When making a jurisdictional challenge in an adjudication, it pays to be quick off the mark
During the course of adjudications it is common for a challenge to the jurisdiction of the adjudicator to be made. These challenges concern the power of the adjudicator to hear the dispute between the parties and they range from challenges to the adjudicator’s internal jurisdiction, on matters such as the terms of the construction contract, to challenges to his or her threshold jurisdiction, on matters such as whether a dispute has crystallised and whether the parties have a construction contract. Challenges by responding parties may be tactical – to prompt the resignation of the adjudicator or to provide a defence to enforcement – or may actually be raising important issues that should render the decision unenforceable.
Parties to adjudications need to raise and maintain specific jurisdictional challenges promptly during adjudications if they wish to have the chance to rely on the same at enforcement
Before parties have reviewed the notice or referral to adjudication in detail they often make general reservations of rights in an attempt to protect their position should a jurisdictional issue become apparent. However, case law reveals that general reservations of rights may be ineffective if a specific issue could and should have been raised. Alternatively, parties may make specific reservations on which the adjudicator considers and makes a non-binding decision. If the adjudication continues, these specific reservations may be maintained and raised as a defence to the enforcement of the adjudicator’s decision. The timing of the reservation and possible waiver of the reservation determine whether a responding party will be able to rely on the challenge to resist enforcement.
Two recent cases, Ove Arup and Partners International Ltd vs Coleman Bennett International Consultancy plc and Donald Insall Associates Ltd vs Kew Holdings Ltd have addressed these very points and have provided further clarification for parties to adjudications.
In the first of these, the parties had entered into a contract to provide engineering services in relation to the investigation of the feasibility of using Hyperloop technology to link Manchester and Leeds as part of the Northern Powerhouse scheme. The project was not taken forward and the parties were in dispute over the fee payable to Arup. During the adjudication, Coleman made a general reservation in relation to jurisdiction in that it did not accept that Part 2 of the Construction Act or the Scheme for Construction Contracts Regulations 1998 applied to the contract in question. It also set out brief reasons why the adjudication had not been validly commenced, which included there being more than one dispute, more than one contract and that the wrong parties were named.
At enforcement, Coleman raised three jurisdictional grounds as part of its defence: that the contract was not a construction contract as it was not a construction operation within the meaning of section 105 of the Construction Act, that there was more than one dispute, and that the adjudicator’s jurisdiction turned on questions of fact that could not be properly determined in the adjudication or enforcement proceedings. The defence to enforcement was rejected and the Court of Appeal judgment Bresco Electrical Services Ltd vs Michael J Lonsdale (Electrical) Ltd, Cannon Corporate Ltd vs Primus Build Ltd  EWCA Civ 27 was applied because the general reservation was made when specific grounds would have been known to Coleman, and Mrs Justice O’Farrell considered it was made generally to try and ensure all options were kept open. Other reasons the defence failed were that the two specific reasons were without merit and the new jurisdictional issues raised at enforcement could not be raised at this late stage.
In the second case, the parties had entered into a contract for Donald Insall to provide Kew with architectural services. The project was long term and a dispute arose over the fees payable for these services. During the subsequent adjudication, Kew argued there was no contract between the parties and it was not a construction contract because it was not in writing or evidenced in writing and also that a dispute had not crystallised. The adjudicator did not accept these challenges and at enforcement Mrs Justice O’Farrell agreed he had made the right decision.
At the hearing, Kew raised two jurisdictional challenges and the judge entertained one of the new challenges about an oral variation and/or new contract (which meant the parties did not have a construction contract) because it was raised as an issue during the adjudication, albeit at a late stage. However, after considering it, the judge did not accept Kew’s challenge and, applying Bresco again, said it was a classic case of a defendant scraping around after the event to find a potential jurisdictional challenge.
What these cases remind us is that parties to adjudications need to raise and maintain specific jurisdictional challenges promptly during adjudications if they wish to have the chance to rely on the same at enforcement.
Stephanie Canham is national head of projects and construction at Trowers & Hamlins