Serial adjudications: the debate over binding force goes on

A recent TCC decision has considered whether an adjudicator was bound by findings made by a previous adjudicator as to the existence of Relevant Events justifying an extension of time under the JCT Design and Build form. The adjudicator in this case had wrongly considered that in granting a further extension of time in relation to the same events he was bound by the findings made in the previous adjudication. The court’s decision emphasises the dissimilarity of the two disputes over a textual analysis of the earlier adjudication decision and is likely to be great interest to those involved in serial adjudications.

When does an adjudicator’s decision have binding force?

It is well understood that adjudication decisions are binding on parties until their dispute is finally determined by court or arbitration proceedings. This is one of the requirements for a valid adjudication clause mandated by section 108 of the Housing Grants Construction and Regeneration Act 1998 (as amended) and is also reflected in paragraph 23 of the Scheme for Construction Contracts (the “Scheme”). It is important to note that only the adjudicator’s “decision” is binding and not the reasons which are given in support of the decision. What comprises the “decision” has been said to include the actual award as well as any other finding “that forms an essential component of or basis for that award” (Hyder Consulting (UK) Ltd v Carillion Construction Ltd). For example, where a decision had awarded £X on the basis that a contractor was entitled to an extension of time of Y weeks, the extension of time finding would be an essential component of the award of £X and both would be binding in future adjudications.

A related principle often found in adjudication rules, including paragraph 9 of the Scheme, is that a dispute cannot be referred to adjudication where it is the same or substantially the same as one which has previously been referred and decided upon. For example, in Quietfield Limited v Vascroft Construction Limited, a contractor had failed to establish an extension of time in an earlier adjudication. It then sought to establish the same extension of time in defence of a subsequent adjudication by the employer claiming liquidated damages. It was permitted to do so because different and more detailed evidence was relied upon in the subsequent adjudication so that the dispute was not the same or substantially the same as in the prior adjudication.

A recent TCC case demonstrates the interaction between these two principles in a case where an adjudicator had declined jurisdiction due to what he concluded was the binding effect of a previous adjudication decision as to extensions of time.

Global Switch Estates 1 Ltd v Sudlows Ltd

Global Switch engaged Sudlows to upgrade a specialist data centre in East London under an amended JCT Design and Build 2011 contract. The project saw a number of adjudications between the parties. The present proceedings concerned a fifth and sixth adjudication.

Part of Sudlow’s scope of work required it to install heavy cables underneath a main road through ductwork installed by others. One of the cables was damaged during the process and Sudlows claimed that the ductwork was defective. Installation of the cables was then removed from Sudlows’ scope of works and the cables were installed by others. However, Sudlows then refused to terminate, connect and energise those cables on the basis that Global Switch had refused to take responsibility for what Sudlows contended was a novel and untested cable installation.

In the fifth adjudication, Sudlows claimed an extension of time arising from these events for a period described as “Window 29”. The adjudicator accepted Sudlows’ claim and awarded an extension of time of 234 days within Window 29. The adjudicator found that this delay arose from the defective ductwork and Sudlows’ reasonable refusal to terminate, connect and energise the cables installed by others, both of which were found to be Relevant Events entitling Sudlows to an extension of time.

A sixth adjudication was commenced by Sudlows after Practical Completion in relation to payment. Sudlows’ payment claim included loss and expense in relation to Window 29 and also in relation to the period between Window 29 and Practical Completion (referred to as “Window 29+”). An extension of time was claimed for this period based on the same Relevant Events as found in the fifth adjudication.

Global Switch claimed that the adjudicator in the sixth adjudication, Mr Molloy, was not bound by the findings as to Relevant Events made by the adjudicator in the fifth adjudication. It also relied on new evidence as to these events which showed that the cables Sudlows had complained of had been successfully energised and tested. Accordingly, it argued that Mr Molloy should consider the question of entitlement afresh in relation to Window 29+ and in relation to loss and expense for Window 29. Global Switch accepted that the extension of time awarded by the previous adjudicator for Window 29 could not be challenged.

Mr Molloy determined that he was bound by findings made in the fifth adjudication as to Relevant Events. He considered these to form an “essential component” of the decision in the fifth adjudication as to the extension of time awarded for Window 29. He therefore proceeded to award an extension of time for Window 29+ on this basis, together with loss and expense. However, with the agreement of the parties, he also noted that had he considered the matter afresh he would not have agreed that the events relied upon were Relevant Events. In particular, the new evidence submitted by Global Switch was said to have shown that Sudlows had unreasonably refused to energise the cables installed by others. Mr Molloy set out an alternative decision on this basis in the event he was wrong about the binding force of the fifth adjudication.

Alternative findings enforced

The case came before the TCC on an enforcement hearing and Global Switch renewed its arguments as to the limited force of the fifth adjudication.

