Clark Electrical Ltd v JMD Developments (UK) Ltd [2012] EWHC 2627 (TCC)

JMD engaged Clark to carry out electrical works on a new distillery in North Yorkshire. Disputes arose and Clark served a Notice of Adjudication seeking payment of some £177k. The CIC appointed an adjudicator who sent his terms and conditions to both parties. These included at item 10, a requirement that by way of security for his fees, each party pay an appointment fee of £6,000. The adjudicator duly issued invoices for this sum.

On the same day, 7 March 2012, JMD sent an email to the adjudicator noting that they did not have representation and were not familiar with the adjudication protocols. They also sought guidance from the adjudicator on the procedures. JMD also noted that they had not yet received a copy of the Notice and supporting documents from Clark. They therefore asked for an extension of time.

On 13 March 2012, JMD paid their part of the adjudicator’s invoice. On 19 March 2012, consultants acting on behalf of JMD, wrote to the adjudicator informing him that the electrical works were not “construction operations” and therefore were excluded under Section 105(2) of HGCRA. If this was correct then the dispute could not be referred to adjudication. They also stressed that the payment of the fees was not to be treated as acceptance of the adjudicator’s jurisdiction. The consultants later wrote noting that:

Our client’s position remains that should you make a non-binding conclusion that you have jurisdiction then [JMD]’s further participation in the purported adjudication is fully reserved. Its position remains that you do not have jurisdiction and for the avoidance of doubt [JMD] will not accept the validity of your decision, nor will it accept liability for any of your fees and expenses, which you may determine it is liable.”

The adjudicator decided that the subcontract works were not “construction operations”. However, he also decided that there was an ad hoc adjudication agreement arising out of the payment of the appointment fee by both parties. Therefore the adjudicator held that the adjudication could continue.

The ad-hoc adjudication was not something which had been raised before. JMD told the adjudicator that they would take no further part in the adjudication process. The adjudicator awarded Clark £177k.

HHJ Behrens QC noted the general proposition that if two people agree to submit a dispute to a third person, then the parties agree to accept the award of that person, or, putting it another way, they confer jurisdiction on that person to determine the dispute. Whether or not this is the case is a matter of fact.

If a defendant to enforcement proceedings has submitted to the adjudicator’s jurisdiction in the full sense of having agreed not only that the adjudicator should rule on the issue of jurisdiction but also that he would then be bound by that ruling, then he is liable to enforcement in the short term, even if the adjudicator was plainly wrong on the issue. Even if a defendant has not submitted to the adjudicator’s jurisdiction then he may still be liable if the adjudicator’s ruling on the jurisdictional issue was plainly right.

Clark relied on the payment of the £6,000 as evidence of an adjudication agreement between the parties. The protests made by JMD’s representatives were too late. By asking for guidance and for further time, JMD had already become bound into the proceedings. JMD said that it was “fanciful to suggest” that there had been a “clear and unequivocal submission” to the jurisdiction. All JMD were doing was explaining that they had not received the relevant documents, that they were unrepresented and unfamiliar with the process and that they needed more time and guidance on the process.

Adopting the usual test for the interpretation of documents, HHJ Behrens QC considered what the 7 March email would have meant to the “reasonable adjudicator.” The “reasonable adjudicator”, it transpired, would have agreed with JMD.

It was significant that JMD had not received the relevant documentation, that it was unrepresented and unfamiliar with the adjudication process. There was no reference to the adjudicator’s decision or jurisdiction at all. Indeed the Judge noted that adjudicator did not interpret the email as a submission to jurisdiction in the full sense. His jurisdiction decision was itself headed “non-binding”. Further, the payment of the appointment fee by JMD did not amount to a submission to the jurisdiction in the full sense. There can still be liability for the adjudicator’s fee where there is a legitimate challenge to the jurisdiction. HHJ Behrens QC duly dismissed the application for summary judgment:

...the decision of the adjudicator on jurisdiction based on an ad hoc agreement was in my judgment not plainly right. In my judgment it was, with respect, plainly wrong”.