Clarification on Severability and Crystallisation of Disputes

The recent Judgment of Mr Justice Akenhead in Working Environments Ltd –v- Greencoat Construction Ltd has provided important guidance and clarification in relation to adjudications on Interim Application Payments.  The key areas of clarification are as follows:-

1. A dispute capable of being referred to adjudication relating to an Interim Application Payment can be considered to have crystallised before the final date for payment of the Interim Application in question.  The adjudication can be commenced before the final date for payment.

2. The Respondent can only raise defences/arguments for reduction of amounts in the adjudication if these arguments/defences form part of the crystallised dispute – new arguments for reductions of amounts raised part way through the adjudication after the referral of the dispute will not be within the jurisdiction of the Adjudicator.

3. Provided the Respondent has indicated the nature of the defence/argument for reduction as part of the crystallised dispute, it is open for the Respondent to modify the value of the reduction attached to that argument/defence part way through the adjudication and the Adjudicator will have jurisdiction to consider such modified amounts.

4. If the Adjudicator purports to decide upon defences/arguments raised by the Respondent where such arguments/defences do not comprise part of the crystallised dispute, then any decision on those matters will be outside of the jurisdiction of the Adjudicator.  The fact that an Adjudicator attempts to deal with such defences/arguments outside jurisdiction does not render the entire decision a nullity.  The Court will be prepared to sever those parts of the decision made outside jurisdiction.

In this case the Adjudicator dealt with two items considered by the Court to be outside of the Adjudicator’s jurisdiction, which items totalled around £21,000.  The Court enforced the Adjudicator’s decision effectively severing the Adjudicator’s decisions on the two items outside jurisdiction, reducing the amount awarded by around £21,000.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information, please contact Philip Eyre at