Legal Q&A: Adjudication
Anita Crozier, Associate, CMS Cameron McKenna Nabarro Olswang
UNDER section 108 of the Housing Grants, Construction and Regeneration Act 1996, a party has the right to refer a dispute that arises under a construction contract to adjudication. As such, it is settled law that an adjudicator does not have jurisdiction to adjudicate more than one dispute in a single adjudication, unless the parties agree otherwise. However, given that most disputes involve multiple, complex issues, arguments often arise as to whether the issues referred to adjudication comprise of one single dispute with a number of subissues or multiple disputes. This creates fertile ground for jurisdictional challenges.
The case of Quadro Services Limited v Creagh Concrete Products Limited (2021) EWHC 2637 does not introduce any new law in this area but considers the court’s approach to the question of whether one or multiple disputes has been referred to adjudication.
The facts
In the Quadro case, parties entered into an oral agreement for Quadro to provide construction labour to Creagh. The agreement was a construction contract for the purposes of the construction act. In the absence of express adjudication wording, the scheme for construction contracts applied.
Works were carried out and Quadro made three applications for payment. The payment applications were cumulative, with each payment application being for the full value of the work done, less the previous payment applications. Creagh did not issue pay less notices in respect of any of the applications. Quadro raised invoices for the amounts claimed. Creagh failed to make payment and Quadro commenced an adjudication seeking payment of £40,026 in respect of the three outstanding invoices.
Creagh challenged the adjudicator’s jurisdiction, arguing that Quadro had referred three separate disputes to adjudication under one notice and referral, which was contrary to the statutory right to refer only one dispute to adjudication at a time, absent parties’ consent. Creagh contended three disputes had been referred because ‘each application, its validity; whether a pay less notice was issued and the sums due in terms of that application is a separate dispute’.
Quadro said that the dispute was the failure to pay a debt in the sum of £40,026, under a single contract for the works Quadro had carried out – consideration of the sums agreed and rendering of the invoices were sub-issues to be considered in resolving the one dispute.
Creagh took no further part in the adjudication. The adjudicator dismissed Creagh’s jurisdictional challenge and found in favour of Quadro for the full amount claimed. Creagh did not pay and Quadro raised enforcement proceedings.
The decision
The judge in the TCC agreed that the adjudicator had jurisdiction – this was a single a dispute over an amount owed. In reaching her decision, the judge considered the leading case of Witney Town Council v Beam Construction (Cheltenham) Limited which provides guidance on what is a dispute and the correct approach to a jurisdictional challenge of this type. In Witney, Akenhead J gave an example of a dispute concerning an interim valuation in which the contractor claims payment for 50 variations “sensibly there is one dispute with several sub-issues. The parties cannot sensibly have intended that each sub-issue for the purposes of adjudication gives rise to a separate dispute which must be referred to a separate adjudication.”
Furthermore, Akenhead J noted:
- A dispute can comprise a single issue or any number of issues.
- What a dispute in any given case is will be a question of fact albeit that the facts may need to be interpreted. Courts should not adopt an overlegalistic analysis of what the dispute between the parties is.
- Where on a proper analysis here are two separate and distinct disputes, only one can be referred to one adjudicator unless the parties agree otherwise. An adjudicator who has two disputes referred to him does not have jurisdiction to deal with the two disputes.
- Whether there is one or more disputes requires a consideration of the facts. If there is a clear link between two or more arguably separate claims or assertions, that may well point to there being one dispute. A useful if not invariable rule of thumb is that, if one disputed claim cannot be decided without deciding all parts of another disputed claim, that establishes a clear link and points to there being only one dispute.
In the Quadro case, the court considered the above guidance and, noted that whilst it was technically possible to determine whether each individual invoice was due without determining the other invoices, it did not mean that those issues could not be sub-issues in the wider dispute. It concluded that the fact that the payment applications were cumulatively established a clear link between them.
Interestingly, the TCC remarked that if Creagh’s arguments were correct (i.e., there were three separate disputes, each having to be dealt with in separate adjudications), then this would put parties to significant cost and inconvenience of numerous adjudications when trying to recover a single claimed balance. Furthermore, it was pointed out that this would be contrary to the policy underlying the adjudication process of efficient, swift and cost-effective resolution of disputes on an interim basis.
Conclusion
Whilst the judgement in Quadro is in line with earlier authorities, the case helpfully confirms that a single dispute may include several distinct issues. What constitutes a sub-issue or separate disputes is inevitably a question of fact and careful analysis of the facts needs to be undertaken. However, as the Quadro case emphasises the courts can and do adopt a broad view of what constitutes a dispute for the purposes of adjudication.
It therefore goes without saying that care should be taken in drafting the notice of adjudication and referral notice particularly when referring one dispute with potential sub-issues. The case also serves as a reminder that whilst succeeding on jurisdictional challenges is not easy, respondents should still consider whether the issues referred are truly separate disputes or whether there are clear links between them.
Anita Crozier, Associate, CMS Cameron McKenna Nabarro Olswang