Practical Law

Lingchi, also known as known as death by a thousand cuts, was a form of torture and execution used in China. According to Wikipedia, it may not have involved as many as 1,000 cuts, that would depend on the crime, the executioner and whether the family could afford a bribe to speed up the process (and reduce the number of cuts).

Finding myself increasingly involved in serial adjudication, I realise that it can be a valuable and efficient way to resolve disputes, particularly with sophisticated parties and their representatives. However, I sometimes feels like certain parties use the process to wear the other down. Hence the reference to lingchi!

The reason I mention this is because of Stuart-Smith J’s judgment in Hitachi Zosen Inova AG v John Sisk & Son Ltd, where the key issue was whether the dispute referred in the eighth adjudication was the “same or substantially the same” as the dispute referred in the second adjudication.

“Same or substantially the same”

I’m sure we are all familiar with the phrase, and understand that it means an adjudicator must resign if the dispute referred to them is the “same or substantially the same” as a dispute previously referred and a decision has been made. It comes from paragraph 9(2) of Part I of the Scheme for Construction Contracts 1998.

Hitachi Zosen Inova AG v John Sisk & Son Ltd

In the second adjudication (which started in 2015) Sisk sought a declaration as to the correct valuation of the events that made up its application for payment number 6. This included event 1176, which was for acceleration works to a boiler and was said to be worth £1.1 million.

Although Sisk purported to provide substantiation for this event, the adjudicator felt the detail provided fell short of that required by clause 30.1 of the parties’ contract (which dealt with the pricing of variations and entitled Sisk to “all reasonable and unavoidable additional direct Cost and Expense incurred”). Consequently, while the adjudicator declared that event 1176 was a variation, he did not value it and, in the schedule included with his decision, he allowed £0.00 for it.

The parties took part in another five adjudications and one mediation before, in June 2018, Sisk referred the value of event 1176 to adjudication (the eighth adjudication). This time, not only did its evidence include the information it relied on in the second adjudication, it also provided information that “went well beyond it”. This allowed the adjudicator to provide a valuation, concluding that the event was worth some £826,000.

Was it the same or substantially the same dispute?

The adjudicator thought not when Hitachi raised the matter at the outset of the eighth adjudication as a jurisdictional challenge. It was the same adjudicator as in the second adjudication (Mr Pontin). What he actually said was:

“In the Second Adjudication I decided that Event 1176 was a Variation that required valuation. Thus I cannot adjudicate now on whether Event 1176 was or was not a Variation as that has been decided.

In addition I decided that for the purposes of Application 6 that Sisk had not complied with the provisions of clause 30.1 and stated that  ‘I do not have sufficient details to value the works and hence for the purposes of Payment Notice 6 my value is £nil.’ The fact that ‘£nil’ was entered onto my spreadsheet does not alter the meaning of the words used in the body of my Decision. I could not conclude a value for Event 1176 in that Notice and as a fact I did not decide a value for event 1176.”

That all seems rather sensible and logical, and that is what Stuart-Smith J concluded too. In the second adjudication the declaration dealt with the event as a variation but not its value. Therefore, under paragraph 9(2), a decision had not been taken on that point.

Applicable principles

I must admit I thought that how the judge set out the applicable principles was really helpful, walking us through the decisions of May LJ and Dyson LJ in Quietfield v Vascroft, where the emphasis was on what the earlier adjudicator had decided, not what was referred to the adjudicator, a point also made by Jackson LJ in Harding v Paice and one that came up in Brown v Complete Buildings. He also explained that we should be careful not to focus on the “ambit and scope of the disputed claims” that had been referred to adjudication earlier, as that could lead to errors. This was something that Akenhead J had looked at in Carillion  v Stephen Andrew Smith.

Having recently been involved with a sequence of eight adjudications, I know that even though appointing the same adjudicator can bring consistency (especially if it was you adjudicating previously), it is not always easy to interpret and ascertain what was dealt with or decided before. It can be even harder if the adjudicator is from a different discipline or professional background, appointed precisely because they bring something different to the adjudication and can address different issues (like contract interpretation, delay, liability, quantum, defects and so on).

It can also be terribly time consuming to try to work out what was dealt with before, as you have to look at the submissions and the decision very carefully. In one sense, this judgment highlights the importance of adjudicators explaining in the body of their decision what they have dealt with and, perhaps, what they haven’t dealt with. That will certainly help the parties and the next adjudicator.

I also think the way Stuart-Smith J approached the task of looking at what had been decided and referred to adjudication is helpful guidance for the next time it happens to any adjudicator. He was able to break the task down into two straightforward questions:

• What did the adjudicator in the second adjudication decide about event 1176?
• Is the dispute about event 1176 referred to the eighth adjudicator the same or substantially the same as the dispute decided by the second adjudicator?

Put this way, with the emphasis on what was decided previously, it seems a simple task, although I know it isn’t (as this judgment demonstrates).