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TCC reminds parties too many adjudication challenges are without merit

These days, adjudicators don’t always get named in TCC judgments. It seems to depend on who the judge is, what the matters in dispute are and how well the adjudicator performed. That said, Coulson J is one judge who seems to like naming the adjudicator and the keen-eyed among you will have noticed that Matt was name-checked in two of his most recent judgments. Therefore, I will be looking at those cases.

This week it is the turn of  AMD Environmental Ltd v Cumberland Construction Company Ltd (I’ll leave Penten Group Ltd v Spartafield Ltd for another time).

AMD Environmental Ltd v Cumberland Construction Company Ltd

This was a fruity little number with Coulson J pulling no punches in the way he described the challenge to enforcement of the adjudicator’s decision. His indemnity costs order probably gives the game away! First though, a few background facts.

The dispute related to the mechanical and electrical works that AMD (as sub-contractor) carried out at the Hilton Hotel on Park Lane, London.

By March 2015, AMD had issued application 11 claiming a final account sum of some £527,800. Cumberland (the contractor) did not agree AMD’s claim. Although the parties exchanged correspondence between March and August 2015, they did not resolve the issue. Consequently, on 2 September 2015, AMD referred the matter to adjudication and RICS appointed Matt Molloy as the adjudicator. The adjudicator issued his decision in October 2015 and determined (among other things) that:

  • AMD’s works were valued at some £465,000.
  • Cumberland’s pay less notice was inadequate and not in accordance with the Construction Act 1996.
  • Cumberland should pay AMD some £78,000 plus VAT, and pay the adjudicator’s fees.

The sums were not paid and enforcement proceedings followed.

Cumberland’s jurisdictional challenges

Coulson J noted that Cumberland had previously raised two jurisdictional points in the adjudication:

Although the first point was not before Coulson J in the enforcement proceedings, he nevertheless felt compelled to comment on it. He described it as “misconceived” because section 107 of the Construction Act 1996 had been repealed with effect from October 2011 (here the sub-contract was entered into in June 2014).

The dispute had crystallised

With regard to the second point, Coulson J noted that it was an argument that the adjudicator had rejected. The adjudicator had been satisfied that, as a result of a five-month gap between application 11 and the notice of adjudication, the parties’ dispute had crystallised. Essentially, Coulson J came to the same conclusion, describing the argument as “hopeless” and suggesting that:

“…this argument is frequently advanced and almost as frequently rejected by the courts.”

He reached this conclusion for a number of reasons:

  • Cumberland had failed to reserve its right to challenge the adjudicator’s decision on crystallisation. Even if its letter of 18 September 2015 was a reservation, it was not an adequate reservation.
  • The parties’ correspondence demonstrated eight months of “too-ing and fro-ing between the parties”, which was ample evidence of a dispute having crystallised. Indeed, as early as December 2014, Cumberland had set out its valuation of AMD’s account, and it hadn’t really moved from that figure. In August 2015, a director of Cumberland wrote saying that it “would very much like a construction court battle with AMD”. That language clearly demonstrated there was a dispute.
  • A party cannot suggest that there is no crystallised dispute because the particularisation is allegedly inadequate (as Cumberland had done). It was wrong in principle to suggest that:

    “…a dispute had not arisen until every last particular of every last element of the claim had been provided.”

  • This case was an ordinary case. Coulson J rejected the suggestion that AMD’s case was “so nebulous and ill-defined” that Cumberland could not “sensibly be required to respond”. The correspondence made it clear that the parties were simply not agreed about the claim.

Request for information no breach

Coulson J rejected the argument that the adjudicator’s request for further information, which AMD complied with, was somehow a breach of the rules of natural justice. He said that such an argument was:

“…tantamount to saying that an adjudicator cannot ask for information which he or she believes will be of assistance in reaching their decision.”

This was contrary to the Scheme for Construction Contracts 1998, which allows the adjudicator “a wide leeway” to ask for evidence (paragraph 13(a)).

Failure to address matters in issue

Cumberland submitted that the adjudicator had failed to take into account Cumberland’s submissions on three variation claims. Coulson J also described this argument as “hopeless”.

In reaching this conclusion, he referred to his own judgment in Pilon Ltd v Breyer Group Ltd, where he summarised the principles, including that adjudicators must answer the question referred to them. If they do that, it doesn’t matter whether the answer they reach is right or wrong, their decision is enforceable (Carillion Construction Ltd v Devonport Royal Dockyard Ltd). Here, Coulson J noted that an:

“…inadvertent failure by an adjudicator to deal with one of many issues, particularly in a final account dispute, will not generally amount to a breach of natural justice or a ground for resisting enforcement.”

Applying those principles to this case, he said:

  • It was wrong to critique the adjudicator’s reasoning.
  • There was no evidence the adjudicator failed to consider Cumberland’s submissions:

    “On the contrary, an analysis of his decision reveals a careful consideration of all the relevant matters.”

  • The adjudicator did not inadvertently or deliberately ignore Cumberland’s submissions.
  • Even if there was a breach, it was not a material breach of the rules of natural justice (the variations amounted to about 15% of the claim).

Interesting lessons

I think the particularisation point is an extremely interesting one. As Coulson J said, suggesting there is no crystallised dispute because the particularisation is allegedly inadequate would allow paying parties to “put off paying up on a claim forever” by repeatedly requesting more information. This approach would allow them to avoid adjudication or the enforcement of an adjudicator’s decision.

As such, his conclusions are a useful reminder for paying parties. They may also prove to be a valuable weapon in the claiming party’s armoury who wants to progress its claim and, if necessary, start an adjudication.

Secondly, it was good to see the breach of natural justice argument dismissed. As an adjudicator, how else are we meant to ascertain the facts and the law if we cannot ask for more information?

Finally, Cumberland’s contention that the adjudicator had failed to deal with a number of the variations was rejected, with Coulson J saying that he had clearly dealt with them and that:

“…he just reached a conclusion that was contrary to Cumberland’s case.”

Coulson J also stated that a failure by an adjudicator to expressly mention particular arguments and contentions in his decision will not usually amount to a material breach of natural justice.

I was pleased to see Coulson J stress that, given the time constraints of adjudication and the short period available to make a decision on a detailed final account claim:

“…the adjudicator was entitled to deal with matters relatively briskly.”

This point is worth remembering by adjudicators and parties alike. Personally, in my decisions I normally include a sentence to make it clear that I have read all of the parties’ submissions and have taken them into account in reaching my decision.

MCMS Ltd Jonathan Cope

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