You are no doubt aware that it is absolutely essential to reserve your position on jurisdiction as early as possible in adjudication proceedings. The reservation itself must also be as specific as possible, as discussed by Coulson LJ in the Court of Appeal decision in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd (this point was not appealed to the Supreme Court).
But how much thought have you given to the possibility of inadvertently waiving the right to raise jurisdictional objections following receipt of the adjudicator’s decision?
This point, and a number of relevant authorities, were recently explored in Croda Europe Ltd v Optimus Services Ltd.
Paying the adjudicator’s fees
Clients who are unsuccessful in adjudication proceedings and intend to challenge enforcement of the decision often ask whether they need to pay the adjudicator’s fees (if so ordered).
The answer is usually yes. Even if the decision is unenforceable because of a valid jurisdictional objection, the adjudicator will still usually be entitled to their fees.
But does paying the adjudicator’s fees come with a risk of waiving the right to later challenge the decision at enforcement stage?
The authorities that have previously grappled with this question demonstrate that it is, to some extent, fact specific:
- In Wales and West Utilities Ltd v PPS Pipeline Systems GmbH, Akenhead J determined that Wales had elected to treat the decision as valid and enforceable in circumstances where it had paid the adjudicator’s fees and the full amount awarded against it without any jurisdictional reservation.
- In Science & Technology Facilities Council v MW High Tech Projects UK Ltd, Fraser J was not persuaded that mere payment of the adjudicator’s fees by MW meant that MW had waived its right to challenge the adjudicator’s jurisdiction. MW had made payment of the adjudicator’s fees without issuing a covering letter explaining the basis on which the payment had been made, but the adjudicator’s terms and conditions permitted MW to challenge jurisdiction on enforcement regardless of the payment by MW to the adjudicator of his fees.
This issue arose recently in Croda Europe Ltd v Optimus Services Ltd. Optimus had raised a number of jurisdictional objections throughout the adjudication. However, upon receipt of the adjudicator’s decision, Optimus acknowledged it by email, confirmed that payment of the adjudicator’s fees would be made, and accepted that Croda would be entitled to interest until payment of the award sum was made. No further reservations were made.
At the enforcement hearing Mr Ter Haar QC concluded that “mere payment of an adjudicator’s fees may well not be approbation of a Decision to which those fees relate” but that, considering Optimus’ email as a whole (and particularly the acknowledgment that interest would accrue until payment of the award was made), there was a clear intention to be bound by the decision. Optimus had therefore waived its right to raise any jurisdictional challenges to the decision’s enforceability.
Slip rule
What about an unsuccessful party that notices an error in the adjudicator’s decision and wishes to rely on the slip rule?
There are several court decisions that confirm that reliance on the slip rule by an unsuccessful party without making an appropriate reservation will be fatal to any jurisdictional objections at enforcement stage:
- In Shimizu Europe Ltd v Automajor Ltd, Automajor had invited the adjudicator following receipt of the decision to reduce the sum awarded to Shimizu by about £170,000. It had also made part payment pursuant to the decision. HHJ Seymour QC concluded that Automajor had by this conduct elected to treat the decision as binding.
- In Dawnus Construction Holdings Ltd v Marsh Life, Marsh Life had written to the adjudicator inviting him to revise the substance of his decision for various reasons, including because of an alleged breach of natural justice. HHJ McKenna concluded that Marsh Life had thereby waived its right to challenge enforcement of the decision.
In both of these cases, the unsuccessful party had sought to rely on the slip rule to request substantive changes to the decision which, if accepted by the adjudicator, would have had substantial monetary consequences.
However, Croda v Optimus demonstrates that any attempted reliance on the slip rule without making a further reservation is a risk.
In that case, the adjudicator had failed to include a date for payment of the award in his decision. Croda had therefore written seeking to invoke the slip rule, requesting that the decision be amended to require Optimus to make payment within seven days. Optimus responded to Croda’s email, suggesting an alternative time for payment of one month.
In his judgment, Mr Ter Haar QC concluded that, by this suggestion, Optimus was seeking to avail itself of the slip rule in order to gain an advantage, and that Optimus had therefore elected to treat the decision as valid and binding. This was notwithstanding the fact that Optimus’ request was only made in response to that of Croda, and the request concerned the time for payment rather than the substance of the decision itself.
Concluding thoughts
Croda v Optimus is another warning to parties to adjudication proceedings to remain alert at all times to the risk of waiving the right to rely on jurisdictional objections.
Some suggested tips to take away from this case are as follows:
- Studiously reserving your position throughout the adjudication may well be insufficient unless due care is also taken following receipt of the decision.
- If you have paid the adjudicator’s fees without repeating your reservation, you may still be entitled to pursue your jurisdictional objections at enforcement stage. However, much will depend on the circumstances and, in particular, whether any other aspect of your conduct demonstrates an intention to be bound by the decision.
- In order to make it as clear as possible that you continue to challenge the adjudicator’s jurisdiction, write to the adjudicator and the other side stating that payment of fees is to be made without prejudice to your reservation. Do so before paying the adjudicator’s fees.
- Take care in any correspondence with the adjudicator or the other side after the decision not to say anything that could be construed as a recognition that the decision is binding. For example, do not acknowledge that the adjudication award is due to the other side or that interest on the award will accrue until payment is made.
- If you may wish to pursue jurisdictional objections at enforcement stage, only seek to invoke the slip rule if absolutely necessary. If you do seek to rely on the slip rule, clearly state that you are doing so without prejudice to your position on jurisdiction.
Emma, instructed by Gosschalks LLP, represented Optimus at the enforcement hearing.
