REUTERS | Darrin Zammit Lupi

Are jurisdictional reservations flavour of the month?

When I wrote about Coulson LJ’s judgment in Bresco  v Michael J Lonsdale, Cannon  v Primus back in January, I said that I thought the waiver points applicable to jurisdictional reservations were:

“… of greatest use to parties and those representatives who deal with adjudications on a day to day basis. After all, how often do adjudications involve insolvent parties? I certainly haven’t dealt with one for some time now. By contrast, I see general (and specific) reservations all the time.”

Fast-forward two months and it seems that, for once, my crystal ball skills are effective, as O’Farrell J has applied Coulson LJ’s principles on the reservations a party made (both general and specific) on two occasions: Ove Arup v Coleman Bennett and Donald Insall Associates Ltd v Kew Holdings Ltd.

Ove Arup and Partners International Ltd v Coleman Bennett International Consultancy plc

This case was about Ove Arup being engaged to provide engineering services in relation to a feasibility study into using Hyperloop technology to link Manchester and Leeds as part of the Northern Powerhouse scheme. Apparently, Hyperloop is:

“… a mode of passenger and/or freight transportation in which pods are propelled by magnetic levitation technology through a partially evacuated tube, which is mounted on stilts or sited underground, at speeds of up to 760mph.”

It sounds like something from a science fiction film (and looks like it too, from the pictures I’ve seen) and I’m not sure how such a system would work across the Pennines, which is hardly flat terrain (although being immune to the winter weather could be handy). Perhaps that is why the project didn’t progress and the parties ended up in a dispute over the fee payable to Ove Arup.

During the adjudication, Coleman Bennett International (CBI) made a general reservation:

“CBI does not accept that Part 2 of the Housing Grants, Construction and Regeneration Act 1996, or the Scheme for Construction Contracts Regulations 1998, apply to the matter or matters referred to in the notice and fully reserves CBI’s position in relation to jurisdiction. CBI does not accept that this adjudication has been validly commenced or that the appointment adjudicator has jurisdiction in respect of the referring party’s claim for the brief reasons set out below.”

Those “brief reasons” included arguments regarding “More than one dispute/More than one contract” and “The wrong parties”. It continued:

“Whilst CBI will participate in the adjudication, it will do so under protest and without prejudice to its contention that any adjudicator or adjudicators that are appointed lack jurisdiction. CBI therefore disputes jurisdiction on the grounds summarised above and on further jurisdictional issues that we have not yet had the opportunity to investigate in the limited time we have had since the service of the notice.”

In the enforcement proceedings, CBI raised three jurisdictional grounds: the contract was not a construction contract as it was not a construction operation within the meaning of section 105 of the Construction Act 1996; there was more than one dispute; and the adjudicator’s jurisdiction turned on questions of fact that could not be properly determined in the adjudication or enforcement proceedings.

O’Farrell J gave a number of reasons why CBI was not able to rely on its jurisdictional challenge but, before doing that, she noted that:

“Fortuitously for the court, but perhaps not so much for the defendant, the Court of Appeal has very recently handed down a decision which is on point in respect of the issue of waiver and reservations of jurisdictional points taken in the context of adjudication.”

Picking up on a point Matt made recently, the parties probably had a pretty clear idea of how the judgment was going to go at this point (that is, by paragraph 17).

I thought it was really interesting that the first reason O’Farrell J gave for concluding that CBI was precluded from relying on its jurisdictional challenge was because it was not clear to the adjudicator what the challenge might be, which meant the adjudicator “had nothing other than a bare assertion on which to base his decision”. As the judge noted, it was “hardly surprising” the adjudicator accepted Ove Arup’s case.

The second reason dealt with two specific jurisdictional points where CBI had “decided to pin its colours to the mast and take those very specific objections”. As the adjudicator had dealt with them and rejected CBI’s challenge, it was inappropriate to permit CBI to raise a new form of jurisdictional challenge in order to resist enforcement.

I think that the third reason O’Farrell J gave  is the most interesting, as it directly applied Coulson LJ’s test at paragraph 92(iv) concerning general reservations, where he said that a general reservation may be effective, but not if:

“(i) At the time it was provided, the objector knew or should have known of specific grounds…

ii) [Or that it] was worded in that way simply to try and ensure that all options… could be kept open… .”

The objection raised in the enforcement proceedings was clearly one that CBI should have known about during the adjudication, and the purpose of its general reservation was evidently to keep all options open for the future.

Donald Insall Associates Ltd v Kew Holdings Ltd

This was a much more conventional project, with Donal Insall Associates (DIA) employed to provide architectural services in respect of works to a property called the King’s Observatory, which was to be converted from commercial to residential use.

This project progressed during the period 2010 to 2017 before a dispute arose over the fees payable to DIA for its services.

From the reservations perspective, I don’t there is much to say, and O’Farrell J summed it up in paragraph 47 of her judgment:

“Having regard to the guidance given by Coulson LJ in the Bresco case, this is a classic case of a defendant scraping around after the event to find a potential jurisdictional challenge that was not made either in the formal jurisdictional challenge at the beginning of the adjudication, or indeed in the additional exchanges and submissions made during the course of and at the conclusion of the adjudication. It is therefore too late for the defendant to raise this argument.”

She arrived at this conclusion following a review of what had been said during the adjudication and subsequently. In effect, during the adjudication Kew had argued that there was no contract between it and DIA; alternatively that the parties’ contract was not a construction contract within the meaning of section 107 of the Construction Act 1996 because it was not in writing or evidenced in writing. There was also a crystallisation issue.

These challenges had been rejected by the adjudicator, who found there was a contract and that it was between DIA and Kew. Consequently, he concluded that DIA was owed some £174,000.

These challenges went to the heart of whether or not the adjudicator had jurisdiction and  O’Farrell J agreed with the adjudicator that he did. One might think that was the end of it, but in the enforcement proceedings Kew raised two new jurisdictional challenges. O’Farrell J noted that Kew had not made a general reservation and that three specific challenges had been raised, considered and rejected by both the adjudicator and the court. However, she was prepared to entertain one of the “new” challenges because it was an issue that arose during the adjudication. This didn’t really assist Kew, as she quite quickly dismissed it.

What do I take from all of this?

I think the Ove Arup judgment is the most interesting and provides a useful reminder for parties and representatives that they must set out jurisdictional challenges with precision, and fully and cogently explain their arguments. Being vague is unhelpful and, as Coulson LJ said, one has to be “appropriate and clear”.

From a practical perspective, being “appropriate and clear” will also assist adjudicators who have to deal with such challenges promptly as they arise. The outcome of these challenges can be far reaching and so it is in the responding party’s interest to ensure that the adjudicator has the full scope of the arguments.

Also, it is helpful to see the TCC applying the Court of Appeal’s judgment with such clarity, and parties should now be in no doubt that a general jurisdictional reservation will be of limited use where they knew or should have known of the specific grounds during an adjudication.

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