Horne v Magna Design Building Ltd [2014] EWHC 3380 (TCC)

Published 19 diciembre 2014

Mr Justice Akenhead rejected an Employer's application for declaratory relief, finding that a dispute referred to an adjudicator did not include the Employer's claim to a net sum under the contract and that the adjudicator correctly decided that he did not have jurisdiction to award that net sum.

Executive summary

This judgment reiterates the need for parties to an adjudication to carefully consider the scope of the dispute referred to adjudication and for adjudicators to consider all the defences that are advanced, whether they had been specifically raised previously or not.

The facts

By way of a JCT Minor Works Building Contract, 2011 Edition, Mr Horne employed a building contractor, Magna Design Building Ltd ("MDB"), to carry out works to the former's flat.

In January 2014, Mr Horne served a notice of default on MDB for failing to proceed regularly and diligently with its works. MDB failed to return to site to complete its works and therefore Mr Horne served a further notice on MDB, which purported to terminate MDB's employment.

In June 2014, MDB served a notice of adjudication on Mr Horne claiming outstanding payment of £16,214 and denying that Mr Horne had grounds to terminate its employment. In defence, Mr Horne claimed that he was entitled to recover additional costs of approximately £28,500 from MDB, which were incurred as a result of having to complete MDB's works.

The adjudicator decided he had jurisdiction to decide whether Mr Horne had correctly terminated the contract and whether MDB was entitled to the outstanding payment claimed. However, he decided that he did not have jurisdiction to decide Mr Horne's entitlement to the net sum claimed for additional costs.

Consequently, the adjudicator found that MDB was not entitled to the monies it claimed and that it should pay the adjudicator's fees.

MDB refused to pay the adjudicator's fees so Mr Horne issued proceedings to recover those fees. In addition Mr Horne sought a declaration that the adjudicator had jurisdiction to decide Mr Horne's entitlement to the additional costs he claimed and to order MDB to pay £27,164, this being the net sum the adjudicator considered due to Mr Horne if the adjudicator did have jurisdiction in this respect.

Summary

The Court rejected Mr Horne's application for declaratory relief for the following reasons:

• The dispute between the parties was ascertained by the Notice of Adjudication. In this case the Notice of Adjudication did not include Mr Horne's claim to a net sum;
• It is open to the responding party to raise any matter, be it law or fact, as a defence in an adjudication whether it has specifically been raised before or not. That does not however undermine the adjudicator's jurisdiction to address the defence, good or bad though it may be;
• By the time of the Notice of Adjudication and the commencement of the adjudication, the defence to MDB's claim was simply that Mr Horne did not have to pay because he had validly terminated the contract. At this point Mr Horne had not yet undertaken the accounting exercise which determined the net sum he claimed;
• The Court considered Mr Coulson J's judgment in Workspace Management Ltd v YJL London Ltd [2009] which was relied upon by both parties, but drew a distinction between the facts in Workspace and the case before it. The dispute in Workspace was described as "a broad one" to determine the balance of the account between the parties, whereas the dispute in the current case revolved around what was due to MDB if Mr Horne had not terminated MDB's employment properly;
• In any event, the adjudicator had not carried out any "reasoned analysis or factual consideration" of Mr Horne's account, meaning it would not be possible or fair for the Court to form a view as to what the adjudicator may have awarded, if he had believed he had jurisdiction.