Construction Adjudication Part 2 of 2021

Construction Adjudication Part 2 of 2021

The Enforcement of Adjudicators’ Awards under the HousingGrants, Construction and Regeneration Act Adjudication Cases

1996: Part 2 of 2021 Kenneth T. Salmon Consultant Solicitor at Slater Heelis

Construction&Engineering

Contents

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1.. . .Introduction ..............................................................................................................................................

4. Jurisdiction overlapping with substantive issues.. .................................................................. Ex Novo Ltd v MPS Housing Ltd [2020] EWHC 3804 (TCC) (17 December 2020) HHJ Eyre QC 2. Contractual requirement to adjudicate not a fetter on the statutory right.............. The Fraserburgh Harbour Commissioners v McLaughlin & Harvey Ltd [2021] CSOH 8 (26 January 2021) Lady Wolffe 3. Foreign law exclusive jurisdiction clause – effect on enforcement................................ Motacus Constructions Ltd v Paolo Castelli SpA [2021] EWHC 356 (TCC) (22 February 2021) HHJ Hodge QC 5. Jurisdiction - Excess of and failure to exhaust – reservation of position..................... Hochtief Solutions AG and others v Maspero Elevatori S.p.A. [2021] CSIH 19 (15 February 2021) (Lord President, Lord Menzies, Lord Woolman) 6. Jurisdiction – Adjudicator’s powers under NEC3 Option W1.3(5) – Waiver d following decision ............................................................................................................................ Croda Europe Ltd v Optimus Services Ltd [2021] EWHC 332 (TCC) (19 February 2021) HHJ Roger ter Haar QC

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Introduction The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 2 of 2021, 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) Contractual requirement to adjudicate not a fetter on the statutory right: The Fraserburgh Harbour Commissioners v McLaughlin & Harvey Ltd [2021] CSOH 8 (26 January 2021) Lady Wolffe Background The Pursuer engaged the Defender to extend the Fraserburgh harbour on an NEC3 contract 2005 with 2006 amendments. They alleged defects in the works and commenced proceedings in court claiming over £7m in damages. The parties’ contract used Option W2.1(1) containing what was described as a “cascade of dispute resolution”. Clause W2.4(1) read: “W2.4 (1) A Party does not refer any dispute under or in connection with this contract to the tribunal unless it has first been decided by the Adjudicator in accordance with this contract.” The ‘tribunal’ in the contract was arbitration. Nothing turned on this, as in Scotland a provision for arbitration does not entirely exclude the jurisdiction of the court. Rather the issue was whether clause W2.4 was a procedural bar to the bringing of proceedings in court to determine a dispute that had not previously been referred to adjudication and in respect of which the party challenging the adjudication decision had served a notice of dissatisfaction under clause W2.4(2). The court decided that the meaning and effect of clause W2.4 was clear. The parties had agreed to resolve disputes in a specified way, with the merits to be finally determined by arbitration.

The court considered whether the clause was in any way a fetter on the basic statutory right to refer a dispute to adjudication “at any time” in section 108 of the Act, noting that Dyson LJ had held this provision “means exactly what it says"[6]. The court accepted the provision operated as a procedural bar on the right to litigate or arbitrate before there had been an adjudication and a notice of dissatisfaction given. Although it did not seem to have been argued by either party, Lady Wolffe considered and adopted the finding of Edward-Stuart J in Anglian {7} that that a provision in identical terms was not a fetter on the right to adjudicate “at any time”. The right to adjudicate was valuable and to deprive the Defender of that right was to deny them the advantages and speed of the contractually agreed “first mode of dispute resolution”.

Comment

Although not argued in this case, it was argued in Anglian that a similar provision to W2.4 denied a claiming party the right to adjudicate at any time (in effect of his choosing) since it obliged him to adjudicate before he could exercise the right to seek a final determination elsewhere. That argument failed in Anglian and Lady Wolffe agreed. Whilst the parties are free to choose their dispute resolution processes, NEC3 and NEC4 are industry standard forms whose provisions are usually dictated by the employer and not individually negotiated. Whilst adjudication has its merits it is not without its drawbacks. To name but two: not every dispute is suitable for adjudication; disputes can add tens of thousands of pounds of irrecoverable costs unless the decision is accepted as final. It is also fair to say that because of the prescriptive time limits for challenging a certificate or decision of the contract certifier, there is in reality little choice but to adjudicate with dispatch which rather negates the option to do so “at any time”.

