Construction Adjudication Case Update: Part 2 of 2022

Construction Adjudication Case Update: Part 2 of 2022

Construction Adjudication Case Law The Enforcement of Adjudicators’ Awards under the HousingGrants, Construction and Regeneration Act 1996: Part 2 of 2022

Kenneth T. Salmon Consultant Solicitor at Slater Heelis

Construction&Engineering

Contents

Page 4

Case 1 : Adjudicator’s Fees – entitlement on resignation........................................................... Steve Ward Services UK Ltd v Davies and Davies [2022] EWCA Civ 153 judgment 14 February 2022

Page 8

Case 2: Dispute – not crystallised ...................................................................................................... Bravejohn Company Ltd v Prosperity Moseley Street Ltd [2021] EWHC 3598 (TCC) Eyre J judgment 13 December 2021

Case 3: Jurisdiction – excess of – undermining arbitral award – no power – wrong question – waiver...................................................................................................................... John Graham Construction Ltd v Tecnicas Reunidas UK Ltd [2022] EWHC 155 (TCC) Morris J judgment 27 January 2022

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Page 13

Case 4: Natural Justice........................................................................................................................... Bilton & Johnson (Building) Co Ltd v Three Rivers Property Investments Ltd [2022] EWHC 53 (TCC) Judge Jason Coppel QC judgment 14 January 2022

Case 5: Strike out or stay...................................................................................................................... RHP Merchants v Treforest Property Company – (TCC) unreported – Roger Stewart QC – judgment 22 October 2021

Page 14

Introduction The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 2 of 2022, by Kenneth T. Salmon, Consultant Solicitor, Slater Heelis.

Legislation The Act means the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 Pt 8.

The ‘new’ provisions apply to contracts entered into on or after 1 October 2011. The Act applies to Northern Ireland.

The main regulations are contained in the Scheme for Construction Contracts (England & Wales) Regulations 1998 (the ‘Principal Regulations’)[1] They have been amended by the Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011[2] (the ‘new Regulations’). The new Regulations apply only to contracts for construction operations in England entered into on or after 1 October 2011. For earlier contracts the Principal Regulations apply. Northern Ireland has its own scheme: the Scheme for Construction Contracts in Northern Ireland 1999 as amended by the Scheme for Construction Contracts in Northern Ireland (Amendment) Regulations (Northern Ireland) 2012. The Northern Ireland Scheme is broadly similar to that in force in England and Wales. There are separate regulations for contracts for work in Scotland applicable to contracts made on or after 1 November 2011.[3] The new Regulations apply only to contracts for work in Scotland entered into on or after this date. For earlier contracts the Scheme for Construction Contracts (Scotland) Regulations 1998[4] applies. There are new separate regulations for Wales, applicable to contracts for construction operations in Wales entered into on or after 1 October 2011[5]. A reference to “the Scheme” is to the Principal Regulations for England and Wales, or the Scheme for Scotland, or Northern Ireland, as the context requires.

[1] Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 1998/649). [2] Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011 (SI 2011/2333). [3] Scheme for Construction Contracts (Scotland) Amendment Regulations 2011 (SI 2011/371). [4] Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/687) (S.34). [5] Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011 (SI2011/1715) (W.194).

1) – entitlement on resignation – Steve Ward Services UK Ltd v Davies and Davies [2022] EWCA Civ 153 judgment 14 February 2022 Adjudicator’s Fees In a 36 page judgment over disputed adjudicator’s fee of £4000 odd plus VAT, the court of appeal gave authoritative guidance on the circumstances in which adjudicators are entitled to their fees when they resign or otherwise do not reach a decision. This was an appeal from the judgment of Roger Ter Haar QC[6] in which he found that the adjudicator Mr Davies was entitled to his fees on resignation. The appellant (SWS) as referring party had commenced an adjudication against a company (BIL). BIL asserted Mr Davies did not have the necessary jurisdiction, on the ground that the request for nomination had been made to the RICS before the notice of adjudication had been issued to BIL. Mr Davies resigned. SWS began a second adjudication and Mr Davies was again appointed by RICS. The contract relied on by SWS was between them and an individual (Ms Patel) who had at one time been but was no longer a director of BIL. After seeing the Referral and Response, Mr Davies raised the issue of the difference between parties to the contract, and the parties to the adjudication with SWS’s solicitors and BIL’s representative Mr Longden. The solicitors made various responses giving a number of unconvincing reasons why BIL was the party liable (e.g. as landlord or occupier of the premises where work took place or because they

