SYSTECH SOLICITORS LEGAL UPDATE

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The TCC case of St Austell Printing Company Limited v Dawnus Construction Holdings Limited 1 has presented some interesting feedback from the courts in relation to the ‘cherry picking’ of a claim in adjudication proceedings. The project involved the construction of two industrial units under a JCT D&B 2005 contract. In December 2013, some months after the works had been completed; the contractor (Dawnus) issued an interim application for payment for the net amount of approximately £2.3 million, which included circa £1.9 million for variations, of which circa £900,000 was for the measured work element of those variations. St Austell’s advisors, also in December 2013, issued a payment notice which stated that the payment to be made was nil, along with a ‘letter of clarification’ which referred to various reasons as to why no payment would be made but stating that a comprehensive response would be issued in January 2014 which would set out details of defects along with a response to the loss and expense element of the application for payment. No ‘comprehensive response’ was issued by St Austell, and so in August 2014 Dawnus started adjudication proceedings. The notice of adjudication, which set the adjudicator’s jurisdiction, stated “The Referring Party limits submissions in this adjudication to these 115 Changes as identified in the attached schedule, and reserves its right to deal with other matters in Interim Certificate 18, and later certificates, in the future.” The adjudicator decided in favour of Dawnus and ordered St Austell to make payment to Dawnus of circa £400k plus his fees. The case before the court was Dawnus seeking to enforce this decision, with St Austell seeking to resist enforcement by stating that the adjudicator lacked jurisdiction on two grounds. The first was, as Mr Justice Coulson described it, the “well-worn suggestion” that a dispute had not crystallised between the parties at the time of the notice of adjudication because St Austell had not formally responded to the claimed amounts. The second ground was the “rather more novel” jurisdictional challenge that the adjudicator could not order St Austell to make payment as the dispute that was referred was strictly limited to one element of the interim application. During the adjudication the adjudicator had dismissed both of these jurisdictional challenges; however St Austell sought to rely on both of these grounds to resist enforcement. At court, the first ground was dismissed, with the judge stating that it was “unarguable” that the dispute had not crystallised. It is the second ground of challenge, and the resulting comments from Mr Justice Coulson, which are of more interest. The judge firstly referred to the case of Fastrack Contractors Ltd v Morrison Construction Ltd 2 in which the court had stated that it was permissible for a claiming party to “prune” elements of a claim as long as this did not transform the pre-existing dispute into something different. For example, if an interim application is for measured works and a loss and expense claim, a claiming party may solely present the measured work element of its application if it feels the loss and expense claim could be difficult to pursue. Mr Justice Coulson said “That is not only permissible, but it is a process that is to be encouraged.” St Austell had argued that the contract did not confer a liability on St Austell to make payment for part of an application, only for the whole application. St Austell did not claim that there had been a previous overpayment or that it had a counterclaim against Dawnus. As a result, the judge said that the only outcome if the adjudicator had been asked to consider the entire application for payment would be that he would have awarded more than, or at the very least not less than, the sums he awarded in this adjudication. Mr Justice Coulson went on to say that it would have been entirely permissible for St Austell to present a counterclaim in its defence to this adjudication, and that the wording of the Notice of Adjudication could not have prevented this. This is based on the case of Pylon Ltd v Breyer Group 3 in which the same judge said “...subject to questions of withholding notices and the like, a responding party is entitled to defend himself against a claim for money due by reference to any legitimate available defence (including set-off)...” The interesting point in this case is that the court stated its encouragement for parties to cherry pick the better elements of their claims for adjudication. Therefore if a party lacks confidence on the merits of certain items within its application, it is encouraged to exclude those items from the adjudication proceedings. This may seem like common sense, but there are a lot of adjudications which contain everything the claiming party can throw in to increase the value of its claim; following this judgment it is sensible to temper the desire to throw the kitchen sink at an adjudicator and to only include those items which are based on a solid foundation. The point regarding the ability to include a counterclaim to set-off the value of any claims 1 [2015] EWHC 96 (TCC) 2 [2000] BLR 168 3 [2010] EWHC 837 (TCC) 14 www.systech-int.com
from the responding party from sums due claimed by the referring party is also interesting. If there had been a previous overpayment or a valid counterclaim for items such as liquidated damages or defectrectification that fell for assessment at the time of the application for payment, the judge confirmed that this could not be excluded as a defence from the adjudication by the drafting of the Notice of Adjudication. Such a defence would only be permissible if a valid Withholding Notice (or Pay Less Notice under the new regime) had been issued. This confirms for a paying party the importance of ensuring that the contractual payment regime is adhered to which would ensure that any such claim could be used as a defence in adjudication proceedings if required. www.systech-int.com 15
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Page 3 and 4: CONTENTS 4 7 10 13 16 19 22 26 John
Page 5 and 6: The first question to ask is: is re
Page 7 and 8: CLIENT’S GUIDE TO ENFORCING ARBIT
Page 9 and 10: virtually any matter can be argued
Page 11 and 12: It is a fairly common scenario in t
Page 13: CHERRY PICKING IN ADJUDICATION Phil
Page 17 and 18: When it comes to construction and s
Page 19 and 20: PROTECTING COMMERCIALLY VALUABLE IN
Page 21 and 22: can be fiercely negotiated and rang
Page 23 and 24: The SICC confirms Singapore as a Di
Page 25 and 26: Summary While arbitration as an alt
Page 27 and 28: The question as to whether the Sing
Page 29 and 30: Systech Solicitors offers a truly u

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