beach Homes Ltd (“Beach”) to carry out construction works on their house. A dispute arose as to whether the works were complete and as to the value of the final account. The contract contained various dispute resolution provisions: one for all disputes to be referred to adjudication under the Scheme; and one for disputes concerning the value of variations to be resolved by expert determination which was to be final, conclusive and binding upon the parties. The dispute was referred to adjudication and expert determination by Beach. A Mr Judkins was appointed as adjudicator and expert by RICS. Mr Judkins proceeded to act and make a decision both as adjudicator and (in respect of the value of variations in dispute) as expert. He found Beach was entitled to a further payment of £128,826 plus interest and £22,616 for his adjudication fees. In relation to the expert determination element of his fees he ordered the parties to be equally responsible for payment. Beach now sought enforcement of the decision and Mr & Mrs Hazell opposed the application on several grounds.
The first and principal ground was that the dispute referred by the notice of adjudication made no mention of expert determination nor had Beach invited RICS to make such an appointment. Accordingly the adjudicator was wrong to conclude as he did that he could embark upon expert determination which Beach had not placed within his remit. Therefore his entire activity was conducted without jurisdiction. The Court accepted that Mr & Mrs Hazell had said in a document in the adjudication “no authority was given for Beach Homes Limited to start an adjudication process and this is not implicit to the contract without our approval.” However after that Mr & Mrs Hazell had played a full part in the process of both adjudication and expert determination in the knowledge that Mr Judkins believed he had jurisdiction to conduct both aspects. They therefore waived any jurisdictional argument they might have had. Other grounds concerned the construction of the variations clause and whether the decision was correct. The answer to these arguments was that “Adjudicator’s decisions will be enforced by the Courts, regardless of errors of fact or law.” 17 There was one other ground, raised before the adjudicator and rejected by him: that the adjudication clause did not comply with the Unfair Terms in Consumer Contracts Regulations (UTCCR). The application of UTCCR had been considered in three previous cases. In two of these three cases the provisions were found not to be unfair. The adjudicator was right to conclude that the clause in this case was not unfair, but even if the Court had been of different view it would not have mattered as the decision was to be enforced regardless of errors of law. Comment It must be said that the dispute resolution provisions were unusual, and possibly the purported appointment of the same person as both adjudicator under the Scheme and expert determiner under the contract in terms of cases on enforcement is unique. The finding of ‘waiver’ was a convenient answer to the main question: whether the adjudicator had been asked and appointed (and therefore had jurisdiction) to perform both roles? The fact that the matter was raised in the adjudication, albeit without a formal objection and reservation of rights and the brevity of reasons for the finding, may suggest to practitioners that this decision be treated with some caution. The outcome might well have been different with the more usual and fulsome objection and reservation.
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