paid invoices) even though not named in the contract. BIL provided unhelpful responses evading the questions posed by Mr. Davies. Significantly they did not take the point that they were not a party to the contract, but neither did they offer to submit to his jurisdiction or say they would waive any objection they might have. Mr Davies resigned and sent the parties an account for his fees for the work he had done based on the hourly rate in his Terms. Mr Davies’ appointment was based on (i) his letter and bespoke terms of appointment (“Terms”) which neither party objected to and (ii) the CIC Low-Value Dispute Model Adjudication Procedure (1st Edition) ("the MAP"); and (iii) The Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998 649), as amended ("the Scheme"). In the first instance proceedings, in which Mr Davies claimed payment of his fees from SWS, the judge held that he was entitled to payment pursuant to both the Terms and the Scheme, even though he had in the judge’s view his resignation was “erroneous”. SWS appealed against the finding of entitlement to payment of fees and Mr Davies cross appealed against the finding of “error” on his part.

Coulson LJ gave the judgment of the court on the following 6 issues:

1.

Was there a jurisdictional issue in the adjudication?

2. Was Mr. Davies entitled to decline jurisdiction and resign in consequence?

3. Subject to bad faith was Mr. Davies entitled to be paid for the work done before resignation?

4. Was Mr. Davies guilty of bad faith?

5. Was clause 1 of the Terms contrary to UCTA[7]?

6. Should the court interfere with the Judge’s costs order?

[6] [2021] EWHC 1337 (TCC) [7] Unfair Contract Terms Act 1977

Issue 1: Was there a jurisdictional issue in the adjudication?

Issue 2: Was Mr Davies entitled to decline jurisdiction and resign in consequence?

The contract was in the names of SWS and Ms Patel. There was no mention of BIL. The wasted and endless arguments by SWS as to why BIL was a contracting party were unsustainable. Mr Davies was entitled to conclude there was a jurisdictional issue. If a defendant can demonstrate a reasonably arguable case that either he or the claimant were not a party to the construction contract, the adjudicator had no jurisdiction to make any decision, and it would not be enforced[8]. It was always open to BIL expressly to indicate that, although they were not a party to the contract, they accepted the ad-hoc jurisdiction of Mr Davies as the adjudicator (per Nordot[9] ) and/or that they waived any right to take a jurisdictional point subsequently. However, they did neither. An argument as to waiver was never put to Mr Davies and it was not for him to speculate what might happen at enforcement and whether an argument of waiver might succeed down the line. In the court’s view, Mr Davies was entitled to conclude that BIL were not a party to the contract; to take into account the fact that the parties had not satisfactorily answered his questions on that topic; to take into account BIL's previous technical objection to his jurisdiction and SWS' current objection to the counterclaim on another jurisdictional ground; and to take into account the absence of any unqualified acceptance of his jurisdiction by BIL on an ad hoc basis. He did not need to go further and estimate SWS' possible chances of success on enforcement, and base his decision on whether to continue with the adjudication on that estimation.

The judge had concluded that Mr Davies had stepped outside paragraph 13 of the Scheme in his reasons for deciding to resign. He felt there was no dispute between the parties about jurisdiction and his decision was therefore erroneous. However this error was not serious or material as he had the power to resign in any event.

This issue was one of fact not law.

