In this blog, I focus on “re-adjudication” of a dispute. In summary, Eurocom Ltd v Siemens plc confirmed that once a claim had been adjudicated, it could not be re-adjudicated, regardless of how the referring party wanted to repackage or re-label the same claim. Others have commented on nominating an adjudicator, so I’d like to start with some brief thoughts on that aspect.
Nominating an adjudicator
In their blog, Fionnuala McCredie QC and Paul Bury focused on the issue of nomination of an adjudicator. In summary, Ramsey J found, for the purpose of a summary judgment application, that the appointment of Mr Anthony Bingham (the second adjudicator) was not valid. He had no jurisdiction because “there is a very strong prima facie case that Mr Giles deliberately or recklessly answered the question ‘Are there any Adjudicators who would have a conflict in this case?’ falsely and that therefore he made a fraudulent representation to the RICS”.
That aspect of the case has shone a bright light on some of the darker aspects of the nomination process for adjudicators and is rightly attracting considerable attention. All I would add is that, from a client’s perspective and as the ultimate users of the construction adjudication process, both as a referring party and responding party, our view is there should be transparency and fairness in the nomination process. Transparency can be achieved by the simple task of the nominating body copying in all correspondence from a referring party to a responding party (and vice versa). Fairness can be achieved by limiting the scope for one party to influence the nomination of the adjudicator.
Facts and background
A number of facts are relevant for my focus on “re-adjudicating” a dispute. Following termination of Eurocom’s engagement on the contract:
- In August 2012, Eurocom launched an adjudication against Siemens seeking about £1.4 million. Mr Matthew Molloy (the first adjudicator) was nominated and appointed via the RICS (as per the contract).
- In September 2012, the first adjudicator found that Eurocom owed Siemens £35,000.
- In October 2013, Knowles Ltd (acting for Eurocom) sent a claim for about £2.2 million.
- Following an application to the RICS on 21 November 2013 by Knowles, the second adjudicator was nominated the next morning.
- On 28 January 2014, after numerous rounds of submissions, the second adjudicator decided that Siemens should pay Eurocom around £1.6 million.
The judgment re-iterated the rule that a party is not allowed to re-adjudicate matters. If a party is dissatisfied with a decision then its recourse is to go to court (or arbitration). There are good public policy reasons for this. Costs of adjudications are not normally recoverable. It would be patently unfair to allow a referring party multiple bites of the cherry, until it gets what it wants, with a respondent repeatedly bearing costs that it cannot recover, even if successful. At least in a court action, if it successfully defends a claim it may be able to recover its costs.
Siemens contended throughout the second adjudication that most of the claims had already been referred to and/or decided by the first adjudicator and this was a case of re-adjudication.
Eurocom contended that this was a new claim for damages for breach of contract and that the first adjudication was an “interim account” adjudication whereas the second adjudication was “a final account claim”.
The second adjudicator agreed with Eurocom and stated in his decision:
“There is a real likelihood that the Decisions in Adjudication No. 1 are about sums due, merely on an interim account basis: an interim account is just that… interim. It does not bind or shut out the Final Respondent Account. It is nevertheless open to the parties to elect to adopt decisions of an adjudicator arising out of an interim account Adjudication as appears to be the case here in the list provided by Eurocom. The adjudicator (here) in Adjudication No.2 does not accept that any other Decisions in Adjudication No.1 are binding.”
Eurocom’s and the second adjudicator’s approach would, in my view, make a mockery of the prohibition on re-adjudication. To illustrate the point, take the following example:
- A subcontractor claims £40,000 for a variation (say extra cabling) in payment application 10. The contractor values it at £5,000.
- The subcontractor adjudicates on this in adjudication one and adjudicator one decides the value of this variation is £10,000.
- The subcontractor is unhappy and then submits payment application 11 and claims for the same variation, this time at £80,000. It then starts adjudication two and a different adjudicator decides this same variation is valued at £80,000.
The judge disagreed with Eurocom and the second adjudicator, and stated:
“Eurocom commenced the First Adjudication after the Sub-Contract had been terminated and therefore there was no difference in the work which had been carried out at the stage when the First Adjudication and Second Adjudication took place. The First Adjudication and the Second Adjudication dealt with the same variation claims. I therefore consider that one adjudication did not deal with an interim application and the other a final application. A party who has sought and obtained an adjudication decision dealing with the value of all variations cannot then seek to have another adjudicator determine claims for the same variations by way of a ‘second bite of the cherry’.”
He concluded that the second adjudicator “did not have jurisdiction to decide those elements”.
The judgment confirms the prohibition on re-adjudicating the same claim. A party cannot simply repackage claims and seek to re-adjudicate matters. Decided matters are binding in the interim and the proper course for a dissatisfied party is to go to court (or arbitration) to have the matter finally determined.