Adjudication Update

In SL Timber Systems Limited v Carillion Construction Limited, Lord MacFadyen held that even where a notice of withholding had not been issued, it was still open to the responding party to argue that the sums claimed were not due under the contract. Here the adjudicator had found that as the notice had not been issued in time, he had no alternative but to award the sums claimed by SL.

Lord MacFadyen said: "In my opinion, the absence of timeous notice of intention to withhold payment does not relieve the party making the claim of the ordinary burden of showing that he is entitled under the contract to receive the payment he claims."

The judge said that a withholding notice is necessary where a sum is due under the contract, and the paying party seeks to withhold payment on some separate ground, for example a counterclaim. It is not necessary when the paying party claims that the sums are not due under the contract. A party making a claim under adjudication must still prove an entitlement to the sums sought.

However, there was a sting in the tail, which confirms that care should always be taken to issue any section 110 or 111 notice(s) within the time stipulated in the contract. For whilst the adjudicator had got the answer wrong, he had asked himself the right question, namely what was the sum due to SL. Therefore, as the decision, which, although wrong, was within the adjudicator's jurisdiction, that decision was upheld.

At the same time, in a decision, which demonstrated a divergence from English authority, Lord MacFadyen rejected the argument, first put forward in England in the Herschel case, that judgement should be stayed since the accounts of SL suggested that there was no guarantee that they would be in a position to repay the judgment in the future. Lord MacFadyen looked to the Act, which only makes provision for a decision not to be enforced if the successful party is in liquidation. Therefore, questions of the solvency of SL were not sufficient to amount to a defence to enforcement.

In Ballast plc v The Burrell Company, Lord Reed had to consider an application for judicial review of the decision of an adjudicator. The adjudicator here, who had been appointed on three previous occasions in disputes concerning this same project, refused to grant the redress sought in the Adjudication Notice. He decided that the claim was "not valid". Ballast sought a declaration that the adjudicator had failed to make any decision in respect of the matters claimed.

The Respondent submitted that the adjudicator could validly decide that he was unable to exercise his statutory jurisdiction. Even if an incorrect decision had been issued by the adjudicator, the matter was decided until finally resolved and thus no subsequent adjudication proceedings on the same dispute could be instigated by the petitioners. If, the adjudicator was in error that was an error, which fell within his jurisdiction and was one, which the Court could not interfere with.

Lord Reed found the adjudicator's decision difficult to understand. The adjudicator appeared to have decided that he could not carry out any valuation, or find any payment due, because the parties had departed from the terms of the pre-printed Contract. He did not take into account the fact that other matters could be agreed between the parties. Such an approach was wrong in law. The error was a material one. Thus, the decision was a nullity and the Petition was granted.

Lord Hardie considered Mitsui Babcock's claim for judicial review of an adjudicator's decision that she did not have jurisdiction to consider a dispute, which related to the construction of two boiler plants situated within the BP Grangemouth site, which were leased to a different company.

The Adjudicator decided that the dispute fell within the section 105(2)(c) exclusion. Mitsui argued that the primary activity of the site was the generation and supply of steam and therefore the dispute was within the scope of the HGCRA 1996. The judge decided that, on the facts, the installation of the boiler plant was to further the primary activity of the processing of chemicals and oil on the petrochemical complex and therefore fell within the exclusion.

In Faithful & Gould Ltd v Arcal Ltd, the receivers of the defendant, sought to strike out a claim for summary judgment by the adjudicator, Mr Gray of the claimant, for his fees. The defendant claimed that the role of an adjudicator must be carried out by one person, an individual. Here, it was suggested that the adjudicator was not acting in a personal capacity because he happened to practice in a partnership or limited company, which administered his fees and recovered them for him. HHJ Mackay rejected this. Whilst an adjudicator must be an actual person acting in his personal capacity, he is not required to sue for his fees in that capacity.

Indeed, HHJ Mackay QC was distinctly unimpressed with the conduct of the defendants in these proceedings and costs were awarded against them on an indemnity basis. The application was said to be both unattractive and untenable.

Health & Safety

Smurfit Limited has been fined £100,000 in relation to the death of a worker at a paper mill. The man was killed whilst attempting to clean a paper machine, which was working at full speed, even though no guards had been provided. The accident was clearly preventable. The breach of Section 2(i)(d) of the Health and Safety At Work Act, (namely the duty to ensure the health and safety and welfare at work of its employees) was described as a very serious breach indeed.

The pressure on the construction industry to improve its record on health and safety continues. Advance details of the Strategic Forum for Construction, which will be chaired by Sir John Egan, and which is being set up to replace the Construction Industry Board, strongly suggest that health and safety will be one of the major concerns. The minister in charge of construction, Brian Wilson, has been reported as saying that health and safety will be an immediate and key priority.


The European Court has ruled that the UK Government is contravening European law by denying freelance workers and those on short term contracts the right to four weeks' annual leave. The Court said that a national government cannot exclude groups of workers from the rights included under the European Working Time Directive. Under UK law currently (and it will have to change), freelance workers do not have a right to be paid annual leave until after completing a qualifying period of employment of 13 weeks.

Other Cases of Interest

In Lidl UK GmbH v Hertford Foods Ltd, the CA had to consider the question of whether either party's standard terms and conditions applied to a contract entered into by a telephone conversation.

Having reached an oral agreement for the supply of corned beef, Hertford confirmed the agreement and sent out its standard terms. Later, Lidl sent out its own terms and conditions. Three months later a further oral agreement was made and confirmed by fax. Whilst Hertford recorded the details of the sale on a standard contract, Lidl did not receive this. Lidl this time sent out its own terms and conditions.

Inevitably problems arose due to delivery failures, which, according to Hertford, were caused by industrial action. Both parties claimed the other was in breach of contract. For Hertford to succeed they needed to establish that their own standard terms and conditions, which included a force majeure clause and which allowed for termination for non-payment, applied.

The CA held that neither party had reached agreement as to which set of standard terms and conditions should apply. The contract was made by telephone and so must have been made on the basis that neither set of standard terms was applicable. Therefore, the terms of contract that would apply would be those, which were expressly agreed or implied by law.

Expert Evidence

The importance of establishing whether or not your experts have prepared an agreed report came to the fore in Stringfellow v Blyth. Here, the CA held that the trial judge should not have gone behind an expert report, which had been agreed. He, therefore, should not have sought a further report upon which he relied in his conclusions. The parties should not have been allowed to adduce further evidence in relation to diminution in value.

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