| Date | 31 August 2000 |
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| Judgment | Whiteways Contractors (Sussex) Limited -v- Impressa Castelli Construction UK TCC 9 August 2000 |
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| The Issue | Jurisdiction of Adjudicators and Abatement. |
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| Implication |
The jurisdiction of an adjudicator is dictated by the notice of intention to refer. The general law of abatement cannot be used to circumvent the notice requirements of the Construction Act. |
printThe recent case of Whiteways Contractors (Sussex) Limited vs Impresa Castelli Construction UK Limited adds to the growing list of cases giving guidance in the operation of the Construction Act. Whiteways were plastering sub-contractors engaged by Impresa in connection with the construction of the Kingsway Hall Hotel in London. The sub-contract was in the form of the standard Dom/1. A first adjudication between the parties had resulted in the Adjudicator ordering Impresa to pay Whiteways something of the order of £100,000 plus VAT. This sum was paid. Whiteways commenced a second adjudication and the same Adjudicator was appointed by the President of the RICS. Once again the Adjudicator found in favour of Whiteways, this time ordering approximately £81,000 plus VAT to be paid by Impresa. On this occasion Impresa refused to pay. They argued that the Adjudicator had exceeded his jurisdiction and for that reason his order should not be enforced. Moreover, they argued that they were entitled to an abatement of monies due to Whiteways in reduction of the amount ordered to be paid. I will return to the abatement point in a moment. As to the question of jurisdiction, Impresa disputed the Adjudicator's jurisdiction to deal with some but not all of the matters referred to in the referral document. These included a claim for extension of time. They invited the Adjudicator to decide on this issue. The Adjudicator decided that in the absence of any agreement between the parties, his jurisdiction would be limited to the dispute or difference described in the Notice of Intention to Refer. The Adjudicator acknowledged that Whiteways' application for an extension of time had not been expressly included in the notice of intention to adjudicate. He nevertheless concluded that if he was to decide on the merits of Whiteways' claims for payment, some consideration was necessary of Whiteways' entitlement to an extension of its sub-contract period. His Honour Judge Bowsher QC concluded that the approach of the Adjudicator was entirely proper and that he had not exceeded his jurisdiction in so acting. Moreover, both parties having invited the Adjudicator to decide these contentions in relation to jurisdiction, the parties had extended his jurisdiction to determine the matter. Like the remainder of his decision, the Adjudicator's decision on jurisdiction was therefore "binding on the parties until the dispute or difference is finally determined by arbitration or by legal proceedings". Clearly parties who allow an Adjudicator to consider questions of jurisdiction before proceeding with the substantive issues will have to distinguish between an invitation to the Adjudicator to determine his own jurisdiction, as opposed to an invitation to the Adjudicator to decide whether he should proceed. The second reason Impresa gave for refusing to pay was that they considered they were entitled to rely on matters of abatement to reduce the amount ordered to be paid by the Adjudicator. Abatement needs to be distinguished from set-off. Set-off, which is a form of counterclaim, concerns the deduction of damages caused by a party’s breach of contract to reduce or extinguish payments due to that party under the contract. This is often contrasted with an abatement, which concerns the right to reduce sums otherwise payable by asserting that sum claimed has not been earned. This distinction will often have little practical effect unless it can be argued that the provisions for payment in the Construction Act, notably the requirements for notices under Section 110 and Section 111, apply only to matters of set-off and not to abatement. Impresa argued that under the law concerning abatement, the sums never became due and therefore did not fall within the ambit of Section 110 of the Act. His Honour Judge Bowsher QC noted that it was common for a party to a building contract to make deductions from sums claimed on account of overpayments on previous applications and it makes no difference whether those deductions are by way of set-off or abatement. Judge Bowsher noted that the scheme under the Act was to provide that if such deductions were to be made, notice was to be given in compliance with the requirements of the Act. In meeting those requirements, the Act makes no distinction between set-off and abatement. Accordingly Judge Bowsher rejected the submissions made on behalf of Impresa in relation to abatement. A party who fails to give Section 110 and 111 notices cannot after the event seek to rely on the general law of abatement to reduce the amounts ordered to be paid by an Adjudicator. Some people may read into this decision more than is said. It will be argued that this decision gives weight to those who suggest that in the absence of a payment notice, the amount of the application becomes the amount due. Accordingly, an Adjudicator must order payment in the amount of the application without further enquiry. It is difficult to see how the absence of a payment notice should alter the fundamental position that a party should be obliged to pay only for those works properly executed in accordance with the terms of the contract. Such a dispute concerns neither abatement nor set-off, and the proper role of the Adjudicator should be to decide on the amounts due, having regard to the terms of the contract.
CJ-0034
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