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Do ongoing Part 8 Proceedings prevent a party from commencing a new adjudication?

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02/06/2017

Aecom Design Build Ltd v Staptina Engineering Services Ltd [2017] EWHC 723 (TCC) (05 April 2017)

This recent TCC judgment provides commentary on the practice of commencing Part 8 proceedings to undermine an Adjudicator’s decision.

In particular, the Judge criticised commencement of further adjudication proceedings before a Part 8 procedure challenging the enforcement of the current adjudicator’s decision had been concluded.

The Facts

Aecom Design Build Ltd (“Aecom”) terminated its subcontract with Staptina Engineering Services Ltd (“Staptina”), stating that the termination did not affect Staptina’s ongoing obligation to correct defects. Staptina issued a payment application for the amount due on termination. This was disputed and Staptina commenced adjudication, claiming that on a proper assessment of the amount due, Aecom was not entitled to deductions for the cost of defects or for any other reason.

This was the parties’ third adjudication on this same project.

The Adjudicator decided that Aecom was, in principle, entitled to make deductions, but that the deductions must be confined to what it would have cost Staptina to remedy the relevant defect, either before the works were completed or during the defect correction period.

Aecom brought a Part 8 claim, arguing that the Adjudicator only had jurisdiction to consider whether or not the deductions could be made and that the Adjudicator did not have jurisdiction to deal with the quantum of those deductions.

Aecom argued that the Adjudicator had exceeded her jurisdiction and that there had been a breach of natural justice because (so Aecom argued) the parties did not have a chance to make submissions concerning how, in principle, the deductions were to be quantified.

Staptina argued that the dispute was a “wide point of principle” which could not be answered so restrictively.

Decision

The TCC decided that the Adjudicator had acted within her jurisdiction. A dispute is defined by the matters in the various documents – not by the dispute’s potential answers. The notice of adjudication and referral notice expressly defined the dispute by reference to how, in principle, the deductions were to be performed. Although the quantum of the deductions was not expressly referred to in the documents, the drafting of the notice of adjudication and referral notice was wide enough to imply that quantum should also be decided.

The TCC said that there was no breach of natural justice because the Adjudicator had decided a point of importance on the basis of the material before her. The parties were aware of all relevant material, all of those documents were before the Adjudicator, and each party provided submissions in relation to them. The Adjudicator was not bound to accept only one of the two alternatives put to her. Choosing a different answer, and failing to notify the parties, is not a breach of natural justice because questions of contractual interpretation will often be capable of having more than two possible answers.

The Judge also criticised Aecom for proceeding with a fourth adjudication as though the decision in the third adjudication was not binding.

Comment

This case is a reminder that although parties may challenge the enforcement of an Adjudicator’s decision, the decision will bind the parties, and should be complied with, until it is overturned by a court or in arbitration.

The party referring a dispute to adjudication should ensure that the notice of adjudication and referral notice is clearly worded so as to avoid scope for confusion as to the precise parameters of the dispute to be decided by the Adjudicator.

(Walker Morris represented the Defendant in these proceedings, Staptina Engineering Services Limited).

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