The petitioner, Ballast Plc, was a management contractor for a development for the respondent, the Burrell Company, in Glasgow. The terms of the contract were a JCT form of management contract 1987 edition. A dispute arose in respect of the valuations. The amount of the valuations fluctuated, and that dispute was referred to adjudication. Ballast claimed that it was owed about £1.6m. However, the adjudicator resigned before issuing a decision. Ballast therefore issued a further notice of dispute in respect of essentially the same subject matter.
The referring party claimed that the construction manager had interfered with the contract, in that payment was being refused on the basis that no formal instruction had been given for work that the construction manager knew had been carried out. The claim was that the respondent to that adjudication had acted in bad faith in withholding the payments. The adjudicator issued a decision that merely stated that the remedies sought by the referring party were "not valid". The issue before the court was whether the adjudication was a nullity in that the adjudicator had, in good faith, misconstrued what he was being asked to do.

Reference

The matter came before Lord President, Lord Johnstone and Lord Weir in the Extra Division, Inner House, Court of Session. The court held that the adjudication was a nullity. The adjudicator had been asked to determine the dispute in the notice, as "amplified" by the referral. However, the adjudicator had considered that his powers were limited to considering the strict contractual terms between the parties. He was obliged to consider the "whole dispute" and had failed to do so. Therefore, he had misconstrued what he was being asked to do and his decision was a nullity.

For further information, call Tony Francis or Nicholas Gould on 0207 956 9354

Postscript

The judges supported their decision with the well-known case of Anisminic v Foreign Compensation Commission (1969). If an adjudicator does not answer a question put to him in its entirety in either a positive or negative way, then the decision will be a nullity. If the adjudicator misconstrues the question put to him then the decision will be a nullity. In this case the adjudicator had failed to consider the entirety of the dispute put to him in that he had considered the strict contractual terms, but had not considered the reality of the situation between the parties.