ISG Retail Ltd v Castletech Construction Ltd (TCC - 22.5.2015)
ISG RETAIL LTD v CASTLETECH CONSTRUCTION LTD
Technology and Construction Court
22nd May 2015
The employer in its notice of adjudication asserted that the contractor completely failed to perform its obligations so that there was "a complete failure of consideration" and claimed the return of the advance payment it had made in consequence of that breach of contract. The employer in its notice of referral stated that (i) If, as in the instant case, a defendant has been paid in advance but fails fully to perform its obligations as it promised to do, the claimant could recover its advance payment by virtue of total failure of consideration and (ii) It had incurred a loss and was entitled to recover in restitution the advance payment of £35,000 plus VAT by reason of a total failure of consideration. The adjudicator (i) held that there had been a total failure of consideration due to the contractor’s non-performance and (ii) ordered the contractor to repay the advance payment. The contractor opposed enforcement on the grounds that (i) The adjudicator made a decision that was outside the scope of the dispute referred to him and (ii) The dispute was not one arising under the contract.
Edwards-Stuart J enforced the decision on the basis that the adjudicator had jurisdiction to grant the restitutionary relief of ordering the contractor to repay the advance payment made by the employer due to there having been a total failure of consideration in respect of that payment.
The adjudicator was required to and did decide whether there had been a total failure of consideration and, if so, whether the employer was entitled to the return of the advance payment because: (i) It was clear from the employer’s notice of adjudication that the central issue in dispute was whether there had been a total failure of consideration, which the contractor denied and (ii) In these circumstances it was clear that a dispute had arisen under the contract with the result that the adjudicator had jurisdiction to hear it and was required to decide the matters in dispute, namely whether there had been a total failure of consideration and, if so, whether the employer was entitled to the return of the advance payment (which was exactly what the adjudicator did).
The adjudicator was entitled to order restitutionary relief if, as it was, that was a remedy available for the contractor’s breach of contract of non-performance because (i) It is clear from the Court of Appeal’s decision in Stocznia Gdynia v Gearbulk Holdings (2009) that the court will order repayment of an advance payment where the consideration has wholly failed as a result of the other party's non-performance (which, in the absence of frustration, will almost invariably constitute a breach of contract) (ii) Whilst the remedy is distinct from a remedy in damages, there is no reason why that should prevent an adjudicator from awarding a sum by way of restitution where it is an available remedy for the breach of contract and (iii) Whilst the adjudicator could not have made an award by way of restitution if there had been no contract even though it was the appropriate remedy in law, that was because he would not have been determining a dispute that had arisen under a contract.