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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.

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