Building contract – Adjudicator – Jurisdiction – Defendant company employing claimant company to carry out building works – Dispute arising over sums payable under building contract – Claimant referring dispute to adjudication – Adjudicator finding in favour of claimant – Claimant seeking to enforce adjudicator’s decision – Whether adjudicator having jurisdiction – Claim allowed
By a written contract in October 2012, the defendant employed the claimant to construct a new care home in Denton, Newcastle-Upon-Tyne. The contract was in the JCT 2011 form of the Intermediate Building Contract with contractor’s design. There was an adjudication clause which incorporated the Scheme for Construction Contracts.
Towards the end of the project, issues arose in relation to the payment due up to and including 28 June 2013. On 8 July 2013, the claimant held a meeting with the quantity surveyor on the project to discuss the exact figure owed. On 30 July the claimant issued and served a notice of adjudication which described the dispute as relating to the failure by the defendant to pay the amount to which the claimant was entitled for work done up to 28 June 2013. In August, the adjudicator made an award in favour of the claimant which issued proceedings to enforce the adjudicator’s decision. The defendant resisted the application and an issue arose whether the adjudicator had jurisdiction.
The defendant argued that the notice of adjudication had limited the dispute between the parties to the claims for specific amounts of money, in the alternative, as asserted in the notice. Further there had been a breach of natural justice by the adjudicator.
The claimant contended that the notice of adjudication, on its wording and viewed in context, had been essentially and simply a disputed claim for the two alternative amounts and the alternative arguments did not reduce the scope of the referred dispute. The defendant had waived its right to challenge on jurisdictional grounds. The claimant had continued to incur costs in the adjudication assuming that there was no jurisdictional challenge and had acted to its detriment. By the time that defendant raised the point it was too late. Moreover, there had been no breach of the rules of natural justice since the adjudicator had clearly raised the point and invited submissions and the defendant had not only addressed the facts in its solicitors’ e-mail but it also had the opportunity if it so wished to put in any further evidence.
Held: The claim was allowed.
(1) In the context of adjudication, jurisdictional issues ventured into a number of different areas, ranging from the ambit of the referred dispute to other matters such as the invalid appointment of an adjudicator. In this case, it was the ambit of the referred dispute which gave rise to the jurisdictional challenge and there was a plethora of factual circumstances which would give rise to slightly different considerations in each case. The documents had to be read in the context and against the background of the prior communications between the parties. A dispute arose generally when and in circumstances in which a claim or assertion had been made by one party and expressly or implicitly challenged or not accepted and was a question of fact. Courts should not adopt an over legalistic analysis of the dispute between the parties, bearing in mind that almost every construction contract was a commercial transaction and parties could not broadly have contemplated that every issue between the parties would necessarily have to attract a separate reference to adjudication: Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC) considered. OSC Building Services Ltd v Interior Dimensions Contracts Ltd [2009] EWHC 248 (TCC) and Witney Town Council v Beam Construction Ltd [2011] EWHC 2332 (TCC) considered.
(2) As regards waiver, the ordinary principles applied. What was needed was some activity, such as the service of a response without qualification, by the party which later sought to challenge jurisdiction which amounted objectively to an assertion or representation that it was participating without reservation. A party which did not raise a jurisdictional challenge which could have been raised during the adjudication had acceded to the jurisdiction of the adjudicator. That would not apply to jurisdictional challenges which only emerged once the decision came out, such as an adjudicator deciding a dispute which had not been referred to adjudication. If a party did not effectively reserve its position on a given jurisdiction issue, of which it had actual or constructive knowledge, it could not raise it as an effective objection to a claim for the enforcement of the relevant adjudication decision: Pilon Ltd v Breyer Group Ltd [2010] EWHC 837 (TCC), Aedifice Partnership Ltd v Ashwin Shah [2010] EWHC 2106 (TCC); [2010] PLSCS 227, Metal Roofing v Kamm Properties Ltd [2010] EWHC 2670 (TCC) and Durham County Council v Jeremy Kendall [2011] EWHC considered.
(3) In the present case, the adjudicator had jurisdiction to decide what he did. On the evidence, the real issue between the parties had been whether and to what extent the claimant had been entitled to what it had claimed in the application document. The notice of adjudication described the dispute essentially as relating to the failure by the defendant to pay the amount to which the claimant was entitled for work done up to 28 June 2013 by the final date for payment. That was, ultimately, exactly what the adjudicator decided in favour of the claimant. Accordingly, there was no good reason why the decision ought not to be enforced.
(4) In relation to natural justice, any breach of the rules had to be more than peripheral and they had to be material. Breaches of the rules would be material where the adjudicator had failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it was one which was either decisive or of considerable potential importance to the outcome of the resolution of the dispute and was not peripheral or irrelevant. That involved a question of degree to be assessed by the judge. In this case, there had been no material breach of the rules of natural justice on the part of the adjudicator who had behaved properly in raising with the parties a point upon which he believed he had not been fully addressed. If the defendant and its legal team had felt some real need to deploy some additional evidence, they would have asked the adjudicator for permission to deploy it: Balfour Beatty Construction Company Ltd v Lambeth London Borough Council [2002] EWHC 597 (TCC), Herbosch-Kiere Marine Contractors Ltd v Dover Harbour Board [2012] EWHC 84 (TCC) and ABB Ltd v Bam Nuttall Ltd [2013] EWHC 1983 (TCC) considered.
James Bowling (instructed by DAC Beachcroft LLP) appeared for the claimant; Peter Oliver (instructed by Clarke Mairs LLP) appeared for the defendant.
Eileen O’Grady, barrister
