Adjudication
Christiani Nielsen Ltd v The Lowry Centre Development Co Ltd (2000) TCC

© Daniel Atkinson 2000       28 December 2000

In Christiani & Nielsen v The Lowry Centre Development Co Ltd (2000) TCC the Lowry issued a letter of intent dated 11th August 1997 following which Christiani started work.  Negotiations took place as to the precise terms of the formal contract which the parties envisaged, and the formal contract was entered into as a deed and was dated 1st December 1998.  The deed contained the provision that notwithstanding the date of execution of the agreement, it would take effect from 11th August 1997.  Disputes arose as to the amount of liquidated damages which the Lowry was entitled to deduct and the matter was referred to adjudication.  Four issues arose in enforcement proceedings:

1. Did the parties agree that the Adjudicator could determine his own jurisdiction?

2. Did the Adjudicator lack jurisdiction because the dispute arose under a contract entered into before the HGCRA 1996 came into force?

3. Was Christiani estopped from relying on the HGCRA?

4. Is the Adjudicator's decision unenforceable because it decides a question concerning the rectification of the deed which the adjudicator has no power to decide?

On the first issue, his Honour Judge Thornton QC examined the facts and found that the adjudicator did not have ad hoc jurisdiction to decide his own jurisdiction but his decision that he had jurisdiction to decide the particular dispute referred to him was correct.  In so deciding Judge Thornton gave useful guidance to adjudicators faced with a challenge to jurisdiction.

When faced with a challenge to his own jurisdiction, the adjudicator has a choice as to how to proceed. The adjudicator has three options:

1. He can ignore the challenge and proceed as if he had jurisdiction, leaving it to the court to determine that question if and when his decision is the subject of enforcement proceedings.

2. Alternatively, the adjudicator can investigate the question of his own jurisdiction and can reach his own conclusion as to it. If he was to conclude that he had jurisdiction, he could then proceed to decide the dispute that had been referred to him. That decision on the merits could then be challengeable by the aggrieved party on the grounds that it was made without jurisdiction it the adjudicator's decision on the merits was the subject of enforcement proceedings.

3. Having investigated the question, the adjudicator might conclude that he had no jurisdiction. The adjudicator would then decline to act further and the disappointed party could test that conclusion by seeking from the court a speedy trial to determine its right to an adjudication and the validity of the appointment of the adjudicator.

It was prudent, indeed desirable, for an adjudicator faced with a jurisdictional challenge which is not a frivolous one to investigate his own jurisdiction and to reach his own non- binding conclusion as to that challenge. An adjudicator would find it hard to comply with the statutory duty of impartiality if he or she ignored such a challenge. 

In the instant case Judge Thornton held that the parties had not given the Adjudicator ad-hoc jurisdiction, but if they had that did not necessarily mean that they had agreed that any decision as to jurisdiction was not reviewable by the court.  This jurisdictional adjudication could not have been conducted under the provisions of the HGCRA since the jurisdictional dispute it would be concerned with would not have arisen under a construction contract.  Judge Thornton stated that the question was not an easy one,but since it was a moot question in this case he did not decide it.

On the second issue, Judge Thornton decided that the Adjudicator had jurisdiction.  There were three different ways in which the letter of intent dated 11th August 1997 and the deed dated 1st December 1998 might inter-relate.  

1. The two might operate simultaneously, or 

2. the letter of intent might be superseded by, or merged with, the deed,or

3. the deed might have varied the letter of intent and be taken to form part of the earlier contract as thereby varied.

It was held that the deed superseded the letter of intent.  The letter of intent was intended to have a limited shelf life which would cease when the subsequent deed was entered into.  Once the deed was executed, the letter of intent ceased to have any effect or independent existence.  This conclusion was reinforced by the provision in the deed that the deed would take effect from 11th August 1997, being the date of the letter of intent.  There would have been no need for this provision if the earlier work was to continue to be subject to the terms of the letter of intent.  The whole of the works were subject to the deed which was entered into after 1st May 1998.

On the third issue, the Lowry's contention was that Christiani had been aware that the purpose of the statement back dating the deed to before 1st May 1998 was intended to ensure that the HGCRA did not apply.  Correspondence exchanged before the deed was executed showed this common understanding.  Christiani on the other hand raised two objections.  First as a matter of procedure, the Lowry had not raised the estoppel point in submissions to the Adjudicator on the matter of jurisdiction so had waived any entitlement to rely on the alleged estoppel.  Second an estoppel argument was not open to the parties to opt out of the HGCRA.

It was held that the Lowry had waived its entitlement to estoppel.  It would be unfair to allow the Lowry now to argue for a lack of jurisdiction on a ground that was not advanced before the Adjudicator, particularly when the that argument is based on a contention which is inconsistent with the argument advanced to the adjudicator.  It was also held that the terms of the HGCRA are mandatory and cannot be contracted out of, otherwise the parties would be robbed of their statutory entitlement to an adjudication.

The fourth issue, went to the substance of the case.  The dispute referred to adjudication was the amount the Lowry was entitled to deduct as liquidated damages form the monies due to Christiani.  The deed stated that the contract period was 81 weeks, whereas the Lowry contended that the deed should have stated that the contract period was 57 weeks and that, in consequence, it was entitled to have the deed rectified.  The Lowry could only legitimately deduct liquidated damages on the basis of a 57 week completion period if it was entitled to have the deed rectified and, equally importantly, was entitled to deduct liquidated damages in advance of the deed being rectified.

It was held that in fact, The Lowry could only have legitimately deducted liquidated damages for the longer period of delay if it could have shown that Christiani was estopped from contending for its legal right to complete in 81 weeks. For such an estoppel to have arisen, it would have been necessary for The Lowry to have shown that it would have been unfair for Christiani to rely on its legal right to complete in 81 weeks. Such an estoppel would have required The Lowry to have demonstrated that Christiani was aware, or should have been aware, that the terms of the true agreement arrived at by the parties had not been accurately stated in the deed when it had been executed.  However, the Adjudicator's decision would have precluded that argument since it decided that the factual basis for such an estoppel had not been established by The Lowry.

It followed that the Adjudicator had full jurisdiction to decide the dispute in the way he did. It also followed that the Court do not have to decide whether an adjudicator appointed under the provisions of the HGCRA has the power to decide a claim for rectification. Such a claim would have arisen, for example, had The Lowry sought the appointment of an adjudicator to decide its entitlement to rectification. It was contended by The Lowry that since the adjudicator was appointed, by virtue of section 108 (1) of the HGCRA, to decide disputes "under the contract", he could not have decided disputes that were merely connected with the contract. This argument was dependent on the line of authorities which were concerned with the limited jurisdiction of arbitrators whose jurisdiction is derived from an arbitration clause which refers only to disputes arising "under the contract". Such a clause has been held not to extend to disputes involving misrepresentation or rectification claims or claims as to the ambit and content of the contract.  The question did not arise in this case and therefore the Court did not express a view.

It was therefore held that the adjudicator's decision was made within jurisdiction and that Christiani was entitled to summary judgment.