Widely recognised in case law and essential to ensuring that adjudicator’s decisions are aligned with natural justice, the application of the ‘any defence’ rule has led to challenges over the adjudicator’s jurisdiction – often proving fatal. Through an analysis of key cases, this article will examine: the courts interpretation of the ‘any defence’ rule; types of valid defence; and potential limits to the defence of set-off.

The ‘any defence’ rule in adjudication refers to the principle that a responding party is allowed to raise any valid legal or factual defence and is not restricted to the specific arguments or evidence presented by the referring party. In doing so, the responding party is not widening the scope of the dispute. This ensures that the responding party is furnished with the opportunity to fully engage with the claim, present all valid defences, and challenge the arguments made by the referring party.

Authority on the ‘any defence’ rule

In the seminal case of Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC), the ‘any defence’ rule proved counter-productive (in a similar vein to the recent case of Bell Building Ltd v TClarke Contracting Ltd [2024] EWHC 1929 (TCC). Urvasco argued that the actual period of delay was different, and that defence gave the adjudicator the jurisdiction to value the loss and expense in line with that assertion. It is here that Akenhead J stated: “… whatever dispute is referred to the Adjudicator, it includes and allows for any ground open to the Responding Party which would amount in law or in fact to a defence of the claim with which it is dealing“. [54]

The principle was further tested in Kitt v The Laundry Building Ltd [2014] EWHC 4250 (TCC), where Akenhead J further clarified the application of the rule in respect of the Notice of Adjudication, stating: “The next question to consider is whether the Notice of Adjudication can so circumscribe and delineate the dispute set out in or purportedly defined within it so as to exclude particular defences. In my judgment, it cannot. It would be illogical and untenable, if not ludicrous, if this was the case​…One cannot refer to Adjudication a disputed claim to payment and dress up the definition of the dispute in such a way as jurisdictionally to prevent a defending party from raising any defence, whether good or bad, in the Adjudication.” [26-28]

Furthermore, in Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25, Lord Briggs emphasized the principle, specifically suggesting that any set-off would be acceptable: “However narrowly the referring party chooses to confine the reference, a claim submitted to Adjudication will nonetheless confer jurisdiction to determine everything which may be advanced against it by way of defence, and this will necessarily include every cross-claim which amounts to (or is pleaded as) a set-off.”

In Pilon Ltd v Breyer Group [2010] EWHC 837 (TCC), Coulson J stated that a failure to consider any valid defences might be fatal: “If the Adjudicator fails to address the question referred to him because he has taken an erroneously restrictive view of his jurisdiction (and has, for example, failed even to consider the defence to the claim or some fundamental element of it), then that may make his decision unenforceable, either on grounds of jurisdiction or natural justice.”

In CC Construction v Raffaele Mincione [2021] EWHC 2502 (TCC), where the adjudicator failed to exhaust his jurisdiction when he said that the defence was ‘not part of the dispute and therefore could not be used as set-off’, Judge Eyre QC advised on how the Adjudicator should proceed in such circumstances:

“It follows that where there is a claim for payment a defence of set off can be raised and will necessarily be part of the dispute which an Adjudicator addressing such a claim has to determine. It is important to keep in mind the distinction between (a) considering an asserted defence and then concluding as a result of that consideration that it is not a tenable defence in the particular circumstances and (b) declining to consider an asserted defence. The former will be an exercise which the Adjudicator will have jurisdiction to undertake and a conclusion that the defence is not tenable even if expressed in short terms is unlikely to involve a breach of the rules of natural justice. Conversely the latter is likely to be such a breach.”

Practical application of the ‘any defence’ rule – When is a defence valid?

In three recent cases, the court have determined that in a true value adjudication seeking payment, the scope of the any defence rule is extensive. In Global Switch Estates 1 Ltd v Sudlows Ltd [2020] EWHC 3314 (TCC), Global referred to adjudication the true value of ‘certain parts’ of an interim payment and the court found that Sudlow’s attempt to set-off prolongation and rectification costs was within the scope of the dispute.  

In Downs Road Development LLP v Laxmanbhai Construction (UK) Ltd [2021] EWHC 2441 (TCC), a dispute on the true value of interim payment, the court found the adjudicator had jurisdiction to consider a defect not included in the payment certificate. Similarly, in Morganstone Ltd v Birkemp Ltd [2024] EWHC 933 (TCC), a dispute over the true value of an interim payment cycle, the court found that the adjudicator had jurisdiction to consider a defence to set-off “latterly discovered” defects. These judgments suggest that the adjudicator’s jurisdiction is far reaching in true value adjudications seeking payment, regardless of whether the set-off is directly related to the interim payment cycle.

In PC Harrington Contractors Ltd v Tyroddy Construction Ltd [2011] EWHC 813 (TCC), the dispute referred was for the release of retention and the Responding Party argued that the adjudicator should set-off the uncrystallised final account. Akenhead J stated that the true value of the final account was a valid defence: “The fact that this defence had not been specifically raised before [sic] the initiation of the adjudication does not put it outside the jurisdiction of the adjudicator.”

However, in the Global case, O’Farrell J also gave some opinion of exclusions to the ‘any defence’ rule. She stated that where a referring party seeks valuation of a specific piece of work it not open to the responding party to request a declaration on a separate piece of work. In this situation, an adjudicator would be correct in not considering a ‘defence’ which is not a valid defence to the claim but an attempt to widen the dispute.

Limitations to set-off

It is opined that the courts have often ruled against adjudicators who have refused to consider valid set-offs but the courts may not have precisely determined, beyond being a defence to payment entitlement, to what extent a set-off must be connected to the original dispute and at what point the defence becomes, in the words of Keyser J, a “freestanding dispute“.

For example, in a valuation dispute seeking the value and payment of a single variation, the responding party might defend the claim by attempting to set-off an outstanding payment by way of a default payment notice. Although the authorities have put notified sum adjudications into a separate category, if the dispute is broadly defined as a payment dispute, that might give the adjudicator jurisdiction to consider this valid defence by way of set-off. It would seem that the ‘any defence’ rule is still a developing area of law.

Key Takeaways for an Adjudicator

✔ Distinguish between rejecting a defence and refusing to consider it.

✔ Refusing to consider a valid set-off can lead to unenforceability.

✔ The Referring Party cannot exclude valid defences by narrowing the scope of the dispute.

✔ A defence does not need to be previously raised or crystallised before adjudication.

✔ Any set-off is likely permitted in a valuation dispute seeking payment.