More than one dispute

By Victoria Russell, Fenwick Elliott

Deluxe Art and Theme Ltd v Beck Interiors Ltd [2016] EWHC 238 (TCC) (12 February 2016)

The Claimant sought summary judgement to enforce two decisions by the same adjudicator. The enforcement application was resisted by Beck. At the centre of the application was a dispute about whether, pursuant to paragraph 8(1) of the Scheme, an adjudicator has the jurisdiction, without the consent of all parties, to adjudicate at the same time on more than one dispute.

In the introduction to his Judgment, Mr Justice Coulson expressed his “consternation that a relatively simple enforcement dispute was the subject of no less than six full lever arch files. Four of these files were never referred to. It is exceedingly rare that any adjudication enforcement dispute requires more than one lever arch file of documents. The time is fast approaching when, unless the parties and their solicitors cooperate properly and comply with the TCC Guide, the court will simply refuse to hear cases with such promiscuous and unnecessary bundling”

Beck had engaged DATL as a sub-contractor to supply and install joinery items in the Lanesborough Hotel at Hyde Park Corner. Beck were refurbishing the hotel as the main contractor.

There were three adjudications between the parties, each started by DATL. On each occasion, the RICS appointed the same person as the adjudicator.

The first adjudication was concerned with variations and acceleration costs. The adjudicator awarded DATL £72,888.95 plus VAT and interest; that sum was paid.

The second adjudication was concerned with DATL’s claim for an extension of time and prolongation costs. The adjudicator awarded DATL £120,559 plus VAT and interest together with an extension of time up to 30 June 2015.

The third adjudication, which was started during the currency of the second one, concerned Beck’s failure to reduce the rate of retention from 5% to 2.5% upon practical completion of the sub-contract works. The adjudicator awarded DATL nearly £39,000, plus VAT and interest.

By letter sent while the second and third adjudications were taking place, Beck objected to the adjudicator dealing with two disputes at the same time, the third adjudication having been started before the decision had been given in the second one. Beck did not comply with the second and third decisions, so DATL applied for summary judgment to enforce them.

Mr Justice Coulson first looked at whether or not adjudications two and three encompassed a single dispute between the parties or whether they in fact encompassed two separate disputes. He said that he was “in no doubt that there were two separate disputes in this case” for a number of reasons.

Firstly, he said that it was “plain” that DATL themselves considered that there were two disputes. If the dispute about retention monies was already included in the second adjudication, there would have been no need for them to issue the fresh Notice in the third adjudication.

Secondly, the adjudicator ruled at the outset that these were, to all intents and purposes, different disputes.

Thirdly, the Judge considered that “on an application of well known principles, the dispute about extensions of time and loss and expense was a different dispute to the dispute about retention”. He referred to the judgment by Mr Justice Akenhead in Witney Town Council –v- Beam Construction (Cheltenham) Ltd [2011] EWHC 2332 (TCC), when he said that:

“A useful if not invariable rule of thumb is that, if disputed claim No. 1 cannot be decided without deciding all or parts of disputed claim No. 2, that establishes such a clear link as points to there being only one dispute”.

In this case, DATL’s claim for an extension of time and loss and expense could easily be decided without any reference to the claim for the failure to reduce retention, which was a separate and standalone claim.

Mr Justice Coulson said:

“It should be noted that there is no authority to support the proposition that two different disputes, deliberately raised by the claiming party in two separate adjudication notices, and described in very different terms, could still somehow be part of the same dispute. All of the authorities about the reference of more than one dispute, which culminate in Witney Town, were cases where there was one notice of adjudication, and the outcome depended on the nature of the issues that had been referred to the adjudicator under that single notice. Thus, whilst I accept that the mere fact that there were two notices may not necessarily be determinative, it might be thought that it would take a very unusual set of circumstances to conclude that the disputes referred to in the adjudication notices, started at different times, both formed part of the same dispute”.

The Judge concluded that there were two disputes between the parties, which were the subject respectively of adjudications two and three.

The Judge then asked:

“Does it matter?”.

He said:

“In my view, this finding does matter. That is because the weight of the adjudication authorities is that an adjudicator only has the jurisdiction to deal with a single dispute at any one time. …. Accordingly, as there were two disputes between the parties, the question then arises as to whether the adjudicator had the jurisdiction to deal with those two disputes at the same time”.

The Judge then examined in detail paragraph 8 of Part 1 of the Scheme, which provides as follows:

“8(1) 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.

(2) the adjudicator may, with the consent of all the parties to those disputes, adjudicate at the same time on related disputes under different contracts, whether or not one or more of those parties is a party to those disputes….”

He noted that paragraph 8(1) allows the adjudicator to deal with more than one dispute at the same time but only with the consent of all the parties. Here, Beck did not consent to the disputes in the second and third adjudications being dealt with by the same adjudicator at the same time. On the face of it, therefore, paragraph 8(1) provided what the Judge referred to as “an insurmountable jurisdictional hurdle for DATL”.

The Judge considered a number of points put forward on behalf of DATL, including that paragraph 8(1) was ultra vires because it was contrary to Section 108(2)(a) of the HGCRA, providing for the ability to adjudicate “at any time”.

The Judge decided that “the clear words” in paragraph 8(1) of the Scheme do prevent an adjudicator dealing with more than one dispute at the same time, if there is no consent for them to do so. In his judgment, the complication arose from the decision to start the third adjudication before the second had been concluded, and to ignore the clear requirement of consent. He said:

“I cannot accept that, in some way, the words at paragraph 8(1) relate only to the situation where there are a number of different disputes on the same piece of paper (the adjudication notice) and not to the situation where there are a number of different disputes on many different such pieces of paper. That makes no sense. Moreover, there is nothing in paragraph 8(1) to allow such fine distinctions to be drawn. Whilst these type of points have only ever arisen before in cases where there was a single notice of adjudication, that is pure happenstance. It does not affect the proper construction of paragraph 8(1).

I do not accept that in some way the Scheme is unlawful or ultra vires. The parties can adjudicate at any time. That is what the Act provides. All they have agreed here is that, if one party wants to adjudicate more than one dispute at the same time before a particular adjudicator, then that party needs the consent of the other party. That does not unreasonably fetter or impinge upon the underlying right to adjudicate at any time. The Scheme comprises a sensible and practical series of rules governing the way in which that right can be exercised”.

Mr Justice Coulson held that the adjudicator had the necessary jurisdiction when he was appointed to deal with the second adjudication, but did not have the jurisdiction to deal with the third one. Since he never had the jurisdiction to deal with the third adjudication, it was a nullity and could not have affected his continuing jurisdiction in respect of the second adjudication. The decision in the third adjudication was therefore unenforceable, but this had no bearing on the decision in the second adjudication, which decision was therefore enforced.

As a consequence of this judgment, the practice of referring separate disputes to the same adjudicator at the same time will have to come to an end, at least in situations where the Scheme applies and insofar as the parties have not consented to such a practice. Alternatively, if parties want the same adjudicator to decide the dispute, any subsequent referral will have to wait until the adjudicator’s decision in the previous adjudication has been received. For adjudicators, it will be one more question they need to ask at the outset, when they are considering accepting an appointment.

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