Serial adjudication – where parties issue numerous notices of adjudication against each other – is the latest tactic to fall foul of the TCC
Key points
- The TCC does not approve of serial adjudication
- Anyone considering it might face short judicial shrift
There are few, if any, more trenchant judicial pens being used in British courts today than that wielded by Coulson J. And his judgment in Penten Group Ltd v Spartafield Ltd [2016] EWHC 317 (TCC) contains typically incisive comments that should be compulsory reading for anyone involved in adjudication.
The facts
In 2013, Spartafield engaged Penten to carry out building works at Plumbers Row in London’s East End. Work was started under a letter of intent dated 19 July 2013. The parties intended to enter into a JCT Intermediate Building Contract with contractor’s design (“ICD 2011”), but never did so. At the end of April 2015, Spartafield terminated Penten’s employment as contractor.
In October 2015, Spartafield commenced the first adjudication. The notice of adjudication sought a series of declarations. These included: the validity of its purported termination of Penten’s employment; quantification of Spartafield’s claims for liquidated and ascertained damages (for Penten’s alleged delay); a refund of an advance payment; and interest. However, it was the first declaration applied for which was key, since the decisions on all of the other points flowed from that. Spartafield asked the adjudicator, Mr Gupta, to decide that “…a valid construction contract exists between the parties, and the terms of that contract include the provisions of ICD 2011”.
In his decision, handed down in November 2015, Mr Gupta held that, while there was a valid contract, the relevant terms were those contained in the letter of intent and not ICD 2011. He also held that the termination of the contract was valid but there was no entitlement to delay damages. He did order Penten to repay the advance payment and awarded a small amount of interest.
Neither party appeared happy with that decision. Penten commenced a second adjudication on 10 December 2015, with Spartafield initiating a third in January 2016. In fact, Spartafield had two separate attempts to start the third adjudication because it served notices (containing exactly the same terms) on 12 and 20 January. In his judgment, Coulson J treats them as being one and the same.
Although neither of those adjudications proceeded, Penten commenced yet another adjudication (the fourth; although the judgment also indicated that there might be nine adjudication notices in total), also on 20 January. That sought payment of additional sums under the letter of intent.
A new adjudicator, Mr Molloy, was appointed. A week before he was due to give judgment, Penten applied to court for declarations that Mr Gupta’s decision in the first adjudication was enforceable and (relying on para 9(2) of the Scheme for Construction Contracts 1998) that any adjudicator appointed to consider the third adjudication would lack jurisdiction because both notices concerned a dispute which was the “same or substantially the same” as that decided by Mr Gupta. Spartafield’s case was that Mr Gupta had exceeded his jurisdiction. It accepted that he could decide whether or not the terms of ICD 2011 had been incorporated, but argued that he had no power to decide that the parties’ rights and obligations were covered by the letter of intent.
The judgment
Coulson J agreed with Penten that the parties were bound by Mr Gupta’s decision, although he was not willing to grant the declaration quite in the terms that Penten sought.
The key document was the notice of adjudication. Because Mr Gupta was asked to decide a dispute which “concerned the existence of a valid construction contract”, it struck the judge as “impossible for the adjudicator to answer that question without deciding what the terms of any such contract might be”. The judge also noted that Penten’s response to the referral notice in the first adjudication clarified that it felt that the letter of intent governed the parties’ relationship. While Spartafield did not refer to the letter of intent in the adjudication notice, Coulson J was keen to stress that “a claiming party cannot artificially restrict the responding party’s defence to its claim by saying that, because they made no reference to a particular point…it cannot therefore arise for decision”.
What next for adjudication?
Arguably these findings do no more than reflect the pragmatic and sensible approach taken by numerous TCC judges. However, the judgment also contains strong hints (albeit obiter) as to the direction of travel for serial adjudication. The judge started the judgment by bemoaning the fact that the “topics raised at adjudication enforcement hearings seem to change with the seasons” and summarised this case as one “bedevilled by the almost maniacal desire of the parties to issue notices of adjudication against each other”, something which seems to have “overwhelmed every other consideration”.
Next, he doubted whether this case would have been caught by the (now repealed) section 107 of the Housing Grants, Construction and Regeneration Act 1996, which stated that all of a contract’s terms had to be in writing or evidenced in writing for the Act to apply. That section had meant that an adjudicator did not have to deal with complex questions as to contract formation and terms within the 28-day period allowed for a decision. Coulson J felt the section’s repeal made life difficult for adjudicators, who should therefore be given “some latitude” by the courts as they grapple with difficult and complicated disputes in short periods of time. Parties to adjudication should take note.
Stuart Pemble is a partner at Mills & Reeve LLP
