It is a well-established rule of the Housing Grants, Construction and Regeneration Act 1996 (the ‘Act’) that an adjudicator will only have jurisdiction to determine one dispute under a construction contract at any one time, unless their jurisdiction has been extended by consent of the parties.
What this means in practice is that where multiple disputes arising under multiple contracts are referred to adjudication in a single referral, an adjudicator could find themselves on the receiving end of a jurisdictional challenge.
In the recent case of Delta Fabrication & Glazing Limited (‘Delta’) v Watkin Jones & Son Limited (‘Watkin Jones’), the Technology and Construction Court (TCC) required to address that exact scenario, and determine whether to enforce an adjudicator’s award in circumstances where the dispute referred to adjudication arose under two separate contracts.
How the dispute arose
The parties entered into two separate sub-contracts for cladding and roofing works as part of a student accommodation project in Walthamstow, London. Each of the subcontracts was identified by reference to a distinct order number, and contained substantial documentation setting out their respective terms.
In February 2020, a few months into the contract works, Watkin Jones issued a payment notice that combined into one document the sums due to Delta under both sub-contracts. In evidence, Delta explained that it understood this to mean that Watkin Jones wanted all project payments to be amalgamated, and so it followed the same approach with its payment applications. From then on, the parties administered all payments due under both sub-contracts together, including one final account sum.
A dispute subsequently arose over the final account, which Delta referred to adjudication. At the outset of the adjudication, Watkin Jones challenged the adjudicator’s jurisdiction on the grounds that Delta had referred disputes under two separate contracts as part of one adjudication. The adjudicator reached the non-binding decision that he had sufficient jurisdiction, and the adjudication proceeded.
In the enforcement proceedings that followed, Delta sought summary judgement to enforce the adjudicator’s award, at which stage Watkin Jones raised its jurisdictional challenge for a second time.
The Technology and Construction Court's decision
Delta argued that the adjudicator had jurisdiction, and that his award was enforceable, on the grounds that:
- the parties had by their conduct agreed that the two sub-contracts should be varied and amalgamated with effect from February 2020; and
- even if the parties had not agreed for all purposes that the contracts be amalgamated, by treating the contracts as one for the payment processes, they had elected to treat them as one contract for the purposes of the Act.
Had the parties agreed to amalgamate the contracts?
Both parties agreed that they had originally entered into two separate contracts so, in order for the court to find in favour of Delta, it had to be “satisfied that the parties' conduct [was] unequivocal and consistent only with the parties having agreed to vary the contracts so that a single contract came into existence”.
In determining that question, the court looked primarily at the payment notice issued by Delta in February 2020, and its supporting documentation.
The court noted that, while the payment notice contained an amalgamated figure for the payment due under both sub-contracts, the following pages contained a detailed breakdown of that figure, under two separate headings: one for the roofing works contract, and the other for the cladding works. Accordingly, the supporting documentation did not confuse or amalgamate the contracts, but dealt with the calculations separately.
The court therefore concluded that while Delta’s conduct may have been indicative of an intention to combine the payment applications together, that was not the same as an offer to combine the contracts into one.
Had the parties elected to amalgamate the contracts for the purposes of the Act?
The essence of Delta’s second argument was that by treating the two sub-contracts as one for the purposes of the payment mechanisms, the parties had elected to treat them as one contract for the purposes of the adjudication provisions of the Act.
The court rejected this argument, which it described as “hard to follow”. It was not persuaded that it is possible for two separate contracts to be treated as a single contract for the purposes of the Act, but remain separate for all other purposes.
Instead, the court concluded that Watkin Jones had “not only a real but a strong, prospect of successfully defending the claim on the ground that the adjudicator lacked jurisdiction”.
Points to take away
This case serves as an important illustration of the difficulties that can arise in circumstances where multiple contracts are agreed in respect of a single project.
An adjudicator only has jurisdiction to determine one dispute at a time and, as this case demonstrates, attempts to adjudicate disputes arising under more than one contract will be vulnerable to jurisdictional challenges.
It follows that where a single project involves multiple contracts, maintaining a clean separation between valuation and payment processes throughout the lifetime of the project will be essential in avoiding misunderstandings as to the true contractual position, and in ensuring that if matters do wind up before an adjudicator, his or her decision will (at the very least) be enforceable.
For further information please contact Alyson Shaw, Solicitor in our property and infrastructure disputes team, at alyson.shaw@shepwedd.com, or get in touch with your usual Shepherd and Wedderburn contact.