Some years ago I wrote a number of blogs about the long-running legal battle between Gary Paice and Kim Springall (property developers) and MJ Harding (the building contractor). That really was the case that kept on giving, and I’m not sure we’ve had two parties provide such rich blog pickings since.
However, I think there might be a favourite to take this most coveted of crowns in the form of the disputes between Sudlows Ltd (the contractor) and Global Switch Estates 1 Ltd (the employer). Although we are only on the second reported TCC enforcement judgment (some of you may recall I wrote about the last one in January 2021), they have had six adjudications and, given that it is clear from the latest judgment handed-down by Waksman J in December 2022 that the parties are still some £16.5 million apart, I suspect we may see more of them in the future.
I appreciate that many of you may already be aware of this very well written judgment, and some commentators are clearly of the view that it could have a significant impact on serial adjudications.
But is that really the case or does the judgment turn on its facts? I want to explore that, and consider what lessons adjudicators in particular can take from this judgment.
Sudlows v Global Switch
In December 2017, the parties entered into a contract based on the JCT Design and Build contract, 2011 Edition, for significant electrical works at the employer’s premises at East India Docks House in London. The contract sum was £14.8 million.
This particular dispute concerned works forming “Section 2 of the sectional completion”, which involved building a new private electricity sub-station at the site. To do that, new high-voltage cables had to be installed. These had to be brought from another part of the site and this involved installing ductwork under a main road that divided the site. The ductwork (the enabling works) was constructed by or at the employer’s instruction before the contractor started work on site.
However, the ductwork works were delayed and the contractor did not start work until May 2019. Shortly afterwards, there was an issue with the cabling, which the contractor alleged was because of defective ductwork. In summer 2020, another party carried out cabling work and the contractor refused to “terminate, connect and then energise” those cables.
In January 2021, the contractor started an adjudication seeking an extension of time for “Window 29”, which was a period of time between 29 May 2020 and 18 January 2021. The fifth adjudicator (Mr Curtis) decided the contractor was entitled to an extension of time to 8 December 2020. In reaching this conclusion, Mr Curtis made a decision regarding matters that were Relevant Events under the parties’ contract (defective ducting and delays caused by taking the cable work out of the contractor’s scope of work).
Following the fifth adjudication, the employer omitted the energisation works from the contractor’s scope of work. Practical completion was certified on 7 June 2021 and the cables successfully energised (by another party) in August 2021.
Thereafter, the contractor applied for an extension of time from 19 January 2021 to practical completion on 7 June 2021. It relied on the same Relevant Events as the fifth adjudicator had considered. When the application was rejected, the contractor referred the dispute to adjudication and Mr Molloy was appointed as the sixth adjudicator. As well as the further extension of time claim, he was also asked to consider the contractor’s loss and expense claim for £12 million.
At the start of the sixth adjudication, there was an issue as to how far Mr Molloy was bound by Mr Curtis’s decision concerning the Relevant Events. To deal with this, Mr Molloy asked the parties to confirm whether they would like him to consider an alternative position, which is what he proceeded to do. He concluded that he was bound by Mr Curtis’s findings on the Relevant Events and awarded the contractor a further extension of time of 133 days and some £997,000. In his alternative decision, he said that if he was not so bound, then his conclusion was that the events in question were not Relevant Events and he awarded the employer some £209,000. He also set out alternative interest calculations and produced alternative figures for the apportionment of his fees.
Enforcement proceedings
The contractor commenced Part 7 enforcement proceedings for the £997,000 awarded it by Mr Molloy. In response, the employer brought Part 8 proceedings, seeking a declaration that:
- Mr Molloy had breached the rules of natural justice by taking a too narrow view of his own jurisdiction by holding that he was bound by the findings of Mr Curtis.
- Mr Molloy’s alternative decision should be enforced.
After detailed analysis of the case law, the judge concluded that the disputes in adjudication five and adjudication six were not the same or substantially the same, which meant Mr Molloy was not bound by certain findings in Mr Curtis’ decision. Consequently, by deciding he was bound, he had breached the rules of natural justice.
However, he had jurisdiction to make detailed alternative findings, and those were enforceable. His decision was severed and enforced in part.