First, the adjudicator an unqualified right to resign in any event pursuant to paragraph 9(1) of the Scheme and paragraph 31 of the MAP. Neither required good cause. But both were silent as to entitlement to fees. In those circumstances the entitlement to fees might rest on two matters: why they resigned and the terms of the appointment. As to the first, the court felt the adjudicator had good cause to resign. It could not sensibly be suggested that, where there was a real jurisdictional issue going to the viability of the entire adjudication, which the adjudicator spotted, the adjudicator should say nothing about it, and instead proceed solemnly to the end of the process, leaving the point to any disputed at an enforcement hearing. That was not the law and would be contrary to common sense. Paragraph 13 of the Scheme gave Mr Davies the express power to consider and raise with the parties a point which they had not raised but which he thought was important in order to determine the dispute. The same answer was dictated by practical common sense. As Coulson LH put it: “It would strike at the heart of an efficient system of adjudication and adjudication enforcement if adjudicators were encouraged to believe that they must stay silent when they spot a potential jurisdictional problem, and wait for the parties to raise it before considering it themselves.”

In the absence of proper assistance from the parties, it was not a matter for him.

[8] Thomas-Frederic's (Construction) Limited v Keith Wilson [2003] EWCA Civ 1494; [2004] BLR 23. [9] Nordot Engineering v Siemens 14 April 2000; Cill Sept. 2001

Issue 3: Subject to bad faith was Mr Davies entitled to be paid for the work done before resignation? The judge construed clause 1 of the Terms as entitling the adjudicator to be paid unless he acted in bad faith. That was challenged on appeal.

The judge’s finding that Mr Davies reason for resigning was “erroneous” linked back to his view that it was not for Mr Davies to consider the jurisdiction issue because it was not raised by the parties. But as the court of appeal had found Mr Davies was entitled to raise the issue in any event, irrespective of the parties, then that criticism of him fell away entirely. The judge was therefore wrong to say that the adjudicator's reasoning was erroneous. It was not. This was also material to the subsequent issue of bad faith. It was suggested for SWS that Mr Davies had not raised the point with parties as one of jurisdiction. That was not correct. It was clearly understood by SWS’ solicitors that it was a jurisdictional issue and they treated it as such. There was more force in the next point: that the adjudicator should have given the parties a final warning that unless the parties accepted his jurisdiction and the binding nature of any decision he was to produce, he would resign. The court said that the giving of such a warning would always be good practice when an adjudicator was preparing to do something draconian, such as resigning. Whether such an omission amounted to bad faith, was dealt with under Issue 4 below. The court also noted that at [66], the judge had rejected the suggestion that the adjudicator "abandoned his appointment and impermissibly refused to provide a decision" , and later found at [79] that Mr Davies had acted with "diligence and honesty". For the reasons given, the court agreed with both of those conclusions. Mr Davies' diligence and honesty were palpable. Those conclusions were also relevant to any consideration of bad faith. The court concluded that the adjudicator had been entitled to decline jurisdiction pursuant to paragraph 13 of the Scheme. He had reasonable cause to resign in all the circumstances of this case.

The Law: the court summarised the applicable principles as follows.

a) Under the provisions of the Scheme, an adjudicator was entitled to resign. No reason was required. b) Whether or not the adjudicator was entitled to fees following any such resignation would depend on i) the precise terms of their appointment, and ii) the conduct of the adjudicator. c) The court's consideration of conduct might involve asking why the adjudicator resigned, so it might matter whether the adjudicator was right or wrong to resign. To that extent, the court disagreed with the learned district judge in Paul Jensen[10] , (although he was quite right in the result because of the absence in that case of any allegation of default or misconduct). d) A finding that the resignation involved was the result of default/misconduct or bad faith, depending on the terms of appointment, would - in accordance with the general approach in PC Harrington[11] usually be sufficient to disentitle the adjudicator from recovering fees. Conversely, absent such a finding, there would usually be an entitlement to the fees incurred prior to resignation. There was no binding authority on an entitlement to fees when an adjudicator resigned. The judge had concluded that absent bad faith the adjudicator was entitled to his fees. SWS complained about this conclusion. Their alternative interpretation was based on the premise that Clause 1 applied where:

[10] Paul Jensen Ltd v Staveley Industries PLC, 27 September 2001 (unreported) [11] PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371; [2013] BUSLR 970; [2013] BLR 1.

Issue 4: Was Mr Davies guilty of bad faith?

