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Hedging your bets in adjudicator nomination doesn’t pay

Life as an adjudicator can be hard sometimes, what with all the jurisdictional challenges flying around. Questions about who we know, who we don’t know, who we’ve spoken to (or not) and who’ve we’ve done business with over the last few years. However, one thing you might think was a sure-fired bet was your appointment and the rules governing that appointment. However, as HHJ Havelock-Allan QC’s judgment in Ecovision Systems Ltd v Vinci Construction UK Ltd demonstrates, not even that is guaranteed.

Ecovision Systems Ltd v Vince Construction UK Ltd

This was a dispute all about an alleged defective heating and cooling system that Ecovision designed and installed at an office development in Daresbury, Cheshire. Vinci was the main contractor on the development, employed under a contract based on the NEC3 Engineering and Construction Contract (ECC). Ecovision was employed under a contract based on the NEC3 Engineering and Construction Subcontract (ECS).

Which adjudication rules?

As the parties were unable to settle their dispute, Vinci referred it to adjudication. This, it seems, is where the problems started. The judgment describes a somewhat complicated set of documents that made up the sub-contract. Unsurprisingly, one of the issues in the adjudication (and then in the court proceedings that followed) was which set of adjudication rules applied to a dispute under the sub-contract.

There was a choice of three:

  • Option W2 of the sub-contract. This named the adjudicator as the president of the RICS and the adjudicator nominating body (ANB) as the president or vice president of the RICS.
  • Option W2 of the main contract, as amended by clause Z16, which referred to the ANB as the chairman of TeCSA, with the TeCSA adjudication rules.
  • The Scheme for Construction Contracts 1998. No adjudicator was named and we are all familiar with the fact that the Scheme allows a party to apply to any ANB.

The problem of which set of rules applied was probably compounded by the “shadow boxing” that the parties engaged in, rather than addressing the question directly. Looking at the way the judge describes events, it was clear from the outset that Vinci thought option W2 applied, since it approached the president and vice president of RICS. When they were both unavailable, it applied to RICS for a nomination and Mr Jensen was appointed. If it thought the TeCSA rules were the relevant ones, surely it would have approached them instead?

However, Vinci did not complete the RICS’ adjudicator application form with details of which rules applied and, when Ecovision asked it which ones applied (after the adjudicator was appointed), it seemed reluctant to say. The adjudicator got involved and quite a number of letters and emails were written. Even Ecovision seemed reluctant to put forward its view of the applicable rules, instead insisting that it was for Vinci to explain to it what the foundation of the adjudicator’s jurisdiction was.

Eventually the adjudicator said that he was proceeding under Option W2 of the sub-contract. He had advised the parties that he did not believe he had power to require Vinci to commit to a position on the basis of his jurisdiction and declined to require Vinci to make a submission on his jurisdiction. He also said he did not have the power to order Vinci to disclose a copy of the RICS nomination form to Ecovision.

Eventually, Ecovision advised that it was not participating in the adjudication because the adjudicator was not validly appointed. It did not serve a response.

When the adjudicator issued his decision, he granted Vinci the declaration it sought regarding the loss and damage it had suffered because of the defects. In the absence of a response, I suspect there was little else he could do. Perhaps unsurprisingly, Ecovision then applied to the TCC for a declaration that it did not have to comply with the adjudicator’s decision.

Adjudicator not properly appointed

At the end of what is a long and detailed judgment, the court agreed with Ecovision, finding that the adjudicator was not properly appointed and purported to follow the wrong adjudication rules. It declared that any future adjudication would be governed by the TeCSA rules.

Difficulties adjudicators face

I think this case highlights the difficulty adjudicators face trying to interpret contractual provisions. It also demonstrates the importance of getting the adjudication provisions right.

Here the parties appeared reluctant to commit themselves and, instead of trying to assist the adjudicator, they both spent time hedging their bets. As a result, everyone incurred time and costs over what, ultimately, was a wasted adjudication. With hindsight, surely it would have been better for the declaratory relief application to have taken place before the adjudication. Alternatively, if one of the parties had said at the outset that it thought the TeCSA rules applied, that would have given the other the opportunity to concede the point and then approach that ANB for an appointment.

This type of contractual difficulty is not common but, in the past when it’s not been too clear to me which adjudication rules applied, I’ve conducted the adjudication in a manner that is compliant with both sets of rules. I note that this was something that the adjudicator did in this case too (when he was considering an extension of time for his decision), which the judge described as a neutral proposal, “consistent with section 108(2)(c) and (d) of the HGCRA and all 3 candidate rules”.  That isn’t always possible though, especially when, as here,  the adjudication rules have different nominating bodies and different procedures.

MCMS Ltd Matt Molloy

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