McAlpine PPS Pipeline Systems Joint Venture v Transco plc 1

This recent case in the TCC provides useful guidance on the nature of a dispute referred to adjudication and the conduct of the adjudicator who is appointed to determine it.

Judge John Toulmin QC, Technology and Construction Court

12 May 2004

Transco plc (“Transco”) engaged McAlpine PPS Pipeline Systems Joint Venture (“McAlpine”) to carry out works in relation to the construction of 37 km of steel pipeline in Kent. The contract incorporated the NEC standard form of contract. A dispute emerged concerning McAlpine’s entitlement to interest on payments for compensation events. The matter was referred to adjudication.

McAlpine issued its notice of referral to adjudication on 17 November 2003. In the notice, McAlpine said that the dispute concerned a claim for interest by reason of Transco’s failure to assess the amounts due for the compensation events by the relevant assessment dates. Transco replied through its solicitors on 26 November 2003. It reserved its position on two jurisdictional issues which it said related to the service of the notice of referral and complained that neither the notice nor the subsequent referral notice contained a comprehensive submission of McAlpine’s claim. It said on this issue: “Firstly, the submissions are selective. The narrative only deals with a selection of compensation events …” and “Secondly, there appears to be no explanation as to how the contract clauses identified by McAlpine have any relevance to the limited examples given.” As such, Transco argued that they had not had a proper opportunity to consider the whole of the claim.

Further correspondence passed between both parties, including Transco’s response to McAlpine’s referral dated 5 December 2003. On 12 December 2003, McAlpine served its reply to Transco’s response. The document consisted of what McAlpine described as “rather bulky” appendices amounting to 500 pages. Despite the adjudicator’s order that it should only relate to matters raised in Transco’s response, the reply (after providing a brief chronology) consisted of documents relating to certain other compensation events. On the same day, Transco registered its immediate objection to the service of evidence which it said, in McAlpine’s own admission, was extremely “bulky”. Transco maintained its objection that a new case had been raised.

The adjudicator wrote to the parties on 14 December 2003. In his letter, the adjudicator stated that he was unable to properly investigate the majority of the compensation events “for lack of evidence which McAlpine ought to have realised would be necessary” and that in order to make this assessment he would need evidence on the remaining compensation events”. McAlpine provided this on 18 December. Transco then served a Rejoinder, under protest, in the form of three full lever arch files on 23 December 2003.

On 8 January 2004 the adjudicator gave his decision. He concluded that McAlpine had not changed the basis for its claim. He said that McAlpine’s omission not to provide the required evidence at the time of its referral notice was not a fatal flaw and that he had acted within his statutory powers by requesting it. He rejected Transco’s complaint that they had been treated unfairly and said that they had been given as full an opportunity as the adjudication procedure permitted to address the further evidence. Having then considered the substance of the claim, the adjudicator ordered Transco to pay £52,119.62 less a sum already paid. Transco refused to pay and McAlpine applied for summary judgment for enforcement of the adjudicator’s award.

The court was asked to consider the issue of whether the adjudicator had acted outside his jurisdiction by deciding matters that had not been referred to him. Transco argued that the whole basis of McAlpine’s claim had changed from that that was initially referred to the adjudicator.

The court stated that there were a number of factors that were relevant to an adjudicator or a court when considering issues concerning an adjudicator’s jurisdiction. These were:

• What issues had been discussed at meetings between the parties prior to the referral to adjudication?
• What was the dispute that had been referred to adjudication after the defendant had had an opportunity to respond to the claimant's claims?
• What was the basis on which the dispute had been referred?
• Was it general and/or by reference to specific issues?
• Was the adjudicator's decision responsive to the issues referred?
• Had new issues been raised during the course of the adjudication?
• If so, were these objected to by the other party?
• Did any such objection go to the fundamental nature of the dispute referred?
• If so, did the objection go to the fairness of the procedure?
• If there was a breach of procedure, did it significantly affect the fairness of the decision?

The court considered that, on the basis of the factors outlined above, McAlpine’s claim had changed from the one that was first referred. It said that new issues were introduced in the course of the adjudication without the agreement of Transco. The court held that “the case ultimately … put forward by McAlpine, represented such a change in the nature of the dispute referred to the adjudicator that Transco [had] a realistic prospect of arguing successfully (this being the test which must apply) either that the adjudicator failed to give a decision which was responsive to the dispute which was referred to him or, put another way, gave a decision on a different dispute”. Either of which, the court said, would have meant the adjudicator had acted beyond his jurisdiction. In any event, it was arguable that Transco had a real prospect of succeeding in showing that the it had been prejudiced due to the late service of substantial amounts of evidence in support of a new case, which ought to have been served with the referral notice. Accordingly, the application for summary judgment was dismissed.

For full judgment, please click here