"there may be justifiable reasons why the Adjudicator is prevented from determining the dispute referred to him through no fault (or default) of his own (e.g. illness, technical mishap, or the parties withdrawing the dispute from him)"

Coulson LJ had little difficulty in finding (as had the judge) that Mr Davies had acted “with diligence and honesty.” As a matter of principle and for the purposes of clause 1 of the Terms, there was plainly a difference between default or misconduct and bad faith. The latter must involve some form of unconscionable or deliberately unacceptable conduct on the part of the adjudicator. The qualitative difference between the two was also reflected in paragraph 26 of the Scheme, where, liability for the adjudicator's acts or omissions is excluded, unless there is also bad faith. Plainly bad faith was more serious than simple default or misconduct. This difference also explained why, Mr Davies drafted a clause in his Terms so the parties could not avoid the payment of his fees on the basis of an inadvertent mistake on his part. Mr Davies was faithful to his bargain more so than the parties themselves. His conduct got “nowhere close to the higher bar of bad faith”. Subject to UCTA, therefore, Mr Davies was entitled to his fees.

Coulson LJ rejected that submission.

Clause 1 did not differentiate between the myriad different circumstances which might result in the dispute not being determined and no decision being delivered. The clause addressed the fact of there being no decision, not the reasons why there was no decision, much less differentiating between those reasons.

To read such distinctions into Clause 1 would be to rewrite the term.

Moreover, there was no commercial unreality about such an interpretation. It made complete commercial sense. Clause 1 sat easily with paragraph 26 of the Scheme, which exculpated the adjudicator for liability for all acts or omissions save where there was bad faith. Neither was there any justification for limiting the right to fees to situations where the decision was ‘reached’ but not ‘delivered’. That submission by SWS ignored the express provision in the Terms which provided that "in the event of the Adjudication ceasing for any reason whatsoever prior to a Decision being reached, a Fee Invoice will be raised immediately and is due for payment…" [emphasis supplied]. Finally, once Mr Davies had resigned, the MAP no longer applied and, in accordance with the Terms, he was entitled to charge his stated hourly rate for all the work he had done prior to resignation.

Issue 5: Was clause 1 of the Terms contrary to UCTA?

The court agreed with the trial judge, that clause 1 of the Terms was not caught by section 3 of UCTA.

Clause 1 did not mean that Mr Davies was entitled to render a contractual performance substantially different from that which was reasonably expected of him, or to render no performance at all. He had an unqualified right to resign, which he exercised. In any case the clause was not unfair. As had been conceded below, such terms were commonly found - indeed ubiquitous.

2) Dispute – not crystallised – Bravejohn Company Ltd v Prosperity Moseley Street Ltd [2021] EWHC 3598 (TCC) Eyre J judgment 13 December 2021 Bravejohn Company Ltd as claimant submitted some six invoices for design and construction work it said it had carried out for the defendant Prosperity. In response the latter gave payment and pay less notices in respect of three invoices showing a sum due to Bravejohn of £36,752 which however remained unpaid. Bravejohn commenced adjudication proceedings in which Prosperity submitted that, no dispute having crystallised, the adjudicator should resign. The adjudicator found that the submission of the invoices and the non-payment of the payment notice gave rise to a dispute and that he had jurisdiction. The adjudicator agreed with Prosperity that the invoices were not valid payment applications, but that they had treated five of them as valid and issued payment notices in respect of the first three. Thus they were obliged to pay the sum in their payment notices and awarded Bravejohn the sums claimed and interest. Upon an application to enforcement the Decision, Mr Lumb, an employee of Prosperity appeared in person and submitted a witness statement arguing there was no dispute as Bravejohn had intimated a claim against a different company, namely Prosperity Wealth. He claimed there was no contract with Prosperity (the defendant company) so no dispute had crystallised before the adjudication took place. In oral argument at the hearing, Mr Lumb put forward a different concern, that Prosperity’s design was defective and needed to be resolved.

There was no inequality of bargaining power; both sides were represented when the contract was made. Most importantly of all, Clause 1 made complete commercial sense and fitted easily with other terms of the contract. It followed the advice in Harrington .

