Quartzelec Ltd v Honeywell Control Systems Ltd

The adjudicator's refusal to consider the sub-contractor's omissions defence meant that he was guilty of a significant jurisdictional error and did not act in accordance with the requirements of natural justice
 
QUARTZELEC LTD v HONEYWELL CONTROL SYSTEMS LTD
 
Technology and Construction Court
His Honour Judge Stephen Davies
5 December 2008
 
 
The sub-sub-contractor submitted a payment dispute to adjudication. The sub-contractor raised for the first time before the adjudicator the defence that the sub-sub-contractor's interim valuations had in error not included a deduction for cost savings due to a separate variation omitting part of the works. The sub-sub-contractor protested that the adjudicator had no jurisdiction to consider this omissions defence because it had not been raised at any time previously and therefore did not form any part of the dispute referred to the adjudicator. The adjudicator accepted this submission, considered that he had no jurisdiction to consider the omission defence and awarded the sub-sub-contractor a specified sum. The sub-contractor refused to comply with the decision.
 
Judge Davies held that the adjudicator's refusal to consider the sub-contractor's omissions defence was wrong and meant that he was guilty of a significant jurisdictional error and that he did not act in accordance with the requirements of natural justice. The omissions defence should have been considered by the adjudicator on its merits. It was difficult to see why a respondent should not be entitled to raise any defence open to him to defend himself against that claim, regardless of whether or not it was raised as a discrete ground of defence in the run up to the adjudication. The fact that the adjudicator had the jurisdiction to and should consider any such defence might result in him accepting or rejecting the defence, in whole or in part. Grounds for rejecting a defence not previously raised included that the defence could not properly be advanced in the absence of a withholding notice and that the failure to raise the defence at an earlier stage was fatal to the adjudicator's assessment of its genuineness. However, a decision by an adjudicator to reject a defence on such a ground was not one as to his jurisdiction to consider the defence and was instead a decision within his jurisdiction about the merits of that defence. The sub-sub-contractor contended that the omissions defence, if successful, would in any event have only been worth a fraction of the total sum awarded. However, the submission that not to permit the offending element of the decision to be severed would produce a result which would be both wrong in principle and unjust should be rejected.
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