[6] Connex South Eastern Ltd v MJ Building Services Group [2005] EWCA Civ 193 [7] Anglian Water Services Ltd v Laing O’Rourke Utilities Ltd [2010] EWHC 1529 (TCC)

2) exclusive jurisdiction clause – effect on enforcement: Foreign law Motacus Constructions Ltd v Paolo Castelli SpA [2021] EWHC 356 (TCC) (22 February 2021) HHJ Hodge QC The court had to consider a novel point on which there was no direct authority: did a jurisdiction clause conferring exclusive jurisdiction on the courts of Paris, France, oust the English court’s power to grant summary judgment to enforce an adjudicator’s award?

" The decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement between the parties." 6. Accordingly, pursuant to ss. 108 (3), 108 (5) and 114 (4) of the Act and para. 23 of the Scheme, it was an implied term of the contract that the decision of the adjudicator would bind the parties until the final determination of the dispute. 7. A dispute arose which was submitted to adjudication in which both parties participated. There was no challenge to threshold jurisdiction although the defendant noted its reliance on the exclusive jurisdiction clause and that the enforcement of any decision would have to take place in the courts of Paris. 8. The adjudicator issued his award on 15 December 2020, in favour of the claimants awarding payment of £454,678.65 plus VAT. 9. The Civil Jurisdiction and Judgments Act 1982 ('the 1982 Act') governs the jurisdiction of the English courts where there is a dispute over which national court should entertain jurisdiction over a dispute. The 1982 Act was amended by the Private International Law (Implementation of Agreements) Act 2020, with effect from the end of the implementation period which followed the UK's departure from the European Union. Jurisdictional questions were no longer determined by the Brussels Regulation but by the Convention on Choice of Court Agreements concluded on 30 June 2005 at the Hague ('the 2005 Hague Convention'). The European Union (and, through the EU, France) was a contracting state.

The following facts and matters were crucial to a consideration of the answer.

1. The parties’ construction contract conferred exclusive jurisdiction on the courts of Paris, France, to determine all disputes of whatever nature, between the parties.

2. The proper law of the contract was Italian law.

3. Part II of the Act applied to the contract regardless of whether or not the law of England and Wales (or Scotland) was otherwise the applicable law in relation to the contract: see s. 104 (7) of the Act. 4. The right to enforce an adjudicator's decision was a right which derived from the parties' contract: s. 108 of the Act.

5. The Scheme applied to the contract, paragraph 23 of which provided:

10. Article 1(2) provided that a case was “international” unless (amongst others) "the parties are resident in the same Contracting State". Here the claimant was resident in the United Kingdom whilst the defendant was resident in Italy so this was clearly an "international case". "Exclusive choice of court" agreements were defined in article 3. The choice of court agreement in this case was such an agreement because clause 19 of the contract designated the courts of Paris, France to the exclusion of the jurisdiction of any other court. 11. .Article 6 of the 2005 Hague Convention provided that a court of a contracting state (in this case the UK) other than that of the chosen court (in this case Paris, France) "shall suspend or dismiss proceedings to which an exclusive choice of court agreement applies unless …….(c) giving effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy of the State of the court seised;

14. "Interim measures of protection" are not a defined term in the 2005 Hague Convention; but art. 4 (1) defined "judgment" as meaning "any decision on the merits given by a court, whatever it may be called, including a decree or order, and a determination of costs or expenses by the court (including an officer of the court), provided that the determination relates to a decision on the merits which may be recognised or enforced under this Convention. An interim measure of protection is not a judgment." 15. As neither party submitted evidence of Italian law, the implied term in the contract was to be interpreted in default in accordance with English law. 16. Neither party submitted any evidence of the availability or utility of summary judgment procedures in the courts of Paris, France. The Issues The claimant contended that giving effect to clause 19 of the contract would lead to manifest injustice or was manifestly contrary to the public policy to be derived from the Act. But that in any case the enforcement of the adjudicators’ award was an “interim measure of protection” within the meaning of the 2005 Hague Convention. The defendant contended the contrary in each case. The parties deployed detailed arguments citing cases on both the ‘old’ law on the Brussels Regulation and the 2005 Hague Convention, including its explanatory notes. The cases referred to are set out at the front of the judgment.

