J&J Nichol were a subcontractor to Northern Developments as main contractor for a project in Cumbria. The contract was based on the DOM/2 conditions with amendments 1-6: 1989 and 7: 1992. J&J Nichol made an application for payments. Northern Developments complained of defective work and as a result paid nothing further to Nichol. Nichol withdrew from site and commenced adjudication. Northern Developments treated the withdrawal from site as a repudiatory breach of contract.

Northern Developments challenged enforcement on the basis that:

(1) The Adjudicator had made an error of jurisdiction by not taking into account set off raised against Nichol, and
(2) By ordering Northern Developments to pay Nichol’s cost of the adjudication.

HHJ Bowsher QC held that the only sanction to be applied as a result of non compliance with Section 110 of the Act was that the Scheme applied. Section 111 required notice to be given of any amount to be withheld. Failure to serve a Section 111 Notice did not prevent later allegations of set offs, abatement or counterclaims for arbitration, litigation or even an adjudication.

However, for the “temporary striking of balances which are contemplated by the Act, there is to be no dispute where any matter not raised in a notice of intention to withhold payment”. The scope of the dispute was established by the Notice of Adjudication. The allegations in respect of repudiation were not contained within the Section 111 Notice and could not therefore be the subject of the adjudication.

In reliance upon Heyman v Darwins (1942) 72 L1 L65 the adjudication provisions of the contract survived repudiation.

In respect of costs, His Honour held that an adjudicator had no jurisdiction to decide that one party’s costs of the adjudication be paid by the other party. However, it was possible for the parties to grant jurisdiction on the Adjudicator to decide costs by implied agreement of the parties. In this case both parties asked in writing for their costs. As a result the Adjudicator had jurisdiction to award costs.

In conclusion the decision of the Adjudicator was enforceable.