A recent TCC decision has confirmed that parties may strategically cherry pick elements of a larger existing dispute and refer to them in a single adjudication without that party falling foul of the well-established rule that only a single dispute may be referred to adjudication at any one time. The judgment serves as a useful authority for those parties unable to refer an entire dispute to adjudication due to its size and complexity.
As Adele Parsons makes clear, the case is also a valuable reminder that a party cannot strategically cherry pick the timing of its objection to an Adjudicator's jurisdiction, confirming that this must be done promptly and in accordance with the applicable terms of the parties' contract.
In April 2018, specialist building envelope contractors, Prater, entered into a NEC3 Option A Subcontract with Sisk for the former to design, deliver and install the cladding and roofing to a new Boeing Fleet aircraft maintenance hangar, office and plant room at Gatwick Airport.
The Subcontract Works were subject to a series of delays and changes which resulted in a number of disputes that ultimately fell under a larger final account dispute between the parties. These included the adjustment to the Subcontract Completion Date, extension of time entitlement, prolongation costs and Compensation Events. These disputes resulted in a total of four adjudications between the parties. It is the second and fourth of these adjudications that concerned the TCC in this instance.
Following completion. Sisk issued a payment certificate which certified Prater's works at £7m less than Prater had applied for. Prater commenced what was then a second adjudication against Sisk (the first one concerning an amendment to the original subcontract completion date).
In the second adjudication, Prater sought declaratory decisions alone on the following discrete issues:
(i) The correct Subcontract Completion Date;
(ii) Whether the Subcontract included provisional sums; and
(iii) Sisk's entitlement to deduct certain indirect losses from sums due to Prater.
The reason for Prater's approach was that it considered the entire final account dispute between the parties to be too cumbersome to be decided by way of a single adjudication.
The Adjudicator found in favour of Prater and a further two adjudications followed.
During the fourth adjudication Prater sought payment of circa £2.2m plus VAT based, in part, on the Adjudicator's decision in the second adjudication. The Adjudicator subsequently awarded Prater £1.7m plus VAT and decided that Sisk pay its fees.
While Sisk paid the Adjudicator's fees, it refused to pay anything further on the basis that the decision in the fourth adjudication was unenforceable. Its reason for this was that the decision was based, in part, on the decision in the second adjudication. Sisk claimed that the Adjudicator had no jurisdiction to reach his decision in the second adjudication as Prater had referred multiple disputes to adjudication rather than a single dispute; there being no clear link between the three discrete issues claimed by Prater.
Conversely, Prater argued that the genesis of the dispute within the second adjudication, as with the fourth, was Sisk's assessment of Prater's account. The dispute referred in the second adjudication simply included a number of issues that were part of a much larger dispute between the parties, namely
Sisk's assessment of Prater's account, and therefore amounted to a single dispute. Accordingly, the Adjudicator had the requisite jurisdiction, and his decision was enforceable.
Cherry picking disputes – a matter of common sense
The court found in favour or Prater. Deputy Judge Veronique Buehrlen QC held that, each of the matters referred to the Adjudicator in the second adjudication could have been decided independently. You need to look at the facts of the case and use some common sense, as a "single dispute" in the context of a construction contract may include several distinct issues, such as determining appropriate deductions for the purposes of a payment application or final account.
The court sympathised with Prater's position and the practicalities of adjudication, particularly when addressing complex account disputes by stating that:
"it would not be desirable for a party to be forced into raising the entirety of the dispute in a single adjudication when that might be oppressive or the entire dispute too complex and extensive to be dealt with in the context of a single adjudication"
Ultimately, a single adjudication was not suitable for resolving all the issues arising from Sisk's assessment of Prater's account. Indeed, the court found that it would be:
"arbitrary to treat distinct issues forming part of a single dispute as each giving rise to a separate dispute because the whole of the dispute itself had not been raised in the context of a single adjudication or because there were other issues that also needed to be resolved to determine the real dispute."
When cherry picking turns sour
As to the timing and manner of Sisk's jurisdictional challenge, the court found this to be something of a "novel argument", agreeing with Prater that it was not open to Sisk to challenge the Adjudicator's decision in the second adjudication in the context of the fourth adjudication.
The dispute resolution provisions within the parties' subcontract clearly stated that the decision in the second adjudication was binding on the parties unless and until revised by a Tribunal (in this case the court) and enforceable as a matter of contractual obligation between the parties.1 In order for any such revision to take place, it was incumbent on the dissatisfied party to provide a Notice of Dissatisfaction to the other party.2
Although Sisk served a Notice of Dissatisfaction in relation to the Adjudicator's second decision, it did not take any further steps to refer that decision to the Court. Therefore, the decision in the second adjudication was binding on Sisk as a matter of principle, as well as contractual obligation unless and until revised by the Court. If Sisk wanted to avoid the findings in the second adjudication being relied upon in a subsequent adjudication, it was for Sisk to not only issue a Notice of Dissatisfaction but to refer its challenge to the Court in a timely manner. It could not pick and choose when to challenge an adjudicator's jurisdiction such as to suit its needs.
Implications of the decision
The decision serves as a helpful authority for those who may wish to cherry pick several parts of a larger single dispute over a number of adjudications. The extent of a dispute is, of course, a matter of fact and parties need to be certain that the issues they choose to adjudicate on at any one time are part of the same dispute. However, this case demonstrates that this can be done strategically without jeopardising the adjudicator's jurisdiction and decision.
Practically, this piecemeal manner of dispute resolution grants the referring party the freedom to adjudicate on certain key issues without stretching internal and consultant resources which seemingly go hand-in-hand with the typically lengthy and time consuming submissions that can accompany final account disputes. This is a matter that Prater highlighted in its submissions to the court where it argued that to bring a final account "kitchen sink" adjudication would be both lengthy and complex, and in the circumstances inappropriate, not least given the summary nature of the adjudication procedure.
In respect of a party seeking to challenge an adjudicator's decision, the case is an important reminder for parties to follow the terms of their contract regarding any notices, and to ensure that action is taken both assertively and in a timely manner.
A party's position as regards an Adjudicator's jurisdiction should be made quickly and clearly as soon as that party becomes aware of any such issue.
1 Clause W2.3(11) of the NEC Option A Subcontract
2 Clause W2.4(2) of the NEC Option A Subcontract
This article is taken from Fenwick Elliott's 2021/2022 Annual Review. To read further articles go to Fenwick Elliott Annual Review 2021/2022
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.