The impact of burden of proof findings on future adjudications

United Kingdom

The Court of Appeal has last week granted permission for the appeal of a TCC decision in relation to burden of proof findings made by an adjudicator. The TCC decision allowed claims which had previously been valued at zero by an adjudicator due to lack of evidence to be re-adjudicated with improved evidence. The case raises an important question as to the extent to which burden of proof findings in one adjudication are binding on future adjudicators. 

Temporary finality and the burden of proof

The nature of adjudication as a swift and temporarily binding dispute resolution procedure lends itself to submissions that a party has not satisfied the burden of proof. Such submissions are often made in response to extensions of time claims or in relation to the valuation of variations or loss and expense claims.

Where an adjudicator finds that the burden of proof has not been satisfied, the outcome of the adjudication may be affected in two ways:

  1. The adjudicator may decline the relief sought by the Referring Party.
  2. The adjudicator may make a positive award or declaration flowing from his finding as to the burden of proof.

An example of the first kind are those cases where an extension of time claim fails due to insufficient evidence. It is clear that such claims may be re-adjudicated where the revised claim is sufficiently different from the original (for example, if it is based on different delay events): this flows from the Court of Appeal’s decision in Quietfield Limited v Vascroft Construction Limited.

An example of the second kind are cases where an extension of time claim is raised in defence of a claim for liquidated damages. If the extension of time claim fails for want of proof, liquidated damages will be awarded. In those circumstances, it is not possible for the extension of time claim to be re-adjudicated even if the revised claim is sufficiently different to satisfy the Quietfield test. That is because any subsequent decision allowing an extension of time would be inconsistent with the award of liquidated damages made in the initial adjudication. That was the position reached in Mailbox (Birmingham) Ltd v Galliford Try Building Ltd

The case reported below is also of the second kind and concerns whether a Referring Party can re-adjudicate a claim which has previously been valued at nil due to a want of proof as to quantum.

Hitachi Zosen Inova AG v John Sisk & Son Ltd

HZI was employed by SSE to construct a multi-fuel power plant in Yorkshire. HZI subcontracted part of the works to Sisk. During the course of the works, Sisk submitted a payment application (number 6) for £4.5 million, including a claim for £1.1 million for acceleration in relation to the Boiler Hall. HZI rejected the application (including the claim for acceleration) and Sisk referred the dispute to adjudication.

In the adjudication Sisk claimed for a “declaration as to the correct valuation of each of the items in dispute” as well as payment of whatever sum the adjudicator found to be due. The adjudicator’s decision contained a declaration which set out in a schedule the “correct valuation of each of the items in dispute” as well as a monetary award considerably less than the amount claimed for by Sisk. In relation to the acceleration claim, the adjudicator found that the claim itself was valid but that the quantum evidence provided by Sisk was insufficient and did not satisfy the requirements of the subcontract. Accordingly, the valuation schedule attached to the decision stated that: “I do not have sufficient details to value the works and hence for the purposes of Payment Notice 6 my value is £nil.”

Sisk subsequently commenced a further adjudication specifically in relation to the acceleration claim. It relied on the previous adjudication decision as supporting the merits of the claim and submitted much more extensive evidence in relation to quantum. The adjudicator found in Sisk’s favour and ordered payment of £825,703.11 in respect of the acceleration claim.

HZI challenged the adjudicator’s decision on the basis that it ran contrary to the initial decision valuing the acceleration claim at nil. The TCC rejected HZI’s challenge and granted enforcement, noting that the scope of previous adjudication decisions is to be determined by reference to what an adjudicator actually decided rather than the issues or questions referred to him/her. In this case, it was clear that the adjudicator had initially refrained from making a decision about the proper valuation of the acceleration claim. Although he had determined that no sum was payable for the claim as part of Sisk’s Application No. 6 due to a lack of evidence, he “did not decide the valuation of [the claim] for any other purposes than in the context of the claim pursuant to Payment Application 6.”

Conclusion and implications

This case raises difficult questions as to the relevance of burden of proof findings in the interpretation of adjudication decisions. The adjudicator was initially asked by Sisk to value the acceleration claim (among other claims) and valued it at nil. On one view, it should make no difference whether that decision flowed from the burden of proof or some positive analysis of the evidence by the adjudicator. The court appears to have been keen to give effect to the adjudicator’s intention of valuing the claim at nil “for the purposes of Payment Notice 6”, however Sisk had asked the adjudicator to value the claim without limitation. More generally, it is not easy to understand how an adjudicator can make a positive finding of fact (such as a nil valuation) only for one purpose, leaving that finding to be challenged or opened up for separate purposes.

The TCC’s decision also seems difficult to reconcile with the position reached in the Mailbox case. In Mailbox, the adjudicator made clear that he was only deciding the contractor’s extension of time defence (to the employer’s claim for liquidated damages) on the basis of three events advanced by the contractor. This left open the potential for extensions of time to be claimed subsequently on other grounds. However, the court in that case found that the adjudicator’s decision in awarding liquidated damages left no room for extensions of time to be claimed afresh.

HZI have last week received permission to appeal and it is hoped that the above issues will be clarified by the Court of Appeal. For the time being, parties would be well advised to consider any burden of proof issues prior to commencing an adjudication and give careful thought to any adverse findings which may arise as a result. If such issues cannot be fixed through further evidence gathering, they can sometimes be addressed through careful drafting of the adjudication papers.

References:

Quietfield Limited v Vascroft Construction Limited [2007] BLR 67.  

Mailbox (Birmingham) Ltd v Galliford Try Building Ltd [2017] EWHC 1405.

Hitachi Zosen Inova AG v John Sisk & Son Ltd [2019] EWHC 495.