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Case Number 37 in our Adjudication series is Whiteways Contractors (Sussex) Ltd vs Impresa Castelli Construction Ltd. Here the adjudicator decided on 26 April that Impresa Castelli owed 拢95 383.50 to Whiteways Contractors for plastering at Kingsway Hall Hotel, London. Two weeks after the adjudication, Impresa said that it had overpaid an earlier interim. Seemingly, it discovered that some bulkheads were not done, and the mark-up on other items was excessive. So, it refused to pay any of the 拢95 383.50.

Whiteways marched Impresa into court. I think that the counsel鈥檚 argument for Impresa was that there was no bar in the Construction Act to retaining money from an adjudicator鈥檚 decision if it is subsequently discovered that work is defective, or not earned and therefore not due.

This is an interesting point. Let鈥檚 try to figure out what鈥檚 going on.

If you are my builder, it is open to you to call for the referee if you think I have underpaid you. On the other hand, I might have three types of reason for not paying. First, I might have a contra claim (some call this a set-off), for, say, late completion. Second, I might have a complaint about the quality of work, which would mean that I think you haven鈥檛 earned all you鈥檙e claiming (some call this 鈥渁batement鈥�). Third, you might have embellished or titivated your account, which is another type of 鈥渘ot due鈥� amount; some people call this a simple error, others call it something worse.

Contras need a special advance withholding notice, called an S111 or an 鈥渁mber notice鈥�. But abatements, or other sums simply not due, do not ordinarily need any special advance warning before being lopped off your interim or final account claim. If that is so, it is open to me to bring this into the adjudication and ask the adjudicator to embark on a valuation of amounts due. But if an abatement is discovered after an adjudicator鈥檚 decision says pay 拢95k, can that abatement be lopped off? His Honour Judge Bowsher says it has to be raised in the adjudication.

The judgment, I think, helps us to understand the correct approach to valuing interim or final accounts. Begin with the notice of intention to adjudicate. Say it complains about unpaid interim No 10. The builder explains that he reckons 拢250k gross is due. The employer replies that only 拢200k is due for one of the reasons given above. The adjudicator will then value the amount due: he or she will look at the efficacy of an amber notice or the real or imagined claims and the real or imagined defects.

If an abatement is discovered after an adjudicator鈥檚 decision, can it be lopped off? His Honour Judge Bowsher says no

So, like a good QS, the adjudicator will publish the gross amount properly due, the good 鈥渃ontras鈥� to come off and finally the amounts previously paid. The decision or award will say what is to be paid for that interim.

The adjudicator had no jurisdiction to investigate the rights or wrongs of any earlier interims because the notice of intention to refer did not include those quarrels. In an adjudication I did, some time ago, I was referred to all 10 interims because the builder complained about underpayments on all of them. He was right, according to my calculations, and I awarded him statutory interest on the earlier underpayments. But I couldn鈥檛 have done that if the notice of intention to refer only asked me to look at interim No 10. Do you follow?

In Whiteways, the notice of intention confined the adjudicator鈥檚 attention to interims 22, 23 and the final account. It was open to Impresa to point out the non-installation of bulkheads and argue that the gross due was much less. But it didn鈥檛 do that until it was too late.

There is another point, which I will finish with, but please do not interpret this judgment to mean that an amber notice is required for abatements as well as contras or set-offs. It says nothing of the sort. Abatements are not withholding; they are amounts not falling due in the first place.

The final point was all about Impresa disputing the adjudicator鈥檚 jurisdiction. When Whiteways gave notice of intention to adjudicate, it described the issues. But when it served its case to the adjudicator (the referral folder) it was said to be wider in scope than the notice of intention. So, Impressa objected to the adjudicator and invited him to decide that 鈥渟atellite鈥� quarrel.

He did 鈥� but this meant that he decided the extent of his own jurisdiction, which isn鈥檛 permitted unless the parties widen his powers.So Impresa said his decision was not binding.