Thermal Energy Construction Ltd v AE & E Lentjes UK Ltd

An adjudicator must give sufficient reasons to show that all essential issues properly referred to him have been decided and to explain the conclusions reached. A failure to address a substantial defence, such as set-off or counterclaim, may justify refusal to enforce the decision where the omission leaves the reasons absent or unintelligible and causes substantial prejudice. The adjudicator’s limited power to correct clerical mistakes or accidental slips does not ordinarily operate as a precondition to resisting enforcement on that ground. Non-enforcement remains an exceptional consequence in the summary adjudication process.

The claimant sought summary judgment to enforce an adjudicator’s decision awarding it £904,567.60 plus VAT under a construction sub-contract. The defendant had advanced a substantial set-off and counterclaim concerning alleged liability for liquidated damages under the main contract.

The adjudicator gave reasons for the claimant’s four pleaded claims but did not expressly address the defendant’s set-off or counterclaim, its jurisdictional objection, or the contractual provision relied upon in answer to that defence. The central issues were whether the adjudicator had failed to deal with a matter properly referred to him, whether the defendant suffered substantial prejudice, and whether the defendant was required first to invoke the correction procedure under paragraphs 32 and 33 of the TeCSA Adjudication Rules.

1. Application dismissed. The adjudicator’s decision was not enforced.
2. The adjudicator was contractually required to give written reasons. The reasons had to make clear that he had decided all essential issues properly put before him and enable the parties to understand what he had decided and why. The court applied the approach stated in Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWHC 779 (TCC), including the requirement that reasons be absent or unintelligible and that substantial prejudice be shown before enforcement is refused.
3. The adjudicator’s carefully structured decision contained no express treatment of the defendant’s set-off or counterclaim. The references relied upon by the claimant were equally, or more, capable of relating to a separate commercial issue. The adjudicator had therefore failed to deal with a substantial element of the defence or provide reasons showing how it had been resolved.
4. The defendant suffered substantial prejudice. It lost the opportunity to have the defence determined by the adjudicator, and the uncertainty as to whether the defence had already been decided created a risk that a subsequent adjudicator might decline jurisdiction. The court did not decide whether a defence lacking merit could ever avoid the prejudice requirement.
5. Paragraph 32 of the TeCSA Rules was confined to correction of clerical mistakes or errors arising from an accidental slip or omission. It did not cover the adjudicator’s failure to address an entire substantial issue. Paragraphs 32 and 33 did not make use of that procedure a precondition to resisting enforcement.
6. The case was an exceptional instance in which the combination of failure to give reasons and substantial prejudice required refusal of enforcement.