Everyone involved in adjudication proceeds on the understanding that an earlier adjudicator’s decision binds a subsequent adjudicator. However, I wonder how often people look to see where that principle comes from.
It was an issue before Akenhead J in Arcadis v May and Baker recently.
It’s from the Act and the Scheme
As far as I’m aware, the principle is derived from the language of section 108(3) of the Construction Act 1996, which provides that:
“the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, arbitration… or by agreement.”
Similar wording also appears in paragraph 23 of Part 1 of the Scheme for Construction Contracts 1998, although it goes further and also tells us that the parties “shall comply” with the decision.
As these statutory provisions don’t actually say one adjudicator is bound by another’s decision – they simply refer to a decision being “binding” – I wondered how you would know this, if you were new to adjudication law. After all, you may think that this wording simply means the parties are bound and must comply with the adjudicator’s decision. You may not think it extends beyond that, to subsequent adjudicators.
I think part of the answer can be found in paragraph 9(2) of the Scheme, which tells an adjudicator that he must resign if the dispute referred to him is “the same or substantially the same as one which has previously been referred to adjudication” and there is a decision in that adjudication. That means the same issue cannot be decided again because the earlier decision is binding on everyone, including potential adjudicators.
The binding nature in practice
In practice, an adjudicator has to decide whether a previous decision is binding on him when he decides whether he has jurisdiction to act. If the dispute referred is the “same or substantially the same” as a previous referral, then he should not accept the appointment. Whether it is (or not) will be a question of fact and degree.
A number of cases have considered this issue, including Quietfield v Vascroft Construction, HG Construction v Ashwell Homes, Benfield v Trudson and Redwing v Wishart. Most recently, the issue came up in Arcadis.
Arcadis v May and Baker
Here, in relation to the two adjudications, Akenhead J said there were “similar issues both in fact and in law”, as well as some distinctions:
- In the first adjudication, which related to the northern boundary works, the works had been implemented before the project manager withdrew his acceptance of the compensation event.
- In the second adjudication, which related to the southern boundary works, the project manager’s withdrawal took place before the work was done.
The first adjudicator said the project manager could not withdraw his approval of the compensation event if the works had been implemented (which they had).
Akenhead J said:
- The first adjudicator’s findings were “germane” to the second adjudication and could be persuasive.
- There was nothing wrong with putting the first adjudicator’s decision before the second adjudicator. He suggested it would be a “rare case” when a party could not do this and went on to say it may be “positively wrong” not to put an earlier adjudicator’s decision before the later adjudicator.
On the facts, the second adjudicator decided the dispute before him on the merits and was not bound by the first adjudicator’s decision about the compensation event since, he found, the southern boundary works were not properly implemented under the terms of the parties’ contract. He went on to make it clear that he would have been bound if he had found the southern boundary works were properly implemented.
What if the issue was sums due under an interim certificate?
In Arcadis, the issue related to compensation events under an NEC3 ECC, but what would have happened if, for example, adjudicator one decided the contractor was entitled to an additional £X for varied works in interim certificate 2? What effect would this have on a subsequent adjudicator if he is asked to look at interim certificate 3 or decide the value of the contractor’s final account?
In my experience, if the contract permits the contractor to make successive applications for payment, which are then certified on an interim basis, there is nothing to stop either party referring a matter to adjudication if they do not like what is decided in relation to a particular certificate. In practice, it is likely to be the contractor who does this. This is because each time there is an interim certificate, there is the potential for a new dispute between the parties. What the adjudicator can do will depend on what the question is that he is being asked to decide.
For example, if adjudicator one was asked to decide that an item was a variation and valued it in interim certificate 2, his decision on liability and quantum would bind subsequent adjudicators looking at later interim certificates or the final account.
In contrast, if adjudicator one was simply asked to decide what sum was due on an interim basis (in my example, under interim certificate 2), then how far that decision binds subsequent adjudicators may depend on how the decision is worded. If adjudicator one decided that the sum of £X or an amount “on account” was due pending further substantiation, this would open the way for the valuation to be looked at afresh if fuller information became available or was provided. However, the decision on liability may still bind.
The issue gets ever more complicated, depending on the facts. For example, what happens if adjudicator one is persuaded that there was a variation based on certain information. Would his decision on quantum and liability bind adjudicator two if adjudicator two was provided with different information?
Perhaps the current authors of Hudson summoned it up, when they said at paragraph 11-044:
“The extent to which a decision or a dispute is binding will depend on an analysis of the terms, scope and extent of the dispute or diffference referred to adjudication and the terms, scope and extent of the decision made by an Adjudicator.”
Clear as mud then!
