Oakley and Anr. -v- Airclear Environmental Limited and Anr.
The statutory demands based on the adjudicator's decision should not be enforced on the assumption that that decision was made without jurisdiction
4 October, 2001
There was a dispute as to payment between the contractor and the sub-contractor. There was also a dispute between them as to whether a sub-contract had been concluded. The President of RIBA appointed an adjudicator. The contractor wrote to the adjudicator stating that no adjudication could proceed until the determination of the sub-contract's terms and, in particular, the dispute resolution provisions. The sub-contractor submitted a notice of referral to the adjudicator but the contractor played no part in the adjudication. The adjudicator in his decision determined that he had jurisdiction and that the monies deducted by the contractor should be released to the sub-contractor. The contractor did not release any sums with the result that the sub-contractor served statutory demands for them on the contractor pursuant to section to 268(1) of the Insolvency Act 1986 and rule 6 of the Insolvency Rules 1986. The contractor applied to have the demands set aside. Etherton J held that it was not the case, as the sub-contractor contended, that even if there was no written sub-contract agreement concluded on the basis of the NAM/T invitation to tender documentation and incorporating the standard terms and conditions of NAM/SC, the statutory demands based on the adjudicator's decision awarding the sub-contractor the value of its work should not be set aside. This was because the statutory demands were worded so as to rely on the adjudicator's decision but it was established by the judge's other findings that the proceedings and therefore the decision were invalid by reason of there having been no construction contract within the meaning of the Construction Act 1996. In addition the basis of the alleged debt on this contention was a right to payment on a quantum merit but the contractor alleged that it had suffered loss and damage by reason of the sub-contractor's conduct in carrying out work and the evidence as a whole before the judge at first instance was directed to whether or not the adjudication process was valid. Advice Note The courts will generally enforce adjudicators? decisions whether or not they were guilty of an error of fact or law unless they acted without jurisdiction. Etherton J made it clear that if the adjudicator wrongly found that there was a ?construction contract?, then any substantive award made in his decision was made without jurisdiction.