Any adjudicator will tell you that dealing with jurisdictional challenges can be one of the most demanding parts of the job. Such challenges must be dealt with at speed because the parties need to know whether the reference will be proceeding, and the adjudicator’s non-binding conclusion can have far reaching consequences. For example, reaching a conclusion that the contract in question was not a construction contract will result in the adjudicator resigning and the referring party will probably not refer the dispute to another adjudicator.
Thankfully, we no longer have to deal with challenges that a contract is not in writing as, in many respects, they were even more challenging, often involving quite a close analysis of what the parties had agreed, or not, as the case may be. For those of you who have not been practising in this area for long, take a look at cases such as RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd for an insight into the “delights” of parties arguing whether a contract was in writing, whether oral variations had been agreed, and so on.
Another issue that can sometimes be quite taxing is when there is, at least on the face of it, a cross-over between substance and jurisdiction. This often arises where there is a question as to whether the work was undertaken under one contract or multiple contracts, and it can leave adjudicators wondering whether they should deal with it as a jurisdictional point or as part of their decision on the substantive dispute. It’s just such a case I want to discuss today, which dates back to December 2020, Ex Novo v MPS Housing.
Ex-Novo v MPS Housing
This was a payment dispute that related to works carried out to local authority properties in Wrexham. In November 2020, the adjudicator decided that Ex Novo was entitled to some £307,000. However, MPS did not pay and, in the enforcement proceedings that followed, it argued that the adjudicator lacked jurisdiction because the work was carried out under “at least” four separate contracts. The adjudicator had considered this point and had decided there was only one contract (a sub-contract dated November 2018), and that these were all “sundry instructions” given under it.
The judge explained that the approach to take depended on whether the reference to the adjudicator necessarily involved the adjudicator having jurisdiction to determine their jurisdiction. If that was an integral part of the reference then the decision as to jurisdiction was unchallengeable. However, if it was not an integral part but was only being determined as a preliminary to determining the “reference proper” then the adjudicator’s jurisdiction decision was not unchallengeable.
He turned to the authorities, which started with Akenhead J’s judgment in Air Design (Kent) Ltd v Deerglen (Jersey) Ltd, where he said:
“However, there are two further factors which effectively override considerations as to whether or not there were one, two, three or four contracts between the parties which establish that the Adjudicator was acting within his proper jurisdiction:
(a) The substantive decision-making process upon which the Adjudicator had to embark in relation to the disputed claim put before him necessarily involved a consideration of whether there was more than one contract … It was thus within his jurisdiction to decide in effect that there was one contract, albeit one that may have been varied by agreement.
(b) There may be cases, and this is clearly one, where substance and jurisdiction overlap so that it is within the Adjudicator’s jurisdiction to decide as matters within his or her substantive jurisdiction whether there have been in effect variations to the contract pursuant to which he or she has properly been appointed Adjudicator.”
Akenhead J returned to this topic in Camillin Denny Architects Ltd v Adelaide Jones & Co, where he said Air Design was:
“… a case in which there could be no doubt that the adjudicator was properly appointed under the first contract and there could be no argument that, in that capacity, he had jurisdiction to decide whether later ‘contracts’ were simply variations of the first contract or stood on their own entirely separately as contracts in their own right. I am not convinced that this case is authority for any proposition other than that there may be cases in which adjudicators properly appointed have jurisdiction to resolve jurisdictional issues if and to the extent coincidentally those issues are part of the substantive dispute referred to adjudication.”
Akenhead J provided further elucidation of the position in Supablast (Nationwide) Ltd v Story Rail Ltd:
“Generally, an adjudicator properly appointed under the original contract between the parties to the adjudication will have jurisdiction to determine whether or not particular work was or was to be treated as a variation under or pursuant to that original contract … That argument will or may in effect give rise both to a substantive defence under the original contract (‘there is no entitlement to payment because there is no variation’) as well as a jurisdictional challenge (‘the adjudicator has no jurisdiction to decide because the extra work cannot have been ordered under the original contract which gives the adjudicator jurisdiction in the first place’). This is where there will often be an overlap between jurisdiction and substance.”
