REUTERS | Herwig Prammer

Multiple contracts or one contract that was varied? Adjudicators beware of the difference

I have been writing this column long enough to have covered many important cases over the years, although it was Jonathan who looked at Akenhead J’s judgment in Air Design v Deerglen back in early 2009. That case saw the Fiona Trust principles applied to an adjudication clause. It also started the line of authorities dealing with an adjudicator’s jurisdiction and the concept of when “substance and jurisdiction overlap“.

That issue was before the courts again recently, this time in Viridis UK Ltd v Mulalley & Company Ltd.

When “substance and jurisdiction overlap”

Before looking at Viridis in a bit more detail, it is worth mentioning what happened in Air Design v Deerglen.

In Air Design, one of the issues both the adjudicator and the court had to grapple with was the number of contracts the parties had entered into. Was it four separate contracts, or one that had been varied?  This question went to the heart of the adjudicator’s jurisdiction, since he could only adjudicate over a dispute arising under one contract, which is what he decided.

In the enforcement proceedings that followed, Akenhead J held that the adjudicator did not exceed his own jurisdiction when he investigated the jurisdictional challenge. He was simply investigating it and reporting his non-binding view. As he found the alleged separate contracts were no more than variations to the original agreement, he had jurisdiction. This was an instance where the adjudicator could decide a jurisdictional issue as part of the substantive dispute.

Back to Viridis v Mulalley

Here HHJ Stephen Davies also had to consider how many contracts the parties had entered into (one or six). This time, the court favoured a multiple-contract approach. As the evidence clearly showed the parties had never reached agreement over the payment terms of one order (order 24), the subsequent orders could not be variations to it. The “substance and jurisdiction overlap” principle could only apply if the parties had reached agreement over order 24 and the adjudicator had been properly appointed under that order. Only then would he have had jurisdiction to resolve jurisdictional issues that were “coincidentally part of the substantive dispute referred to him”.

What about Fiona Trust?

One element of Viridis v Mulalley that I found particularly interesting was that the court did not look at the Fiona Trust elements of Air Design v Deerglen. It did not (as far as I can tell), grapple with the meaning of the phrase “arising under the contract” and whether that can (and does) extend to disputes that are also “in connection with” the contract, even if those words are absent from the adjudication clause.

(In Fiona Trust, the Court of Appeal adopted a robust approach and said there was no difference in substance between the two phrases “arising under” and “arising out of” in the context of an arbitration clause.)

While I was pondering the implications of this, another Manchester TCC judge (this time HHJ Raynor QC), issued a judgment (in Hillcrest Homes Ltd v Beresford and Curbishley Ltd), suggesting that “there is considerable force” in the argument that the Fiona Trust principles do not apply to an adjudication clause. While Jonathan looked at that judgment, I wonder if we are seeing a shift in thinking from the courts or whether it is just the view of a different judge. Either way, it may lead to greater uncertainty over what can be referred to an adjudicator and an increase in arguments over the scope of the adjudicator’s jurisdiction. It may also mean that, just like in adjudication, in the TCC your result may well be different depending on which judge you get!

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