UK: Blowing Hot And Cold On The Jurisdiction Of An Adjudicator - Clearing The Mist?

In the recent case of SKYMIST HOLDINGS LIMITED v GRANDLANE DEVELOPMENTS LIMITED [2018], the Technology and Construction Court (TCC), considered the principle of "approbation and reprobation" in "satellite litigation" over the jurisdiction of adjudicators.

But is challenging the jurisdiction of an adjudicator worth the cost involved? - we review the key points in the Skymist decision, and the TCC's view of the approach taken.

Background

  • In around May 2016, a contract for development and project management services provided by Grandlane (relating to property in Hampshire) was novated /transferred to Skymist, as employer.
  • The key terms of the contract between Skymist and Grandlane were evidenced in an agreement that was never signed or formally agreed. The final iteration of that agreement was exchanged in December 2016. At that time, a "Draft Deed of Appointment" (the DOA) was also in circulation between the parties.
  • In October 2017, Skymist terminated Grandlane's appointment - this was not accepted by Grandlane as a valid termination, and Grandlane contended that significant sums remained due.
  • In August 2018, Grandlane served a Notice of Adjudication and a request to the Chartered Institute of Arbitrators (the CIArb) to nominate an adjudicator - Mr Silver was nominated. This request was made pursuant to the Scheme for Construction Contracts 1998 as amended (the Scheme) flowing from a specific clause (the Clause) of the DOA.
  • Skymist challenged the jurisdiction of Mr Silver on various grounds - one argument was that the contract between Skymist and Grandlane was not contained in the DOA and did not contain the Clause. As a result (it was argued) Mr Silver's appointment through the CIArb was a nullity.
  • Faced with these challenges, Grandlane withdrew this adjudication and commenced another adjudication (incorporating mostly the same issues), this time requesting the nomination of an adjudicator by the RICS Dispute Resolution Service under the Scheme, and not in reliance on a contractual term. Mr Riches was appointed as adjudicator.
  • In its Response in the adjudication, Skymist addressed the merits of Grandlane's claims but also raised jurisdictional challenges. Skymist's key challenge was that, since Grandlane's case was (or still was) that the relevant contract was constituted by the DOA, the reference to the RICS to nominate an adjudicator was wrong because the Clause provided for an adjudicator to be appointed by the CIArb and yet this had not been done. (This latter course of appointment was precisely what Skymist had objected to in respect of the first adjudication.)
  • Mr Riches determined that he did have jurisdiction and issued his decision in November 2018. In the meantime, Skyline had issued proceedings in the the TCC.

TCC Proceedings

In the TCC, Skymist sought a declaration that Mr Riches had been appointed by the wrong body (and therefore had no jurisdiction) as:

  1. in Mr Riches' Decision, he found that the relevant contract between the parties was the DOA - the Clause in the DOA specified that the appointment of the adjudicator should be made via the CIArb (and so, not the RICS); and
  2. even if the Decision had not found that the DOA was the relevant contract, Grandlane had "approbated and reprobated" the DOA with the result that Grandlane was now precluded from applying to the RICS to nominate Mr Riches.

On either basis, Skymist contended, the Decision was a nullity.

TCC Decision

In short, Skymist's claim was dismissed.

Mr Justice Waksman reviewed case law and the principle of "approbation and reprobation" (A/R), (also described as "blowing hot and... cold" in previous judgments) in the context of adjudication and identified the following factors:

  1. the approbating conduct (by Party A) must be clear and unequivocal;
  2. Party A must gain a benefit from the approbation with the result that it would be unjust to Party B to allow Party A later to "reprobate";
  3. the reprobating act by Party A must be clearly inconsistent with the earlier approbating conduct.

As Mr Waksman stated, "...[Party A] is not permitted to simply reverse out of the position previously taken...".

The Judge did not agree that the adjudicator had made a finding that the DOC as a whole was the contract between the parties. Specifically, the adjudicator did not find that there was " .... a contract which contained sufficient of the DOA's terms to include the Clause".

Following on from that, as the adjudicator did not find that the contract contained the Clause, there was no issue with his appointment under the Scheme via the RICS, and the Decision was not a nullity.

In terms of the allegation of approbation and reprobation, the Judge had doubts as to whether the principle could even be applied as contended by Skymist.

Even if the principle could be applied in this context, the Judge held that Grandlane had not approbated and reprobated as alleged. On an obiter basis (that is, not required for the decision of the Court), he considered that, ironically, it was actually Skymist who had probably approbated and reprobated by challenging the first adjudication on the basis that Grandlane could not rely on the Clause, and later challenging the second adjudication on the basis that Grandlane should have sought the appointment of an adjudicator as prescribed by the Clause.

Commentary

A volte face of this nature on jurisdiction is unlikely to be well received by the court, and may amount to approbation and reprobation (blowing hot and cold) which may prevent a successful challenge or enforcement of an adjudication decision.

The Judge was not impressed by the approach taken by Skymist referring to "highly technical (but legally unmeritorious) arguments in what effectively becomes satellite litigation in the context of a form of dispute resolution that is meant to be speedy and efficient". Certainly, considering the background to this TCC decision, it might be postulated that it must have been relatively clear that, one way or another, Skymist's attempts to commence adjudication would ultimately result in an enforceable adjudication decision.

Bear in mind that even if upheld, a jurisdictional challenge to an adjudication may not justify the cost (time and money) incurred, unless there are other strategic considerations.

Read the original article on GowlingWLG.com

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