In this latest 'Adjudication Watch', our construction experts review the most important cases involving adjudication enforcement from the last six months.
Key point: Courts will preserve the right to adjudicate wherever possible
T Clarke (Scotland) Limited v MMAXX Underfloor Heating Limited [2014] - this was a Scottish case and as such, although it is not technically binding on the English Courts, it will be considered as a persuasive precedent. The Technology and Construction Court (TCC) has consistently demonstrated that Scottish caselaw will be considered significant in adjudication cases.
The facts of this case are interesting. Clarke was a sub-contractor appointed to carry out mechanical and electrical works at a primary school - MMAXX was appointed as sub-sub-contractor. In short, MMAXX commenced eight adjudications against Clarke and seemed poised to start a ninth. At that point, Clarke lost patience and applied to the court to restrain any further adjudications, arguing that it would be an abuse of process and that the restraint would serve the balance of convenience as MMAXX could still pursue claims through the courts.
Clarke's application was refused even though the court acknowledged that it was understandable that a "cloud of suspicion" hung over MMAXX's conduct. In the court's opinion, MMAXX's behaviour was "robust", rather than oppressive and unreasonable. There was a "high threshold" to justify the exercise of this "drastic" power to prevent further adjudications and Clarke had not satisfied this, bearing in mind that the proposal was that MMAXX should be prevented from further adjudications but Clarke would retain the right to adjudicate.
It will only be in extremely rare cases that adjudication will be so restrained.
Key point: the process of appointing the adjudicator must be objective and fair, not inappropriately influenced by either party
In Eurocom Limited v Siemens plc [2014], Eurocom was appointed by Siemens to carry out works relating to the installation of communications systems at Embankment and Charing Cross tube stations in London. A dispute arose in relation to time and money and in due course, some 16 months after Eurocom's appointment, the contract was terminated by Siemens.
In a second adjudication, Eurocom was awarded £1.6 million and this matter came before the TCC after Siemens failed to pay the amount awarded to Eurocom. Siemens resisted the enforcement proceedings and one of its key arguments was that the appointment of the adjudicator was invalid.
The facts relied upon by Siemens included the application form submitted on behalf of Eurocom to the RICS (Royal Institute of Chartered Surveyors) for the appointment of an adjudicator. When asked in the form whether any individuals had a conflict (and inferentially should not therefore be appointed), Eurocom's representative's response included the adjudicator in the first adjudication and solicitors who had previously advised Eurocom. Two months after this form was submitted to the RICS, a copy was provided to Siemens' solicitors who queried the supposedly conflicted individuals listed on the form but got no response.
The court would not enforce the decision of the second adjudicator. The TCC found that there was a "strong prima facie case" that Eurocom's representative had made a fraudulent misrepresentation in the application form to the RICS. This misrepresentation invalidated the appointment of the second adjudicator meaning that he had no jurisdiction.
One of the points highlighted was that it was not correct to state on the application form that the first adjudicator had a conflict - in fact, the usual position would be that the RICS would appoint the same adjudicator as in a previous adjudication (on a particular project between the same parties). As a result of the response to the conflict question on the RICS application form, some potential parties (including the first adjudicator) had been improperly excluded from the group of potential adjudicators.
Interestingly, Eurocom's representative was clear that when completing the form, he had included in the list individuals that he/Eurocom did not want to be appointed - this approach has not been supported by the court and needs to be avoided going forward.
It is also worth noting that Siemens were awarded indemnity costs and in deciding this, the court focussed on the fact that on top of the prima facie fraudulent misrepresentation, Eurocom had not replied to Siemens' query about the parties that Eurocom's representative had listed on the form as being conflicted - this turned out to be a costly omission.
Key point: if an employer fails to serve the appropriate payment and/or pay less notice in response to an interim application, the employer will be taken to have agreed the value of works claimed - he cannot then have a second adjudication to revisit the value of the works at the date of that interim certificate.
ISG Construction Limited v Seevic College [2014] - see our article on this case from December 2014.
Key point: the Housing Grants, Construction and Regeneration Act 1996 (including adjudication and payment provisions) will extend to systems and equipment that are sufficiently permanent to form part of the land.
Savoye and Savoye v Spicers Limited [2015] - see our article on this case from January 2015.
Key point: a responding party in adjudication can raise any defence - defences cannot be excluded by the wording of the Notice of Adjudication.
In Gary Kitt (1) EC Harris LLP (2) v The Laundry Building Limited and Etcetera Building Services Limited [2014], Etcetera (ETC) were employed by Laundry Building to carry out some works and a payment dispute arose. ETC referred the matter to adjudication and in its Notice of Adjudication against Laundry Building, sought to limit the defences which could be considered by the adjudicator.
It stated for example: "... ETC does not give the adjudicator jurisdiction in this adjudication to open up the extension of time award or the agreed weekly value for loss and expense...... [final account] Item No. 161 is not to [be] opened up .... and [final account] item No. 163 is not to be opened up..".
The Adjudicator did in fact consider all defences put forward by Laundry Building. ETC refused to pay the amount awarded in the adjudication and the matter came before the TCC for enforcement.
The court confirmed that the Adjudicator had been correct to consider all of the defences raised by Laundry Building and it was not open to a referring party in adjudication to exclude any anticipated defences by the wording of the Notice of Adjudication. The adjudication award was enforced.
So be aware if you are contemplating an adjudication that you may open up for investigation issues that you might prefer to be overlooked.
Key point: in exceptional cases, the courts may decide not to enforce all or part of an adjudication award - here, enforcement was partially stayed due to the Employer's impecuniosity.
Galliford Try Building Limited v Estura [2015] - see our article on this case from March 2015.
Key point: any unilateral communication with the adjudicator (ie not involving the other party) or the adjudicator's organisation can give rise to the possibility of bias.
In Paice and Springall v MJ Harding [2015], Mr Paice and Ms Springall appointed Harding contractors to carry out building works. Works stalled and in due course, there were arguments relating to termination.
Four adjudications followed and this matter came before the TCC when Harding refused to pay to Mr Paice and Ms Springall the amount awarded to them in adjudication 4.
Of key importance was the fact that the adjudicator in adjudication 4 ("the Adjudicator") had also been the adjudicator in adjudications 1 and 2 (but not 3). After adjudication 3, Mr Paice and Ms Springall called the Adjudicator's office and had a long discussion by speaker phone with the Adjudicator's office manager about various matters including adjudications 1 and 2; the office manager told the Adjudicator about that call.
The Adjudicator was then appointed for adjudication 4 and when specifically asked by Harding, he confirmed he had had no contact with Mr Paice and Ms Springall except during the course of adjudications 1 and 2.
The TCC decided that the phone call to the Adjudicator's office should not have been permitted and in any event, should have been detailed by the Adjudicator at the time of his proposed appointment in adjudication 4. A fair-minded observer would conclude that the Adjudicator had been biased and as a result, the award in adjudication 4 was not enforced.
Make sure that any contact you have with the adjudicator is either in writing copied to the other party or if by phone, that it is organised in advance, with all parties present on the call. Otherwise, you risk any award you receive being effectively set aside for bias.