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Adjudication
Allied P&L Ltd v Paradigm Housing Group Ltd [2009] EWHC 2890 (TCC)

Daniel Atkinson 26 November 2009


KEYWORDS: Allied P&L Ltd v Paradigm Housing Group Ltd [2009] EWHC 2890 (TCC), Amec Civil Engineering Ltd v The Secretary of State for Transport [2005] BLR 63, Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] EWHC 2218 (TCC), Bovis Lend Lease ltd v The Trustees of the London Clinic [2009] EWHC 64 (TCC), Cantillon Ltd v Urvasco Ltd [2008] EWHC 2218 (TCC), Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358), The Project Consultancy Group v The Trustees of the Gray Trust [1999] BLR 377, adjudication, enforcement, severance, severability, jurisdiction, reservation, general reservation, specific reservation, dispute, difference, crystallised dispute, determination, notice of determination, notice of withholding, repudiation, costs, summary assessment, indemnity costs, standard costs, His Honour Judge Akenhead.

The decision in Allied P&L Ltd v Paradigm Housing Group Ltd [2009] EWHC 2890 (TCC) usefully summarises the relevant law on matters of dispute, reservation of rights and severance in the context of adjudication and makes observations on the costs of enforcement.

The first issue was whether a dispute had crystallised on the quantum for unlawful termination or accepted repudiation at the date of the Notice of Adjudication and therefore whether the Adjudicator had jurisdiction to decide the issue. If not, then the second issue was whether Paradigm has sufficiently reserved its position on that issue or instead whether it had acceded to the adjudicator's jurisdiction. If there had been sufficient reservation then the third issue was whether the invalid part of the decision could be severed from the rest.

The Facts

Allied was a building contractor engaged by Paradigm to construct some 40 dwellings and other works at Bishop's Stortford. On 19 May 2009, Paradigm's issued the First Notice identifying seven complaints including the alleged failure to proceed regularly and diligently allegations. Paradigm required Allied to remedy each of the alleged breaches and stated that if it failed to do so with 9 working days from receipt of the First Notice the contract would be terminated in accordance with the Contract.

On 4th June 2009 by its Second Notice Paradigm puported to determine the contract and require Allied to immediately vacate the site. Paradigm ejected Allied from site on that day.

On 6 July 2009 Allied served a Notice of Adjudication on Paradigm seeking a declaration that Paradigm had wrongfully determined Allied's employment under the Contract and had therefore repudiated the Contract and sought payment of 248,016.80 as the balance between the sum due under the Contract at the date of the repudiatory breach and the monies that have been paid, damages for losses of 30,456.40 incurred as a direct consequence of the repudiatory breach of the Contract and payment in the sum of 8,567.15 for the profit it would have earned on the Contract, had the Contract had been performed.

Crystallisation of the Dispute

Akenhead J provided a re-statement of the law on the meaning of dispute:

  1. The Court must be astute in vetting jurisdictional challenges to adjudicators' decisions Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358. The Court will consider carefully every jurisdictional challenge on its merits. If the challenge is wholly unjustified or unarguable, the losing party may face a more stringent costs order.
  2. For a dispute or difference to arise, there must be a claim, an assertion or adoption of a position by one party which is expressly or by implication rejected or at least not accepted by the other Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] EWHC 2218 (TCC). The claim, assertion, rejection or non-acceptance does not need to be in writing or to be in any form or necessarily be detailed.
  3. The claim, assertion or adoption of the position must be communicated to the other party. It is not enough to create a dispute that one party simply believes in its own mind (without any communication to the other) that if it was to make a claim it would in all probability be rejected by the other party.
  4. The history and the context in which the dispute is said to have arisen must be examined but the law adopts an inclusive interpretation as to what amounts to a dispute Amec Civil Engineering Ltd v The Secretary of State for Transport [2005] BLR 63 and Bovis Lend Lease Ltd v The Trustees of the London Clinic [2009] EWHC 64 (TCC). The Court will not adopt an over legalistic analysis of what the dispute between the parties are but instead will determine in broad terms what the disputed claim, assertion or position is. Akenhead J made reference to the propositions referred to in his judgment in Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC) from Amec Civil Engineering Ltd v Secretary of State for Transport [2005] BLR 227 and Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd [2004] EWCA (Civ) 1757.
  5. The term "difference" is less hard edged than "dispute". The words are ordinary words of the English language and not terms of art. It was a mistake to gloss the word "dispute" so as to require a "claim" or a "reasonable time to respond" as condition precedent to the establishment of the dispute.

