In the January 2007 Updater, we reported on Quietfield Ltd -v- Vascroft Construction Ltd EWCA Civ 1737, in which the Court of Appeal set out the following principles:
- Under the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”) and the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the “Scheme”), successive adjudications were permissible provided that a second adjudicator was not required to decide an issue which the first adjudicator had already decided.
- The first question in each case therefore was: what had the first adjudicator decided?
- Whether dispute A was substantially the same as dispute B was a question of fact and degree.
In the following case, the court considered whether the principles established in Quietfield applied in a case where the Scheme did not apply.
HG Construction Ltd -v- Ashwell Homes (East Anglia) Ltd  EWHC 144 (TCC)
In this case, there were four successive adjudications.
The central issue was whether the contractor could rely upon:
- the adjudicator’s decision in adjudication 3 - that: “There is no basis on which the Liquidated and Ascertained Damages operate and therefore they should be refunded”
in the light of:
- the adjudicator’s decision in adjudication 1 - that: “The provisions within the contract for the deduction of Liquidated and Ascertained Damages ... are valid and enforceable”. The employer argued that the adjudicator’s decision in adjudication 3 was unenforceable since the issue of the enforceability of liquidated damages had already been determined in adjudication 1.
What principles apply to determine whether the earlier adjudication decision is binding in relation to a later adjudication?
Under paragraph 9 of the Scheme, if an adjudicator is faced with a dispute which is the same or substantially the same as one which has previously been determined in an adjudication, the adjudicator must resign.
In this case, the adjudication provisions set out in the Scheme did not apply. The only relevant contractual provision was clause 39A.7.1 of the relevant JCT contract, which provided that the decision of the adjudicator was temporarily binding, pending final determination by arbitration, legal proceedings or subsequent agreement between the parties (reflecting section 108(3) of the Construction Act).
The question therefore arose as to whether the principles set out by the Court of Appeal in Quietfield (in which the Scheme applied) were equally applicable in this case.
Do the Quietfield principles apply where the Scheme does not apply?
The judge found that - whether or not the Scheme applied - the underlying principles did not differ. If an adjudicator was being asked to determine a matter which was the same or substantially the same as one which had previously been determined in an adjudication then - as a matter of practice - the adjudicator should decline to decide that matter. If that was the only matter which he was being asked to decide, the adjudicator should resign. This was the effect of clause 39A.7.1 of the JCT contract.
Ramsey J emphasised that the test was whether the issue the adjudicator was being asked to decide was “the same or substantially the same” as a dispute or difference that has already been the subject of an adjudication: there did not have to be complete identity of factual and legal issues.
Was the dispute the same or substantially the same?
The contractor argued that:
- the dispute in adjudication 1 was limited to the issue as to whether the liquidated damages provisions (i) were unenforceable because of uncertainty with regards to the works comprised in each section ; and (ii) constituted a penalty; whereas
- the dispute in adjudication 3 was as to whether the liquidated damages provisions were unenforceable because the employer had taken early possession of parts of the premises, and it was not possible to calculate the resulting reduction in the amount of liquidated damages payable for the remaining parts (pursuant to the contractual mechanism for granting proportional relief).
The court noted that, in adjudication 1, the employer had characterised the dispute as concerning “... the validity and/or enforceability of the provisions within the Contract for the deduction of liquidated damages.”
The court found that the underlying argument in adjudication 3 was the same as that in adjudication 1, namely, that the liquidated damages were unenforceable because it was not possible to value the works in each section. The adjudicator had rejected this argument in adjudication 1.
The judge went on to say that, even if the contractor’s argument in adjudication 3 (as to why the liquidated damages were invalid and unenforceable) had been a new one, the contractor would still not have been entitled to raise this argument as the first adjudicator had decided the dispute between the parties in relation to the enforceability of the liquidated damages provisions.
The employer, in this case, had referred to adjudication the general issue as to the enforceability of the liquidated damages provisions, since this had been in dispute. Its notice to refer had not been restricted to certain specific issues raised by the contractor. The employer was well advised in so doing. The first adjudicator’s decision - that the liquidated damages provisions were enforceable - precluded the contractor from subsequently developing new arguments - or allegedly new arguments - impugning the validity and enforceability of the liquidated damages provisions.