REUTERS | Kai Pfaffenbach

Adjudicator’s chicken and egg jurisdictional dilemma

The last time I looked at the dispute between Rawlings Consulting (UK) Ltd and Maelor Foods Ltd, I was talking about HHJ Eyre’s judgment and how the arbitration clause in a JCT standard building contract can “trump” a Part 8 application for declaratory relief.

This time, I’m looking at HHJ Stephen Davies’ judgment and Maelor’s (the employer) jurisdictional challenge, based on the argument that the dispute which Rawlings (the contractor) referred to adjudication arose under more than one contract. 

Rawlings Consulting (UK) Ltd v Maelor Foods Ltd

As I mentioned last time, this case involved Jonathan as the adjudicator.

As part of his June 2018 decision, Jonathan accepted that if more than one dispute had been referred to him (or if disputes under different contracts had been referred to him), then he would not have jurisdiction to determine the dispute(s) referred. However, he felt he did have jurisdiction to determine the question of whether the matters referred to him had arisen under separate contracts or just one. Ultimately, he decided that the various items in dispute arose under variations to the parties’ August 2016 contract, rather than under separate contracts. Thus he concluded that the contractor’s payment notice was valid and, as the employer had failed to serve a pay less notice, the contractor was entitled to the £720,300 it claimed.

The matter came before HHJ Stephen Davies on enforcement, although HHJ Eyre had dealt briefly with the “how many contracts” point, agreeing with Jonathan (and the contractor) that there was just the August 2016 contract. After more detailed reasoning, HHJ Stephen Davies also reached the same conclusion.

Where substance and jurisdiction overlap

It isn’t often that we see arguments about whether an adjudicator can make a decision about his jurisdiction, based on the line of case-law that Akenhead J described as ones “where substance and jurisdiction overlap”. It all started with Air Design (Kent) Ltd v Deerglen (Jersey) Ltd, and then Euro Construction Scaffolding Ltd v SLLB Construction Ltd and Supablast (Nationwide) Ltd v Story Rail Ltd.

In all the cases, the issue was whether the adjudicator had jurisdiction because (it was argued) disputes under more than one contract had been referred to him. The adjudicator had to decide if that was the case before he could determine whether or not he should resign (because he did not have jurisdiction to hear the dispute).

Put another way, it is a bit like the chicken and egg argument over which came first. The adjudicator has to deal with jurisdictional challenges early on, when he is first appointed, but cannot do so without making a substantive decision about the nature of the parties’ contractual relationship. It becomes somewhat irrelevant whether that jurisdictional finding is non-binding or not, if the adjudicator decides there is a only one, varied contract and proceeds to make a decision. Hence, why Akenhead J suggested that there are occasions when the dispute referred to the adjudicator “necessarily involved” considering whether there was more than one contract. It was the judge’s view that this question was within the adjudicator’s jurisdiction to decide, hence the phrase “where substance and jurisdiction overlap”.

This all comes about because of section 108(1) of the Construction Act 1996, which is clear and allows a party to refer “a dispute” to adjudication, not “disputes”. We also know that if the Scheme for Construction Contracts 1998 applies, then under paragraph 8(1), the same adjudicator cannot adjudicate on more than one dispute at the same time without the parties’ consent. This applies equally to the number of disputes referred in a single adjudication as to the number of disputes that may be referred in separate adjudications at the same time to the same adjudicator (see Coulson J’s judgment in Deluxe Art & Theme Ltd v Beck Interiors Ltd, which I looked at at the time).

So, back to Rawlings v Maelor. HHJ Stephen Davies ran through the various elements of Jonathan’s decision and concluded that:

“… there is no real prospect of [Maelor] establishing… that these further works could sensibly have been regarded as anything other than variations to the main contract. On that basis, the jurisdictional defence falls away.”

This meant he did not have to decide the Air Design point but, for completeness, said that he would have followed Akenhead J’s judgment and would have concluded this point in the contractor’s favour.

and finally…

It is worth mentioning that the parties’ dispute has given rise to the potential for two arbitrations, one to address the Part 8 point and one to address the true value of the money due to the contractor.

It demonstrates a point I’ve mentioned before regarding the temporary finality of adjudicators’ decisions and the potential benefit to those parties who want to go forward if they do not like the answer the adjudicator gives them (assuming they are solvent to do so). I guess if the parties don’t want to start that second arbitration, they could always refer the “true valuation” point to adjudication. After all, since Coulson J’s judgment in Grove v S&T, we all know that can now happen, although it may not give them the final determination they need.

MCMS Ltd Matt Molloy

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