Global Switch Estates 1 Ltd v Sudlows Ltd

Adjudication decisions are enforced unless the adjudicator decided a question outside the reference or acted in a manner that was obviously unfair. A referring party may confine a payment dispute to specified elements of an interim application. That does not prevent the responding party from raising any properly arguable defence to the payment claim, including matters concerning other elements of the works. An adjudicator who takes an erroneously restrictive view of jurisdiction and deliberately fails to consider a material defence may breach natural justice. Where the adjudicator considered the wrong question, the decision is unenforceable, even though errors of law or fact in answering the correct question ordinarily do not justify resisting enforcement.

The claimant sought summary judgment to enforce an adjudication decision requiring the defendant to pay £5,019,120.86 plus the adjudicator’s fees. The adjudication concerned the true value of specified parts of the defendant’s interim payment applications under a construction contract.

The defendant resisted enforcement, alleging that the adjudicator had failed to consider material defences, including further loss and expense claims and an allegedly fraudulent call on a bank guarantee, and had acted inconsistently with an earlier adjudication decision. The central issues were the permissible scope of a payment adjudication, the respondent’s right to raise defences, and whether any failure to consider them was material.

1. Enforcement principles. The court adopted the robust approach to adjudication enforcement summarised in Carillion v Devonport Royal Dockyard. An adjudicator’s decision will ordinarily be enforced despite errors of fact, law or procedure. Intervention is confined to cases where the adjudicator decided a question not referred or acted in an obviously unfair manner.
2. Scope and defences. A referring party may define and confine the dispute to specific parts of a wider valuation dispute. A responding party cannot introduce separate disputes without consent, but may raise any properly arguable defence to the payment claim. Where payment is claimed, that may include valuation issues concerning other elements of the works. The adjudicator must decide whether the alleged defence succeeds; the answer may be right or wrong without making the decision unenforceable.
3. Natural justice. A failure to consider a defence may amount to a breach of natural justice where the adjudicator has deliberately adopted an erroneously restrictive view of jurisdiction. The breach must be material and plain and obvious. Here, the adjudicator wrongly treated Sudlows’ further loss and expense claims as outside his jurisdiction, although they were relied on as defences to GSEL’s claim for payment. Those claims were potentially material to the true valuation and the amount payable.
4. Bank guarantee. The adjudicator initially considered that the guarantee issue was outside his jurisdiction, but went on to reject it on the evidence. He had therefore asked the right question on that issue, and any error would not independently invalidate the decision.
5. Earlier adjudication. The earlier decision bound the parties as to its essential components and basis, but not the adjudicator’s reasoning. The fourth adjudication accepted the earlier extension of time decision and separately assessed loss and expense. It did not impermissibly override the earlier decision.
6. The failure to consider the loss and expense defences was critical and rendered the adjudication decision unenforceable. GSEL’s application for summary judgment was dismissed.