A recent TCC decision has considered the principles in play where an adjudication is withdrawn and re-commenced in relation to the same claim. Whilst such tactics are generally permissible as long as they do not become oppressive, the referring party in this case was found to be in breach of an agreement as to the timetable in the first adjudication with the result that the responding party was entitled to its wasted costs of the first adjudication.

Background

Generally speaking, once a dispute has been referred to adjudication the referring party is permitted to withdraw its referral, regardless of the motive for the withdrawal, and to pursue its claim in a later adjudication, provided that the adjudicator in the first adjudication has not made a decision.

Although the principle of abuse of process does not apply to adjudication, the courts do have jurisdiction to grant an injunction under section 37 of the Senior Courts Act 1981 in cases where it appears to the court to be “just and convenient to do so”. In relation to adjudication, the court may grant such an injunction where the commencing or continuing of an adjudication is unreasonable and oppressive. Such a power can be exercised where:

  • the adjudicator does not have jurisdiction (such as where the dispute has already been decided in an earlier adjudication);
  • the referring party has failed to comply with the adjudication agreement (such as by failing to comply with a previous adjudication decision); or
  • the adjudication is vexatious (such as serial adjudications in respect of the same claim).

Jacobs UK Ltd v Skanska Construction UK Ltd

Jacobs and Skanska entered into a contract in around February 2011 under which Jacobs would provide design services in respect of a PFI project for the design and replacement of street lighting in Lewisham and Croydon. A dispute arose between the parties as to the adequacy of the design services provided by Jacobs and Skanska gave notice of an intention to refer the dispute to adjudication.

By an exchange of emails shortly after the notice, the parties agreed as to the applicable procedural rules and timetable for the adjudication. This agreement confirmed that the Scheme would apply and included the dates on which the referral notice, response and reply were due and when the adjudicator would issue his decision.

The referral and response were submitted in accordance with the timetable but ahead of the deadline for the reply Skanska’s counsel became unavailable and it requested an extension of time, which was refused. Skanska withdrew its reference to adjudication and invited the adjudicator to resign. Skanska then commenced a second adjudication in which the scope was narrowed and new quantum information included.

Jacobs commenced TCC proceedings seeking an injunction restraining Skanska from proceeding with the second adjudication and a declaration that it was entitled to its costs of the first adjudication.

Unreasonable and oppressive?

The court rejected Skanska’s argument that a party could start and stop serial adjudications with impunity. Subjecting a party to serial adjudications in respect of the same claim, with the costs that entailed, could amount to unreasonable and oppressive behaviour. It is a question of fact in every case.

The court held that Skanska’s withdrawal of the claim was unreasonable as the unavailability of counsel was not a good excuse for failing to meet an agreed timetable, especially where the party in default is the referring party who controls the timing and scope of the adjudication. It was necessary, however, for Jacobs to show that the second adjudication was both unreasonable and oppressive. In this case, the substance of the claims had not changed and, although there was new material, it had been anticipated that there might be new arguments in Skanska’s reply. As a result, the inconvenience and additional costs suffered by Jacobs were not so severe or exceptional as to warrant injunctive relief.

Breach of the timetable agreement?

Although not oppressive, Sksanska’s conduct was held by the court to be in breach of the agreement between the parties as to the timetable for the adjudication. The exchange of emails between the parties went beyond mere agreement as to directions to be made by the adjudicator and imposed new enforceable obligations on the parties. Skanska’s failure to serve its reply or continue with the first adjudication constituted a breach of this agreement, entitling Jacobs to its wasted or additional costs as damages. Alternatively, there was an implied term that if the timetable were ignored by one party, it would pay the wasted costs of the other party.

This finding entitled Jacobs to those costs it could establish were incurred due to Skanska’s failure to comply with the agreed procedure and timetable, but did not include costs in respect of claims abandoned by Skanska because Skanska would have been at liberty to abandon claims in any event if the first adjudication had continued.

Conclusions and implications

This decision highlights the large degree of freedom parties have to withdraw and recommence adjudication proceedings for strategic or logistical reasons. The absence of any principle of abuse of process in adjudication proceedings means that such conduct must be both unreasonable and oppressive before the court will intervene.

The decision also appears to be the first time in which an agreement over the timetable for an adjudication has been held to give rise to binding obligations and the potential for wasted costs claims. As the court noted, not all agreements over timetable will have this effect. Some will amount purely to an agreement over directions to be issued by the adjudicator. In light of this decision, however, parties may now wish to make clear when concluding such agreements that they are not intended to give rise to legally binding obligations.

References: Jacobs UK Ltd v Skanska Construction UK Ltd [2017] EWHC 2395 (TCC)