Issue 6: Should the court interfere with the Judge’s costs order?

In his second judgment[12] the judge summarily assessed the respondent's costs in the sum of £26,328. That was based on the time that Mr Davies had spent on the case[13]. The judge rejected the submission that he could have engaged a paralegal to do much of that work. He also rejected the submission that the hours claimed were excessive. Each of those conclusions were matters for the judge's assessment and the exercise of his discretion, and there was no basis on which the appellate court would or should interfere with them.

Appeal dismissed. Cross appeal (against finding of error) allowed.

[12] At [2021] EWHC 1874 (TCC) [13] Mr Davies acted in person throughout and presumably his Terms entitled him to claim for his time in recovering his fees.

3) Jurisdiction – excess of – undermining arbitral award – no power – wrong question – waiver – John Graham Construction Ltd v Tecnicas Reunidas UK Ltd [2022] EWHC 155 (TCC) Morris J judgment 27 January 2022 The Claimant (“Graham”) was employed by the Defendant (“Tecnicas”) under a sub-contract relating to the Tees Renewable Energy Plant Biomass Power Station. There had been four adjudications and two arbitrations between the parties. In Adjudication 1, the adjudicator concluded that Tecnicas was not entitled to contra charge the cost of employing others to complete work which Graham refused to do, alleging it was outside the scope of its subcontract obligations. Graham later left site and carried out no further works. The first arbitration (“Arbitration 1”) concluded in early 2021 and the award (“Award 1”) overturned the decision in Adjudication 1 thus finally deciding that the works that Graham had refused to carry out were in fact within the scope of its subcontract, and Graham was therefore in breach. The second arbitration was continuing and is not relevant to what follows. On 5 March 2021 Graham gave notice of its intention to refer to adjudication a dispute “as to the correct value of Interim Payment Application Number 47”, thereby commencing “Adjudication 4” . Graham also set out a challenge as to the validity of the Contra Charge in the Notice of Adjudication, stating that “the Contra charge is invalid and that [Graham] is entitled to be certified and paid the amount deduced [sic] by [Tecnicas]”.

As the judge observed, it could be a defence to an application for enforcement that no dispute had crystallised, and the adjudicator had no jurisdiction. The court was referred to several authorities on the question of when a dispute crystallises[14]. The court found it was clear a dispute had crystallised here. Six invoices were sent and treated by Prosperity as having been sent to them and in respect of which they issued pay less notices and payment notices as well as writing a letter disputing liability. The late challenge to liability to pay under the contract by reason of (alleged) defective design was not a defence available on enforcement. Judgment for Bravejohn in the sum of £39, 038 plus interest, together with costs on the indemnity basis assessed £23,857 (as against cost claimed of some £33,000).

[14] Ringway Infrastructure Services Ltd v Vauxhall Motors Ltd [2007] EWHC 2421 (TCC), at [55]; Coulson J in CSK Electrical Contractors Ltd v Kingwood Electrical Services Ltd [2015] EWHC 667 (TCC) where he referred to the starting point being the decision of Jackson J in AMEC Civil Engineering Ltd v Secretary of State for Transport [2004] EWHC 2339 (TCC); Ramsey J in City Basements Ltd v Nordic Construction UK Ltd [2014] EWHC 4817 (TCC) at [29], had quoted from Jackson J's position in the Amec case as adopted by Clarke LJ in the Court of Appeal in Collins (Contractors) Ltd v Baltic Quay Management [1994] Ltd [2004] EWCA Civ 1757; and finally Akenhead J in VGC Construction Ltd v Jackson Civil Engineering Ltd [2008] EWHC 2082 (TCC) at [49]

In Adjudication 4 the adjudicator found that whilst he was bound by Award 1, the decision in Adjudication 1 which he could not disturb, had continued to have temporary effect and to bind the parties up to the moment Award 1 was made. At the most basic level, he found that Tecnicas had no power to levy the Contra Charge. He also found that Graham’s failure to carry out the full scope of works was as a result of its entitlement to rely on the decision in Adjudication 1 and did not arise from the breach later established by Award 1 (“the Decision”).

