Legal Q&A: Adjudication
Rachel Todd, Associate, CMS Cameron McKenna Nabarro Olswang
IN a series of adjudications – is the adjudicator being asked to decide the same or substantially the same dispute?
A well-known principle of adjudication (which derives from the statutory Scheme for Construction Contracts but is also provided in other sets of industry adjudication rules) is that an adjudicator must resign where a dispute before them is the same or substantially the same as one which has previously been referred to adjudication and a decision has been taken.
It is well established that a second adjudication is only permissible if the second adjudicator is not asked to decide what the first adjudicator has already decided. This is a ground on which a party may challenge the jurisdiction of an adjudicator and have a decision set aside.
The issue of whether disputes in two successive adjudications are sufficiently similar to deprive the second adjudicator of jurisdiction was considered by the court recently in Lewisham Homes Ltd v Breyer Group Plc.
What happened?
Lewisham entered into a contract with Breyer for Breyer to provide improvement works to flats owned by Lewisham. The works included installation of door sets that had to comply with fire safety regulations. However, it subsequently transpired that some of the doors supplied by Breyer did not comply with the relevant fire safety requirements.
It may be that the subject matter of the two disputes is the same, but this is not the test. The relevant decision maker should consider what was actually referred to the adjudicator in each of the adjudications and what the adjudicator actually decided in each.
Lewisham brought an initial adjudication against Breyer, seeking a declaration that Breyer was liable for the defective doors and payment of £3.75m for the cost of replacing them. The adjudicator decided that Breyer was liable for the defective doors.
However, he also determined that Lewisham was not entitled to any payment on account that at that time, the defects liability period had not yet commenced and Breyer’s obligation to fix the damage had not yet been triggered as the contract was still running. In addition, he noted that Breyer was still on site at the time and had expressed a willingness to undertake remedial works, albeit no proposal or remedial scheme had been developed at that stage.
When the contract term expired, Breyer was developing a remedial scheme which involved repairing rather than replacing the doors and was much less expensive. Lewisham gave Breyer time to develop its proposals but in the end such proposals were not acceptable to Lewisham or its fire expert. Lewisham contended that replacement was the only option and instructed another contractor to replace the doors.
Lewisham commenced another adjudication against Breyer seeking the costs of replacing the doors. The adjudicator found that some replacement was necessary and Lewisham was awarded £2.75m for the cost of remediating the door sets. Lewisham later commenced enforcement proceedings in the Technology and Construction Court (TCC).
What did the court decide?
Breyer sought to resist enforcement action on the basis that the adjudicator had already decided the same or substantially the same dispute in the first adjudication. Breyer argued that, the adjudicator had already determined remedial costs in his earlier decision and the circumstances in the two adjudications were the same.
The court found that the disputes were not the same or substantially the same and therefore the adjudicator had jurisdiction to make the award – the previous decision related to liability and appropriateness of an interim payment on account (where Breyer had not yet proposed remedial works) and the second decision concerned the suitability of the proposed remedial scheme and a final award of damages. The adjudicator’s decision was therefore enforced by the court and Breyer was ordered to pay £2.7m plus VAT to Lewisham.
So, when is a case the same or substantially the same?
While it is always a question of fact and degree, the court noted some points of wider application. For example, it noted that mere differences between the adjudications would not be sufficient and any comparison between the adjudications should be carried out realistically and with common-sense. It may be that the subject matter of the two disputes is the same, but this is not the test.
The relevant decision maker should consider what was actually referred to the adjudicator in each of the adjudications and what the adjudicator actually decided in each. In addition, the second dispute cannot just be an improved version of the first. Weight may also be given to the decision of an adjudicator that has been faced with a jurisdictional challenge, especially when the same person is appointed to determine both disputes, as they will have clearly thought about the matter and asked themselves the correct questions.
The case demonstrates there is understanding and acceptance for some overlaps between disputes and that two adjudications can concern different disputes even if the underlying subject matter is the same.
Rachel Todd, Associate, CMS Cameron McKenna Nabarro Olswang
Rachel.Todd@cms-cmno.com www.cms.law @cms_law