Adjudication Matters: November 2022

To what extent is an adjudicator bound by a previous adjudication/arbitration award?

In John Graham Construction v Tecnicas Reunidas UK [1], the TCC held that an adjudicator’s award will be enforceable in circumstances where the question determined by the adjudicator is not the same, or substantially the same, as a question determined in prior adjudication or arbitration proceedings.

Here the parties disputed whether the adjudicator had overridden a prior arbitration award (and the parties disagreed as to the correct interpretation of that arbitration award).

The court specifically considered whether the adjudicator had exceeded their jurisdiction in basing their decision on a disputed interpretation of the prior arbitration award.

The general position is that an adjudicator will be bound by a prior arbitration decision, adjudication award or court judgment on any issue which forms part of a dispute referred to adjudication. However, whether an adjudicator bases their decision on a correct interpretation of the prior decision is irrelevant for the purposes of determining their jurisdiction.

This means that the adjudicator can decide how to interpret a previous award. The fact that an adjudicator bases their decision on a disputed interpretation of a prior decision/award will not ordinarily constitute grounds to resist enforcement of that decision.

Is the design, manufacture and supply of doors “construction operations” for the purposes of the Construction Act?

In Cubex (UK) v Balfour Beatty Group [2] the TCC held that a contract for the design, manufacture and supply of doors was not a construction contract under the Construction Act (the Act) [3].

The statutory right of parties to refer a dispute to adjudication only applies to contracts concerning “construction operations“, as defined under the Act.

Section 105(2)(d)(i) of the Act excludes contracts for “manufacture or delivery to site“. Cubex argued that the contract here was construction operations because it included design of the doors. The TCC held that the contract was still excluded because the design related only to manufacture and delivery and there was no installation.

As a consequence, the court declined to enforce the adjudication award, on the basis that the adjudicator had no jurisdiction to determine the dispute.

The court alternatively determined that Balfour Beatty had a real possibility of defending the enforcement proceedings on the basis that the adjudicator had not been validly appointed under a construction contract. The adjudicator had inferred the existence of a contract between the parties based on email exchanges and meetings. But the court found there was insufficient evidence to support the conclusion that the inferred contract had actually been formed. In particular, it was unclear as to when, or even if, contractual terms between the parties had actually been agreed. Cubex was unable to provide any compelling evidence on this point.

Will an adjudicator breach natural justice if they base their decision on a programme rejected by both parties?

In this Scottish case, Van Oord v Dragados [4], the court held that the adjudicator had not given the parties a fair opportunity to comment on the adjudicator’s choice of baseline programme in an extension of time claim and the consequences the adjudicator considered that that programme had on the critical date. This meant that the adjudicator’s decision breached the rules of natural justice and was not enforced.

Both parties had instructed a delay expert and the experts disagreed as to which programme should be used as the baseline in the analysis of critical delay. The adjudicator selected a baseline programme which was rejected by both experts and made an extension of time award to the sub-contractor based on a critical date which had not been requested by either party. The adjudicator didn’t ask the parties for comment on this before issuing a decision.

The court said that because the adjudicator had decided that:

• the programme rejected by both experts was the appropriate baseline (something which could not reasonably have been foreseen by the parties); and
• had formed the view that the critical date was earlier than that contended for by the referring party;

fairness demanded that the parties be given a further opportunity to address the adjudicator on those issues.

This case highlights that the threshold for establishing a breach of natural justice is high but not impossible, and the courts will decline to enforce a decision if it’s clear that the adjudicator has gone off on a frolic of their own. To avoid a breach of natural justice, if an adjudicator reaches an interpretation not advanced by either party, the adjudicator should put this interpretation to the parties for comment prior to issuing their decision.

Is it appropriate to use the Part 8 procedure to resist adjudication enforcement?

In Breakshore v Red Key [5], Red Key tried to resist enforcement of an adjudicator’s decision by seeking determination of the substantive dispute by way of a Part 8 claim.

The adjudicator had decided that Red Key was liable to pay Breakshore liquidated damages for delay. Red Key denied its responsibility for the delay and claimed that Breakshore prevented it from achieving practical completion because Breakshore was responsible for getting revised planning permission for the increased height of the building. The Part 8 claim sought various declarations about which party was responsible for the breach of planning permission and the enforceability of the adjudicator’s decision.

The court rejected the Part 8 claim and held that “there was an obviously inappropriate use of the Part 8 procedure for tactical advantage“. The court held that the Part 8 procedure should not be used for matters involving disputed facts and there was no clear-cut issue from which it could be seen the adjudicator was obviously wrong to decide that liquidated damages were due. The judgment considered the very limited circumstances (as set out in Hutton v Wilson [6]) in which the court will determine substantive issues at adjudication enforcement proceedings:

“a) there is a short and self-contained issue which arose in the adjudication and which the defendant continues to contest;

1. b) that issue requires no oral evidence, or any other elaboration beyond that which is capable of being provided during the interlocutory hearing set aside for the enforcement; and
2. c) the issue is one which, on a summary judgment application, it would be unconscionable for the court to ignore.“

This case is a reminder that it’s rare for the court to decline to enforce an adjudicator’s decision. It provides a helpful checklist that parties must think about when considering whether it would be appropriate to challenge adjudication enforcement by bringing a Part 8 claim.

Finally, it should be noted that the court will not be impressed by an obviously inappropriate use of the Part 8 procedure and will likely penalise the offending party for such inappropriate use by awarding costs on an indemnity basis.

If you have any queries about any of the points covered or would like to know more about adjudication please contact Carly Thorpe.

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[1] John Graham Construction Limited v Tecnicas Reunidas UK Limited [2022] EWHC 155 (TCC)

[2] Cubex (UK) Limited v Balfour Beatty Group Limited [2021] EWHC 3445 (TCC)

[3] See section 105(2)(d)(i) of the Housing Grants, Construction and Regeneration Act 1996

[4] Van Oord UK Limited v Dragados UK Limited [2022] CSOH 30

[5] Breakshore Limited v Red Key Concepts Limited (unreported), 6 May 2022, (County Court)

[6] Hutton Construction Limited v Wilson Properties (London) Limited [2017] EWHC 517 (TCC)