Building contract – Adjudication – Jurisdiction – Defendant contractor referring dispute over sub-contract to adjudication – Adjudicator ruling in favour of defendant – Claimant appealing – Whether adjudicator having jurisdiction to rule on matter referred – Appeal allowed
The defendant company was engaged as the main contractor for an office development called Vanguard House on the Daresbury Science and Innovation Campus in Cheshire. It entered into a sub-contract with the claimant company, under which the claimant agreed to carry out the design, supply and installation of a ground source heating and cooling system for the development. The main contract was based upon the NEC3 Engineering and Construction Contract, and the sub-contract was based upon the corresponding NEC3 Engineering and Construction Sub-Contract. The sub-contract was a construction contract as defined in section 104(1) of the Housing Grants, Construction and Regeneration Act 1996. The sub-contract contained three sets of terms under which either party might refer to adjudication. The procedures in relation to each option were not identical.
A dispute arose between the parties following an operational failure of the ground source heating and cooling system. The defendant alleged that the design had been defective and referred the issue of liability to adjudication. The claimant challenged the adjudicator’s appointment, asking for clarification of the source of the defendant’s right to adjudicate and details of the adjudication procedure pursuant to which the reference had been made. The defendant’s response was that it had referred the matter to the RICS in accordance with the scheme (one of the three optional adjudication procedures), and that RICS had put the adjudicator’s name forward. The adjudicator found in favour of the defendant and made an award of damages against the claimant.
The claimant appealed against that decision contending that the adjudicator lacked jurisdiction. It submitted among other things that, as there were two or more adjudication procedures which might be applicable to the dispute, identifying the right one went to the heart of the adjudicator’s jurisdiction and was therefore essential. Since the defendant had not identified the rules under which it had referred the dispute in the notice of adjudication or when requesting the nomination of an adjudicator or in the referral, or at any time before the adjudicator had made his decision, the notice of adjudication and the adjudicator’s nomination had been invalid.
Held: The appeal was allowed.
(1) An adjudicator had no jurisdiction to determine whether he had jurisdiction, even on a temporarily enforceable basis, and a choice between two sets of adjudication provisions would amount to such a determination if the choice made a material difference to how he should be appointed, what rules he was obliged to follow or the effect of his decision. That principle was subject to one exception, which was that the adjudicator could inquire into his jurisdiction and make such a determination with temporarily binding effect if his conclusion coincided with the claimant’s contentions as to the contractual terms and the claimant was right. Even where it was common ground that a construction contract existed under which there was a right to claim adjudication, the adjudicator had no power to determine what rules of adjudication applied if there was a dispute about those rules and the dispute affected the procedure for appointment, the procedure to be followed in the adjudication or the status of the decision. There was no rule that the court would not interfere with an adjudicator’s conclusion as to a matter affecting his jurisdiction when considering whether to enforce a decision by summary judgment. A notice of adjudication or purported nomination made under a contractual provision or legislative power which, on a correct analysis, did not apply, was invalid: Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd [2004] 1 WLR 2082, Lead Technical Services Ltd v CMS Medical Ltd [2007] EWCA Civ 316, Twintec Ltd v Volkerfitzpatrick Ltd [2014] EWHC 10 (TCC), Viridis UK Ltd v Mulalley & Co Ltd [2014] EWHC 268 (TCC) applied. University of Brighton v Dovehouse Interiors Ltd [2014] EWHC 940 (TCC); [2014] PLSCS 118 considered.
(2) On the true construction of the main contract, the wording of the adjudication procedure did not provide that the president of the RICS was to be the adjudicator nominating body. It was a nomination of the president or any vice-president as the adjudicator. It followed that not only had the adjudicator been wrong to deciding the governing adjudication rules but also his appointment had been made by the wrong body. On both counts, he had lacked jurisdiction to make the decision; of the judgment: IDE Contracting Ltd v RG Carter Cambridge Ltd [2004] EWHC 36 (TCC), Hart Investments Ltd v Fidler [2006] EWHC 2857 (TCC) and Vision Homes Ltd v Lancsville Construction Ltd [2009] EWHC 2042 (TCC); [2009] PLSCS 240 considered.
Andrew Kearney (instructed by RPC) appeared for the claimant; Mark Smith (instructed by Systech Solicitors) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read transcript: Ecovision Systems Ltd v Vinci Construction UK Ltd
