Adjudication - In The Absence Of A Withholding Notice Was The Adjudicator Wrong Not To Consider A Party's Counterclaim?

In the adjudication enforcement case of Urang Commercial Ltd v (1) Century Investments Ltd (2) Eclipse Hotels (Luton) Ltd, [2011] EWHC 1561 (TCC), Mr Justice Edwards-Stuart was faced with two questions. First, was the adjudicator right to have ignored a responding party's counterclaim on the basis that that party had failed to serve a withholding notice? Second, even if the adjudicator was wrong, was the Decision still enforceable?

The Facts

Urang sought to enforce two adjudication decisions arising from separate adjudications against Century and Eclipse (collectively referred to as "the Defendants") in relation to building conversion works to hotels that Urang had performed under the JCT Standard Form of Building Contract 2005 Edition and the JCT Design and Build Form of Building Contract 2005 Edition respectively.

Urang had made several claims in the adjudication against Century including a claim for payment of a sum that had been certified under an interim valuation but not paid, and claims for an extension of time and prolongation costs, retention and interest.

Century had in its Response claimed that it was entitled to payment in respect of remedial work to soil drainage, loss of revenue during repairs and liquidated and ascertained damages. Century also referred to other defects in the works without quantifying them. Eclipse had made similar claims in response to Urang's claims in adjudication.

The adjudicator decided that these claims were presented as a counterclaim and should properly have been the subject of a withholding notice; absent such a notice he was unable to assess the value of these claims in each adjudication.

The defence raised by the Defendants in the enforcement proceedings was that the adjudicator had failed to make a ruling on their counterclaims in breach of natural justice and failed to take into account, also in breach of natural justice, the fact that they had each served a withholding notice.

Urang submitted that in each case the adjudicator did not fail to address the counterclaim but simply regarded it as a defence that was bound to fail in the absence of a withholding notice. If this was an error, then it was an error made by the adjudicator when addressing the right question, namely whether or not the counterclaim could be deployed as a defence to Urang's claims in the adjudication.

The Defendants also submitted that in each case Urang had failed to show that any sum was due under the contract and that...