Rossco Civil Engineering Ltd v Dwr Cymru Cyfyngedic (Welsh Water) 1

On the enforcement of an adjudicator's decision a party can be estopped from denying the adjudicator's jurisdiction if that party had earlier represented that the adjudicator had jurisdiction or that there was a common understanding between the parties to that effect. Also, an adjudicator can order the referring party to make a payment to the responding party if it is implicit in the referred dispute that the adjudicator is required to decide the responding party's entitlement and/or under paragraphs 13 and 20 of the Scheme (when it applies).

Recorder Dermod O'Brien QC, Technology and Construction Court

15 July 2004

Rossco Civil Engineering was a partnership carrying on business as civil engineering contractors ("the Partnership"). Welsh Water ("WW") engaged the Partnership to carry out refurbishment works to water mains. The contract was a construction contract to which the Scheme applied. After the contract was concluded the Partnership incorporated, becoming Rossco Civil Engineering Ltd ("the Company").

WW commenced an adjudication naming the Company as the responding party. WW claimed that the Company owed it about £500k for "free issue materials" supplied by WW and that this should be deducted from a sum of about £380k that the parties had otherwise agreed was payable to the Company (with the result that the Company would owe WW about £120k).

WW lost the adjudication. The adjudicator found that WW was not entitled to any payment in respect of the free issue materials and that, therefore, the Company was owed £380k plus interest and VAT. The Company sought to enforce the adjudicator's decision. WW said that the adjudicator had lacked jurisdiction (because WW's contract was with the Partnership) and that therefore the decision was unenforceable. WW also asserted that the adjudicator had no authority to order WW to pay money to the Company.

The court held that the Company was entitled to the sum awarded by the adjudicator for the following reasons:

WW was estopped by convention and by representation from denying that the contract was with the Company. WW treated the Company and not the Partnership as the other party to the contract. There was a clear common understanding between the parties that WW's contract was with the Company. Also, WW commenced the adjudication with a representation that the contract was with the Company (by naming the Company as the "other party to the contract" in WW's application to the adjudicator nominating body).

At the outset of the adjudication, the adjudicator inquired as to the status of Rossco. The Company said that the Partnership had incorporated. WW did not comment on this or answer the adjudicator's inquiry. The judge said that an estoppel cannot normally be based on silence unless there is, in all the circumstances a duty to speak up. WW did owe such a duty. If WW ever wished to contend that the true contracting party was the Partnership it was obliged to speak up not only in the general context but so as to give efficacy to the initial words of paragraphs 13 and 15 of the Scheme.

The estoppel was mutual. If the adjudication had gone the other way, the Company would have been obliged to make any payment ordered. Both parties acted to their detriment on the basis of the common understanding; both incurred what must have been the considerable expenditure of dealing with the adjudication.

The contract (that WW was estopped from denying was with the Company) was in writing for the purposes of section 107 of the HGCR Act 1996. The common understanding of the parties was something upon which "the parties agree otherwise than in writing by reference to terms which are in writing" for the purposes of section 107(3) and therefore deemed to make an agreement in writing. Also, letters passing between the parties which referred to the full contractual terms, constituted evidence in writing of the agreement (in accordance with the common understanding of the parties) for the purposes of section 107(2)(c).

The judge said in passing that he saw no particular problem in saying that, if in the unlikely event that all the material terms of an agreement (other than in writing) have been the subject of an exchange of submissions and not disputed in the adjudication in question, the requirements of section 107(5) have been met. In this respect the judge expressly disagreed with Judge Bowsher QC's judgement in Grovedeck Ltd. v. Capital Demolition Ltd.

The adjudicator had authority to order WW to pay money to the Company. The adjudicator was not merely empowered to deal with the dispute over the free issue materials insofar as WW were entitled to a sum of about £380k. The judge reasoned that "the adjudicator could never get to this position without deciding whether there were any, and if so how much, in the way of free issue materials for which a disallowance should be made".

In any event what the adjudicator did was exactly what paragraphs 13 and 20 of the Scheme expect and authorise him to do. His authority to require "any of the parties to the dispute to make a payment under the contract" is specifically provided for in paragraph 20(b).