HS Works Ltd v Enterprise Managed Services Ltd

Valid adjudication decisions under a construction contract must generally be enforced promptly. Where two valid and enforceable decisions affect each other, the court should give effect to both, while exercising discretion over the form of its orders and, where appropriate, reflecting their net effect. An adjudicator’s jurisdiction is defined by the dispute referred, including the claimant’s chosen formulation of its claim. An adjudicator need not decide an alternative issue that becomes unnecessary after resolving the primary issue. Complex evidence does not itself make adjudication unfair. Fairness is assessed in the context of the statutory timetable, the parties’ prior knowledge and the opportunity they had to respond. Spot checks may properly be used to test large-scale valuation evidence.

HS Works Ltd and Enterprise Managed Services Ltd were parties to a construction sub-contract for highway repair and reinstatement works. Following disputes over the final account and contra-charges, two adjudications took place.

1. In the first adjudication, the adjudicator held that Enterprise had no effective withholding notice for the final application and ordered payment of £1,835,252.26 plus interest, VAT and fees.
2. In the second, the adjudicator declared the proper net valuation of the sub-contract works to be £23,253,931.09.

Each party sought summary enforcement of the decision adverse to it. The central issues were whether either decision was invalid for jurisdictional or natural justice reasons, how the two interlocking decisions should be enforced, and whether the court should decide the substantive withholding-notice issue.

Both adjudication decisions were valid and enforceable.

1. The court adopted a staged approach where two adjudication decisions may affect each other: determine whether both decisions are valid; determine whether each can be enforced or given effect to; and, if both can, enforce both where separate enforcement proceedings have been brought. The form of enforcement is for the court. A set-off may be inappropriate where the first decision proceeded on a basis excluding set-off.
2. The first adjudicator’s jurisdiction was defined by the Notice of Adjudication and the dispute HSW chose to refer. The primary issue was whether the contra-charges were withheld without effective notices. Once that issue succeeded, the alternative merits of the contra-charges became unnecessary. An adjudicator is not generally required to decide every issue arising in the reference, only those necessary to explain the decision reached. Any alleged omission was immaterial in the circumstances.
3. The dispute referred in the second adjudication had crystallised. The parties had exchanged and rejected materially different final-account valuations before the notice was served. Later evidence, including the expert report, could support or enlarge the evidential case without changing the essential dispute.
4. The second adjudicator did not breach natural justice by continuing or by deciding the dispute within the available time. He had extensive material, a hearing, opportunities for submissions and responses, and an additional week. HSW had long possessed or understood much of the underlying information and was able to respond in detail. This was not one of the rare cases in which resignation was required.
5. The use of spot checks in a large final-account adjudication was permissible. The adjudicator could use representative checks to assess the reliability of competing evidence and prefer one party’s valuation on a disputed category. The statutory and contractual 28-day context meant that the decision was not to be judged as if it were a full trial.
6. Under section 108(3) of the Housing Grants Construction and Regeneration Act 1996, reflected in paragraph 23(2) of the Scheme for Construction Contracts (SI 649), the parties had to comply temporarily with a valid adjudicator’s decision. The declaratory second decision therefore bound the parties pending final determination. The court exercised its discretion to draw orders reflecting the net effect of the two decisions, including interest and adjudicators’ fees.
7. The court declined to determine whether fresh withholding notices were required after the final account. The issue was not fully argued, earlier notices were not before the court, and it was unnecessary to resolve it.