Serial adjudications: approach with care?
Serial adjudications are all too often a fact of life for those involved in construction disputes. Most often they are seen where the amounts disputed in the final account are spread across multiple elements of that account. In those circumstances carving up the account into smaller, more manageable parts, with the aim of unlocking the account, can make strategic (and financial) sense.
However, serial adjudications come with risks attached to them. In particular there is a risk that the parties will waste significant time and money arguing about whether the dispute referred has (or elements of that dispute have) been decided previously. This is particularly the case where the underlying issues are concerned with delay potentially caused by the same underlying issues spread over different periods of time.
The recent Court of Appeal case of Sudlows Limited v Global Switch Estates 1 Limited provides an excellent example of why serial adjudications should be approached with caution. The Court of Appeal decided that the adjudicator in Adjudication No. 6 between the parties was correct to hold that the underlying contractual issue in relation to an extension of time had already been decided in Adjudication No. 5. In reaching their conclusion the Court of Appeal provided an extremely helpful summary of the key principles to be deployed by adjudicators (and party representatives) in working out if the dispute referred has already been determined.
Had the same, or substantially the same dispute been referred?
The issue was essentially whether the adjudicator in Adjudication No. 6 was bound by the decision made in Adjudication No. 5 because the dispute referred (relating to an extension of time) was the same (or substantially the same) in both adjudications. The adjudicator in Adjudication No. 6 had held that he was bound by the decision in Adjudication No. 5, albeit he noted that he would have reached a different decision as to contractual liability than the adjudicator in Adjudication No. 5, a finding which hinged on who had contractual responsibility for cabling and ductwork issues at a data centre.
Global argued that Adjudication No. 6 was a fresh claim for an extension of time and an entirely new claim for loss and expense. The period in question, and to which the extension of time related, was also different. Sudlows said the issue of contractual responsibility for the cabling and ductwork issues on which the extension of time hinged had been determined in adjudication No. 5.
The TCC disagreed with the adjudicator, holding that the dispute was different to that referred in Adjudication No. 5. The Court of Appeal disagreed with the TCC. They considered that the adjudicator was correct to consider himself bound, albeit they also noted: “I have found it more of a borderline case than any of the authorities to which I have referred”. As such the case serves to illustrate how difficult working out whether the same (or substantially the same) dispute has been referred again can be in practice.
So, what are the principles that should be deployed to determine if a dispute has already been decided?
First, the Court of Appeal emphasised that any debate about whether a particular dispute has already been decided should be dealt with robustly and using common sense. As emphasised by Lord Justice Coulson, “It should not be a complex question of interpretation of documents and citation of authority”.
Second, “is the need to look at what the first adjudicator actually decided to see if the second adjudicator has impinged on the earlier decision” [emphasis added]. In doing that, it is relevant to look at the adjudication notice and the referral notice but the Court emphasised the need to look at “what it was, in reality, that the adjudicator decided”. Documents alone, it was noted, can be misleading.
Finally, the Court of Appeal noted there is a need for flexibility. The key is to ensure that “what is essentially a new claim or a new defence is not shut out … one way of at least testing whether the correct approach has been adopted is to consider whether, if the second adjudication is allowed to continue, it would or might lead to a result which is fundamentally incompatible with the result in the first adjudication” [emphasis added]. A practical approach is therefore essential.
The distillation of the principles to be applied in determining whether the same (or substantially the same) dispute has been referred again to a later adjudicator is extremely helpful. The key is to look to the practical effects of the subsequent adjudication – could the result of the subsequent adjudication lead to a result that is incompatible with the previous one?
However, applying these principles in practice can (as even the Court of Appeal found) be difficult for both an adjudicator and party representatives. Those seeking to cut and carve extension of time claims need to be particularly careful that in doing so they are not shutting the door to claims in later windows or placing themselves at a disadvantage in not presenting the overall picture to an adjudicator. If a project is ongoing, referring extensions of time claims in different windows in separate adjudications may be unavoidable. However, for those referring delay related issues after practical completion, they may wish to think again in light of this decision.
Similarly, party representatives should always force themselves to ask whether a purposeful strategy of serial adjudications is sensible and/or cost effective for their client. Does splitting the account up make sense overall? As noted by the Court of Appeal: “The practice of serial adjudication, involving repeated references of disputes to adjudication under the same contract, is not always easy to reconcile with the emphasis on speed and proportionality”. Whilst they are sometimes unavoidable, keeping your strategy under active review is always good practice.