Important guidance on that question is given in the decision of His Honour Judge Thornton in the case of Sherwood & Casson Ltd vs Mackenzie which, no doubt to the relief of some readers who have become tired of reading about the round ball game in these columns recently, takes us into Eddie Waring territory.1
Mackenzie engaged Sherwood as steelwork and cladding contractor for the construction of a grandstand at Barrow RUFC. Sherwood went to adjudication over non-payment of interim payment applications for variations, and the adjudicator awarded it about £6500, plus VAT. The bulk of the claim related to variations to Sherwood’s work instructed by Mackenzie.
Sherwood was not satisfied with the amount awarded, and so it repeated the claim for variations in its final account claim. This time, it backed the claim up with considerably more supporting information. Sherwood also included an entirely new claim for loss and expense. Sherwood started a second adjudication, at the end of which a different adjudicator rejected the claim for loss and expense, but awarded a further £12 000 for the variations.
Mackenzie refused to pay the second adjudicator’s award. Sherwood was forced to take the matter to the Technology and Construction Court for enforcement. In its defence, Mackenzie relied on paragraph 9(2) of the statutory Scheme for Construction Contracts, which provides that an adjudicator must resign where the dispute referred to him is substantially the same as one that has previously been decided by another adjudicator. That was exactly the position here, Mackenzie argued, with the claim for the variations.
If Mackenzie was right, it followed that the second adjudicator had no jurisdiction to deal with the dispute, and his award was a nullity. Interestingly, this had been raised before the adjudicator, and he had ruled that he did have jurisdiction. Relying on Mr Justice Dyson’s decisions in Macob vs Morrison and PCG vs The Trustees of the Gray Trust, Mackenzie argued that the adjudicator’s ruling on his own jurisdiction did not preclude them from raising jurisdiction in the enforcement proceedings.
First, the judge had to decide whether Mackenzie’s contention was correct. If he concluded that he should examine the matter at that stage, he would have to decide whether the disputes in the two adjudications were in fact substantially the same. On the first question, the judge ruled in Mackenzie’s favour. Although the scheme did require the adjudicator to decide whether to proceed or resign, the decision was not conclusive. This was a jurisdictional issue, so it could be raised during enforcement.
- The judge said that, in considering jurisdiction, the adjudicator’s own ruling on it carries a lot of weight
- Cases cannot be broken down into ‘old’ and ‘new’ elements
The judge said that, in deciding whether it would be appropriate to reinvestigate the matter at the enforcement stage, considerable weight should be given to the adjudicator’s own decision. In circumstances such as these, the judge concluded that the court should only embark on that exercise where there were good reasons for thinking the adjudicator had got it wrong, and that would be only in the rarest of cases.
Nevertheless, embark upon that exercise was exactly what Judge Thornton did. In doing so, he had to consider the fact that the disputes involved in each adjudication related to the same variations and contra charges. On the other hand, he was influenced by the fact that the final account claim, to which the second adjudication related, had far more supporting information and the new loss and expense claim. Furthermore, the judge noted that the contract between parties provided for remeasurement of Sherwood’s work at final account stage. These factors were sufficient to persuade the judge that the disputes in question were not substantially the same.
One possibility, explored by the parties’ counsel at the hearing, was that, in a situation such as this, it would be appropriate to treat each element of the claim as a separate dispute. So the judge might properly conclude that, although the adjudicator should have resigned on one aspect of the case, it was appropriate for him to proceed with others. The judge rejected that approach. He considered that only one dispute can be referred to an adjudicator at any time. So for the purposes of paragraph 9(2) of the scheme, the only choices were whether to resign or to proceed with the adjudication as a whole.
The significance of Judge Thornton’s decision is not limited to situations to which the statutory scheme applies. He noted that none of the seven sets of institutional adjudication rules contains
a provision equivalent to paragraph 9(2) of the scheme. However, in his view, exactly the same issue would arise on similar facts where the scheme did not apply, because, where an adjudicator has already decided a particular matter, there can be no dispute or difference capable of being referred to another adjudicator in the future.
1 TCC 30 November 1999
Dominic Helps is a partner in solicitor Shadbolt & Co, which has offices in Reigate, London, Paris and Hong Kong.