In any event, Tecnicas had waived its right to raise a jurisdictional challenge at this stage by failing to object during Adjudication 4. Tecnicas said it had not waived its right to object to jurisdiction because (i) the jurisdictional error here was “fundamental” and not capable of being waived and (ii) it was in no position to waive its right to object, since it had no actual or constructive knowledge of the jurisdictional error until the Decision was published.

The law

The adjudicator was acting pursuant to s 108 of the Act and the Scheme which applied by virtue of the express general provisions of the Contract. Paragraph 23(2) of the Scheme provided that an adjudication decision was binding and shall be complied with by the parties “until the dispute is finally determined … by arbitration …” After looking at the general principles of enforcement[15], the court turned to the binding nature of a prior decision in both adjudication and arbitration[16]. Drawing the principles from the authorities together, for the exclusion of jurisdiction to apply, the second decision must override or undermine the first, in the sense of deciding again something which had already been decided. There was a distinction to be drawn between the content of the first decision and a second decision which determined the consequences of that first decision: Amey Wye Valley §§14 and 35 (e.g. dispute as to the true construction of contractual terms and a dispute as to the financial consequences of the true construction as found were not the same or substantially the same dispute). Further an error of fact or law in applying the first decision might not amount to an excess of jurisdiction; see Amey Wye Valley, supra.

In effect the breach did not cause the loss suffered.

Graham now sought to enforce the Decision to avoid payment of the Contra Charges.

The issues

Tecnicas said the Decision was not capable of being enforced because the adjudicator lacked jurisdiction for three reasons – namely:

(1) the Decision undermined and in substance overrode Award 1;

(2) the adjudicator failed to act in accordance with the powers granted to him by the Subcontract;

(3) the adjudicator answered the wrong question. In essence. Award 1 had retrospective effect, the adjudicator could not ignore it and by doing so acted without jurisdiction. Graham denied that the Adjudicator acted outside his jurisdiction. Tecnicas’ arguments amounted to nothing more than asserting that the Adjudicator was wrong. He had resolved the dispute referred to him. In doing so he expressly did not reopen any disputes decided in Award 1. Any error made was within his jurisdiction.

[15] Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2006] BLR 15 (at §§52, 84, 85 and 87) [16] Benfield Construction Limited v Trudson (Hatton) Limited [2008] EWHC 2333 (TCC) §34; Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] EWHC 2218 (TCC) 127 Con LR 110 §§41 and 67 and Amey Wye Valley Ltd v The County of Herefordshire District Council [2016] EWHC 2368 (TCC) [2016] BLR 698 §§14, 15, 28, 31, 34 and 35. Court of Appeal in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] 3 All ER 337; [2019] EWCA Civ 27 §§91 to 99; The issue is also addressed in Coulson on Construction Adjudication (4th edn) §7.145.

Now, if the adjudicator answered the wrong question, this decision would be outside his jurisdiction. But provided he decided the dispute referred to him, it remained a valid and binding decision, even if it was mistaken and even if the mistake was of fundamental importance[17]. The Adjudicator was entitled to give a wrong answer to the (right) question referred to him. It was important to distinguish between, the underlying dispute between the parties and, the issues and legal arguments they deployed when setting out their side of the dispute[18].

The adjudicator acknowledged Award 1 and expressly did not re-open that dispute. Even he failed to correctly apply Award 1 that did not undermine it. In fact, on analysis, and whilst it might have been more clearly expressed in the Decision, the adjudicator rejected the Contra Charge on the basis of causation. Thus having accepted that Graham was in breach of contract, he concluded such breach was not the cause of their decision not to carry out the works; rather, it was the binding nature of Adjudication 1 which was the cause of its refusal and the cause of the Tecnicas giving the works to others (and incurring the cost leading to the Contra Charge). The Decision did not therefore undermine or override Award 1. 2. No power – did the adjudicator fail to act in accordance with the powers granted to him by the Subcontract?

The key question was “did the adjudicator decide the dispute that had been referred to him?”

