A questionable answer

In June the third M6 toll road dispute between Midland Expressway Ltd and CAMBBA (a joint venture between Carillion, Alfred McAlpine, Balfour Beatty and Amec) found itself before Mr Justice Jackson in the Technology and Construction Court.

The dispute, concerning the global claim by CAMBBA for indirect costs associated with variations against MEL and the Department for Transport, had previously gone to an adjudicator. The global claim, which was for about £56m, was put before the adjudicator but later withdrawn.

In court the principal issue was whether the adjudicator had been right to conclude that CAMBBA’s claim for indirect costs had not crystallised as a dispute.

Assuming the judge found that the dispute had crystallised, the secondary issue was whether CAMBBA could withdraw its claim for indirect costs from the adjudication.

The judge agreed with the adjudicator that there was no crystallised dispute upon CAMBBA’s claim for indirect costs. What is interesting is that the judge still went on to consider whether, had there been a dispute, CAMBBA would have been entitled unilaterally and without the adjudicator’s consent to withdraw its claim from adjudication. He concluded that it would have been.

His conclusion was based on the following reasoning:

• There is nothing in the Construction Act or the accompanying scheme that suggests that any restriction on the right to withdraw a claim from adjudication is intended.
• The act states that adjudication should be a cost-effective resolution of disputes. If parties were prevented from withdrawing a claim, that would mean they would be required to forge ahead with bad claims, leading to wastage of costs and resources.

We now have judicial support for the proposition that a party is not prohibited from withdrawing an adjudication claim. Sensible stuff, but the decision raises more questions than it answers.

You could overload a respondent with claims, then withdraw them and proceed with only the strongest

A situation where a party can withdraw a claim from adjudication at any stage before the adjudicator’s decision is given is surely open to abuse.

Although the adjudicator can decide who is to pay their costs, unless the contractual provisions state otherwise, each party will bear its own costs of adjudication. Further, a party is only precluded from commencing a new adjudication on the same issues where there has been a previous adjudicator’s decision on that issue or substantially the same issue.

A party that perceives that an adjudication is not going its way could pull out and commence a fresh adjudication before a new adjudicator knowing that, at worst, it would have to pay the adjudicator’s fees.

A claimant could also use the right, tactically, to overload a weaker respondent with claims, with the intent of withdrawing them and proceeding with only the strongest. The respondent would have expended time and money on building up his case on decoy referrals while the claimant could have focused all its resources on the single claim it intended to take forward.

The obvious answer is to impose a cost penalty on the party withdrawing in addition to the adjudicator’s costs. But would that then frustrate the intent of the act? Would it be fair to penalise a claimant in costs for withdrawing from adjudication where the respondent raises in its defence matters that it could and should have previously disclosed to the claimant and where, had it been disclosed, the adjudication would not have been commenced?

Parties that wish to protect against these eventualities would be well advised to incorporate within the adjudication procedure under the contract an express power for the adjudicator to decide, after hearing representations from the parties, whether the party seeking to withdraw should contribute some or all of the other party’s costs.