PC Harrington Contractors Ltd v Tyroddy Construction Ltd

An adjudicator must determine a defence which is properly raised and materially relevant to the dispute referred. A decision is unenforceable where the adjudicator adopts an erroneously restrictive view of jurisdiction and thereby fails to consider the merits of a substantial defence, or decides a material jurisdictional point without giving the parties an opportunity to address it.

Where a construction contract provides for retention but does not state when it becomes payable, there is no necessary implication that payment must await completion of a final account. Retention is generally a credit due after completion, payable within a reasonable time. Interim, on-account valuations remain open to later adjustment, and a permissible defence based on overvaluation, abatement, set-off or counterclaim is not excluded without clear contractual wording.

Harrington engaged Tyroddy as a reinforcement sub-subcontractor on the Wembley Stadium project and on two related projects. The written terms provided for retention, but did not specify its release date. After completion, Tyroddy referred claims for repayment of retained sums to adjudication.

Harrington argued that the retention could not become due until a final account had been ascertained and that its evidence of overvaluation and cross-claims had to be considered. The adjudicator decided that the retention was payable in two moieties, treated the final-account exercise as outside the dispute and jurisdiction, and ordered payment.

Harrington commenced Part 8 proceedings seeking declarations and challenging enforcement on natural justice and contractual-construction grounds. The central issues were whether the adjudicator had wrongly excluded a substantial defence and whether the contract made release of retention conditional upon completion of a final account.

1. Adjudication and natural justice. The adjudicator’s decisions were not enforceable. Harrington’s Response sufficiently raised two connected defences: first, that retention was not due until the final account had been ascertained; and secondly, that the true value of the work was less than the sums previously certified, so that the retention claim might be reduced or extinguished.
2. The second defence was within the referred dispute and had to be adjudicated. By treating the final-account evidence and argument as outside his jurisdiction, the adjudicator failed to consider a potentially decisive defence. That was a material, more-than-peripheral breach of natural justice. The court was not required to speculate whether the result would have been different.
3. The adjudicator also took the jurisdictional point himself without inviting submissions. A decision based on such an unargued jurisdictional basis denied the parties a proper opportunity to be heard and independently rendered the decisions unenforceable. The adjudicator’s honesty and transparency did not cure the breach.
4. Construction of the contract. The retention provision did not imply, and could not properly be construed as containing, a term that retention became payable only after finalisation of the final account. Retention represented a credit already due, broadly payable after completion within a reasonable time, subject to any proper defence.
5. It was open to Harrington as a matter of law to contend that the retention was not due because of earlier overvaluation, whether characterised as abatement, set-off or a restitutionary counterclaim. That right was not excluded by the contract. The interim valuations were expressly or substantively on account and were not final, binding or conclusive; a later account could adjust them upwards or downwards.
6. The requested declaration could not be granted solely as a matter of contractual construction, but the court recognised the legal right to raise overvaluation and related claims as a defence. The parties were to address the appropriate form of declaration.

First-instance Part 8 proceedings. No appellate history was stated in the judgment.