In the fast paced world of adjudication, tactics are key. However a recent TCC decision serves as a sharp reminder that tactics can only be taken so far – or may even backfire. The court held that based on misrepresentations made in the application form for his nomination, an adjudicator lacked jurisdiction and his award was unenforceable. The court’s decision contains important guidance on the limits to which parties may attempt to control the adjudicator nominating procedure.
In 2011 Siemens acted as main contractor to London Underground Limited. The works were installing communications systems at various underground stations. Siemens engaged Eurocom as sub-contractor. The parties fell out over issues of variations, prolongation, delay and disruption. In 2012 Siemens terminated Eurocom’s employment. This was closely followed by Eurocom referring matters to adjudication. This adjudication was decided against Eurocom, with an award in favour of Siemens, but dispute continued.
In 2013 Eurocom started a second adjudication. Eurocom’s agents applied to the RICS for the nomination of an adjudicator. The RICS application form contained the question “Are there any adjudicators who would have a conflict of interest in this case?”. Eurocom’s agents answered that question by naming a number of people, including the adjudicator from the first adjudication. Siemens did not see the application form and a new adjudicator was appointed. The
The new adjudicator made an award against Siemens for £1.6m. Siemens wouldn’t pay up. Eurocom went to the Technology and Construction Court for enforcement proceedings. By this time, Siemens had a copy of Eurocom’s application form to RICS for the adjudicator’s nomination. Siemens resisted enforcement of the adjudicator’s award on a number of grounds, including that the adjudicator was invalidly appointed. It claimed information in the application form misrepresented to the RICS which adjudicators had a conflict of interest. Therefore the nomination was invalid, which went to the “foundation” of the adjudicator’s jurisdiction.
Eurocom denied this, saying an adjudicating nominating body does not make a substantive decision affecting the rights and liabilities of the parties. Further, the person who completed the form was answering the question “Are there any adjudicators who would have a conflict of interest in this case?” largely as a means of saying which adjudicators, based on past experience, he would not send a referral document to. This was in effect a pre-emptive rejection list, which would save time and money that would otherwise be spent allowing notices of adjudication to lapse and re-applying for alternative adjudicators. As Eurocom pointed out, such “adjudicator shopping” was allowed following the 2011 case of Lanes Group plc v Galliford Try Infrastructure Limited.
The court’s decision
Many witness statements and a hearing later, the court decided that there was a very strong prima facie case that the person who had completed the application form had deliberately or recklessly answered the question “Are there any adjudicators who would have a conflict in this case?”falsely. Therefore a fraudulent representation had been made to RICS as the adjudicator nominating body.
What was the effect? The court concluded that without such a misrepresentation the first adjudicator would likely have been nominated again, based on the RICS’s policy of nominating previous adjudicators to save time and costs. Plus, other adjudicators were wrongly eliminated which “improperly limited” the pool of possible adjudicators.
Generally, the court noted that, where a party makes a material fraudulent representation to an independent party which is exercising a discretion, the exercise of that discretion will be invalidated. Further, there is an implied term that a party applying for the nomination of an adjudicator should not act dishonestly. That includes not subverting the system of nomination by making a “false misrepresentation”. Such a misrepresentation would invalidate the process of the adjudicator’s appointment and make it a nullity.
The net result? The adjudicator did not have jurisdiction and the award was unenforceable.
- The adjudication process continues to be closely scrutinised by the courts from the off, when an application for an adjudicator’s nomination is made.
- A false misrepresentation made in the appointment process can result in the adjudicator lacking jurisdiction.
- Make sure to follow the nomination procedure in your contracts and the procedure of the adjudicator nominating body to the letter.