One of the main tenets of adjudication is that only 1 dispute at a time can be referred to an adjudicator. The principle is clear, adjudication is a system that provides for a quick resolution of a dispute within the time scales allowed. From the start, adjudication was described as “rough and ready justice” with the option of battling it out in the court at a later date if one party was really that unhappy with the adjudicator’s decision.
Whether a claim comprises 1 or more disputes has occupied the Technology and Construction Court recently in the judgments given in -
Delta Fabrications and Glazing Ltd v Watkin Jones and Son Ltd, and
Prater Ltd v John Sisk and Son (Holdings) Ltd
Both judgments were handed down on 30 April 2021.
In the Prater case, Sisk alleged that Prater had referred multiple disputes to the adjudicator. The parties were clearly unhappy with each other as there had already been 4 adjudications between them with a 5th to follow. The hearing before the court was in relation to adjudication No. 4. Adjudication No. 4 was for payment following the decisions given in adjudications 1 -3, and more particularly in respect of Adjudication No. 2 which formed the basis of Sisk’s defence. Sisk defended the claim on the basis that the adjudicator had no jurisdiction to award payment because in adjudication No. 2 Prater had referred more than 1 dispute to the adjudicator and therefore, this decision was unenforceable, a nullity and therefore was not binding on Sisk. Further, because this decision was unenforceable the adjudicator did not have the authority to come to the decision that he did in respect of adjudication No. 4.
Sisk argued that Prater sought a number of decisions in the second adjudication [these included the correct completion date, the status of provisional sums and Sisk’s entitlement to deduct certain indirect losses] which, taking into account the judgment of Akenhead J in Witney Town Council v Beam Construction (Cheltenham) Ltd in 2011, each of the issues could have been decided independently.
In return, Prater said that it was not open to Sisk to challenge the decision in adjudication No. 2 as that decision was binding and, in order to come to a decision in adjudication No. 4, the adjudicator had to rely on the decisions in the second adjudication as these were pertinent to the amount that was due to Prater.
The court therefore had to consider whether there was a lack of jurisdiction in relation to the second adjudication, and if so, was it capable of impugning the adjudicator’s jurisdiction in adjudication No. 4 as that decision was based in part on the findings in the second adjudication; and secondly, did the adjudicator lack jurisdiction in respect of the second adjudication?
The Court held that the decision in adjudication No. 2 was binding on the parties and the adjudicator and would remain binding unless and until a party took steps to have the matter reviewed fully by the court in litigation. The court also held that because of this, the decision in adjudication No. 4 was enforceable. The court emphasised that the contract only allowed a single dispute to be referred but found that the adjudicator was correct in holding that whether or not this was correct, the contract specifically stated that a decision by the adjudicator was binding on the parties “until revised by the tribunal and is enforceable as a matter of contractual obligation between the parties” Perhaps a point to consider when drafting future contracts?
In the Delta Fabrications judgment, the argument centred around the issue of whether or not 2 contracts had been amalgamated into one contract and whether the Defendant was estopped from denying this to be the case.
Delta, the Claimants, argued that the adjudicator had jurisdiction and the award was valid because the parties had agreed by their conduct to vary the contracts so they were amalgamated; that the parties’ conduct did not amount to a variation because the contract had been amalgamated and finally, the defendant was estopped from denying that there was only one contract.
The court had to consider, as this was an application for summary judgment, whether the Defendant had a real prospect of success at trial. Such a prospect “must be real, as opposed to fanciful. The defence must carry some degree of conviction”. However, as this was an application to enforce an adjudicator’s decision, there are only limited grounds to resist the application. The main ground is that the adjudicator did not have jurisdiction to reach a decision as Delta had referred disputes under 2 separate contracts.
On that basis, the court had to review the evidence. As far as amalgamating the contracts, the court found that the only evidence was a payment notice which, whilst it contained one payment figure for both contracts, the supporting documentation and detailed breakdown of the figures were very clearly in respect of 2 separate contracts, and this followed through in later correspondence where it was clearly shown that there were 2 sub-contracts. The Defendants’ evidence was that they had adopted the practice of having one payment notice for both of the subcontracts without amalgamating the contracts. However, the Claimant argued that the wording of the final account made it clear that the Defendant intended them to be “treated and administered” as one contract.
The court found that the documents that Delta relied upon were not “unequivocal” and based on the fact that the amounts were all calculated as separate contracts, the judge found that the defendant has a reasonable prospect of succeeding in its defence and thus dismissed the application for summary judgment.
These 2 judgments show that if the contract is to be varied, it must be in such a manner that there can be no doubt as to the parties’ intentions but equally, you can be too specific in your wording as Sisk found out to their cost – be careful what you wish for!
May 2021
This article was written by Sarah Shemmings, a partner of Shemmings Hathaway LLP, a firm specialising in Construction Law.
Comments