12. I t was common ground that Article 6 (a), (b), (d) and (e) were not engaged.

13. The claimant also relied on Article 7: "Interim measures of protection are not governed by [the Hague] Convention. [That] Convention neither requires nor precludes the grant, refusal or termination of interim measures of protection by a court of a Contracting State and does not affect whether or not a party may request or a court should grant, refuse or terminate such measures."

Decision: Article 6 (c) The burden lay with the claimant to persuade the court that one or both of the two limbs of the particular exception was engaged. The threshold was a high one. In the judgment of the court, giving effect to the exclusive jurisdiction clause in the contract would not lead to any "manifest injustice" ; nor would it be "manifestly contrary to the public policy" of the United Kingdom. Parliament could have provided for a derogation for the enforcement of adjudicators’ decisions in the English and Welsh (or Scottish) courts, in accordance with art. 21 of the 2005 Hague Convention, but had not done so. The claimant had not satisfied the court that it would be contrary to public policy, or unjust, (let alone manifestly so) to require the claimant to enforce its adjudication award in the courts of Paris, France. There was no good reason why the parties should not be held to the bargain that they freely made when they incorporated clause 19 into their construction contract. There was a total absence of any evidence as to why enforcement might not proceed effectively in the courts of Paris, France. In a future case, an issue might arise where, on undisputed evidence, there was a tension between the statutory policy of affording the parties a speedy mechanism for settling disputes in construction contracts on a provisional, and interim, basis, and the contractual right, enforceable by statute, afforded to contracting parties, to confer exclusive jurisdiction on a foreign court.

D ecision: Article 7 The court

preferred claimants’ submission. Lord Ackner recognised in his contribution to the debate on the Act in the House of Lords, the underlying purpose of the adjudication remedy was to address the need to produce a "quick, enforceable, interim decision" . the Dyson J (as he then was) explained in Macob[8], that it was plainly Parliament's intention in enacting the Act " to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis and requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement" . In Babcock Marine[9]. O'Farrell J described adjudication as "a sui generis system of dispute resolution which is in many respects unique. The primary aim of adjudication is the swift temporary resolution of the question of the dispute pending the final determination of the issues between them." The concept of an interim measure of protection was not restricted to measures intended merely to preserve the position of the parties pending a final judgment. The categories of "interim protective measures " were not closed but were capable of expansion as national courts devised new interim remedies (or measures) to protect the interests of litigants pending the final and substantive resolution of their dispute. The concept extended to any decision that was not a final and conclusive decision on the substantive merits of the case.

That issue did not arise in this case.

There was no evidence that the adjudicator's decision could not be enforced in a timely and effective manner in the courts of Paris.

[8] Macob Civil Engineering Ltd vMorrison Construction Ltd (1999) 64 Con LR 1 [9] BabcockMarine (Clyde) Limited v HS Barrier Coatings Ltd [2019] EWHC 1659 (TCC), [2019] BLR 495

It extended to a decision of an adjudicator which, by the operation of the Act and the Scheme, was not final and binding on the parties. Its function was to protect the position of the successful party on an interim basis pending the final resolution of the parties' dispute through the normal court processes (or by arbitration). Whilst summary judgment was clearly a final and conclusive remedy, the reality of this summary judgment application was that the court was being invited to grant an interim, rather than a final and conclusive, remedy. The underlying dispute between the parties was not before the court. This was consistent with the position under construction contracts containing arbitration clauses. The Policy of the Act required the enforcement by the courts of the interim adjudicator's award before the final determination by an arbitrator. In the ordinary case, the paying party could not avoid payment of a sum awarded by an adjudicator by staying enforcement proceedings for arbitration. A similar approach was mandated, in the face of a foreign exclusive jurisdiction clause, by art. 7 of the 2005 Hague Convention. The court held that the exception in art. 7 (but not art. 6 (c)) of the 2005 Hague Convention applied and gave summary judgment for the claimant.

Comment This is a careful and fully reasoned judgment which repays reading. As pointed out, the application would have failed had there been contested evidence before the court as to the manner in which implied terms were to be treated in Italian law.

