Thermal Energy Construction Ltd ("TEC") was engaged as a sub-contractor by AE & E Lentjes UK Ltd ("Lentjes") to perform mechanical erection services on the Fiddlers Ferry Power Station near Warrington, Cheshire. TEC alleged that Lentjes had failed to pay it for certain works and referred the dispute to adjudication. The sub-contract incorporated the TeCSA Adjudication Rules 2002 version 2.0. In accordance with paragraph 31, the parties requested the adjudicator to give reasons for his decision.

In the adjudication Lentjes raised a defence by way of set-off and/or counterclaim seeking £3.75m as liquidated damages for TEC's alleged failure to achieve completion by the agreed date. TEC submitted that the adjudicator had no jurisdiction to consider the counterclaim, and that in any event the counterclaim was barred by virtue of Clause 9 of the contract:

"The parties agree that liquidated or unliquidated damages shall not be applicable to the contract in the event of delays to completion of the works, irrespective of the causes of such delays, and accordingly the purchaser shall not hold the contractor liable for late completion and/or any consequential costs arising therefrom".

Lentjes responded asserting that the adjudicator did have jurisdiction and that as a matter of construction Clause 9 might apply to a claim based on a delay in overall completion but it did not apply to the individual completion dates of the sub-contractors.

The adjudicator found in favour of TEC in the sum of £904,567.60. Lentjes failed to pay, and TEC brought enforcement proceedings before HHJ Davies QC. Lentjes claimed that the adjudicator had failed to give reasons for his decision in relation to its set-off and/or counterclaim defence, whereas TEC submitted that the adjudicator impliedly gave reasons whilst deciding on TEC's entitlement. If Lentjes was right, the Judge then needed to consider whether or not Lentjes suffered prejudice as a result of the failure to provide reasons.

TEC relied upon the following paragraph from the adjudicator's decision:

"This decision would be taken bearing in mind that the Claimant's liability was capped and liquidated damages were not applicable on this contract"

Following Carillion v Devonport, the Judge noted that the correct test was that Lentjes would need to show both that the reasons were absent or unintelligible and that as a result it had suffered substantial prejudice. The Judge said that:

"[A]n adjudicator is obliged to give reasons so as to make it clear that he has decided all of the essential issues which he must decide as being issues properly put before him by the parties, and so that the parties can understand, in the context of the adjudication procedure, what it is that the Adjudicator has decided and why."

The Judge held that there was no express reference at all to the set-off and/or counterclaim defence being one of the issues which the adjudicator recognised he has decided, nor was it the subject of any express reference as being an issued he has in fact decided, nor is it even included in the summary of items decided on the summary of the decision. Therefore, the adjudicator had not dealt with the issue at all and he had not given any reasons which would indicate that he had dealt with this issue. Therefore this was a case where the Adjudicator had failed to comply with his obligations. This left the question of substantial prejudice as a result. Lentjes said that it was unclear whether or not the adjudicator had considered the set-off defence on its merits. Thus it had lost the opportunity of having that defence dealt with, and had lost the prospect of the adjudicator deciding that point in its favour. If Lentjes had to start a further adjudication to seek to recover its losses, first it would have to comply with this decision and second there was a risk that a second adjudicator might decline to act on the basis that the point had already been decided. TEC had argued that the adjudicator did give reasons for his decision, and, once the Judge had already decided this point against TEC, did not pursue an argument against an injustice.

However, TEC submitted that there were provisions in the TeCSA rules so that Lentjes could apply for the adjudicator to correct a "clerical mistake or error arising from an accidental slip or omission" . TEC submitted that this meant that Lentjes should have exhausted this procedure before appealing against the decision before a court, and Lentjes did not. The Judge disagreed and stated that the TeCSA rules did not encompass this situation.

The apparent omission of the adjudicator to consider Lentjes' counterclaim could not be considered a clerical mistake. Further, to make the application of that rule a pre-condition to adjudication would require very clear wording. The Judge agreed with Lentjes that there had been a substantial injustice and dismissed TEC's procedural argument. Accordingly the decision was not enforced.