In Harding v Paice, Edwards-Stuart J has considered the meaning of paragraph 9(2) in Part 1 of the Scheme for Construction Contracts 1998.
Paragraph 9(2) provides that:
“An adjudicator must resign when the dispute is the same or substantially the same as the one which has previously been referred to adjudication and a decision has been taken in that adjudication.”
Whether dispute A is the same as dispute B is a question of fact and degree (Dyson LJ in Quietfield v Vascroft Contractors Ltd). In applying this test it is necessary to consider the terms, scope and extent of the dispute referred and the first adjudicator’s decision, and to ask whether the one dispute is the same or substantially the same as the other.
The courts have considered this test in a number of decided cases. For example, see:
- HG Construction Ltd v Ashwell Homes (East Anglia) Ltd.
- Benfield Construction Ltd v Trudson (Hatton) Ltd.
- Barr Ltd v Klin Investment UK Ltd (which was a decision of the Outer House of the Court of Session).
- Redwing Construction Ltd v Charles Wishart.
- Eurocom Ltd v Siemens plc.
But what happens when the scope of the decision in the first adjudication does not match the scope of the dispute referred in that adjudication?
For example, suppose that in the first dispute the referring party raised issues in the alternative. Would the first adjudicator’s decision on the referring party’s primary case prevent the second adjudicator from determining the issue raised by the alternative case?
Harding v Paice
The court had to consider this question in Harding v Paice. Edwards-Stuart J held that, in order for paragraph 9(2) of the Scheme to be triggered, there must be a decision on the dispute referred in the previous adjudication. In other words, the subsequent adjudicator need not resign if the dispute referred to him is the same or substantially the same as the dispute previously referred, so long as the dispute subsequently referred has not been decided by the previous adjudicator.
It is clear from Edwards-Stuart J’s reasoning that this must be the right answer (see paragraphs 41 to 45, judgment). If the position were otherwise, a party could refer a number of questions to adjudication, under the umbrella of being part of one dispute, and then invite the adjudicator to decide only one or two of them, thereby preventing the other party from subsequently referring any of the undecided issues to another adjudicator.
In Harding, Harding’s primary case in the previous adjudication was that it was entitled to payment of the sum claimed because Paice had failed to serve a valid pay less notice pursuant to the Scheme for Construction Contracts 1998 (as amended). Harding’s alternative case was essentially to invite the adjudicator to determine the proper value of its account, but to do so only in the event that the adjudicator rejected Harding’s primary case.
In his decision, the adjudicator accepted Harding’s primary case and so the issue raised by Harding’s secondary case, namely the proper value of the works, remained undecided.
Paice subsequently referred to adjudication the valuation of the disputed account. This was met by Harding’s application for an injunction restraining Paice from continuing with the adjudication on the ground that the dispute was the same or substantially the same as the dispute previously referred. For the reasons summarised above, the court rejected Harding’s argument in relation to paragraph 9 (2) of the Scheme.
Clause 8.12.5 of JCT IC 2011
The parties’ building contract was based on the JCT Intermediate Building Contract, 2011 Edition (IC 2011). Clause 8.12 of IC 2011 deals with the consequences of termination, including the mechanism for determining payments due to the contractor (Harding) following termination.
Clause 8.12.5 provides as follows:
“…after taking into account amounts previously paid to the Contractor under this Contract, the Employer shall pay to the Contractor (or vice versa) the amount properly due in respect of the account within 28 days of its submission to the other Party, without deduction of any retention.” (Emphasis added.)
The court also rejected Harding’s argument that the previous adjudicator had in fact decided “the amount properly due in respect of the account”, for the purposes of clause 8.12.5 of the contract.
The previous adjudicator had found that, if Paice wished to pay less than the sum stated in Harding’s clause 8.12 account, then it needed to issue a pay less notice under the Scheme (a proposition about which Edwards-Stuart J expressed no opinion).
Edwards-Stuart J held that, on its proper construction, the absence of a pay less notice in response to a clause 8.12 account does not convert that sum into “the amount properly due in respect of the account”. Thus, it remained open to Paice to have the question of what sum was properly due in respect of the contractor’s account pursuant to clause 8.12.5 determined, either by adjudication or litigation. In those circumstances, Harding’s application for an injunction was dismissed.
It is good that this case hasn’t upset considered wisdom on the meaning of paragraph 9(2) of the Scheme, or allowed a party to bind forever the employer to an account submitted under JCT clause 8.12 because it failed to serve a valid pay less notice.
Charles acted for Mr Paice and Ms Springall.