There is no indication at this time whether the decision might be the subject of an appeal.

3) Jurisdiction overlapping with substantive issues: Ex Novo Ltd v MPS Housing Ltd [2020] EWHC 3804 (TCC) (17 December 2020) HHJ Eyre QC I t is well established that parties to construction contracts may, in each adjudication, refer only a single dispute arising under their contract to the adjudicator. This means that an adjudicator does not, in the absence of the agreement of the parties, have jurisdiction to decide multiple disputes, arising under multiple contracts, within one adjudication. It is also "broadly the uncontroversial view that an adjudicator does not have jurisdiction to decide his or her own jurisdiction unless the parties have effectively agreed or permitted him or her to do so"[10]. In this case, the court considered and reviewed the law on an exception to the usual position on the power of an adjudicator to rule on his/her own jurisdiction, the position being, that an adjudicator may determine his/her jurisdiction, if there is an ‘overlap’ between the substantive dispute and the matter of jurisdiction. This could occur for example where the parties dispute whether works were carried out under a single contract (under which the adjudicator was appointed), or multiple and/or other contracts. In such cases, an allegation that there are multiple contracts could give rise to both a substantive defence that the adjudicator must determine, and also a jurisdictional challenge. The adjudicator’s decision on the substantive defence would necessarily involve a decision on jurisdiction.

The defendant, MPS, engaged the claimant, ENL, to carry out renovation works at local authority properties in Wrexham. ENL initially carried out works pursuant to a contract purchase order issued in November 2018. The works continued throughout 2019, whilst the parties engaged in discussions regarding the replacement of their original contractual arrangements with a framework agreement, and with MPS issuing further purchase orders to ENL. A dispute arose regarding the sums due to ENL for their works which ENL referred to adjudication. ENL contended that its works were carried out under one contract, made in November 2018, which had later been varied. MPS argued that the parties had concluded at least four separate contracts (including the November 2018 contract). The adjudicator found that all the works were carried out under the November 2018 contract and awarded ENL payment of just over £300,000 and ENL now applied to enforce that decision. The issues If an adjudicator is properly appointed under a contract about which there is no dispute, he/she may be entitled to decide its own jurisdiction, if the jurisdictional issues ‘overlap’ with or are ‘coincidentally’ part of the substantive dispute. The adjudicator’s decision will be part of the matters determined within his/her jurisdiction, and therefore binding even if the determination is wrong in fact or law. However, the court will ‘look closely’ to decide whether it was necessary for the adjudicator to decide the point that coincided with the jurisdictional issue, in order to resolve the substantive dispute.

[10] Per Akenhead J quoting fromthe judgment of Simon Brown LJ in Thomas-Fredric's (Construction) Ltd v KeithWilson [2004] BLR 23

(b) In certain adjudications, matters of substance and jurisdiction might have ‘overlapped’. Thus in Air Design v Deerglen , Mr Justice Akenhead found that, as part of determining the substantive dispute referred to him, the adjudicator had been required to decide whether there had been variations to a single contract, or multiple contracts concluded between the parties. Because the question of whether there were multiple contracts formed part of the substantive dispute, the adjudicator was entitled to find that there had been one contract, pursuant to which he had been properly appointed—thus, the adjudicator had been entitled to determine his own jurisdiction, in that respect. In later cases, Akenhead J explained that Deerglen was simply authority for the point that, if an adjudicator had been properly appointed under a contract about which there was no dispute, he may have power to determine jurisdictional issues, if and to the extent that those issues were ‘coincidentally’ part of the substantive dispute. Reviewing these authorities, HH Judge Eyre distinguished between two kinds of issue that an adjudicator might need to determine: (i) issues that are ‘as a preliminary’ to resolving the substantive dispute. The question of whether the adjudicator had jurisdiction was such a matter and these determinations were not binding; (ii) issues that are necessary to determine the substantive dispute which are decisions the adjudicator is entitled to make within his/her jurisdiction and which are therefore binding, even if wrong in fact or law. There may be an overlap between the adjudicator’s preliminary and substantive

If the adjudicator could have determined the dispute without deciding that particular point, then the adjudicator’s finding on the point (and in turn, on jurisdiction) will not bind the parties, leaving them free to challenge the adjudicator’s jurisdiction on enforcement, in the usual way. MPS argued that the adjudicator had no jurisdiction to make his decision, on the basis that the reference to adjudication concerned multiple sums due and disputes under multiple contracts.