The court decision

1. Did the Decision undermine or override Award 1?

Applying the test as to what Award 1 actually decided, the question determined by the Decision was not the same or substantially the same as the question determined in Award 1. The dispute in Award 1 was as to the terms and interpretation of the Subcontract in relation to the scope of the work to be carried out under the Subcontract and whether the scope related to all civil works or was that described in the intermediate milestones. It did not address any dispute about the financial consequences – such as entitlement to payment or to damages or to levying contra charges flowing from the Subcontract as properly interpreted. By contrast, the dispute in Adjudication 4 was about the financial consequences of that interpretation and concerned Graham’s entitlement to payment of the various sums within its application, including Tecnicas’ entitlement to levy the Contra Charge.

Clause 39.3 of the Subcontract provided for disputes to be finally settled by arbitration.

Tecnicas argued that looked at through the prism of the Subcontract terms, the Decision sought to override Award 1. This was essentially the same result as was argued for under issue 1 above. And for the same reasons it failed. Even if clause 39.3 of the Subcontract was a “relevant term” under paragraph 12(a) of the Scheme (as to which the court expressed no concluded view) it added nothing to the accepted position under the general law: that an adjudicator was bound by a prior arbitration award or court judgment (on the same issue).

[17] Bouygues UK Ltd v Dahl-Jensen UK Ltd [2000] BLR 49 §25. [18] Benfield Construction Ltd v Trudson (Hatton) Ltd [2008] EWHC 2333 (TCC) §48.

3. Did the adjudicator ask the wrong question?

Further the existence of a separate class was inconsistent with the observations of Coulson LJ in Bresco. Secondly, any jurisdictional objection here was on the basis of the undermining issue, and this would not have been ‘fundamental’ in the same way as there being no statutory power (i.e. to award costs) or a statutory exclusion. Had the court concluded (contrary to its actual findings) that, by deciding on the causation basis, the Adjudicator had undermined Award 1 and thus exceeded his jurisdiction, it would have found that Tecnicas did not have actual or constructive knowledge of the jurisdiction objection and thus its failure to raise such an objection prior to the Decision did not amount to a waiver of the objection.

At its most basic level the relevant question was this: “was [Tecnicas] entitled to levy the Contra Charge?”

The Adjudicator answered that question in the Decision, concluding that they were not so entitled. The Adjudicator’s error relied upon by Tecnicas was in his reasons for not accepting their arguments in support of their side of the dispute. That did not amount to answering the wrong question. More specifically, if there were two questions as suggested by Tecnicas, the Adjudicator answered both. He addressed the question of breach – finding in favour of the Tecnicas.

Then the question of loss flowing from breach – he addressed that too (albeit in less clear terms).

Judgment for Graham for the Contra Charges plus interest.

He concluded that the loss claimed in the Contra Charge did not flow from the breach of contract. The incurring of the costs of other contractor was caused by Tecnicas’ decision to abide by the terms of Adjudication 1 (as it was required to do at the time). That was a conclusion that the loss was caused by an intervening event. Whether it was right or wrong was immaterial; it was the Adjudicator’s answer to the correct question.

4. Waiver

In light of the conclusions at 1-3 above, the question of waiver did not fall for decision. However in case the court was wrong on those matters, the court addressed waiver.The court was not convinced there was a separate class of fundamental jurisdictional objection (that could not be waived). The discussion in Acqua Leisure [19] was obiter as the matter was not argued and the case decided on a different point.

[19] HH Judge Bird in Aqua Leisure International Limited v Benchmark Leisure Limited [2020] EWHC 3511 (TCC)

4) Natural Justice – Bilton & Johnson (Building) Co Ltd v Three Rivers Property Investments Ltd [2022] EWHC 53 (TCC) Judge Jason Coppel QC judgment 14 January 2022 Three Rivers appointed Bilton for refurbishment works at an industrial estate. The original contract was based on a tender prepared by Three Rivers agents. After works started The agents issued another contract to Bilton based on the JCT DB 2016 which was duly signed and returned by Bilton. There was a dispute over delays and Three Rivers entitlement to liquidated damages (LDs) for late completion. The key issue was whether the rate of LDs was £2,500 per week per section under the original contract or £2,500 per week for the whole of the works under the signed contract. The adjudicator decided the signed contract superceded the original contract. This meant Three Rivers had over deducted LDs and was liable to repay £230,000 to Bilton. He dismissed Three Rivers claim to rectification of the signed contract to restore the original LDs provisions. Bilton enforcement proceedings when Three rivers declined to pay the sum awarded alleging breach of the rules of natural justice in that: raised the present

