Balfour Beatty sought to enforce an adjudicator's decision for £180,858.67 including VAT and fees plus interest of £2,633.68 as well as summary judgment for a valuation/interim certificate 29 in the sum of £976,265.20 with interest of £18,723.00. Modus sought a stay of proceedings so that the disputes could be the subject of mediation. Alternatively, Modus also sought to set off their counterclaim against sums otherwise due to Balfour Beatty and/or summary judgment on that counterclaim for liquidated damages in the sum of £2,073,300.00.

Balfour Beatty had been engaged by Modus under an amended 1998 JCT standard form of Building Contract with Contractor's Design.

Although the Court had an inherent jurisdiction to stay proceedings brought in breach of agreement between the parties as to a particular method by which their disputes were resolved, Mr Justice Akenhead considered that it was not appropriate to grant a stay in this case for the following two reasons:-

1. The mediation agreement was nothing more than an agreement to agree. That is it was too uncertain to be enforced by the Court.

2. Even if the Judge was wrong about this and there was a binding agreement to mediate he would only stay the claim and the counterclaim if he concluded that:-

(a) The party making the claim and/or the counterclaim was not entitled to summary judgment on that claim and/or counterclaim i.e. that there was an arguable defence on which the other party had a realistic prospect of success, and
(b) The best way of resolving that dispute was a reference to mediation.

Modus also took a point in respect of the fact that now the statements served by Balfour Beatty contained the necessary statement of belief required. The Judge felt that the failure was more than technical but considered he could order Balfour Beatty to make good this omission under Rule 3.10 of the CPR as it was a procedural error. In relation to the enforcement, Modus made three points in relation to the alleged invalidity of the adjudicator's decision:-

1. Contrary to the contract, the decision was not a reasoned decision;

2. The adjudicator exceeded his jurisdiction and/or breached the rules of natural justice because he failed to have regard to a particular point they raised;

3. The adjudicator exceeded his jurisdiction and/or breached the rules of natural justice because he failed to give Modus an opportunity to put a Rejoinder to Balfour Beatty's Reply.

After looking at the detail of the adjudicator's decision itself and viewing whether in substance it was something different to that for which the parties had contracted; the Judge reached the conclusion that the decision of the 8th October 2008 was a reasoned decision in accordance with the contract. It contained many pages of reasons which explained how and why the adjudicator concluded that the work to the shop front mounted to a change to the employer's requirements. Nothing of significance was omitted and the decision was clear and cogent. Modus did not seek additional reasons and the clarification of any parts of the notes. Justice Akenhead concluded that the adjudicator did provide reasons for his decision and that the reasons complied with the principles set out in Gillies Ramsay and Carillion. The Judge noted that Modus did not say they had suffered prejudice as a result of the adjudicator's decision that being in the form that it was.

In relation to the alleged omission, Modus complained that the adjudicator failed to consider a secondary defence they raised in their response document in the adjudication. This point was that if they were wrong and Balfour Beatty were entitled to be paid extra, that payment was not due by way of an interim payment but through a final account process. This criticism was rejected. The adjudicator decided that Balfour Beatty were entitled to be paid for the change now and not at the end of the final account process and he was not obliged to set out in extenso his response to every last element of Modus' case nor was he obliged to give detailed reasons for every part of his conclusion. Further, the adjudicator took all of his matters in account. As it was clear that the adjudicator dealt with and decided the point there therefore could be no breach of natural justice.

In relation to the absence of a Rejoinder, the Judge stated the following at paragraph 53:-

"The provision of late material by a claiming party can sometimes give rise to an arguable breach of the rules of natural justice: see London & Amsterdam Properties Ltd v Waterman Partnership Ltd [2004] BLR 179 and McAlpine PPS Pipeline Systems Joint Venture v Transco plc TCC (Unreported) 12th May 2004. Such a finding depends on the information concerned; the lateness of that material; whether it can properly be described as an "ambush" as in London & Amsterdam; the surrounding facts; and, most importantly, the adjudicator's obligation to comply with the 28 or 42 day timetable."

The Judge considered Modus' submission to be untenable. The adjudicator had set out a timetable for the adjudication and provided it to the parties. The timetable allowed for a Reply from Balfour Beatty but made no allowance for a further response or a Rejoinder from Modus. Modus did not query or challenge that timetable and at no time during the currency of the adjudication ask the adjudicator for permission to serve any such Rejoinder. On that ground alone, the point was now not open to Modus.

Further, the point was also hopeless because Modus had failed to identify any significant new points allegedly raised by Balfour Beatty for the first time in the Reply, they had failed to say what new points would have been included in any Rejoinder and they had failed to identify how, if at all, such a Rejoinder would or could have had any effect on the outcome of the adjudication. Therefore, far from being an ambush what happened was entirely predictable and there was no question of prejudice.

In relation to the inclusion of the sum in a subsequent valuation, against which there had been a valid withholding notice served by Modus. This point was not addressed. Therefore, the Judge gave judgment for the total sum of the adjudicator's decision.

In relation to the application for payment based on valuation 29, Modus' defence that they were entitled to rely on their set off and counterclaim in respect of liquidated damages was "unsound" as:-

1. Clause 30.3.3 provides notice to give a written notice specifying the amount of the proposed payment and this notice was given for the full amount. Therefore Clause 30.3.5 was of no relevance and Clause 30.3.6 applied and the sum fell due to be paid.

2. The effect of Modus' interpretation of the contract in Clause 30.3.5 would allow them to avoid the consequences of their failure to serve withholding notice under Clause 30.3.4 Judge Akenhead considered this contrary to the whole contractual scheme which was derived from the Housing Grants and Construction and Regeneration Act.

3. Even assuming that amended Clause 30.3.5 did apply to the payment Judge Akenhead stated that it made no difference. The Clause referred to "properly due in the application for interim payment" and the amount properly due must be the amount shown on the application and in the subsequent certificate.

4. A decision that a sum which has been certified by the employer's agent as being due and irrespective of which there is no withholding notice, should now be paid by the employer to the contract without recourse to cross claims or other argument as entirely consistent with the approach of the Court of Appeal in Rupert Morgan Building Services (LLC) Limited v David and Harriet Jervis.

In relation to the alleged set off and counterclaim for liquidated damages, the Judge referred to the case of Balfour Beatty v Serco Limited and set out the two principles at paragraph 53. These authorities were considered by Justice Ramsey in William Verry v The Mayor and Burgesses of the London of Camden who concluded that there was generally an exclusion of the right to set off for an adjudicator's decision. The Judge agreed and adopted this approach. Therefore there could be no set off against the adjudicator's decision in this case. The Judge also considered that as a matter of construction of the contract there could be no set off against the sum due by way of Clause 30.3 because the absence of the withholding notice was fatal to the alleged set off against that amount.

In relation to the summary judgment for liquidated damages, Judge Akenhead concluded that neither the act nor the scheme applied to claims by employers for liquidated damages. Judge Akenhead concluded that there was a bona fide dispute in respect of extensions of time (and therefore liquidated damages) on which Balfour Beatty had a realistic prospect of success. Therefore, Modus was not entitled to summary judgment and if CPR Part 24 for their counterclaim for liquidated damages.