In Viridis UK Ltd v Mulalley & Company Ltd, HHJ Stephen Davies considered the judgments in Air Design, Camillin and Supablast and said Air Design:
“… is authority only for the proposition that where an adjudicator is properly appointed under a contract about which there is or can be no dispute, then he may also have jurisdiction to resolve jurisdictional issues if they are coincidentally part of the substantive dispute referred to him.”
All of this led the judge to conclude that it was necessary to distinguish between two kinds of case:
- Those where it was necessary for an adjudicator to decide matters as a preliminary to deciding the reference substantially. Whether the adjudicator has jurisdiction is a “paradigm example” of a matter that needs to be determined on a preliminary basis.
- Ones where matters are such that the adjudicator needs to determine them in order to resolve the dispute referred. The single contract/multiplicity of contracts issue is an example of where there might be overlap between a preliminary determination and a substantive determination.
However, he didn’t stop there. He acknowledged that the court must also consider why an adjudicator made a decision, what was its purpose? He suggested that an adjudicator’s decision (whether on jurisdiction or something else) will only be within jurisdiction and unchallengeable if:
“… it was necessary for the adjudicator to make that decision not just as a part of the process of conducting the adjudication but also as an element and a necessary element in resolving the matter referred to him or her once the question of jurisdiction has been resolved.”
The fact that there might be an “admitted and unchallenged contract” and then a dispute over whether work was carried out under that contract as varied or under a number of contracts did not mean the adjudicator’s decision on that was “necessarily conclusive and within the adjudicator’s jurisdiction”. This was something the court had to look closely at. Also, the fact that there was a contract under which the adjudicator could be validly appointed did not mean the adjudicator had an unchallengeable jurisdiction to determine the question of jurisdiction if the challenge was based on a multiple contract argument.
On the facts, the judge decided that the adjudicator’s decision on jurisdiction – was there a single contract or multiple contracts – was challengeable in the enforcement proceedings. It was necessary for the adjudicator to determine the issue to decide whether to proceed with the adjudication but it was not necessary to determine the issue to decide the parties’ substantive payment dispute (what was the effect of a failure to serve a pay less notice?). It was not a decision the adjudicator:
“… was entitled to make as within his jurisdiction albeit it was one that he was required to make as part of the process of determining the adjudication.”
However, for the purposes of a summary judgment application, there was no real prospect of the adjudicator’s decision that there was one contract, as varied, being shown to be incorrect and so his decision was enforced.
This case appears to be authority for the proposition that, if it is necessary for an adjudicator to decide a point not just as a part of the process of conducting the adjudication, but also as a necessary element in resolving the matter referred to them once the question of jurisdiction has been resolved, then the adjudicator’s decision on that point is likely to be unchallengeable.
It may well be that I hadn’t fully appreciated the implications of Akenhead J’s previous judgments on this point in cases such as Air Design, but personally I think that this judgment could have quite far reaching consequences. For example, where there is potentially an issue concerning multiple contracts, a referring party could try and frame a referral so that such a challenge will inevitably involve the adjudicator having to deal with it in the substance of their decision, as well as in respect of jurisdiction, in order to try and make it unchallengeable.
Furthermore, I wonder if it matters how the adjudicator frames the point in their decision? For example, I deal with points of jurisdiction separately to my substantive decision and always make it clear that it is a non-binding conclusion (unless the TeCSA rules apply and I have jurisdiction to determine my own jurisdiction). If an adjudicator clearly states that a conclusion is non-binding is that challengeable notwithstanding the cross over with substance?
Given that the question of whether an adjudicator’s decision on such points is challengeable is so fact dependent, I suspect that it is not the last time we see such issues arise in TCC enforcement proceedings. Furthermore, as the law on this point appears not to have been considered by the Court of Appeal, perhaps it won’t be long before it comes before Coulson and/or Carr LJJ?