Adjudication Matters – February 2019

8th February 2019

Approbation and Reprobation: Referring Party did not “Blow Hot and Cold” in appointing Second Adjudicator

Introduction

In the recent judgment of Skymist Holdings Ltd v Grandlane Developments Ltd [2018] EWHC 3504 (TCC), Waksman J in the Technology & Construction Court held that the referring party had not approbated and reprobated or ‘blown hot and cold’ in changing the adjudicator nominating body (“ANB“) and appointing the second adjudicator.

Summary

The term ‘approbation and reprobation’ in the context of adjudication, means that a party cannot both argue that an adjudicator’s decision is valid (and take benefit from it) and at the same time seek to challenge the validity of the decision (or part of it). In other words, it is often referred to as being the legal term for saying you can’t ‘blow hot and cold’ or ‘have your cake and eat it too’!

In Skymist, the court had to consider whether the adjudicator had been appointed correctly and had jurisdiction, or whether the referring party had approbated and reprobated when, in the first adjudication, it had relied upon a draft deed of appointment (the “DOA“) regarding the procedure for appointing an adjudicator and the relevant ANB, whereas in the second adjudication, it had relied upon the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the “Scheme“).

Background

Skymist Holdings Limited (“Skymist“) engaged Grandlane Developments Limited (“Grandlane“) to provide development and project management services at its property in Hampshire. In October 2017, Skymist terminated Grandlane’s services and Grandlane subsequently claimed that it was owed substantial sums as at the date of termination. Skymist disputed the claim.

Adjudication No.1:

Grandlane issued a Notice of Adjudication (“NOA“) to Skymist and applied to the Chartered Institute of Arbitrators (“CIArb“) for the nomination of an adjudicator pursuant to paragraph 2 (1) (b) of the Scheme. This was on the basis that the DOA included a clause identifying the CIArb as the ANB. The request led to the nomination of an adjudicator by the CIArb.

This appointment was contested by Skymist. Skymist argued that the parties had not agreed the DOA (as it had been heavily negotiated/revised and never signed) and any appointment through the CIArb would be a “nullity”.

Consequently, Grandlane withdrew Adjudication No.1.

Adjudication No.2:

In light of Skymist’s objections, Grandlane issued a new NOA but this time wrote to the RICS Dispute Resolution Service (the “RICS“) requesting the nomination of an adjudicator in the absence of a contractual term providing for a particular ANB (paragraph 2 (1) (c) of the Scheme). This resulted in the appointment of Mr Riches.

In Skymist’s Response, it challenged Mr Riches’ jurisdiction and said that since Grandlane’s case was (or still was) that the relevant contract was constituted by the DOA, the reference to the RICS was wrong, and Grandlane should have applied to the CIArb for the nomination of an adjudicator in accordance with the DOA.

Mr Riches considered he had jurisdiction and proceeded with the adjudication. Skymist issued a Part 8 claim challenging the decision of the adjudicator.

Decision

Waksman J dismissed Skymist’s Part 8 claim and held that there had been no approbation and reprobation when Grandlane required the RICS to nominate an adjudicator.

It was decided that the only reason Grandlane had changed ANB to the RICS was Skymist’s objections in the first adjudication and that the adjudicator’s decision did not entail finding that the DOA as a whole was the governing contract.

In rejecting Skymist’s claim, Waksman J considered the relevant case law and set out the principles of approbation and reprobation in adjudication:

• The approbating act or conduct needs to be clearly defined and unequivocal;
• The party in question must gain a benefit from the approbation; and
• The reprobating act must be clearly inconsistent with the earlier approbation and the reprobating act itself must be clear and unequivocal.

Waksman J commented that this was a curious case in that the “thing” that was argued to have been approbated and reprobated was the DOA as a complete contract, rather than the adjudicator’s decision itself.

Waksman J expressed “serious doubts” as to whether the principle of approbation and reprobation could ever be used in this way and observed the “irony of this case” that if there had been any approbation and reprobation, it was the actions of Skymist (not Grandlane). The course of appointment by the CIArb was precisely what Skymist had objected to in the first adjudication.

Practical Implications

This case highlights the importance of finalising the terms of agreement and entering into a contract signed by both parties. If a dispute arises, this will minimise scope for disputes regarding the form of contract, the process for appointing an adjudicator and/or the relevant ANB.

This case also serves as a reminder that the referring party should always ensure the adjudicator is appointed following the correct procedure, so as to avoid any jurisdictional challenge. On the other hand, the responding party must remember to clearly reserve the right to challenge the adjudicator’s decision in any submissions/correspondence to the adjudicator, if it continues to participate in the adjudication.

Finally, despite the judgment being fact specific, Waksman J’s summary of the principles (as set out above) provides a helpful guide for parties involved in an approbation and reprobation claim.