Urang Commercial Ltd V Century Investments Ltd
Technology and Construction Court
17 June 2011
The project quantity surveyor issued an interim valuation under the contract. The employer did not pay the whole of the certified sum despite the employer failing to give a withholding notice. Disputes arose as to payment of the balance of the sum certified as well as to other claims advanced by the contractor, including claims for an extension of time and associated prolongation costs. The contractor began an adjudication. The employer served a response in which it advanced a counterclaim in respect of remedial work to soil drainage, loss of revenue during repairs and liquidated and ascertained damages. The adjudicator refused to deal with the counterclaim on its merits on the grounds that the subject matter of the counterclaim should properly have been the subject of a withholding notice and that he was unable to assess a value for the counterclaim in the absence of such a notice. The adjudicator awarded sums in respect of the counterclaim which the employer did not pay.
Edwards-Stuart J held that the adjudicator could not be said to have acted in breach of the rules of natural justice by declining to deal with the employer's counterclaim on its merits on the mistaken ground that the employer failed to serve a withholding notice in respect of that counterclaim. The single exception to this decision was that element of the counterclaim which sought to withhold payment in respect of a "sum due under the contract" in the form of part of the interim valuation. The amount certified for payment was a "sum due" under the contract with the result that there could be no defence to a claim for that sum (or any unpaid balance of it) in the absence of a valid withholding notice. The adjudicator had been wrong to decide that the employer could not deploy its counterclaim as a defence to the contractor’s claims (apart from the claim under the certificate) in the absence of a withholding notice. However, the adjudicator had not failed to deal with the counterclaim on its merits since he addressed the issue of whether he should deal with it, albeit that he answered it in the wrong way by ruling that he should not.