29
Nov

No to Enforcement: Adjudications cannot override Legal Principles

The General Rule: The Technology and Construction Court (TCC) is non-interventionist and reluctant to accept challenges to adjudicators’ decisions in enforcement proceedings. This is because the court considers that an adjudicator’s decision should be upheld if he has answered the questions put to him correctly; this is so even when he has made a factual error where he still answered the right question (albeit wrongly). Anyway, even if he did answer it wrongly, any dispute over the decision can be determined definitively by litigation, arbitration, or agreement.

Exceptions to the Rule: There are some limited exceptions such as a lack of jurisdiction or where the adjudicator has breached principles of natural justice (serious irregularities in procedure or fairness).

Example: The April 2021 case of Delta Fabrication & Glazing Ltd v Watkin Jones & Son Limited (Delta v Watkin Jones) demonstrates how an adjudicator ended up making an award which he had no right to make because of a lack of jurisdiction. The Claimant obtained the adjudication award and then sought to enforce it via summary judgment.

Background

The parties disagreed about the final accounts of two sub-contracts for the construction of student accommodation in Walthamstow. The two sub-contracts dealt with cladding and roofing works respectively. The parties had agreed that if the referral to the adjudicator concerned disputes arising under two separate contracts, the adjudicator lacked jurisdiction. They did not disagree that there had initially been two contracts. Delta then claimed that the two sub-contracts had merged into one and therefore the adjudicator had jurisdiction to make an enforceable award.

The Law

Under section 108(1) of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act), parties to a “construction contract” have the right to refer a single dispute to adjudication.
Only one dispute may be referred for adjudication at a time.
Delta therefore had to convince the judge that there was in fact one contract and one dispute. Delta sought to do this by relying heavily on the fact that the payment notices, regarding the works under the two sub-contracts, were combined into one. Delta issued its summary judgment application and argued that:

  • There was an agreement to vary the two contracts so as to amalgamate them into a single contract;
  • Alternatively there was a single contract for the purposes of the Construction Act 1996, and the parties treated the two contracts as one for the purposes of the Act by conduct;
  • The conduct of Watkin Jones’, by treating the two contracts as being one, gave rise to an estoppel preventing any assertion that there were two contracts.

The court dismissed all three of Delta’s arguments. The Court was convinced that Watkin Jones had a real prospect of success at defending itself at trial because:

  • There was no evidence of an offer from Delta to vary the two contracts to amalgamate them into a single contract, nor was there any acceptance of the offer by Watkin Jones.
  • Delta was wrong in its assertion that the contractual requirements of offer, acceptance and consideration, are not relevant to the definition of “construction contract” under the Act or the standard definition of “agreement” is different at common law. The court held that  “agreement” holds its natural meaning, and
  • There was no evidence as to the essential ingredients of an estoppel claim: namely no evidence of a misrepresentation by Watkin Jones relied on by Delta resulting in Delta’s detriment.

This case shows the importance of how an adjudicator cannot ignore the effect of legal principles when making an award. To do so is outside the adjudicator’s jurisdiction and will render the award unenforceable. Claimants seeking to adjudicate should keep things simple – one dispute and one contract.

Other Notes

  • No right to adjudication if the construction contract does not include in writing all the adjudication provisions included in s108(2)-(4) Construction Act 1996.
  • This is because under para 8 Scheme for Construction Contracts Regulations 1998, an adjudicator may:
    • Para 8(1) adjudicate on more than one dispute under the same contract with the consent of all parties.
    • Para 8(2) adjudicate at the same time on related disputes under different contracts with the consent of all parties to the dispute.
  • If it does not comply with s108, all adjudication provisions in part 1 scheme of construction contract 1998 implied instead – s114(4) Construction act 1996
  • Following a battle of the forms case – Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd [2003] where CoA held that no contract existed because parties had not agreed which of the standard forms proposed by parties would apply; accordingly, no right to adjudicate existed. – point being, the construction contract must be enforceable in accordance with general contractual principles (offer and acceptance).