HS Works is a civil engineering company carrying out construction works in the utilities sector. Enterprise is a utilities contractor which was retained by Thames Water to carry out clean water and network repair and maintenance services. By a subcontract, HS Works was employed by Enterprise to carry out construction work which involved repair, reinstatement and re-surfacing of highways at various locations in and around Greater London.

Following completion of the works, issues arose between the parties in relation to the evaluation of the final account and to a number of contra-charges said to be due to Enterprise. Two adjudications followed. In the first adjudication, the sum of £1,835,252.26 plus interest and VAT was awarded to HS Works. In the second adjudication, the adjudicator decided and declared that the proper valuation of the subcontract works allowing for contra-charges was £23,253,931.09. This decision's effect could mean that all or part of the sum decided to be due under the first decision should be repaid, if paid at all. During this adjudication, HSW objected to the Adjudicator's jurisdiction on the grounds of the lack of a crystallised dispute and a breach of natural justice. The respective parties argued that the decision adverse to its interests was invalid on the grounds of jurisdiction or natural justice. Both parties issued enforcement proceedings.

The issues to be considered were:

1 In the first adjudication, did the adjudicator exceed or fail to fulfil his jurisdiction in failing to address the merits and quantum of the contra charges? Did he in that respect fail to comply with natural justice? How should the decision in the second adjudication affect the first adjudication?
2 In the first adjudication, did the adjudicator have jurisdiction to issue his decision? Did the adjudicator fail to apply the rules of natural justice?
3 If both decisions are valid, how should they be given effect to?
4 Should the Court decide the substantive issue as to whether new withholding notices needed to be issued by Enterprise after the submission of the Final Account, and if so, what is the answer to that issue?

With regard to the first decision, Enterprise argued that the decision was unenforceable because the adjudicator had failed to address the merits and make findings about its submissions on the contra-charges. Enterprise submitted that the adjudicator was bound to address HS Works' alternative case in its referral and Enterprise's response about the contra-charges. In addition, Enterprise claimed that the adjudicator failed to follow the rules of natural justice to deal with the contra charges claim on its merits.

The Judge concluded that these objections were not made out. The adjudicator's decision was defined by the Notice of Adjudication and the nature of the dispute referred to him. The primary assertion was that Enterprise had not given any, or indeed any effective withholding notices, and as a result the sums withheld as contra-charges had not been properly withheld and were therefore payable. As this primary case was made out, there was no need to consider the alternative case. Further, it was not incumbent upon an adjudicator to comment or make findings on every issue which arose in a reference, except to the extent that it was necessary to provide reasons or explanations for his or her actions. The Judge concluded that the decision should be enforced.

Counsel for Enterprise argued that the adjudicator should have reviewed his findings about each of the contra-charges because if he had done so, he may have taken a different view about the merits of the arguments relating to the need for withholding notices. The Judge held that the adjudicator had considered this point, formed his view, and that it was,

"fanciful to speculate that the adjudicator, having formed the view that in principle the primary case should succeed, would have played some form of mental gymnastics to reach an opposite view having considered the merits of the contra-charges."

With regard to the second decision, the Judge had to consider whether the dispute had crystallised. By the time that HS Works had submitted its final account in May 2008, it was already clear that the parties were in dispute as evidenced in correspondence. There was also no doubt that the parties were and remained in dispute before and throughout the first adjudication in respect of the contra-charges. Further, the fact that Enterprise served their referral for the second decision with an expert's report did not impact upon what dispute had crystallised beforehand. The Judge considered the decision in Cantillon Ltd -v- Urvasco Ltd, whereby it was decided that the Courts should not adopt an over legalistic analysis of what the dispute between the parties is. What is necessary is to determine broadly what the disputed claim or assertion is; the disputed claim is not necessarily defined or limited by the evidence or arguments submitted by the parties to each other before the referral to adjudication.

There was found to be no breach of natural justice on the adjudicator's part because he did not consider that he needed additional time to reach his decision, even through his decision showed that he had found the task onerous. He was given a week's extension, and did not ask for more time. He was an experienced adjudicator, and there was no suggestion that he thought he could not act fairly in producing a decision. He had clearly done a good and conscientious job. It was argued that HS Works could not adequately respond to the information provided in the Referral because it was fresh to them. The Judge made the point that if the adjudicator was able to cope with these very large amounts of information, then there was no reason that HS Works could not cope with it, and further to this, should have put forward its own positive case as to the value of its final account. The Judge held that the adjudicator had not act unfairly for not resigning.

HS Works also argued that the adjudicator did not address each and every difference in the accounting position between the parties, and that by simply doing spot checks the adjudicator was not ruling on what had been referred to him. The Judge held that this was a flawed argument, and that this was an acceptable approach to check credibility.

The Judge held that the second adjudication was also valid and enforceable.

Enterprise also sought to either set off the enforcement of the first adjudication, or alternatively, a financial judgment. However, the Court decided that an adjudicator's decision is to be binding until finally determined. Consequently, by implication, the parties' subcontract must also be read in this way. Therefore, the parties must abide and comply with the decision in the second adjudication for the time being.

That being the case, the Court and the parties were required to give effect to both decisions and this therefore left the Court in something of a difficult position. On the one hand, Enterprise was in breach of contract for failing to pay without set-off, or at all, what was due by 16 February 2009. On the other hand, as from 12 March 2009, it would have been entitled to the return of the money because there had been an overpayment. After analysing the law and the facts, the judge made the following observations about what steps needed to be considered before permitting a set off of one decision against another:

(a) "First, it is necessary to determine at the time when the Court is considering the issue whether both decisions are valid; if not or if it can not be determined whether each is valid, it is unnecessary to consider the next steps;
(b) Both are valid, it is then necessary to consider if, both are capable of being enforced or given effect to; if one or other is not so capable, the question of set off does not arise;
(c) If it is clear that both are so capable, the Court should enforce or give effect to them both, provided that separate proceedings have been brought by each party to enforce each decision. The Court has no reason to favour one side or the other if each has a valid and enforceable decision in its favour.
(d) How each decision is enforced is a matter for the Court. It may be wholly inappropriate to permit a set off of a second financial decision as such in circumstances where the first decision was predicated upon a basis that there could be no set off."

The Court possessed discretion, and on balance, it ordered that orders should be drawn to reflect the net effect of this judgment. It would be pointless to order Enterprise to pay the net sum, allowing for the belated payment due under the first adjudication, only for HS Works to have to pay back the majority of what Enterprise had been paid.