In Sherwood & Casson Ltd v Mackenzie (Nov 1999) TCC the issue was whether a second adjudicator had jurisdiction to decide a dispute referred to him, part of which had already been decided in the first adjudication. The decision gives useful guidance on how to assess whether two disputes are substantially the same.

Facts

The work involved the provision of steelwork and cladding for the new Main Grandstand being constructed for Barrow-in-Furness RLFC. Sherwood was the subcontractor and had obtained a decision in its favour in a first adjudication on an interim payment application. Sherwood then prepared a Final Account document. This listed the same 16 variations as had been listed in its previous interim application with one further variation. The sums claimed were different and a considerably greater amount of supporting documentation for each variation was provided. Importantly, a new claim was included for the first time - a claim for loss and expense alleged to arise from the delayed completion of the subcontract works. Mackenzie’s response included the same contra charges as had been submitted and dealt with in the first adjudication.

The Final Account document led to a second adjudication and a decision in Sherwood’s favour that Mackenzie should make payment. The second adjudicator decided that the valuation of the Final Account was not the same as valuation of interim payments and that he had jurisdiction to decide. He dismissed the loss and expense claim. As to the contra charges he decided that these had already been adjudicated upon by the first adjudicator and unlike interim and final valuation of variations there was nothing to differentiate them from the first adjudication and the parties were therefore bound by the first adjudicator’s decision.

Mackenzie’s Objections

Mackenzie objected as soon as the second notice to adjudication was served on it and continued the objection throughout the adjudication. They opposed the summary judgment application on the same grounds that the second adjudicator lacked jurisdiction and argued that his decision was therefore unenforceable. Mackenzie maintained that the claim based on the final account was substantially the same as the claim under the previous interim application and therefore the adjudicator should have resigned relying on paragraph 9(2) of the Scheme which applied to the adjudication. Paragraph 9(2) requires the Adjudicator to resign "where the dispute is the same or substantially the same as one which has previously been referred to adjudication, and a decision has been taken in that adjudication".

Definition of Dispute

His Honour Judge Thornton QC first decided the meaning of the term "dispute" under the HGCR Act 1996. He noted that there was no definition of the term under either the Act nor the Scheme. He held that the HGCR Act 1996 and the Scheme both envisaged that only one dispute will be referred to an adjudicator at one time. That dispute is whatever is encompassed within the referral notice. He held that although it is possible to enshrine more than one dispute in a single notice, the Scheme envisaged that each dispute would be subject a different notice and a different appointment of an adjudicator, although the same adjudicator could be appointed to determine simultaneously more than one dispute.

He held that it followed that a "dispute" within the meaning of the Scheme, can encompass several causes of action, issues or claims arising out of the same construction contract. This part of the judgment was developed further in Judge Thornton’s later decision in Fastrack Contractors Ltd v Morrison Construction Ltd (4^th Jan 2000) TCC.

The Scheme requirement at paragraph 9(2) was then examined. It was held that in order to decide whether the disputes are the same or substantially the same it was necessary that each dispute be considered in the round and in for the two disputes to be considered in their entirety. There is no possibility of the Adjudicator resigning from determining part of a dispute referred to him. He must resign from the dispute in its entirety or confirm his appointment in its entirety. The Adjudicator cannot resign from part that has been referred whilst retaining jurisdiction to determine the balance of the reference.

Should the Court Investigate the Adjudicator’s Jurisdiction

His Honour Judge Thornton QC gave a summary of the guidance provided by decided cases on the approach to the enforcement of adjudicator’s decisions. The cases are Macob Civil Engineering Ltd v Morrison Construction Ltd (1999), The Project Consultancy Group v The Trustees of The Gray Trust (1999) and Bouygues UK Ltd v Dahl-Jensen UK Ltd (1999) and the summary is as follows:

1. A decision of an adjudicator whose validity whose is challenged as to its factua1 or legal conclusions or as to procedural error remains a decision that is both enforceable and should be enforced (Macob);

 

2. An decision that is erroneous, even if the error is disclosed by the reasons, will still not ordinarily be capable of being challenged and should, ordinarily, still be enforced (Bouygues);

 

3. A decision may be challenged on the ground that the adjudicator was not empowered by the HGCRA to make the decision, because there was no underlying construction contract between the parties (Project Consultancy), or because he had gone outside his terms of reference (Bouygues);

 

4. The adjudication is intended to be a speedy process in which mistakes will inevitably occur. Thus, the court should guard against characterising a mistaken answer to an issue, which is within an adjudicator’s jurisdiction, as being an excess of jurisdiction. Furthermore, the court should give a. fair, natural and sensible interpretation to the decision in the light of the disputes that are the subject of the reference (Bouygues);

 

5. An issue as to whether a construction contract ever came into. existence, which is one challenging the jurisdiction of the adjudicator, so long as it is reasonably and clearly raised, must be determined by the court on the balance of probabilities with, if necessary oral and documentary evidence (Project Consultancy).

The court therefore was required to enforce the adjudicator’s decision without further ado unless the challenge to the adjudicator’s decision was a jurisdictional challenge. In this case Mackenzie’s challenge was a jurisdictional challenge so it must be determined by the court.

The Scheme gave the adjudicator power to determine the jurisdictional question of substantial overlap, but it was held this did not mean that his decision on the issue was not open to challenge. This part of the decision strictly speaking only affects Scheme adjudications. It was noted however that in other situations where the particular rules did not have an equivalent of paragraph 9(2) of the Scheme, that the same issue would arise. If a dispute had already been substantially decided by an adjudicator, there would no longer be a dispute capable of being referred to a second adjudicator. Any second appointment would probably be one without jurisdiction.

When are Two Disputes Substantially the Same

Judge Thornton then considered whether the claim based on the final account was substantially the same as the claim under the previous interim application. There were three elements to be considered, the variations, the loss and expense and the contra-charges.

The claim for contra charges were identical in both adjudications, but in this case were not so large a part as to be a substantial part of either adjudication. The contra-charges were not however subject to remeasurement under the contractual machinery concerned with the Final Account. It was held that it was therefore open to the Adjudicator to conclude that the representation of the same contra charges amounted to no new dispute or question and that therefore, these claims should not be revisited by him.

There was no dispute that the loss and expense claim was a new dispute.

In the case of variations, the subcontract required them to be remeasured and revalued during the consideration of the Final Account. The variations in the Final Account had to be considered in the context of loss and expense, since these were alleged to have caused the delay and disruption. It was also alleged by Mackenzie that the valuation of the variations provided sufficient remuneration for such delay and disruption. This therefore raised a separate dispute since the valuation in the interim application was without loss and expense being considered. The factual content of the original work, the variations, the cause of the claimed loss and expense and the contra-charges were closely inter-related and an exercise to determine the overall sum due on both the interim application and the

Final Account gave rise in each case, to only one dispute.