In the recent case of DC Community Partnerships Limited v Renfrewshire Council  CSOH 143, Lord Doherty in the commercial court issued a decision in an action where a party sought to enforce an adjudicator's award. If a party advances a claim in defence to an adjudication, must the adjudicator consider it and if so, must he or she give reasons as to why it is accepted or rejected in order to exhaust his jurisdiction?
The short answer is yes.
The facts of the case are all too familiar - construction contract, valuation, contractor dissatisfied with sum certified, refers dispute to adjudication seeking to open up a payment certificate and to find it entitled to a different sum than that certified. The notice of adjudication covered all the usual matters, the point of interest lies in the Response.
In Response to the Referral (or more properly the Reply to the Sur-rejoinder so a little later in the proceedings than might be expected) the Responding Party sought to advance an argument that, in addition to its principal position that the Project Manager had not under-assessed the valuation, delay damages, as a result of failure to complete on time, ought to be set off as against any award which might have been awarded.
The adjudicator was tasked with providing reasons for the decision. He or she did so finding the Referring Party entitled to have the payment certificate be opened up and to payment of additional sums. In connection with the Responding Party's defence of set off, the reasons simply stated "The Council's relief sought is declined."
The action made its way to the commercial court on the Referring Party's application to enforce the adjudicator's award. The defence was that the adjudicator had not exhausted his jurisdiction in that it had failed to properly consider the argument of set off nor provided reasons as to why it had been rejected (if indeed it was rejected).
It is well settled that the adjudicator's jurisdiction is defined by the Notice of Adjudication together with any ground founded upon by the Responding Party to justify its position in defence of the claim made. A failure by an adjudicator to consider properly a defence is a failure to exhaust jurisdiction. The court was, in this case, not persuaded that the adjudicator had considered the set off defence. General statements in the reasons given by the adjudicator for his decision were not considered sufficient to show that it had been considered but rejected. At para 26 of the decision Lord Doherty states:
"It is well established that such reasons need not be elaborate or deal with every argument: but in my opinion the adjudicator required to give at least some brief, intelligible explanation of why the defence of set off was being rejected….I am conscious that a court should hold that there has been a failure to exhaust jurisdiction in only the plainest of cases: but I am satisfied that this is such a case."
The adjudicator had a dispute referred and the court in this situation held that he or she had failed to consider, or give adequate reasons for rejection of, a defence founded in set-off. As a result the decision was reduced ope exceptionis and parties are back to square one. This case doesn't provide authority that an adjudicator's decision has to go over each and every line of the referral and defence and provide a view on each in the context of his or her reasons. However, where a substantive issue is raised in a defence, more than a cursory rejection is required.