The key issues that arose in the enforcement proceedings were, therefore, whether:

(1) the adjudicator had jurisdiction. This turned on whether there was a single contract with multiple instructions for works, or multiple contracts (it being common ground that while the adjudicator had jurisdiction to determine multiple issues under one contract, he could not, without the parties’ agreement, determine disputes under multiple contracts), and (2) the adjudicator’s decision that there was a single contract was a decision that he had jurisdiction to make, so that, even if his decision was wrong in fact or law, that error would be no defence to the summary judgment application.

From the existing authorities the court drew the following propositions[11]:

(a) An adjudicator did not have jurisdiction to decide his/hers own jurisdiction, unless the parties agreed that he/she may do so. However, it might in sometimes be necessary to consider whether the adjudicator was entitled to determine his/her jurisdiction as part of the substantive dispute, rather than as a preliminary jurisdictional matter.

[11] Viridis UK v Mullaley and Company Ltd [2014] EWHC 268 (TCC) Air Design (Kent) Ltd v Deerglen (Jersey) Ltd [2008] EWHC 3047 (TCC); Camillin Denny Architects Ltd v Adelaide Jones & Co [2009] EWHC 2110 (TCC); Supablast (Nationwide) Ltd v Story Rail Ltd [2010] EWHC 56 (TCC)

determinations—such as where it was necessary to decide whether there was one contract which had been varied, or a series of contracts. The implication was that in such a case, the adjudicator’s decision on the preliminary matter may be binding. However, such determination was not always binding, just because it had been necessary to make it. The Court had to consider why and for what purpose the determination was made. In His Honour’s view, an adjudicator’s determination was only made within his/her jurisdiction (and therefore binding) if it had to be made, not just as part of the process of conducting the adjudication, but as a ‘necessary element’ in deciding the substantive dispute, once any questions of jurisdiction were resolved. That it had to be ‘integral’ to the substantive decision. In a case like the present, even where the dispute involved a question of whether works were carried out under an original contract or other contracts, a decision on that point would not always be a necessary element of resolving the dispute. The court would need to ‘look closely’, at what issues and why, the adjudicator was required to decide, in order to make the award. Just because there was a contract under which an adjudicator could be validly appointed, would not necessarily mean that the adjudicator could determine his/her own jurisdiction, where the particular challenge to its jurisdiction was that there were multiple disputes under multiple contracts. On the facts, it had not been necessary for the adjudicator to decide the ‘multiple contracts’ point, in order to determine the substantive dispute. The real issue between the parties on that dispute was whether there was a valid payless notice from MPS, and a potential valuation matter.

It was only necessary to consider the multiple contracts point as part of determining whether the adjudicator had jurisdiction. It was not an issue that the adjudicator could determine within his jurisdiction. The decision on it could not bind the parties. The remaining question then was whether MPS had a real prospect of demonstrating that there were in fact multiple contracts. The evidence persuaded the court that the parties had made a single contract, under which the works were called off. There was no real argument that the parties had concluded multiple contracts. Accordingly, the adjudicator had jurisdiction to decide the dispute, and his decision should be enforced. Had the court concluded otherwise, it would have been asked to sever the decision and enforce parts of it. While it was not necessary to decide this point, the court indicated it would not have considered severance appropriate. Among other difficulties, it would not have been clear which parts of the decision should be treated as valid or not.

Judgment for ENL

4) Jurisdiction – Excess of and failure to exhaust – reservation of position: Hochtief Solutions AG and others v Maspero Elevatori S.p.A. [2021] CSIH 19 (15 February 2021) (Lord President, Lord Menzies, Lord Woolman) This was an appeal by Maspero against the judgment of Lord Clark at first instance[12]. The adjudicator had been required to decide whether an agreement reached in July 2018 had varied the subcontract under which he was appointed or was a new agreement. The adjudicator decided the agreement was a variation of the sub contract and was not a new contract and the dispute was within the scope of his jurisdiction. He also considered that the challenge to his jurisdiction (if that is what it was) having been first raised in the rejoinder came too late and was not set out in appropriate and clear terms. When the matter came before Lord Clark for enforcement of the adjudicator’s award, he held (i) the adjudicator had not exceeded his jurisdiction in deciding whether the July agreement was a variation of the subcontract or a new contract; (ii) the adjudicator had not failed to exhaust his jurisdiction as alleged, in that he had taken into account Maspero’s contentions before concluding that certain design costs were covered by a clause in the determination provision of the subcontract; (iii) Maspero in merely “hinting at a challenge” had not made an appropriate and clear reservation “at the outset” such as was required and had therefore acceded to the adjudicator’s jurisdiction.

