Fashion retailer Tally Weijl was one such losing party, having been directed by an adjudicator to pay its shopfitting contractor, Pegram, more than its quantity surveyor calculated was due in the final account. The difference stemmed from the fact that Tally Weijl was under the impression that the terms of the JCT Prime Cost contract governed their relationship, whereas Pegram was relying on its standard terms. The adjudicator (who based his jurisdiction on section 108(5) of the construction act) did not decide which terms governed the contract before making his decision.
Tally Weijl denied that the adjudicator had jurisdiction, arguing that either the JCT adjudication rules applied or there was no contract, and so the statutory scheme could not be applied by default. It declined to pay and Pegram went to court to make the award enforceable.
Judge Thornton found in Pegram's favour. He held that it was neither clear-cut nor obvious which set of conditions applied. However, he went on to find: "If the parties enter into their construction contract in such a way that its terms are not clearly and unquestionably capable of being identified … the parties have not produced a construction contract whose terms enable a party … to refer a dispute to adjudication."
As a result, the learned judge found that section 108 of the act would apply. He felt that the defendant's juridictional challenge was based "on the premise that there was in existence a construction contract between the parties".
Not so. Tally Weijl had always denied that there was a construction contract on any basis other than the JCT98 form. Both Pegram in its submissions to the court, and the adjudicator in his decision, recognised that if the JCT terms were not agreed, it was the employer's position that the contractor was only entitled to be paid on a quantum meruit basis (there being no contract).
So Tally Weijl was left feeling doubly aggrieved. Not only had the adjudicator ignored its argument that he could not have jurisdiction unless he first found that a contract existed, but the court had also apparently got the wrong end of the stick by overlooking the very argument Tally Weijl had made to the adjudicator.
Furthermore, unless the adjudicator first determined whether the JCT or Pegram's terms applied, he could not have measured the value of the work that was the subject of the adjudication – even assuming he had jurisdiction to do so.
If the adjudicator had in fact measured the final account by reference to the JCT terms then he must have done so without jurisdiction (as he had not been appointed under those terms). Alternatively, if he had applied Pegram's terms, the error could have been so fundamental as to deprive the decision of any validity, as the judge himself determined in Joinery Plus (In Administration) vs Laing Ltd (January 2003, unreported). Lastly, the adjudicator might have applied quantum meruit, but in that case, Tally Weijl argued, he must have acted outside his jurisdiction because neither party contended for that basis and it could only apply if there was no contract in existence for the purpose of section 108 – in which case the adjudicator had no jurisdiction anyway.
In the event, the most fundamental question was never tested, namely, exactly what the parties agreed should be the basis of payment. How could any adjudicator have valued payment without that knowledge? Why should a party (in this case, a foreign company) have to put up with such a completely opaque decision? Does this really engender respect for the adjudication system? In short, Tally Weijl is more a case about the fundamentals of fair dispute resolution than it is about jurisdictional challenges, artificial or otherwise.
The Court of Appeal will review the law on challenges to an adjudicator's jurisdiction when Tally Weijl's appeal is heard in the autumn.
Philip Knights is a partner and head of property litigation at Maxwell Batley, which acted for Tally Weijl throughout.