The court agreed with Global Switch, finding Mr Molloy was not bound by the Relevant Events found in the fifth adjudication. In Mr Justice Waksman’s judgment, Mr Molloy had not properly directed himself to whether the dispute in the fifth and sixth adjudications were “the same or substantially the same”:

“First, the cases make clear that the jurisdictional question involves an analysis of what both disputes are about, and whether they are the same or substantially so. Mr Molloy did not apply that test at all. Second, he failed to give any real weight to the fact that the decision in Adjudication 5 was as to an EOT for a prior period. Third, … he made no reference to the new material adduced before him and which, as we know, he considered to be so significant. … One of the reasons why, I suspect, he did not consider this is because he was focusing too much on the decision in Adjudication 5 in something of a vacuum, as it were.”

The court stopped short of accepting Global Switch’s primary case that the mere fact that the sixth adjudication concerned an extension for a different period of time meant that it was not substantially the same dispute as in the fifth adjudication. That fact together with the new evidence of successful energisation and testing of the cable were sufficient to differentiate the sixth adjudication and it was unnecessary to say if the difference in time period were alone sufficient.

Interestingly, the court did not appear to disagree with Mr Molloy’s characterisation of the essential parts of the decision in the fifth adjudication. Mr Justice Waksman was prepared to accept that:

“[T]he decision to grant this EOT relied upon a finding that there were two Relevant Events, essentially consisting of the defective ductwork, and … Global's unreasonable conduct in requiring Sudlows to terminate and energise the new cable, which caused the delay behind the EOT then being sought. I would accept that it would be an insufficient description of the decision to say that there was simply an EOT granted without more. … If the decision was limited in that way, then all it really consisted of was the ultimate result without reference to any "building block". On the other hand, Mr Curtis did not decide that the Relevant Events found were so for all times and all purposes going forwards, even if, on their face, they were or could be Relevant Events causing ongoing delay.”

The court’s findings meant that Mr Molloy’s primary decision could not stand, as that decision had been reached on the erroneous basis that Mr Molloy had considered himself bound by the fifth adjudication. However, as both parties had agreed for Mr Molloy to give an alternative decision in the event he was not bound by the fifth adjudication, the alternative decision in favour of Global Switch was capable of enforcement.

Conclusion and implications

This is a significant judgment which has considerable ramifications for parties engaged in serial adjudications. The adjudicator considered that the rule in Hyder bound him to those findings which were an essential component of the fifth adjudication decision. The previous adjudicator’s findings as to the two Relevant Events were thought to be an essential component of the extension of time award based on those events. The court appears to have agreed with this, but found it to be insufficient because the previous adjudicator’s findings were not “for all times and all purposes going forwards”.

It is unclear why the court considered that the findings in fifth adjudication decision were not made for all times and all purposes. No such limitation appears in the text of the adjudication decision quoted in the judgement. It is also unclear on what basis an adjudicator could decide something for a specific purpose only and reserve the right for a different decision to be reached for other purposes. It is also unclear whether the court’s judgment intends to qualify the rule in Hyder so that in addition to being an essential component of an adjudication decision, an adjudicator’s findings must also be intended to apply to future adjudications and if so, how such an intention is to be ascertained.

This judgment follows an earlier decision in the same litigation where O’Farrell J made obiter remarks that an adjudicator determining a loss and expense claim under the JCT form would not be bound by findings in a previous adjudication which identified certain Relevant Events as justifying extensions of time. The subsequent adjudicator was not bound by such findings when determining whether the same events were Relevant Matters justifying an award of loss and expense. For our Law-Now on this earlier decision, please click here.

The overall direction of these cases appears to be against giving an overly generous effect to previous adjudication decisions and a greater focus on the disputes referred in each adjudication and whether they can properly be regarded as the same or substantially the same dispute. Another example of this approach is Hitachi Zosen Inova AG v John Sisk & Son Ltd where an adjudication decision valuing a variation as “£nil” in the context of an interim payment application was found not to be binding in a subsequent adjudication. For our Law-Now on that case, please click here.

One way in which parties may seek to enlarge the binding force of an adjudication decision is to include requests for more detailed relief within their Notices of Adjudication. For example, rather than seeking only a decision as to its entitlement to extension of time, a contractor might also seek separate declarations that each of the events relied upon are Relevant Events. This will lead to greater complication in the drafting of such notices, but may enable parties to confer a greater degree of binding force to adjudication decisions, if the requested declarations are granted by the adjudicator. Whether the court will permit the binding force of an adjudication decision to be extended in this way remains to be seen.

References:

Quietfield Limited v Vascroft Construction Limited [2007] BLR 67

Hyder Consulting (UK) Ltd v Carillion Construction Ltd [2011] EWHC 1810 (TCC)

Hitachi Zosen Inova AG v John Sisk & Son Ltd [2019] EWHC 495 (TCC)

Global Switch Estates 1 Ltd v Sudlows Ltd [2020] EWHC 3314 (TCC)

Sudlows Ltd v Global Switch Estates 1 Ltd [2022] EWHC 3319 (TCC)