Cornerstone - Jurisdiction: adjudicators under pressure?


08 March 2019

I am always interested to hear the Technology and Construction Court’s views on adjudicator’s decisions and the recent case of Skymist Holdings Limited v Grandlane Developments Limited [2018] particularly caught my attention.

The case included all the classic hallmarks of a construction dispute that we see so often. Multiple adjudications, challenges to jurisdiction, court hearings – and ultimately a lot of time and money arguing about procedure. Not exactly the fast, cost-effective dispute resolution that adjudication was supposed to be – but that is a discussion for another day.

Background

Skymist was the client and owner of a property in Hampshire. It engaged Grandlane to provide development and project management services, but the terms of contract were never agreed. On 27 October 2017 Skymist terminated Grandlane’s services; Grandlane claimed sums were owed to it as at the date of termination, and commenced an adjudication to recover such sums.

Grandlane’s Notice of Adjudication was issued on 10 August 2018. This was followed by a letter to the Chartered Institute of Arbitrators (CIArb) dated 13 August 2018, requesting the nomination of an adjudicator. Grandlane said that the application was being made to CIArb because the contract stated this to be the appropriate nominating body.

An adjudicator was appointed, but Skymist contested the adjudicator’s jurisdiction because the contract to which Grandlane referred to (which said that the nominating body was CIArb) was not the correct contract which governed the agreement between the parties.

Because of these objections, Grandlane withdrew the adjudication by way of letter dated 29 August 2018. It issued a new Notice of Adjudication on 31 August 2018, which had been amended from that issued on 10 August 2018. On 3 September 2018, Grandlane applied to the RICS for the appointment of an adjudicator. This time, Grandlane asserted that there was no term in the contract stating a particular nominating body and, as such, Grandlane could apply to whichever nominating body it wished. Grandlane also stated that the application was made under the Scheme for Construction Contracts (the Scheme) and not by way of a contractual provision.

John Riches was appointed as adjudicator and Grandlane issued its referral on 7 September 2018. Skymist’s response was issued on 17 September 2018 and included submissions on Mr Riches’ jurisdiction (or lack of). Skymist said that if Grandlane believed the terms of the contract were those set out in its first Notice of Adjudication, then this provided for the adjudicator to be appointed by CIArb and not RICS, meaning Mr Riches did not have jurisdiction to decide the dispute which had been referred to him.

On 19 September 2018 Mr Riches decided he did have jurisdiction. He took the view that although the parties were not in agreement as to the entirety of the contract, there was some common ground, particularly in relation to the fact that the Scheme applied to the contract. What was also agreed was that the adjudication rules under the Scheme governed the adjudication, which meant that Grandlane’s application to RICS was valid. The adjudication, therefore, continued and Mr Riches proceeded to issue his decision on 12 November 2018.

Part 8 proceedings

Following Mr Riches’ (non-binding) decision on jurisdiction, Skymist issued court proceedings on 27 September 2018 alleging that the adjudicator had no jurisdiction. Once the decision had been issued, Skymist’s challenge came before Waksman J on 10 December 2018.

Skymist’s position was that if Mr Riches was nominated by the wrong body then he had no jurisdiction, meaning the decision was invalid. Skymist’s reasoning for this was twofold.

  1. In reaching his decision, Mr Riches found that the contract which governed the arrangement between the parties was the contract which contained a clause that CIArb should be the nominating body.
  2. Even if this was not correct, Grandlane ‘approbated and reprobated’ the contract, relying on some parts when it wanted to, but ignoring other parts which were detrimental to its position.

As to the first point, Waksman J looked at Mr Riches’ decision in detail and decided that he did not find the contract contained a clause which required the nomination of an adjudicator to be made by CIArb. He concluded that Mr Riches’ “findings are not inconsistent with the route by which jurisdiction was conferred upon him. That being so, the decision was not a nullity on that basis”. As the route to his appointment was correct (or rather did not conflict with his decision regarding the contract itself), Mr Riches, therefore, had jurisdiction to make his decision.

On the allegation of approbation and reprobation (i.e. Grandlane having their cake and eating it, an ‘I want it all’ approach), Waksman J did not find this to be the case. In fact, in his further observations at the end of his judgment, Waksman J actually found that it was Skymist that was guilty of approbation and reprobation by disputing the appointment by CIArb in the first adjudication, then challenging the appointment by RICS in the second adjudication.

Conclusion

Waksman J did not appear to be impressed with Skymist’s challenge stating that “referring a matter to adjudication should not be a formalistic obstacle course akin to 18th century forms of action, where one slip may put a party literally out of court. Far better to spend the available time and money on litigating out the dispute subsequently if it really cannot be resolved”. That mirrors the court’s general approach in supporting adjudication as a reliable means of dispute resolution, and its discouragement of ‘unmeritorious’ challenges by disgruntled losing parties.

This case highlights the importance of finalising the terms of agreement and entering into a contract signed by both parties. If a dispute arises, this will minimise scope for disputes regarding the form of contract, the process for appointing an adjudicator and/or the relevant adjudicator nominating body.

For further information, please contact Hanna McNab or a member of Birketts' Construction and Engineering Team.

This article is from the March 2019 edition of Cornerstone, our newsletter for those working in the construction industry. To download the latest issue, please visit the newsletter section of our website. Law covered as at March 2019.

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