A recent decision of the TCC has decided that adjudicators appointed under the Scheme for Construction Contracts are not able to adjudicate at the same time upon separate disputes referred under separate Notices of Adjudication. The Scheme for Construction Contracts is the default adjudication procedure specified by the JCT suite of contracts and the decision is likely to have significant ramifications for adjudication practices in the UK.
Deluxe Art & Theme Limited v Beck Interiors Limited
Beck Interiors Limited ("Beck") engaged Deluxe Art & Theme Limited ("Deluxe") as a subcontractor to supply and install joinery items at a hotel in London which Beck was refurbishing as main contractor. The parties fell into dispute and Deluxe commenced 3 separate adjudications as follows:
- Adjudication 1 concerned acceleration costs and was decided on 10 July 2015 in Deluxe’s favour (and paid by Beck).
- Adjudication 2 concerned an extension of time and loss and expense claim and was commenced on 22 October 2015. In a Decision issued on 4 December 2015, Deluxe was again successful, but Beck did not pay the sum awarded.
- Adjudication 3 concerned a claim for a partial release of retentions upon Practical Completion (from 5% to 2.5%) and was commenced on 9 November 2015 whilst Adjudication 2 was still pending. The Decision was issued on 11 December 2015, Deluxe being successful again and Beck refusing to pay.
In all three adjudications, Deluxe applied to RICS to appoint an adjudicator and, in line with RICS policy (which is the same for many other appointing bodies), RICS appointed the same adjudicator in all three adjudications.
Deluxe applied for summary judgement to enforce the decisions in Adjudications 2 and 3 which Beck resisted by claiming that the adjudicator had impermissibly determined two disputes at the same time.
Two disputes or one?
The court rejected Beck’s submission that Adjudications 2 and 3 concerned the same dispute. It was not possible to say that both concerned one overarching dispute as to the amount due to Deluxe. In what appears to be the inverse application of a rule of thumb taken from a previous case (Witney Town Council v Beam Construction), the court considered whether the two adjudications could be decided independently of each other or whether a decision in one would decide all or part of the dispute in the other (which was not the case here). The issue of two separate Notices of Adjudication was also a telling factor in favour of separate disputes.
Can one adjudicator decide two Notices of Adjudication?
Beck next relied on paragraph 8(1) of the Scheme for Construction Contracts, which applied to all of the adjudications. Paragraph 8(1) states that the adjudicator "may, with the consent of all the parties to those disputes, adjudicate at the same time on more than one dispute under the same contract".
The court concluded that, in absence of consent, paragraph 8(1) was an "insurmountable jurisdictional hurdle for Deluxe." The court rejected Deluxe’s argument that the paragraph only applied to multiple disputes included within the same Notice of Adjudication, and not multiple disputes referred via separate adjudications. The court noted that the wording of paragraph 8(1) did not allow "such fine distinctions"to be drawn and that it would make no sense for an adjudicator’s position to depend on whether multiple disputes had been referred "on the same piece of paper … [or] on many different such pieces of paper".
Conclusion and implications
The court’s decision is likely to have significant ramifications for adjudications commenced under the Scheme:
- The practice of "counter-adjudicating" is common in the industry. It is often deployed where one party seeks to deliberately narrow the scope of an adjudication, where the responding party might then counter-adjudicate to bring a broader scope of dispute before the adjudicator. Counter-adjudications have also been (and still are) popular where a claim for payment is adjudicated purely on the basis of a failure to serve payment or pay less notices under the Construction Act. The paying party in those circumstances will often counter-adjudicate for a decision as to the true value of any payment owed.
- The present decision means that such counter-adjudications will no longer be able to be heard by the same adjudicator where the Scheme rules apply. Although this may in some circumstances dissuade counter-adjudications, in others it is likely to result in parallel adjudications before separate adjudicators. This in turn may result in a "race to judgment", as the decision issued first in time will take priority and render the second decision unenforceable to extent of any inconsistency. Confusion may arise where decisions are issued very close in time and the costs of a whole adjudication process may be wasted where a decision is second in time and proves to be unenforceable. The Scheme rules are adopted in the JCT suite of contracts and this position is therefore likely to apply to a considerable number of adjudications.
- The decision may also provide a way for parties to avoid the re-appointment of an adjudicator who has decided against them in previous adjudications. As noted above, many appointing bodies will appoint the same adjudicator for subsequent adjudications under the same contract. This provides the parties with an adjudicator who is already familiar with the project and can aid consistency between decisions and save time and cost in the adjudication process. However, parties may sometimes feel that an adjudicator who has found against them previously may be more likely to do so again in the future . The present decision potentially provides a route for such parties to secure the appointment of a different adjudicator by commencing an adjudication at the same time as an existing adjudication referred to the incumbent adjudicator.
- In a similar vein, adjudicator nominating bodies will need to adjust their nomination practices for adjudications conducted under the Scheme. They will need to be careful not to nominate the same adjudicator where he or she is already appointed on an existing adjudication under the same contract.
The decision may also have implications beyond adjudications under the Scheme. The court’s inverse application of the rule of thumb from the Witney case may broaden the circumstances in which multiple issues referred under a single Notice of Adjudication amount to more than one dispute. This may prompt an increase in jurisdictional objections based on observations that separate issues referred under a Notice of Adjudication are capable of being determined independently of each other (and thereby amount to separate disputes).