Last month, Fraser J handed down his judgment in Aecom Design Build Ltd v Staptina Engineering Services Ltd, where he held that the adjudicator (Ms Gaynor Chambers) did not exceed her jurisdiction or breach the rules of natural justice. As a result, the court declined to make a declaration that would have severed parts of her decision.
You may have seen what Charles Pimlott had to say about the judgment and noted his comment that it:
“… provides a powerful reminder that adjudication is merely a temporary resolution of any particular dispute and that, only in the plainest of cases, will the court uphold an enforcement challenge on the grounds of excess of jurisdiction or a breach of the rules of natural justice.”
Therefore, if you are wondering what I can add to that, read on.
Aecom v Staptina
Aecom was the main contractor to Thames Water Utilities Ltd for certain works at its Long Reach treatment plant. Aecom entered into a sub-contract with Staptina under which Staptina agreed to undertake mechanical installation works at Long Reach. The sub-contract was based on the NEC3 Engineering and Construction Short Subcontract form.
In March 2016, the sub-contract was terminated, although we do not know the details of why. This led to two adjudications before Ms Chambers.
In November 2016, Staptina started a third adjudication and Ms Chambers was again appointed as the adjudicator. This third dispute centred on whether Aecom was entitled to make deductions from sums otherwise due to Staptina following the termination. The adjudicator decided that Aecom could make deductions but that this right was:
“… confined to a deduction of the sum (if any) it would have cost [Staptina] to carry out the relevant rectification works…”
It is this adjudicator’s decision that ended up before Fraser J, with Aecom objecting to the ruling on the nature of the deduction. It said that the adjudicator should have answered the “yes/no” question of whether the contractor was entitled to make a deduction under the sub-contract after the letter of termination. Going further than this meant the adjudicator had exceeded her jurisdiction and had also breached the rules of natural justice by not allowing Aecom to make submissions on the nature of any permitted deductions. Fraser J clearly disagreed.
Charles looked at both of these points and I am not going to repeat his thoughts here. Instead, what struck me was how this is such a subjective and fact-specific issue. Even though the adjudicator’s approach did not breach the rules of natural justice this time, another judge with another set of facts may decide differently. Therefore, as a matter of good practice I would urge adjudicators to err on the side of caution and always raise issues of internal jurisdiction with the parties if they are uncertain as to the precise scope of the dispute they have jurisdiction to decide. This gives the parties the opportunity to comment on the scope of the adjudicator’s jurisdiction and, if necessary, also make submissions on the substantive point that the adjudicator considers is within their jurisdiction. In this case, that would have been the question of whether the nature of any deductions fell within the adjudicator’s jurisdiction.
The “catch all” element
The second part of the adjudicator’s decision (the nature of the deductions) arose because the notice of adjudication included the wording:
“… such other relief as the Adjudicator deems proper.”
As the adjudicator noted in her decision:
“I am empowered to decide how the sums to be deducted are to be assessed in the event that I find that deductions can be made, rather than simply stating that some form of deductions can be made in principle and no more. That is inherent in the wording of the Notice, which requests that I am to make ‘such declaration as the Adjudicator deems proper’.
Fraser J made it clear that the inclusion of such provisions can allow an adjudicator to make an alternative declaration, as the adjudicator had done in this case. However, he also sounded an important word of caution when he stated that:
“… such wording is most unlikely to be determinative on its own, and should not be seen by parties as giving any adjudicator carte blanche to go outside the scope of the dispute referred to them in any particular case.”
I most often see responding parties trying to rely on “catch all” provisions in smash and grab adjudications. In particular, where a referring party is claiming a sum of money on the basis that no payment and/or pay less notice has been served, they will obviously state the sum claimed in the declaration sought, but will also sometimes include the words “or such other sum as the adjudicator may decide” (or something similar). On a number of occasions I have come across responding parties arguing that this means that I have jurisdiction to consider the merits of the sum due.
To date, I have given all of these challenges relatively short shrift because it is quite clear to me that a notice of adjudication needs to be read as a whole in order to define the extent of the dispute referred. The scope of a dispute cannot be widened by a “catch all” provision in circumstances where it is clear from the notice that, no matter what was in dispute prior to the notice being issued, only the technical right to payment of a notified sum due to a lack of a payment notice and/or pay less notice has been referred to adjudication. If the merits of the sum due had been referred to adjudication then it begs the question of why the referring party would not have made any submissions or served any evidence regarding this aspect of the dispute.
In my view, this is consistent with the decided cases that make it clear that jurisdictional issues will be considered by reference to the nature, scope and extent of the dispute identified in a notice of adjudication. The TCC has made it clear that the scope of a dispute can be expanded by the parties’ submissions and, in Stellite Construction Ltd v Vascroft Contractors Ltd, Carr J stated that:
“Generally, given the limited timetable allowed by adjudication, on the question of the scope of the referred dispute the ‘courts are going to have to give adjudicators some latitude’ and not take an ‘unduly restrictive’ view (see Penten Group Ltd (supra) per Coulson J at paragraph 28).”
However, in my view this does not mean that an adjudicator’s jurisdiction can be expanded by catch-all provisions. This was evidently what Fraser J was cautioning against.