The Inner House rejected Maspero’s appeal. First the court looked at the subcontract and held that the words “…a dispute or difference arises under this subcontract” were wide enough to allow the adjudicator to determine whether or not the July 2018 agreement varied the subcontract or was a new contract. The words (quoted) should be given a broad construction[13]. The subcontract actually provided for variations and reasonable commercial parties would have wanted variation disputes to be included within the ambit of the adjudication provision. Turning the question around, the adjudicator could not have determined the issue referred by looking only at the subcontract. He had to rule on the variation to see if the subcontract termination had been valid. The Inner House rejected a call to rule that Scots law did not require a party to reserve its position in order to mount a jurisdictional challenge on the grounds that an adjudicator either had jurisdiction or he did not. There must be an appropriate and clear reservation. Maspero did not use the term “jurisdiction”, did not invite the adjudicator to resign and in any case a challenge in the rejoinder was too late.

[12] [2020] CSOH 102 reported in Cases part 1 0f 2021 [13] Lord Briggs in Bresco Electrical Services Ltd vMichael J Lonsdale (Electrical) Ltd [2020] UKSC 25

5) Jurisdiction – Adjudicator’s powers under NEC3 Option W1.3(5) – Waiver following decision: Croda Europe Ltd v Optimus Services Ltd [2021] EWHC 332 (TCC) (19 February 2021) HHJ Roger ter Haar QC The parties contracted on an NEC3 Professional Services Contract (PCS) under which Optimus agreed to provide services in connection with the expansion of Croda’s chemical work. The Act did not apply as the agreement was not one for construction operations as defined in the Act. The PSC did contain provision for adjudication when the Act applied (Option W2) but also contained an Option for adjudication when the Act did not apply (W1). In this case the parties agreed to apply Option W1. In a first adjudication over the value of the services, the adjudicator decided the gross value due to Optimus was less than had been paid but decided he had no power to order repayment of the excess to Croda, who then began a second adjudication for repayment of the overpayment. Croda was successful and when Optimus refused to pay the sum awarded by the adjudicator, Croda applied for summary judgment. Optimus resisted enforcement or several jurisdictional grounds. First they contended that the adjudicator’s powers to “review and revise any action or inaction” under Option W1.3(5), did not extend to finding that the value of Optimus’s services was less than had been paid and to order repayment. The judge found no justification for such a limitation. He held that the power under Option W1.3(5) should not be construed any differently than the like power under OptionW2.3(4).

There should be a consistent approach. The powers of the adjudicator under Option W2.3(4) must be unlimited, as a party was entitled to refer “any dispute” to adjudication under the Act. It would be improbable and un-commercial to construe W1.3(5) as being a closed list of powers; it applied to all disputes just like W2. Next the judge dismissed the submission that the adjudicator was not entitled to create a negative valuation and payment, though even if that were true, it would be a contractual interpretation that was open to the adjudicator and therefore not a ground upon which to resist enforcement. Last, he found that Optimus had elected to treat the decision as binding and had waived its right to challenge enforcement on jurisdictional grounds, when it wrote to the adjudicator confirming payment of his fees and to ask him to correct his decision under the so called ‘slip rule’, without reserving its right to raise a jurisdictional challenge. Comment It is now clear, if it was not before this decision, that a party who wishes to retain its right to raise a jurisdictional challenge upon enforcement must expressly reserve that right not only when participating in the adjudication, but after the decision is published before taking any steps which might otherwise be seen as an election to the treat the decision as valid and binding. Such steps would include, for example, paying the adjudicator’s fees, asking him to correct his decision, or for clarification or explanation or additional reasons.

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