Does the case turn on its facts?
I think that a lot of adjudicators would have proceeded in the same manner as Mr Molloy did, namely concluding that they were bound by Mr Curtis’s finding that the defective ductwork and Sudlow’s reasonable refusal to energise the cable amounted to a Relevant Event – that would certainly appear to have been an “essential component” of Mr Curtis’s decision. Furthermore, the employer was basically relying on further evidence concerning the same Relevant Event and, as Akenhead J stated in Carillion Construction Ltd v Smith:
“The fact that different or additional evidence, be it witness, expert or documentary, over and above what was relied upon in the earlier adjudication, is deployed in the later claim to be referred to a second or later adjudication, will not usually alter what the essential dispute is or has been. The reason is that evidence alone does not generally alter what is the essential dispute between the parties. One needs to differentiate between the essential dispute and the evidence required to support or undermine one party’s or the other’s case of defence”.
Waksman J considered that the key differences in this case arose from the fact that the two adjudications concerned different periods of time, as well as the fact that the new extension of time claim involved new materials and the event of testing. These were not, and could not, have formed part of the dispute in the fifth adjudication. Hence Waksman J’s finding that Mr Molloy had not been bound by Mr Curtis’s findings as to the Relevant Event, and that his principal decision amounted to a breach of the rules of natural justice.
The judge was quite clear that both components (namely that the two adjudications concerned extension of time claims for different periods arising from the same event, and that the new testing evidence could not have been presented in the previous adjudication) were key to his finding that the disputes were not substantially the same. I cannot recall ever coming across a set of remotely similar facts, which is why it could be argued that this case will most probably turn on its facts.
However, could the same principles be applied in serial adjudications concerning interim payment applications? For example, if an adjudicator decided that a contested variation constituted a variation in adjudication one concerning interim application 20, but then the employer presented new evidence regarding that variation in adjudication two concerning interim application 21, would the subsequent adjudicator be bound by the initial finding as to the validity of the variation? If not then it is arguable that this case could have wider ramifications.
Lessons for adjudicators
Dealing with serial adjudications can be a real challenge for adjudicators, particularly as issues often need to be resolved at an early stage of the proceedings so that parties know whether they need to deal with particular points in their submissions.
However, Mr Molloy’s approach of getting the parties agreement for him to consider the alternative position was, as Waksman J put it, a “very sensible approach”. He evidently explained both positions, which enabled his decision to be severed and his alternative findings enforced.
It shows that sometimes adjudicators shouldn’t be afraid of thinking outside the box and putting procedural proposals to parties that they might not otherwise have thought of. In this case it meant that the time spent in adjudication six was not wasted (as the judge noted).
This feels to me like the lid on Pandora’s box has just been lifted up for a peek inside.
I agree that Mr Molloy acted entirely properly in this adjudication. He asked for and received permission to issue alternative decisions. But I am not sure how many parties would be so willing to repeat this course of action in future cases, simply because of the attendant costs in taking this approach.
As an aside, I am troubled that an adjudicator can be found to be in breach of the rules of natural justice by deciding that a decision of a previous adjudicator is binding on him. That was a point that was argued out before Mr Molloy, he considered it and made a decision on the point. If that was an incorrect decision in law, was this not one that the adjudicator was entitled to reach in any event?
As for the dispute itself, this looks very much like a continuation of the same delay, albeit analysed in a different window with new evidence having come to light and being considered at a later date.
So, if you extend that principle to variations claimed in interim payment applications. Are we back at a position were a party could have two bites of the same cherry simply because, it will be argued, that new evidence has come to light. I thought we had gone past these lines of arguments?
I think Jonathan Cope is correct when he says that many adjudicators would have followed Mr Molloy’s decisions that the previous adjudicator’s reasons in adjudication number five were an essential part of that decision and as such Mr Molloy was bound by them.
So where does this leave us?
Parties and advisers like to know where they stand and the rules of the adjudication game. This case has introduced a degree of uncertainty on the temporarily binding nature of adjudication decisions. I am not convinced that this judgement is good for our industry.
For these reasons, I very much hope there is an appeal and we get some more guidance from the court on these very important issues.