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Arbitrating after adjudication

I’m sure most people are familiar with the concept of temporary finality. Coulson J describes it as “the essence of the adjudication process”. He goes on to explain that it is one of the principal reasons why the courts endeavour to enforce adjudicators’ decisions, provided they have answered the right question (paragraph 3.100, Coulson on Construction Adjudication).

I wrote about the concept last month, in the context of where it comes from, quoting from section 108(3) of the Construction Act 1996:

“the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, arbitration… or by agreement.”

That post appeared just a few days after the judgment in Atkins v Secretary of State for Transport was published on BAILII. A little while later, the judgment in Berry Pilings v Sheer appeared. Both judgments have one thing in common: an arbitration followed the adjudication and then the matter ended up before the TCC.

It is worth briefly mentioning the facts of both cases.

Atkins v Secretary of State for Transport

Atkins was employed to repair pot holes in the roads of East Anglia. Due to the inclement weather of the last few years, more pot holes were found than had been anticipated when the contract was signed. Therefore, Atkins claimed more money, arguing that it was a compensation event under clause 60.1(11) of the parties’ NEC3 contract. The employer rejected the claim.

Atkins referred the matter to adjudication and Andrew Bartlett QC was appointed. He decided (effectively as a preliminary issue) that there was a compensation event. The employer was unhappy with this, and referred the matter to arbitration, where Professor John Uff CBE QC was appointed. He reached a decision the other way; there was no compensation event. Atkins complained to the TCC, challenging that decision under section 68 of the Arbitration Act 1996. The rest is in the judgment, so to speak.

Berry Pilings v Sheer

In Berry v Sheer, there was an adjudication over the disputed cost of Berry’s piling works. The adjudicator awarded Berry some £21,000. Although Sheer paid this sum, it didn’t agree that the amount reflected the true position of the parties, and so it referred the matter to arbitration and I was appointed. Prior to reaching my decision, Berry went into administration and took no further part in the arbitration. I decided that Sheer was entitled to just under £100,000 (including costs and interest).

For reasons that are not entirely clear to me, Sheer subsequently applied to the TCC for committal for contempt of court against two of Berry’s former directors.

Arbitrating after adjudication

Given the temporary finality of an adjudicator’s decision, it’s no surprise that parties refer matters on when they are unhappy with a decision. It is what many people lobbied for and what Parliament intended with its drafting of section 108(3). I often say that one of the best selling points/advantages/attractions (call it what you will) of adjudication is the very fact that, subject to any insolvency issues, a party who is unable to live with an adjudicator’s decision can seek to have the whole issue tried again in arbitration or litigation.

Although the facts in Berry v Sheer may be highly unusual (I’m not aware of any other committal proceedings arising out of an enforcement hearing), issues arising out of NEC contracts (like in Atkins) are more common, especially around compensation events, pain/gain share provisions and even the scope of notices of dissatisfaction, which must be served after an adjudicator’s decision as a condition precedent to other proceedings. I’m sure the same can be said for disputes arising under all of the other standard form contracts too.

It is rare (in my personal experience) to now see a domestic arbitration that hasn’t followed an adjudication.

2 thoughts on “Arbitrating after adjudication

  1. Hello Matt Molloy

    The crucial subject has been dealt in a lucid manner.
    When the Adjudication completed, adjudicator’s decision is not satisfactory to a party he can refer the same to arbitration.
    Then what he has to do? Whether he has to refer the Adjudicator’s decision for Arbitration? or he has to submit a fresh case for arbitration?

    Whether the Tribunal can make a postmortem of the adjudicator’s decision and give award; or it has to examine the entire case and shall give a fresh judgement?

    In between, whether the other party have the right to demand to implement the Adjudicator’s Decisions, when on the same decisions the 1st party invoked arbitration.

    Your valuable insights will be more useful to enhance my under standing.

    Thank You.

    Krishna Rao

  2. Krishna

    In answer to your questions:

    Yes, a party can apply to the TCC to enforce an adjudicator’s decision (assuming the losing party is unprepared to comply with it), irrespective of whether the matter is being referred to a tribunal for final resolution. The TCC adopts a robust approach to enforcement, and will only refuse to enforce a decision if the adjudicator has breached the rules of natural justice or has made a decision without having the jurisdiction to do so.

    What is submitted to the tribunal will depend on the parties’ contract. For example, under an NEC3 or NEC4 contract, an adjudicator’s decision is binding on the parties “unless and until” it is revised by the tribunal and a dispute must be referred to adjudication before it can be referred to the tribunal. The tribunal can then reconsider an adjudicator’s decision, which generally means that it will start afresh with the evidence and reach its own conclusion on the dispute. This is because the tribunal and the parties are not limited to the information, evidence or arguments that were previously put to the adjudicator. However, they are restricted to the dispute that was referred to the adjudicator. Conversely, if the parties contract is an unamended JCT contract, there is no requirement to refer a dispute to adjudication before it is referred to the tribunal, so the parties can opt to go directly to the tribunal, or they can adjudicate first. However, if they adjudicate first, before the tribunal, they are not limited to the dispute that was referred to adjudication.

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