| Date | 13 September 2000 |
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| Judgment | KNS Industrial Services (Birmingham) Limited v Sindall Limited TCC 17 July 2000 |
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| The Issue | Whether an adjudicator's decision can be corrected on enforcement in circumstances where it is argued that the adjudicator exceeded his jurisdiction. |
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| Implication |
An adjudicator's decision cannot be dissected to enforce those parts which are decided with jurisdiction, and disalllow other parts. |
printDisputes in the construction industry can be hopelessly complex and it is reasonable sometimes to question whether an adjudicator acting under the time constraints of the Construction Act can ever be expected to deliver a clear and proper answer. In the case of KNS Industrial Services (Birmingham) Limited -v- Sindall Limited, the disputed matters could not be described as simple. KNS had entered into a sub-contract to carry out mechanical and electrical works for Sindall at a private house in London. The sub-contract was for approximately £160,000 based on the standard DOM/1 conditions subject to amendments imposed by Sindall. To say the least there was some growth in the value of the sub-contract works. By application number 14, KNS were seeking payment in excess of £1.1 million. In accordance with the requirements of the Construction Act, Sindall notified that it considered the gross value of the subcontract work to be of the order of £990,000 and that taking into account previous payments no further monies were due. Application 15 followed in which KNS requested still further monies. Sindall did not issue a payment notice (they considered that no payment was due) but issued a notice of withholding in the amount of approximately £45,000. Matters deteriorated. KNS gave notice of its intention to suspend performance of the subcontract works and having received no further payment, subsequently stopped work. Sindall countered by giving notice and determining the employment of KNS under the sub-contract. Certain provisions of the sub-contract added to these complications. Notably a clause which stated that payment to the subcontractor would become due no later than 28 days from the date of issue of the main contract payment certificate applicable to the relevant valuation date. Moreover by clause 29.6 the main contractor would not be bound to make any further payment to the subcontractor until after completion of the sub-contract works in the event of a valid determination. The whole unfortunate story was handed over to an adjudicator in an attempt to resolve matters. KNS argued that the sum of approximately £155,000 remained due and payable. No payment notice had been issued and the withholding notice had been served out of time. The suspension of the works had been justified and properly notified. Sindall replied to contradict all these points and noted that since the contract had been validly terminated it was in any event not bound to make any further payment. The adjudicator started with the question of suspension and determination and held that since the date of payment was governed by the issue of an interim certificate under the main contract, payment had not been due at the date the subcontractor had given notice of suspension. It followed that the notice of suspension was premature and as a consequence ineffective. Thereafter the adjudicator's findings became slightly less certain. He did not say that Sindall could rely on clause 29.6 to make no further payment. Indeed he ordered that Sindall pay to KNS an amount of approximately £5,000. In arriving at this figure he took the amount of the gross application from KNS and reduced this to a balance due after deducting a sum of the order of £100,000 for "non-compliant work". He did not give a reason for this reduction (nor was he required to). Nevertheless the deduction jarred with KNS and its advisors. They considered that as it had been held that Sindall had failed to give a payment notice and failed to give a withholding notice in respect of such an amount, the adjudicator had exceeded his jurisdiction by making such a deduction. Perhaps of course the adjudicator had simply decided that he was entitled to reduce the amount applied for on the basis that certain of the works were not compliant with the sub-contract. Irrespective of payment or withholding notices, payment was simply not due for more than the value of work properly carried out under the terms of the sub-contract. KNS applied to the Court for enforcement of the adjudicator's decision. Their approach was novel. It was argued that the adjudicator had lacked jurisdiction to make the deduction for non-compliant work and that accordingly the true amount due under the adjudicator's decision was significantly greater than the balance he had arrived at. His Honour Judge Humphrey Lloyd QC was unimpressed. KNS was not entitled to sever parts of the adjudicator's apparent conclusions from others. By operation of clause 29.6 there was no need for Sindall to have to given notice in respect of the sums deducted by the adjudicator. The adjudicator appeared to have prudently anticipated the inevitable without necessarily drawing attention to or explaining this in his decision. Accordingly KNS's application for enforcement of its interpretation of the adjudicator's decision was dismissed. There was no evidence to suggest that the adjudicator had exceeded his jurisdiction and indeed if the deduction had been made wrongfully in the absence of an effective notice from Sindall, this was no more than an error by the adjudicator which would be immaterial in considering whether the adjudicator's decision was to be enforced as it stood.
CJ-0036
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