Pilon Ltd v Breyer Group Plc

An adjudicator must address the dispute referred, including any legitimate defence necessarily encompassed by a monetary claim. A deliberate and materially significant refusal to consider such a defence, based on an erroneously restrictive view of jurisdiction, may render the decision unenforceable for jurisdictional error or breach of natural justice.

An adjudicator’s ruling on jurisdiction binds the parties only where they agreed to that result or waived or failed to reserve an objection. Where one dispute has been referred, a material jurisdictional or natural justice defect ordinarily prevents severance. A stay of execution may also be appropriate where the successful party probably could not repay the judgment sum and its financial deterioration was not caused by non-payment of the adjudicated amount.

Pilon Ltd, a refurbishment contractor subject to a company voluntary arrangement, sought summary enforcement of an adjudicator’s award against Breyer Group Plc. The adjudication concerned an interim payment application for batches 26–62 of work on the Ealing Project. Breyer defended the claim partly by alleging an earlier overpayment on batches 1–25.

The adjudicator decided that the earlier overpayment fell outside his jurisdiction and awarded Pilon £207,617.74 plus VAT and interest. Breyer resisted enforcement on jurisdictional and natural justice grounds. The court considered whether the adjudicator’s jurisdictional ruling was binding, whether his refusal to consider the defence was material, whether the decision could be severed, and whether any judgment should be stayed because of Pilon’s financial position.

1. Application dismissed. The adjudicator’s decision was unenforceable because he deliberately and materially declined to consider Breyer’s overpayment defence. His refusal rested on an erroneously restrictive view of his jurisdiction and amounted alternatively to a breach of natural justice.
2. An adjudicator’s ruling about his own jurisdiction has no binding effect unless the parties expressly or impliedly agreed to be bound, or the objecting party waived its objection. Breyer clearly maintained its objection during the adjudication and promptly repeated it afterwards. The court was therefore required to determine the jurisdictional challenge.
3. A notice of adjudication ordinarily identifies the claim rather than every defence that may answer it. A claim for an interim payment necessarily permitted consideration of any legitimate defence affecting what further sum was payable, including the alleged overpayment and set-off concerning earlier batches. A claimant cannot exclude such a defence merely through restrictive drafting.
4. Not every omission by an adjudicator defeats enforcement. A decision remains enforceable where the adjudicator has generally attempted to answer the referred question, despite an inadvertent error or failure to address a subsidiary issue. Refusal of enforcement requires a deliberate failure which is also material, meaning that it could have had a potentially significant effect on the result. The omitted defence here was worth £147,774, about 71% of the award, and might also have affected the adjudicator’s treatment of other disputed set-offs.
5. Pilon could not enforce the adjudicator’s valuation while asking the court to substitute a contrary conclusion on the need for payment or withholding notices. That would amount to approbation and reprobation. The adjudicator’s conclusion on that issue remained temporarily binding pending final determination in arbitration.
6. The decision was not severable. Only one dispute had been referred: what sum, if any, was due under the interim application. The material defect affected that single dispute and risked tainting the decision as a whole.
7. Alternatively, any judgment would have been stayed under RSC Order 47. Breyer proved on the balance of probabilities that Pilon would probably be unable to repay the money after final determination. Pilon’s financial position had deteriorated substantially since contracting, and that deterioration was not caused by non-payment of the adjudicated sum.

• High Court (Technology and Construction Court): refused summary enforcement of the adjudicator’s decision. The court would alternatively have stayed execution of any judgment.
• Adjudication: the adjudicator awarded Pilon £207,617.74 plus VAT and interest, but declined to consider Breyer’s alleged overpayment defence concerning earlier batches of work.