Construction contract – Adjudicator – Jurisdiction – Defendant entering into contract with claimant to construct dwellings – Defendant alleging breaches of agreement and terminating contract – Award in favour of claimant – Whether claimant entitled to summary judgment – Claim allowed
The defendant engaged the claimant on a construction contract to construct 40 dwellings. Subject to any entitlement to extension of time, the claimant was obliged to complete the work by April 2008. Either party could refer a dispute to adjudication.
The work was delayed and the defendant withheld an interim payment that was due under the contract. The defendant served a notice of determination setting out alleged breaches of contract and giving notice that the contract would be terminated if the breaches continued. This was followed by a second notice giving details of continuing breaches, terminating the contract and requiring the claimant to vacate the site immediately.
The claimant served a notice of adjudication stating that the defendant had wrongfully terminated the contract and had therefore repudiated it. It claimed moneys alleged still to be due under the contract at the date of the repudiatory breach and damages for losses incurred as a direct consequence of the breach. The adjudicator found that the alleged breaches had not been established and that the defendant had repudiated the contract, which the claimant had accepted by leaving the site. He made an award in favour of the claimant including the interim payment, the balance due for the work undertaken and damages for loss of profit.
The claimant brought proceedings to enforce the adjudicator’s decision and applied for summary judgment. The defendant submitted that since it had received no letter of claim, no dispute had arisen and the adjudicator had no jurisdiction.
Held: Judgment given for the claimant.
(1) To enable a dispute or difference to arise, there had to be a claim, an assertion or adoption of a position by one party that was expressly or by implication rejected, or at least not accepted, by the other. The claim did not need to be in writing or in any particular form or necessarily to be detailed, but it had to be communicated to the other party. It was not enough to create a dispute that one party simply believed in its own mind that, if it were to make a claim, it would probably be rejected by the other party. In the instant case, it was clear that, prior to the second notice and the removal of the claimant from the site, there was already a dispute between the parties as to whether the defendant was entitled to terminate the contract, which was referable to an adjudicator: Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] EWHC 2218 (TCC) applied.
(2) There had been no objection to the jurisdiction of the adjudicator, in relation to that part of the dispute referred to adjudication, on the ground that all or some of those claims had not effectively been disputed. It was immaterial in determining the ambit of the dispute that the defendant might have known that there would be financial consequences as a result of the termination procedure, if it turned out to be unlawful. The dispute that had crystallised, and which was an important part of the claims addressed in the notice of adjudication, was whether there had been any breaches that justified the termination threatened by the first notice and whether those breaches had continued to the time of the second notice. It did not include alleged entitlement to money or damages. Although the notice of adjudication purported to add on claims for the financial consequences of termination, it did not give the adjudicator jurisdiction to deal with them. However, as the adjudicator had decided unequivocally that there were no material breaches of contract justifying termination, that part of his decision had been made within his jurisdiction as part of what had referred to him. He had been entitled to find that the unlawful termination was repudiatory conduct in those circumstances because that finding was ancillary and incidental to the dispute had crystallised: Cantillon Ltd v Urvasco Ltd [2008] EWHC 2218 (TCC); [2008] BLR 250 considered.
(3) A party challenging the adjudicator’s jurisdiction had to reserve its position in relation to its challenge. There might be numerous types of jurisdictional challenge and there could also be different types of reservation. One could reserve generally or specifically but if a specific reservation were made on one ground, and it was established that the ground in question was an invalid jurisdictional objection, the party in question had to be taken to have acceded to the jurisdiction. The defendant had not made an effective reservation but had acceded to the jurisdiction to resolve all the claims that were the subject matter of the referral. The adjudicator’s jurisdiction to resolve and issue a decision in respect of all those claims was unchallengeable: Project Consultancy Group v Trustees of the Gray Trust [1999] BLR 377 considered.
Calum Lamont (instructed by Davies Arnold Cooper) appeared for the claimant; Christopher Camp (instructed by Owen White, of Slough) appeared for the defendant.
Eileen O’Grady, barrister