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Some of the consequences of Deluxe v Beck

Earlier this year I wrote about Coulson J’s judgment in Deluxe Art & Theme Ltd v Beck Interiors LtdAt the time, I wondered how parties in adjudication may react, particularly the responding party. It may only be a few months on but, with the restriction on the number of disputes that can now be before the same adjudicator at the same time, I am already seeing the impact of Deluxe v Beck on a party’s behaviour and tactics.

Scheme for Construction Contracts 1998

Paragraph 8(1) of the Scheme for Construction Contracts 1998 provides that:

“The adjudicator may, with the consent of all the parties to those disputes, adjudicate at the same time on more than one dispute under the same contract.”

(Paragraph 8(2) refers to “related disputes under different contracts”.)

Deluxe v Beck Interiors

Deluxe v Beck was the judgment where Coulson J held that under paragraph 8(1), an adjudicator cannot adjudicate two (or more) disputes in different adjudications at the same time without the parties’ consent. The issue arose in Deluxe v Beck because:

  • Adjudication two was started in October 2015.
  • Adjudication three was started in November 2015, before adjudication two had run its course.
  • The same adjudicator was appointed in both adjudications.
  • Beck objected to the same adjudicator dealing with two disputes at the same time, but the adjudicator continued with both adjudications.
  • The decision in the second adjudication was given on 4 December 2015 and the decision in the third adjudication was given on 11 December 2015.

Adjudication two was all about Deluxe’s claim for an extension of time and prolongation costs, whereas adjudication three was about the retention.

Disputes as bite-sized chunks

I didn’t think the scenario in Deluxe v Beck was such an unusual one. I often see parties split their disputes into bite-sized chunks (and I wrote about it a few weeks ago). In fact, it is something that has been encouraged by the court as a way of making adjudication more manageable.

On the flip side, parties must be careful not to fall foul of the dispute not disputes rule in section 108(1) of the Construction Act 1996. As I said when Coulson J’s judgment came out:

“…am I alone in thinking that section 108 of the Construction Act 1996 and paragraph 8(1) of Part I of the Scheme for Construction Contracts 1998 were really referring to multiple disputes in the same adjudication and not multiple disputes in different adjudications?”

Careful timing

Following Deluxe v Beck, it’s now a question of careful timing, with referring parties having to wait until one adjudicator’s decision is issued before they start the next adjudication ball rolling. Clearly they don’t have to do so, but not waiting runs the risk of having the responding party calling the shots and deciding who the adjudicator ought to be (or not be). That is because, if a subsequent adjudication starts before a previous one has concluded, the onus is on the responding party to decide whether they want the same individual to deal with that subsequent dispute. The responding party can either raise the jurisdictional point (just as Beck did), or they can agree to the same person’s appointment. I guess it will all depend on what they think of the individual and previous decisions that individual has issued.

It may be more complicated for others. While adjudicators and the parties will clearly be aware of whether they have an on-going adjudication, the same cannot be said for the adjudicator nominating bodies (ANBs). That means ANBs may inadvertently fall foul of their own policy of appointing the same adjudicator to deal with disputes between the same parties under the same contract. Therefore, the emphasis is now on the parties not to try and pull a “fast one” and for adjudicators to resign promptly in such circumstances.

Kitchen sink disputes on the increase?

Another (possibly unforeseen) consequence of Deluxe v Beck is an increase in the sort of kitchen sink disputes that adjudication may be less well suited to deal with, a sort of reverse of the bite-sized chunks of a dispute being referred.

It is still early days for this one, but it is something I anticipate seeing more of. If we take the Deluxe v Beck example, clearly Deluxe’s claim over an extension of time and prolongation costs could have been wrapped up in one adjudication that also involved the release of the retention. It may have required careful drafting of the adjudication notice, but nothing more than that.

The down side is that this may lead to even more jurisdictional challenges, based on the dispute not disputes rule. In Penten Group v Spartafield, Coulson J may have suggested that the court will have to give adjudicators “some latitude” when it comes to dealing with “complex questions as to contract formation, appropriate terms and the like” following the repeal of section 107. However, it is arguable that “some latitude” will also be required in dealing with disputes that involve multiple strands or issues (borrowing from Akenhead J in TSG Building Services v South Anglia Housing).

Consistency matters

Another issue that arises relates to ensuring there is consistency in the decisions adjudicators reach, particularly in disputes involving multiple works packages. It will be less than ideal in many situations for different disputes to be dealt with by different adjudicators. A lack of consistency could derail the whole process.

A final thought

It is just a thought, but how long will it be before we see a party arguing that by naming a single adjudicator in the contract, the parties have agreed to refer all disputes to that individual and that agreement extends to dealing with more than one dispute at the same time?

 

 

MCMS Ltd Matt Molloy

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