Related adjudications under the Scheme for Construction Contracts: Deluxe Art expanded

United Kingdom

A recent decision of the Sheriff Court in Edinburgh has confirmed that related disputes under different contracts, referred to adjudication under the Scheme for Construction Contracts, may not be adjudicated on by the same adjudicator except with the consent of all the parties to those disputes. This decision follows and expands on the TCC’s decision in Deluxe Art & Theme Limited v Beck Interiors Limited. Like the Deluxe Art decision itself, the implications of this decision are significant given that the Scheme applies where a construction contract fails to provide for adjudication and is the default adjudication procedure specified by the JCT and SBCC suite of contracts.

Paragraph 8 of the Scheme

Paragraph 8(1) of the Scheme (both in Scotland and in England) states that an adjudicator “may, with the consent of all the parties to those disputes, adjudicate at the same time on more than one dispute under the same contract”. Paragraph 8(2) is similar and states that an adjudicator “may, with the consent of all the parties to those disputes, adjudicate at the same time on related disputes under different contracts, whether or not one or more of those parties is a party to those disputes.”

The TCC considered the effect of paragraph 8(1) recently in Deluxe Art v Beck (for our Law-Now on that decision please click here). Beck engaged Deluxe Art as a sub-contractor to supply and install joinery at a hotel in London which Beck was refurbishing as the main contractor. Various disputes arose between the parties and were referred to three separate adjudications, with the final adjudication being commenced part way through the second and the same adjudicator appointed in all three. Before the TCC, Beck argued that by adjudicating on the second and third adjudication at the same time, without consent, paragraph 8(1) had been breached.

The TCC agreed with Beck and found that the adjudicator did not have jurisdiction to deal with the third adjudication. The court noted that paragraph 8(1) applied regardless of whether two disputes were referred in the same or separate notices of adjudication.

Pentland Investments Limited v Aitken Turnbull Architects Limited

This case turned on similar facts to Deluxe Art v Beck and expands the TCC’s decision to paragraph 8(2) of the Scheme. Pentland owned the Raeburn Hotel in Edinburgh and appointed Aitken as architect for refurbishment works. Pentland later discovered defects in the work and sought to recover losses from Aitken. Pentland referred this, among other related matters, to adjudication.

The appointed adjudicator wrote to Pentland and Aitken to inform them that he had also been appointed in a related dispute between Pentland and the structural engineer for the project. Aitken refused its consent to this appointment and invited the adjudicator to resign. The adjudicator refused and the adjudication continued under a reservation as to jurisdiction. Pentland was successful and brought enforcement proceedings against Aitken in the Sheriff Court.

Aitken defended enforcement on the basis that, by virtue of paragraph 8(2) of the Scheme, the adjudicator could not adjudicate on related disputes without its consent.

The Sheriff agreed with Aitken and followed Deluxe Art v Beck in finding that paragraph 8(2) prevented an adjudicator from hearing multiple related adjudications at the same time without the consent of the parties. The Sheriff considered that the essence of the right to adjudicate in section 108 of the Construction Act was practicality and commented that a reason for restricting an adjudicator to a single adjudication at a time might be to ensure: “each one is done properly” (although this doesn’t explain why the adjudicator may nonetheless accept appointments for multiple unrelated adjudications at the same time).

Conclusions and implications

As noted in our earlier Law-Now, the implications for this interpretation of paragraph 8 of the Scheme are considerable. Prior to Deluxe Art, many had thought that the terms of paragraph 8 were limited to multiple disputes included in a single adjudication, rather than applying across multiple adjudications. It is now clear for both paragraph 8(1) and 8(2) that the restriction on multiple disputes applies across adjudications.

A number of implications arise with regard to related disputes in particular:

  • Appointing the same adjudicator at the same time in related disputes can have benefits for the effective management of a dispute. The risk of inconsistent decisions is avoided and costs are likely to be saved (at least by the Referring Party). The ability of Referring Parties to adopt this approach under the Scheme is now subject to the consent of the other parties.

  • The Deluxe Art decision made it possible for parties to avoid the re-appointment of an adjudicator appointed previously by commencing an adjudication at the same time as an existing adjudication referred to the incumbent adjudicator. Similar implications arise from this decision. Referring Parties under the Scheme rules can be assured that any adjudicator appointed in a related dispute will not be available whilst that appointment is ongoing.

  • Referring Parties may be the subject of “reverse ambush” tactics if counterparties to related disputes become aware that an initial adjudication has been commenced. Those parties might then commence their own related adjudications, knowing that a different adjudicator will be appointed (assuming the Scheme applies) with the result that the Referring Party to the initial adjudication will be fighting on different fronts without scope for a single adjudicator to co-ordinate the proceedings.

  • Adjudicator nominating bodies should take action to adjust their nomination practices for adjudications commenced under the Scheme to avoid appointing an adjudicator that has already been appointed to resolve a related dispute under a different contract. It could prove hard for nominating bodies to spot related disputes without sufficient background knowledge. The Referring Party may therefore have to provide further information than that required previously in the nominating form.

References:

Deluxe Art & Theme Limited v Beck Interiors Limited [2016] EWHC 238 (TCC)

Pentland Investments Limited v Aitken Turnbull Architects Limited [2018] SC EDIN 16