Adjudication update 1

By Andrew Rawstron

In the 12 months since Mr Justice Dyson's decision in Macob Civil Engineering Ltd v Morrison Construction Ltd (reported in our Autumn 1999 Bulletin) there is no doubt that adjudication has caught on.

Initially, the reported cases tended to focus on the manner in which Adjudicators' decisions might be enforced. However, an increasingly diverse range of issues are now being heard by the Courts, usually in response to enforcement proceedings. And if one issue stands out, it is the attempt by Defendants to avoid payment by disputing the Adjudicator's decision.

The most important judgment to be handed down in recent months was that of Mr Justice Dyson in Bouygues UK Ltd v Dahl-Jensen UK Ltd (17 November 1999). In that case, Bouygues was a main contractor for building works at Kings College, London. Dahl-Jensen was a domestic sub-contractor responsible for various M&E works. In July 1999, Bouygues purported to determine Dahl-Jensen's employment under the Sub-Contract and, predictably, claims and counterclaims were advanced.

The dispute was referred to an Adjudicator and, to cut a long story short, he decided that Dahl-Jensen was due £178,801.51. Unfortunately, the Adjudicator made what, with hindsight, was a clear mathematical error in arriving at the sum which was due. By including retention in some calculations but not in others, the Adjudicator found that Bouygues was liable to Dahl-Jensen, whereas on the true figures it was Dahl-Jensen who, in fact, owed Bouygues the sum of £141,254.

There is no doubt that the Adjudicator had made a clear error but, regrettably, he did not see it that way when asked by Bouygues to correct his decision. Dahl-Jensen then sought to enforce the Decision by way of summary judgment.

At trial, Bouygues argued that the Decision was not just wrong but that the Adjudicator had exceeded his jurisdiction. Mr Justice Dyson had none of it. Not only did he decide that the decision was within the Adjudicator's jurisdiction, but he had this to say on adjudication generally:

"It is inherent in the Scheme that injustices will occur, because from time to time, adjudicators will make mistakes. Sometimes those mistakes will be glaringly obvious and disastrous in their consequences for the losing party."

Therein lies the rub. Dahl-Jensen are insolvent and, whilst the Adjudicator's decision could be opened up in arbitration proceedings, it is enforceable until that time. The prospects of recovery in these circumstances look slim.

Rather less contentious, but by no means of less interest, was a decision of the Scottish Court of Session in Homer Burgess v Chirex (Annan) Ltd (10 November 1999). By way of background, disputes arose in relation to the value of works carried out by Homer Burgess at a site near Annan, Dumfriesshire. The works in question included pipework which, it was generally accepted, formed a link between various pieces of machinery or equipment.

Chirex argued, before the Adjudicator and before the Court in subsequent enforcement proceedings, that the pipework in question was "plant" for the purposes of Section 105(2)(c) of the Construction Act, and that accordingly the Adjudicator did not have jurisdiction to resolve this aspect of the dispute.

Whilst the Adjudicator concluded that Chirex were wrong, the Judge disagreed. In reaching his decision, the Judge noted that it is quite possible for a contract to include both works which are caught by the legislation and works which are not. It is therefore necessary to consider "on an item-by-item basis" whether the works in question are construction operations for the purposes of Section 105 of the Act in deciding whether a statutory right to the adjudication of disputes exists at all.

Disputes on jurisdiction have not, however, been limited to the definition of works carried out under Construction Contracts. In the unreported case of Lathom Construction Ltd v AB Air Conditioning, a novel issue arose. The disputes under the contract were run of the mill, and there is no doubt that the Adjudicator had power to consider them. However, in a subsequent adjudication Lathom sought to resolve disputes in relation to the settlement agreement which had been intended to resolve the disputes raised in the earlier adjudication. The Adjudicator decided that he could resolve the second dispute, but AB Air protested that he could only consider matters arising under the construction contract and not the settlement agreement itself.

The Judge held that the question of jurisdiction was at least arguable and that to give summary judgment in those circumstances was not appropriate. Had Lathom avoided adjudication and sought summary judgment of its claim under the settlement agreement itself the position would have been quite different since the claim would at least have been considered on its merits. As it was, it failed at the first procedural hurdle.

Even if a dispute in question can, in principle, be resolved by an Adjudicator, it is still important to define the dispute with reasonable precision. However, following the decision of His Honour Judge Thornton QC in Fastrack Contractors Ltd v Morrison Construction Ltd it would seem that the courts will not adopt an unduly restrictive approach. On the facts of this case, Fastrack sought summary judgment following an Adjudicator's decision that it was due £85,401.98. Morrison sought to resist payment, principally on the basis that

"... if a dispute concerns a precise basis of claim and a precise amount, the notice of adjudication and the subsequent adjudication must be concerned with that basis of claim and amounts and with no other."

Judge Thornton disagreed. Whilst a claimant cannot add new issues during the course of a reference, a dispute as to a specific sum which is alleged to be due can encompass the hearing of matters which give rise to a greater or lesser sum. Indeed the Judge noted that a claim can often be made without quantification having been finalised or even attempted.

For further information please contact Andrew at [email protected] or on +44 20 7367 2519.