Since our last update, the Courts have considered a diverse range of issues in relation to adjudication. Jurisdiction continues to be the main area of contention.
Under the Scheme for Construction Contracts, an adjudicator should resign if the dispute before him is the same or substantially the same as one which has previously been referred to adjudication and a decision been given. Can a party challenge a second adjudicator’s decision if he thinks the adjudicator should have resigned, because the dispute is the same as one previously adjudicated upon? The answer appears to be “maybe”: the Court will entertain a challenge in certain circumstances.
The Court provided some guidance in the case of Sherwood & Casson v Mackenzie. HHJ Thornton QC said:
“The court is not concerned to investigate the merits of the disputes, let alone resolve them. In conducting the enquiry, the court would give considerable weight to the decision of the adjudicator and would only embark on a jurisdictional enquiry in the first place where there were substantial grounds for concluding that the adjudicator had erred in concluding that there was no substantial overlap.”
It remains to be seen whether parties will have to prove “substantial grounds” for error in other jurisdictional disputes.
We examined the case of Bouygues UK Limited v Dahl-Jenson UK Limited in our last Bulletin where the adjudicator had made a clear mathematical error and refused to correct it. In the recent case of Bloor Construction (UK) Limited v Bowmer & Kirkland (London) Limited, the adjudicator made an error when he forgot to take into account payments already made by the responding party to the referring party. The mistake was pointed out to him, and he corrected it within a few hours. The court held that a term was to be implied into the construction contract allowing an adjudicator to correct accidental errors or omissions so that the award reflected his original intentions. The claimant therefore could not enforce the original, uncorrected, award. However, the Court cannot correct errors if the adjudicator fails to do so.
An outstanding question of whether one could make set-offs against sums awarded by an adjudicator was clarified in VHE Construction plc v RBSTB Trust Company Limited. In that case, the defendant contended that the contract (an amended JCT ‘81 standard form) allowed it to set off liquidated damages claims against any monies due, including sums awarded by the adjudicator. HHJ Hicks QC commented that this construction would “drive a coach and horses” through the provisions requiring notices of set off to be served. The court will not permit such set offs to be made.
The Housing Grants, Construction and Regeneration Act provides that adjudication only applies to construction contracts in writing, as defined by the Act. In Grovedeck Limited v Capital Demolition Limited the adjudicator decided that he had jurisdiction, despite the fact that the contract was an oral one, because the referring party had claimed in its submissions that there was a contract, and the other party had not disagreed: in other words, this exchange of written submissions constituted an agreement in writing under section 107(5) of the Act. HHJ Bowsher QC decided that section 107(5) did not operate in this way. An adjudicator who did not have jurisdiction when appointed could not gain it during the adjudication by the exchange of submissions.
The position on costs when adjudicating under the Scheme has now been clarified by HHJ Bowsher QC in Northern Developments (Cumbria) Limited v J&J Nichol. The Scheme does not give the adjudicator the power to order one party to pay the others’ costs. However, the parties can expressly give him the power, if they wish. They can also do so impliedly, where each party asks for its costs, or one party requests costs and the other fails to challenge the adjudicator’s powers to award costs during the adjudication. It is clearly easy to grant this power to the adjudicator, and care should be taken when considering costs requests.
There has been argument that it might be possible to obtain an injunction to stop an adjudication proceeding where a party believed that the adjudicator had no jurisdiction and wished to save the time and costs that would be wasted by participating. The Court has now been requested to make such an injunction in the case of Workplace Technologies v E Squared, but it refused to do so. The case has not yet been reported, but it seems that the refusal was because an injunction can only be granted where a legal or equitable right is threatened. Harassment that may be caused by unfair or futile proceedings is insufficient to constitute such a legal wrong. In any event, even where the Court has jurisdiction to grant an injunction, it will also consider the “balance of convenience”, i.e. would the Court cause more injustice in granting the injunction than if it refused to do so. In this case, the Judge said it would have been more unjust to stop the adjudication proceeding.
We will continue to report future developments in adjudication as they happen, and perhaps we will shortly receive some guidance from the Court of Appeal on some of these difficult issues. We also look forward to some interesting arguments concerning whether Article 6 of the Human Rights Act (the right to a fair trial) renders adjudicators’ decisions unenforceable.
For further information on this topic, please contact Clare Collier at clare.collier@cms-cmck.com or on +44 (0)20 7367 3000.
