In two recent decisions, the Court of Appeal has reconsidered the question of whether the dispute in successive adjudications is “the same or substantially the same” dispute. The answer to the question is important because paragraph 9(2) of the Scheme for Construction Contracts 1998 provides that if the second dispute is the same or substantially the same as the previous dispute, the adjudicator must resign. Therefore, the issue has arisen in a number of reported cases.
The contracts in both Matthew Harding (t/a) M J Harding Contractors v Paice and Springall and Brown v Complete Buildings Solutions Ltd were contracts for the construction of residential properties, but each contract contained an express clause entitling the parties to refer disputes to adjudication.
Harding v Paice
In Harding v Paice, the parties fell out at an early stage of the works and the employers attempted invalidly to determine the contractor’s employment. The contractor subsequently terminated the contract. The parties engaged in no less than four adjudications, with the employers threatening a fifth during the Court of Appeal hearing. The third and fourth adjudications were the subject of the proceedings that terminated in the Court of Appeal.
The third adjudication concerned Harding’s final account claim for £397,912. Harding claimed two alternative forms of relief: either a decision that he was entitled to the full amount in the absence of an effective pay less notice; or that the amount was properly due to him as a correct valuation of the works.
Although the parties presented their valuation evidence in full, the adjudicator decided that the employers had failed to serve an effective pay less notice. This meant Harding was entitled to the full amount claimed. The adjudicator expressly said that he had not made a decision about which sum was the correct valuation of the works.
The employers paid the full amount under the pressure of enforcement proceedings, but also commenced the fourth adjudication, seeking a decision as to the correct value of the works. Harding sought injunctive and declaratory relief in order to stop the fourth adjudication proceeding, but Edwards-Stuart J dismissed his claims, finding that the employers were entitled to proceed with the fourth adjudication.
Two grounds of appeal were raised:
- The correct construction of paragraph 9(2) of the Scheme for Construction Contracts 1998.
- The scope and effect of the adjudicator’s decision in the third adjudication.
The Court of Appeal agreed with the employers’ submission that the reference to “a decision” in paragraph 9(2) was a reference to a decision in relation to the dispute referred to adjudication. The contrary meaning would have the consequence that any disputes or issues referred, but which remained undecided, would be barred from further adjudication. The court also firmly expressed the view that the adjudicator had decided only one of the two alternative issues referred to him, so that the other remained open to be decided in a subsequent adjudication.
Brown v Complete Building Solutions
In Brown v Complete Building Solutions, the adjudication also concerned the contractor’s final account. The adjudicator decided that the contractor had not served a valid payment notice to satisfy the terms of the contract, so that no sum was payable. However, on the day the adjudicator’s decision was issued, the contractor served a fresh payment notice. It commenced a second adjudication three weeks later. The employer challenged the second adjudicator’s jurisdiction on the basis that the dispute was the same as that decided in the first adjudication. It did not serve a counter notice nor did it participate in the second adjudication.
The employer sought to rely on paragraph 48 from Dyson LJ’s judgment in Quietfield Ltd v Vascroft Construction Ltd:
“Where the only difference between disputes arising from the rejection of two successive applications for an extension of time is that the later application makes good shortcomings of the earlier application, an adjudicator will usually have little difficulty in deciding that the two disputes are substantially the same.”
The employer argued that the second payment notice was no more than an attempt to make good the shortcomings of the first notice, but the Court of Appeal disagreed. The effect of the first payment notice was in issue in the first adjudication, but not in the second. The second notice did not exist at the time of the first adjudication, and was not an attempt to cure a defect in the previous notice. It was a new notice that founded the contractor’s entitlement to be paid.
Carefully review first adjudicator’s decision
It is clear from these decisions that one must look carefully at the first adjudicator’s decision, as that sets the bar for what is or is not available for the second adjudicator to decide. One must carry out a careful comparison of the first decision with what is the subject-matter of the second referral. As Jackson LJ noted in Harding v Paice:
“One must look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided which determines how much or how little remains for consideration by the second adjudicator.”
The adjudicator’s own view?
Whether one dispute is the same or substantially the same as another dispute is a question of fact and degree. But to what extent should the adjudicator’s answer to the question be relevant?
In Brown v Complete Building Solutions, Simon LJ said (at paragraph 23) that it was important for the court to give due respect to the adjudicator’s decision as to whether one dispute was the same or substantially the same as another. But his reference to a paragraph from Carillion Construction Ltd v Devonport Royal Dockyard Ltd was a reference to an adjudicator’s substantive decision, not to a preliminary decision as to whether he should proceed with the adjudication or resign.
In Sherwood & Casson Ltd v Mackenzie, HHJ Thornton QC said of the nature of the enquiry that a court should conduct when it is alleged that an adjudicator has erroneously concluded that the two relevant disputes are not substantially similar:
“In conducting that enquiry, the court would give considerable weight to the decision of the adjudicator and would only embark on a jurisdictional enquiry in the first place where there were substantial grounds for concluding that the adjudicator had erred in concluding that there was no substantial overlap.”
Coulson J referred to those words in Benfield Construction Ltd v Trudson (Hatton) Ltd and added:
“I am inclined to the view that any decision by an adjudicator, including one on jurisdiction, is a matter which ought to be the subject of careful consideration by the court in circumstances where that court is being invited not to enforce the adjudicator’s decision.”
“Due respect” and “careful consideration” may be one thing, but to give it “considerable weight” is perhaps going too far. The question of fact and degree is one on which the courts are as equally able to express a view as an adjudicator.
