Adjudication is recognised as the prevalent dispute resolution process for the UK construction industry. As recently as 2020, the Supreme Court (in Bresco) acknowledged that since its introduction in 1986, adjudication has been “conspicuously successful” - it had become a mainstream dispute resolution mechanism producing for the most part, final resolutions.
Central to any adjudication is the jurisdiction of the adjudicator - the true scope of the dispute to be determined. A party referring a crystallised dispute to adjudication is required to describe the dispute and identify the issues to be decided. However, the true scope of the dispute, and the adjudicator’s jurisdiction, will implicitly extend to any legitimate defences to that claim.
Jurisdictional issues seem to crop up in almost every adjudication. Adjudicator’s decisions are not enforceable if (amongst other things) the adjudicator takes a wrongly restrictive view of jurisdiction. There were a handful of relatively historic cases where the Courts did not enforce decisions because the adjudicator took too narrow a view on jurisdiction. Two recent cases in quick succession highlight that defining the true scope of the dispute and the adjudicator’s jurisdiction are back in the spotlight.
The first, CC Construction Ltd v Raffaele Minicone [2021] EWHC 2502 (TCC), arose from an adjudication brought by a contractor seeking a determination that the final statement was conclusive (and payable) because the employer’s challenge thereto was out of time. The employer’s defence included a claim that liquidated damages for late completion should be set-off against the contractor’s claim.
The adjudicator found for the contractor and declined to consider the employer’s liquidated damages argument on the basis that it was not part of the dispute referred to him and therefore outside his jurisdiction.
The employer refused to pay the sum awarded and the contractor commenced litigation to enforce the decision. The Court however agreed with the employer that the adjudicator had erroneously taken too restrictive a view on the scope of the dispute and his jurisdiction. The employer’s claim for liquidated damages was held to be properly part of the dispute because, as a money claim in its own right, it was a legitimate defence to the claim for payment of the final statement.
In the second case, Downs Road Development LLP v Laxmanbhai Construction (UK) Ltd [2021] EWHC 2441 (TCC), a contractor brought an adjudication against an employer requesting determination of the sum due under an interim payment application. In its defence, the employer asserted that it was entitled to contra-charge damages suffered as a result of the contractor’s breach of contract. The adjudicator decided that this damages claim was not part of the dispute because that claim had not been advanced by the date of interim assessment and was not therefore within his jurisdiction.
The employer commenced litigation seeking a declaration that the decision was unenforceable because the adjudicator took too restrictive view of his jurisdiction. The Court agreed with the employer and found that the proper analysis of the dispute, and accordingly, jurisdiction, in a claim for entitlement to be paid money necessarily included any defence which would remove or reduce that entitlement. The claim for damages was therefore a potential defence operating to reduce the sum payable.
These cases serve as useful reminders as to why (i) careful consideration should be given to possible defences or cross-claims before disputes are referred to adjudication and (ii) adjudicators are likely to adopt a fairly generous approach to defining a dispute.
