Allegations of breaches of natural justice have recently taken on a new twist, as parties start to make pre-emptive strikes by using Part 8 proceedings to seek declarations during ongoing adjudications, on the basis that there is a real risk of a breach of natural justice if the adjudication proceeds. In January 2009, Mr Justice Coulson heard applications in two different cases in the same week.

CPR Part 8: In the first case - The Dorchester Hotel Limited v Vivid Interiors Limited [2009] EWHC 70 (TCC) – the claimant maintained that, even though the parties had agreed an extension to the 28-day adjudication period, the timetable was still too tight and there was a very real risk of there being a breach of natural justice. It issued proceedings under Part 8, seeking a declaration to that effect, thereby raising the ‘novel question’ of the extent to which, if at all, the TCC should intervene in an ongoing adjudication in connection with potential breaches of the rules of natural justice.

Mr Justice Coulson held that the TCC did have jurisdiction to decide such an application and that it was ‘sensible and appropriate’ for the parties to have recourse to the TCC where, for example, an ongoing adjudication was fundamentally flawed in some way, or about to go off the rails irretrievably. But because such a decision would be final and binding on the parties, he wished to make it clear that this jurisdiction will only be exercised in exceptional circumstances. Alleged breaches of natural justice in an adjudication should always be approached with ‘a certain amount of scepticism’ as the concepts of natural justice are not always easy to reconcile with the swift and summary nature of the adjudication process. Where the two clash, the adjudication process should be given priority, especially where, as here, the breaches of natural justice claimed have not yet occurred and may, in fact, never occur. The court concluded that this was not an appropriate case in which to exercise its jurisdiction in the applicant’s favour. To read the judgment click here.

An appropriate case did, however, present itself less than a week later. In Dalkia Energy and Technical Services Limited v Bell Group UK Limited [2009] EWHC 73 (TCC), Dalkia sought a variety of declarations against Bell relating to the terms of the contract agreed between the parties and the alleged lack of jurisdiction on the part of the adjudicator. Mr Justice Coulson reiterated that, if Dalkia was entitled to a declaration to the effect that the adjudicator does not have the necessary jurisdiction to decide this dispute, then it would be better for everyone concerned if that declaration was granted now, rather than everyone having to wait for the point to arise in subsequent enforcement proceedings.

Here, the issue was whether, by agreeing that the adjudicator should investigate and rule on his own jurisdiction, Dalkia had submitted to the adjudicator’s jurisdiction in the full sense of having agreed not only that the adjudicator should rule on the issue, but also that Dalkia would then be bound by that ruling. The court concluded that, in the absence of an ‘unequivocal acceptance by Dalkia …that they would abide by and comply with the decision on jurisdiction’, it could not be said that Dalkia had submitted to the adjudicator’s decision in the full sense. Nevertheless, there was no dispute between the parties that there was a written construction contract, simply a dispute as to whether or not Bell’s standard terms and conditions had been incorporated into that contract. As a result, an adjudicator would have had to be appointed to decide any dispute that arose under that contract. In such circumstances, the adjudicator’s decision as to whether or not a particular set of contract conditions were incorporated would be part of the dispute properly referred to him and would not ordinarily be a matter with which the court would interfere on enforcement.

Dalkia argued that the issue did not arise on enforcement, but rather in the midst of an ongoing adjudication, in the context of Part 8 proceedings. There could be no question of want of jurisdiction on the part of the court in those circumstances and Mr Justice Coulson concluded he should not ‘duck the issue’. He ultimately concluded that Bell’s terms and conditions had been incorporated into the contract. Dalkia’s case effectively amounted to an assertion that, even if a tenderer has made clear that his quotation, and any eventual contract, would incorporate his terms and conditions and, even if that suggestion was not discussed, let alone queried or challenged, by the other party, but those terms and conditions were not re-stated again when the final discussion as to price take place, they somehow became irrelevant and formed no part of the contract agreed between the parties. In HHJ Coulson's view, that would be a ‘startling’ and ‘artificial’ conclusion and he rejected it.

In reaching that decision, Mr Justice Coulson again made it clear that not every issue in an ongoing adjudication will be suited to the Part 8 procedure: ‘far from it.’ He cited Dorchester Hotel v Vivid [see above] as an example where seeking a declaration as to natural justice in an ongoing adjudication was, on the facts of that case, entirely inappropriate and went so far as to say that ‘I suspect that the use of CPR Part 8 will rarely be appropriate in an ongoing adjudication, but I can see that there will be times when as issue as to, for example, which contract conditions apply, may be suitable for decision before or at the time of the ongoing adjudication.’ To read the judgment click here.

These two cases suggest Part 8 applications will rarely be appropriate, at least under the current adjudication framework. However, once the amendments to the scheme set out in the Construction Act come into force, so that it is no longer a prerequisite that there be a contract in writing, it is almost inevitable that there will be an increase in disputes as to which contract conditions should apply, or the terms of the contract generally, so that the courts may be entertaining an increasing number of such applications. In the meantime, it should be noted that parties who bring Part 8 proceedings in inappropriate circumstances can expect to be penalised in costs. A party who wishes to challenge jurisdiction must clearly reserve its rights to do so and should reiterate that reservation of rights at appropriate junctures.