On the basis of the above propositions of law, Akenhead decided that the dispute which had crystallised and part of the dispute in the Notice of Adjudication, was whether there were any breaches which justified termination which was being threatened by the First Notice and whether those breaches were continuing or being repeated up to the Second Notice. It did not include any or any alleged entitlement to money or damages.

Nothing material was intimated, claimed or asserted by Allied before the Notice of Adjudication in relation to the quantum consequences of the termination. Akenhead decided that although it could be implied from conduct or even silence that a claim or assertion or position taken was disputed, it would be a very rare case that a claim, assertion or position could be implied from silence. The fact that Paradigm may or must have known that there would be the usual financial consequences flowing from the termination procedure which it invoked if it turned out to be unlawful was broadly immaterial in determining what the ambit of the dispute was as at the time of the Second Notice. He observed that there was nothing logically or intrinsically unacceptable or wrong in there being a dispute about liability only.

Accordingly on that basis the Adjudicator did not have jurisdiction to decide the quantum flowing from the unlawful termination which he had decided was repudiatory conduct. The next issue was whether Paradigm had reserved its position on jurisdiction on this issue.

Reservation of Rights

Akenhead J re-stated the law that it is necessary for a party challenging the jurisdiction of the adjudicator to reserve its position in relation to its challenge The Project Consultancy Group v The Trustees of the Gray Trust [1999] BLR 377.

Akenhead decided that there might be unusual circumstances in which a jurisdictional challenge could be mounted when there has been no reservation as for instance, if the party making the challenge did not know or could not reasonably have ascertained the grounds of challenge before the decision was issued. He stated that it was difficult to envisage circumstances in which a jurisdictional challenge on the grounds that there was no dispute should not and could not be the subject of a reservation of rights.

Akenhead J observed that there can be different types of reservation - generally or specifically. He left open whether a general reservation as to jurisdiction without any hint or suggestion as to what the grounds were could be effective. He observed that it might be so indefinite as to be a meaningless and ineffective reservation but it may be that in a particular context a general reservation may suffice.

In this case it was common ground, correctly in Akenhead's judgement, that if a specific reservation was made on one ground and it was established that the ground in question was an invalid jurisdictional objection, the party in question must be taken to have acceded to the jurisdiction only subject to the specific failed ground; in those circumstances, the parties will be taken to have submitted to the jurisdiction even if there are other good grounds which existed but were not mentioned.

Akenhead J then decided on the facts that there was in effect and in practice no valid or effective jurisdictional reservation made by Paradigm on the grounds that no dispute had crystallised in relation to the financial consequences of the unlawful termination as asserted by Allied. There had been bad jurisdictional points which showed that the solicitors were aware of the need to reserve their position in relation to jurisdictional matters. The fact that they did not use the language of reservation in relation to claims referred to adjudication supported the view that there was no intention to make a jurisdictional reservation with regard to that point.

Accordingly Akenhead J decided that the decision of the adjudicator should be enforced.

Severability

It was not necessary for Akenhead to decide the issue of severability, but he usefully summarised the law on whether the Court will enforce that part over which the adjudicator did have jurisdiction. He referred to the review of the previous cases on the topic in Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC).

  1. The first step is to ascertain whether in fact or in effect there is in substance only one dispute or two and what any such dispute comprises.
  2. If there is no objection to referring more than one dispute or difference to an adjudicator or if the contract permits it, the adjudicator will have to resolve all referred disputes and differences. If there is objection, the adjudicator can only proceed with resolving more than one dispute or difference if the contract permits him to do so.
  3. If the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on that part of the decision which deals with one such dispute or difference will not undermine the validity and enforceability of that part of the decision which deals with the other(s).
  4. The same in logic must apply to the case where there is a non-compliance with the rules of natural justice which only affects the disposal of one dispute or difference.
  5. There is a proviso to (3) and (4) above which is that, if the decision as drafted is simply not severable in practice, for instance on the wording, or if the breach of the rules of natural justice is so severe or all pervading that the remainder of the decision is tainted, the decision will not be enforced.
  6. In all cases where there is a decision on one dispute or difference, and the adjudicator acts, materially, in excess of jurisdiction or in breach of the rules of natural justice, the decision will not be enforced by the Court.