How many adjudications?

In this article Michael Woolley looks at the rule against adjudicating the same issue twice in the light of the latest Court of Appeal decision in Sudlows v Global Switch Estates. If you would like to see the detailed argument and reasons, the judgement may be accessed here. 

The rule against adjudicating a decided issue a second time is well known. The rule results from s108(3) of the Housing Grants, Construction and Regeneration Act 1996 and paragraphs 9(2), 20 and 23 of the Scheme. Put succinctly ‘a second adjudicator cannot decide a dispute which is the same or substantially the same as a dispute that has already been decided in an earlier adjudication’.

That seems very straightforward until you have to reach a view on what has been decided in the earlier adjudication. Often the decision of an adjudicator will be that a sum of money is owing. In some circumstances he may give a declaration as to the parties’ rights, such as the amount of time. That bare decision might be difficult to understand without reasons. As a consequence, the court decided in Hyder v Carillion that ‘any other finding in relation to the rights of the parties that forms an essential component of or basis for that award’ is part of the decision.

This can be particularly difficult in cases involving delay and applications for extension of time, particularly at the interim stage. An adjudicator may have to consider the effects of many events upon the time the contractor should have for performance.

What if a contractor seeks an extension of time for one set of events and then succeeds in adjudication to get X days; further events occur which would justify an extension of Y days in another adjudication. Can you bring the second adjudication? This happened in Quietfield v Vascroft Construction (in fact a third adjudication on time). The adjudicator declined to deal with the claim but Mr Justice Jackson (as he then was) said the adjudicator was wrong and the adjudication should have proceeded.  What if the further events depend, for their effect, upon the first set of events, perhaps because of an impact on the critical path or because the date to which time is extended depends upon X days being in place?

This brings us nicely to Sudlows v Global Switch Estates. Here the case was concerned with adjudication 5 and adjudication 6. Surprisingly, some may say, in adjudication 5, much was agreed between the parties; both acknowledged that problems in running cables through ductwork gave rise to delay and both acknowledged the amount of delay. The ductwork (employer’s responsibility) was itself late and, Sudlows said, was defective and that had caused damage to the cables when pulled through by Sudlows. Sudlows declined to carry out a fresh cable pull without Global’s agreement to pay. There was significant delay but virtually no difference between the programming experts on the amount of delay resulting.

What was not agreed was whether the ductwork was defective. In adjudication 5, Sudlows presented 5 witness statements and 7 experts’ reports. Global used 9 witness statements and 9 experts’ reports, together with a legal opinion. The Adjudicator’s decision ran to 82 pages and he held Global responsible. Sudlows obtained a 482 day extension of time.

Global had used different contractors to pull the replacement cable, but Sudlows still had a contractual obligation to test and energise the cables to achieve practical completion. Global then withdrew that work and so the work actually carried out by Sudlows was certified as practically complete.  Sudlows then sought, in adjudication 6, an extension of time through to practical completion (133 days) on the basis that the further delay, after that addressed in adjudication 5, also resulted from the defective ductwork. The Adjudicator, Mr Molloy, decided that the decision in adjudication 5 (that the delay was caused by defective ductwork and was Global’s responsibility) was binding on the parties. He allowed and determined Sudlows’ loss and expense for the 482 day delay. He went on to say that if he had been looking at matters afresh, he would not grant the 133 day extension and would have allowed Global to deduct some £200,000 of liquidated damages (for the 133 day period). This view appears to be because he was influenced by some further evidence provided by Global and the use of a different type of cable in the pull replacing the cable put in by Sudlows. The outcome was an award of £996,898.24 plus VAT to Sudlows.

Global were clearly unhappy about this and appear to have declined to pay. Sudlows went to court to enforce. Global replied with Part 8 proceedings to say Mr Molloy should not have decided the parties were bound. Mr Justice Waksman in the Technology and Construction Court agreed. He refused to enforce the decision in favour of Sudlows, but did give judgement for Global for the £200,000 odd of liquidated damages.

Sudlows appealed. Lord Justice Coulson gave a detailed judgement (25 pages) with which the Court of Appeal’s other members agreed. He concluded that the judge was wrong. He agreed with Mr Molloy and observed that a court should be slow to interfere with an adjudicator’s decision on such a point unless it was ‘clearly wrong’. He did, however, appear to support the “thoughtful” analysis in Hitachi Zosen Inova AG v John Sisk & Son where it was said the adjudicator’s decision did not bind the court.

In the key cases regarding a subsequent adjudication on a previously decided dispute it is clear that to test whether the disputes are the same it is necessary to look at the first decision and then see as a matter of ‘fact and degree’ if the second dispute has already been decided or whether it is different. 

In Sudlows v Global Switch Estates particular attention was paid to the decision in adjudication 5 which included that;

• Global were ‘hence liable for any resultant delays to the Completion Date’,
• Sudlows ‘were correct and entitled to refuse to connect and energise the HV supply provided by Global’,
• ‘Global are culpable for any delays that flow from this issue.’, and
• ‘It is common ground between the parties that the dominant cause of the delays to Practical Completion of the Section 2 Works had been the issues covered in the previous section regarding the termination and energisation and testing of the HV supply system’.

These were strong indicators that the question of responsibility for delays resulting from the allegedly defective ductwork was decided in adjudication 5.

Points to takeaway

What then can be drawn from the case?

1. The first point is that the facts were stark. There will not be many cases where a significant extension of time is caused by a single agreed event let alone where further delay then results from the same event and where the only true issue was ‘whose fault’?
2. Lord Justice Coulson made it clear that to say the decision in Adjudication 5 was simply ‘482 days Extension of Time’ would be to elevate the form of the decision over its substance.
3. Looking to the future we can note that Lord Justice Coulson went on to say ‘there are three over-arching principles to be applied by an adjudicator, or an enforcing court, when considering arguments of overlap’.
   1. The first of these was that  ‘adjudication is intended to provide a speedy and proportionate temporary decision’. 
   2. The second was to look at  ‘what it was, in reality, that the adjudicator decided. It is that which cannot be re-adjudicated’.
   3. The third was ‘… the need for flexibility. That is the purpose of a test of fact and degree’.
4. Whether the parties have found speed and proportionality here is for them to say, but for others, this and the third point militate against such challenges unless the adjudicator was clearly wrong.
5. There was also emphasis on the ‘pay now and argue later’ rubric. The parties were free to go to court to fully test the underlying issues but not in the context of reviewing an adjudicator’s decision.

Sudlows v Global Switch Estates is another case to mark the caution the court has for interfering with the decisions of adjudicators. 

If you would like advice on adjudication or enforcement of a decision, please contact David Banks, Anjon Malik or David Rintoul.