UK: Skanska Ruling Shows You Can Exit Adjudication – But At What Cost?

Last Updated: 17 April 2018
Article by Gurbinder Grewal and Esther McDermott

What if you can't comply with an adjudication timetable and both the other party and the adjudicator refuse an extension?

Can you withdraw from the adjudication and start again by serving another notice to refer?

Yes, said the court in Jacobs UK Ltd v. Skanska Construction UK Ltd [2017] EWHC 2395 (TCC). But parties should not rely on this decision as a licence to withdraw from adjudication proceedings when the going gets tough: withdrawal should remain a last resort.

Why did Skanska withdraw from the adjudication?

Skanska had entered into a design agreement with Jacobs but later argued that Jacobs' design services were inadequate. A dispute ensued. The design agreement was a construction contract under the Housing Grants, Construction and Regeneration Act 1996 (the Act) and contained an adjudication provision.

Skanska referred the dispute to adjudication (adjudication number one – A1). The parties agreed on the procedure and an adjudication timetable (including dates for service of the notice, response and reply). An adjudicator was appointed, the referral was served and Jacobs responded (at substantial cost).

Skanska's counsel then became unavailable. This meant it could not serve the reply by the agreed date. Jacobs refused to agree an extension and the adjudicator also refused an extension without the parties' agreement. Skanska withdrew from A1 and, on Skanska's request, the adjudicator resigned.

Skanska later referred essentially the same dispute to a second adjudication (A2). Jacobs claimed this was unlawful and went to court for an order that Skanska take no further action, withdraw from A2 and pay Jacobs' costs of A1.

Why Skanska could continue with a second adjudication

The court allowed Skanska to proceed with A2 on the basis that:

  • A party can withdraw unilaterally from a disputed claim in adjudication – even after the referral is made.
  • Neither the Act nor the scheme restricted Skanska from withdrawing or referring the dispute to A2.

However, the court can intervene and grant an injunction (to stop a second adjudication) if the party's behaviour is unconscionable or the pursuit of the second adjudication is unreasonable and oppressive (whether a party's behaviour is, on an objective basis, unreasonable and oppressive, will be a question of fact in every case).

While Skanska's withdrawal from A1 due to counsel's unavailability was unreasonable, its action in starting another adjudication was not oppressive in the particular circumstances: the inconvenience and additional costs to Jacobs were not so severe as to merit judicial intervention.

Jacobs was entitled to the wasted / additional costs caused by Skanska's failure to comply with the timetable in A1 and most of Jacobs' work in A1 could be reused.

Does the withdrawal 'get-out' amount to rough justice?

Cynics might argue that Skanska's withdrawal enabled it to take a second, arguably unfair, shot at its referral. However, any perceived advantage must be judged in context. Parties have a statutory right to refer a dispute to adjudication 'at any time' – and, in this case, the adjudicator had not made a decision when Skanska withdrew.

Starting a second adjudication is not 'oppressive' behaviour in itself: the facts are important. For example, serial adjudications might be oppressive. Here, the second referral was essentially the same as the first: Jacobs could use the work already prepared for A1 and was entitled to recover those costs wasted in A1.

Some adjudication tips

  • Withdrawal should not be regarded as a standard adjudication 'tactic'.
  • Withdrawing should be limited to scenarios where, for example, new evidence has come to light and can't be processed within the timetable, or if a key witness is taken ill.
  • Adjudications are a restrictive, 28-day process, with little scope for extensions. This means it is particularly harsh on respondents who have to respond to well-prepared claims in weeks.
  • Keep all disputes on your radar and have a broad plan of action in hand in case a notice should arrive. Claimants should not rely on time extensions. Without party agreement, the adjudicator is hamstrung (as in Skanska).
  • Even if the parties agree an extension, the adjudicator must weigh up the reasons fairly and the effects of the delay on both the other party and the timetable.
  • Counsel's unavailability is not a good reason for withdrawal. Barristers are increasingly instructed in substantial adjudications, especially when meetings are likely. Their diaries are busy and court commitments come first. Book early; keep in touch with counsel's clerk. If there's a diary clash, enlisting a substitute will often be cheaper than restarting the process.

So, yes, claimants can withdraw but should only do so as a last resort after weighing up the pros and cons.

If a claimant uses the 'refer, withdraw, refer again' option oppressively, not only might the court prevent another adjudication, but its credibility and the perceived strength of its claim might suffer. After all, they started it.

Originally published in Construction News on 10 April 2018.

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