A case of foot and mouth

The first envelope that a construction adjudicator opens with trembling fingers usually contains an outline of the dispute and a request from the claimant that they resolve it. The second is often a letter from the other party's lawyers pompously informing them that they have no power to do so. The adjudicator will be told that they have not been appointed as required by the contract, or that the contract is not covered by the Construction Act, or that there is no dispute. The adjudicator, who has seen all this before, sighs wearily, and prepares for to tackle the "dispute about a dispute" (often called a jurisdictional issue) before starting work on the dispute itself.

Such challenges to jurisdiction are sometimes tactical, sometimes genuine. The adjudicator often decides them on the first instance. They must be robust enough – and sufficiently unconcerned about losing their fee – to be willing to conclude, if necessary, that they have no jurisdiction and cannot act.

One question is: if an adjudicator decides that they have power to act, is that decision binding? Or can it be argued before the High Court that they did not?

In Nordot Engineering Services vs Siemens the parties agreed to let the adjudicator decide a jurisdictional issue. The employer's view was that there was no construction contract, and that the adjudicator could not proceed. But it wrote to the adjudicator saying: "We will, however, abide by your decision in the matter and will comply with whatever decision you deem appropriate."

That proved to be fatal. The court held that these words prevented the employer from later trying to overturn the adjudicator's view that there was a construction contract. Clearly, the employer should have reserved its right to argue the matter before the court.

Thomas-Fredric's Construction vs Keith Wilson was different. Here, a contractor was claiming against a developer, Mr Wilson, as an individual. Mr Wilson told the adjudicator that it was his company Gowersand, and not himself, that was the party to the contract. The adjudicator disagreed, proceeded and awarded a sum against Mr Wilson. The case went to the High Court, where Mr Wilson argued the jurisdiction point again, and lost again. Undeterred, he appealed.

Clearly, the employer should have reserved its right to argue the matter before the court

The Court of Appeal proved to be third time lucky. The court said that there was no evidence, let alone any clear evidence, that Mr Wilson was the contracting party. Furthermore, he had not agreed that the adjudicator could decide the jurisdiction issue once and for all. He had not written any letter of the type that had sunk the employer in Nordot.

The court was also concerned that an earlier (unrelated) judgment had been seen by some legal commentators as chipping away at the sanctity of adjudication decisions. It was keen to rebut this, and therefore laid down two guidelines.

The first was that if a party can be taken to have submitted to the adjudicator's jurisdictional decision in the "full" sense, as in Nordot – that is, had agreed that the adjudicator should rule on the point, and that its decision would be final – then it cannot later argue a jurisdictional matter in the High Court. This would be so even if the adjudicator was plainly wrong. The second guideline was that if the parties had not given the adjudicator this "full" power, the court would still not review the decision if it was plainly right.