Judgment

The judge held the adjudicator had ‘not come close’ to breaching the rules of natural justice in reaching his decision on the applicable contract terms. In the adjudication, Three Rivers had contended that the original contract was the only binding contract. Bilton had argued that the time provisions in the original contract were never binding or enforceable so it was the provisions of the signed contract which applied. The adjudicator adopted a different line of reasoning in concluding that the signed contract superceded the original contract. But the court said that line was derived if not expressly taken from the parties submissions, so did not need to be canvassed with them in advance of the decision being taken. In any case, the reasoning at this point was not material. It did not undermine the conclusion that the applicable terms were those in the signed contract. A breach of the rules of natural justice had to be material and more than peripheral. He was not obliged to consult with the parties on every aspect of his thinking. Three Rivers objection based on failure to consider the defence of rectification had an unpromising start: the Decision contained a heading “Rectification” and there followed four pages on the topic. He had fairly addressed the defence and ruled on it. He found that even if Three Rivers had been entitled to seek rectification, they had not been entitled to deduct LDs at the ‘rectified rate’ because the contract had not been rectified at the time of the deduction. Whether those reason were correct as a matter of law was irrelevant.

1.

the adjudicator’s findings as to the contract terms were not based on arguments made by either party; and

2. the adjudicator had failed to determine its the rectification defence

The decision was enforced.

5) Strike out or stay – RHP Merchants v Treforest Property Company – (TCC) unreported – Roger Stewart QC – judgment 22 October 2021 The Claimant contractor RHP lost a first adjudication over its final account and was ordered to pay its employer Treforest £260,000. When RHP refused to pay, Treforest took enforcement proceedings and the court ordered RHP to pay the sum awarded. RHP commenced a second adjudication about its liability for defects and this time they were successful and the adjudicator awarded them £220,000. RHP commenced part 7 proceedings for a final determination of the sum due on its final account and Treforest met that claim with an application that the proceedings be stayed until RHP paid the full amount due under the first award. RHP offered to pay a minimum sum of £36,000 on account of the difference between the two awards if the stay application were withdrawn but that offer was rejected. At the hearing Treforest relied on the maxim “pay now argue later” and argued that justice required that the action be stayed [20] where the claimant had shown bad faith, or acted oppressively or unreasonably. The court said that the application highlighted the tension between two important principles: the right of a party to have access to the courts and the ‘pay now argue later’ policy which was the ‘core essence’ of construction adjudication under the Act. The matters to be considered in resolving that tension were as follows:

The pay now argue later policy should be applied evenly to the first and second adjudication decisions. The second, the validity of which had not been challenged, had significant effect on the parties’ overall position. There was however a balance due and no good reason why RHP should not have paid it as indeed they had offered to do. There was no lack of good faith or ‘obvious bad conduct’, RHP having held a determined view throughout supported by valid arguments that it was entitled to a payment from Treforest. Nevertheless, the court held the proceedings must be stayed until the balance due was paid by RHP. A time limit had to be imposed. Thus the court ordered that unless payment was made within 28 days the proceedings would be struck out.

Comment

In resolving the tension the court felt it was only right to give effect to the net position following the two awards. This seems a given. The court will take into account the conduct of the defaulting party and whether it has acted in bad faith, or unreasonably or oppressively. The fact that the claimant has strong even justified beliefs for resisting payment will not excuse it and the pay now argue later principle will prevail. It would have been open to Treforest to seek an injunction to restrain the RHP from commencing or pursuing its adjudication, pending payment of the first award, following the court of appeal decision in S&T v Grove[21]. The same outcome was achieved in similar circumstances in the Scottish case of Greater Glasgow Health Board v Multiplex Construction Europe Ltd and others[22].

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