Contractor fails to land novel jurisdictional challenge to adjudication enforcement

As the primary purpose of the adjudication scheme is to facilitate cashflow in the construction industry you are always going to be facing an uphill battle to persuade a court not to enforce an adjudication award. That is not to say that it can’t be done, but the case of Prater Ltd v John Sisk & Son (Holdings) Limited [2021] EWHC 1113 (TCC) is clear warning that unless the jurisdictional issue is well within established paths, it may be better to put your money towards payment of the award rather than your lawyers.

Background to the Dispute

Prater is a specialist building envelope contractor.

John Sisk & Son (Holdings) Limited (“Sisk”) is a group of companies that provides domestic and international construction services across a wide range of industries.

The dispute centred around payment to Prater under an NEC sub-contract for the installation of the envelope façade (cladding and roofing) works to a new Boing Fleet aircraft maintenance hanger, office and plant room at London Gatwick. Delays in construction caused a significant dispute in respect of the final account payment. This dispute was subject to a series of adjudications. Sisk challenged Decision 4 for lack of jurisdiction. The jurisdiction challenge argument consisted of two steps, namely:

1. Adjudication 2 was invalid because it related to three disputes rather than one; and

2. Adjudication 4 was invalid because it was based, at least in part, on Adjudication 2 which was invalid for lack of jurisdiction.

Sisk failed on both arguments.

The Test

Veronique Buehrlen Q.C. sitting as a Deputy High Court Judge noted that the starting point on Jurisdiction is paragraph 7.37 of Coulson on Construction Contracts (4^th Edition) which states:

‘The fundamental principal that governs all enquiries into the adjudicator’s jurisdiction can be simply stated. If a dispute has arisen between two parties to a construction contract and the adjudicator is validly appointed to decide the dispute then, provided his decision attempts to answer that dispute his decision will be binding in accordance with the 1996 Act, regardless of errors of fact or law or procedure. If, on the other hand, he was not validly appointed, or he decided something other than the dispute that was referred to him, his decision will be unenforceable because it would have been made without jurisdiction. Thus it follows that it is not enough for the defendant to show an error on the part of the adjudicator. What matters, in the words of Sir Murray Stuart-Smith in C&B Scene, is whether the error on the part of the adjudicator went to his jurisdiction, or was merely an erroneous decision of law (or fact) on a matter within his jurisdiction. If it is the former, the decision would be unenforceable, if it was the latter, the decision would be enforceable by way of summary judgment.’

The Arguments

Issue 1: Sisk argued that as each of the three identified ‘disputes’ could be considered and ruled on separately they were independent and not one dispute. The Court disagreed and stated that this is but one part of the test. What is needed is to step back from the detail and to identify what the dispute is really about. When you did this, you realised that it was ultimately just one payment award which was being disputed. Therefore, it is one dispute with multiple elements.

In this case, due to the size of the dispute, the elements had been broken down into a series of bite size adjudications, and this is appropriate in complex disputes where taking a kitchen sink approach to a single adjudication would render the adjudicator with insufficient time to properly consider all the issues (per HHJ Coulson in William Verry (Glazing Systems) Limited v Furlong Homes Ltd [2005] EWHC 138 (TCC)). Therefore, the first limb of the argument was dismissed.

Issue 2: In respect of the novelty of challenging jurisdiction for Decision 4, by challenging jurisdiction for Decision 2, the Court dismissed this argument on two simple grounds:

• Firstly, if the adjudicator was wrong to rely on Decision 2, then his decision to do so is an error of law and not of jurisdiction, making his decision enforceable.

• Secondly, it was not open to the adjudicator to retry issues dealt with in Decision 2 until and unless it was set aside. Indeed, had the adjudicator done so then this would have been a ground to set aside Decision 4 for lack of jurisdiction. It is not for a party seeking to rely on an adjudication award to prove it is valid, it is for a party challenging it to prove that it is not. Sisk had not challenged Decision 2. So the adjudicator was correct to have relied upon its findings.

Enforcement of Adjudication 4 was allowed in its full sum of £1,757,821.35 + VAT.

Conclusion

This is a welcome and sensible result by the Court, which is wholly in keeping with the aims of the Scheme and adjudication within the construction market. Sisk would have been far better off paying the adjudication sum to Prater and putting its legal budget towards challenging the adjudication decision through final determination by way of Court or Arbitration. In the heat of a dispute, and with large sums of money at play, you can of course understand the allure of legal challenge. It is at just such times, that you need sensible, grounded and commercial advice from your legal advisors.

Cardium Law are specialists in construction law, disputes, and adjudications. If you are in need of our assistance please do not hesitate to contact the article authors at chrismacqueen@cardiumlaw.com or Juliasmith@cardiumlaw.com or by telephone at: +44 (0)75 5382 4127.