Background
Global Switch Estates 1 Ltd (“GSEL”) engaged Sudlows Ltd (“Sudlows”) for various works at GSEL’s specialist data centre located at East India Dock House in London. Four adjudications were raised between the parties following disputes regarding various matters. For a detailed analysis of the TCC’s decision in respect of the fourth adjudication, please read our corresponding article.
A fifth adjudication was raised concerning Sudlows’ claim for an extension of time (“EOT”). Sudlows argued that delays were caused by GSEL’s defective ductwork. The adjudicator agreed and awarded Sudlows an EOT. GSEL then reduced Sudlows’ scope of works, allowing other parties to complete aspects of the project. Sudlows then sought a further EOT, which was refused by GSEL. Sudlows referred this dispute to a sixth adjudication along with its claim for related loss and expense.
Sudlows argued that the EOT should be awarded because (i) GSEL’s defective ductwork caused the delay, and (ii) it was the “natural consequence” of the fifth adjudicator’s decision. In its referral notice, Sudlows included a full loss and expense claim, totalling over £12 million. GSEL argued that the EOT should not have been awarded in the fifth adjudication because Sudlows was contractually responsible for ductwork issues. GSEL relied on the same documentation they produced for the fifth adjudication, with the addition of two new reports. The sixth adjudicator found that he was bound by the fifth adjudicator’s decision and granted Sudlows the further EOT and a sum of £996,898.24. The sixth adjudicator also found that had he not been bound by the previous decision, he would not have granted the EOT and would have allowed GSEL’s claim for liquidated damages.
Sudlows sought to enforce the sixth decision, but the Technology and Construction Court (“TCC”) found that the sixth adjudicator was wrong to find that he was bound by the previous decision. The TCC applied the test used to determine whether disputes are the same, or substantially so, and found that the disputes in the fifth and sixth adjudications were not the same. The TCC held that (i) the sixth adjudicator failed to apply the relevant test and (ii) the sixth adjudication involved reports that were not part of the fifth adjudication. The TCC held that by failing to apply the test, the sixth adjudicator had narrowed his jurisdiction and his decision was unenforceable. Ultimately, the TCC enforced the sixth adjudicator’s alternative finding, allowing GSEL’s claim for liquidated damages. Sudlows appealed the TCC’s decision.
Decision
The Court of Appeal found that the sixth adjudicator had been right to comply with the fifth adjudicator’s decision and reasoning as a matter of “fact and degree”. It held the TCC was mistaken to say that the sixth adjudicator had failed to apply the test and was not bound by the previous decision. The disputes in the fifth and sixth adjudications revolved around who was contractually responsible for the defective ductwork. The disputes were substantially the same. Coulson LJ found that the fifth adjudicator’s decision, namely that GSEL was responsible for the ductwork and subsequent delay, “was binding on the parties and on any subsequent adjudicator”. The TCC’s finding that Sudlows was responsible for the delay was “fundamentally inconsistent with the binding decision” and, therefore, wrong.
Coulson LJ also found that GSEL’s stance in the adjudication was a challenge to the previous decision, ignoring the binding nature of an adjudicator’s decision as prescribed in S108 of the Housing Grants, Construction and Regeneration Act 1996. The Court further provided that the results of the fifth adjudication and the TCC’s judgment, which were months apart, were “diametrically opposed”, and that this undermined the principles of adjudication. Moreover, Coulson LJ dismissed the TCC’s observation that the disputes were different because GSEL had produced new reports for the sixth adjudication. The reports may have been new, but they related to the same dispute and did not raise any new issues.
The Court of Appeal allowed Sudlows’ appeal and reinstated the sixth adjudicator’s decision.
Over-arching principles
Coulson LJ outlined various principles that should be considered by adjudicators and enforcing courts in respect of serial adjudications:
- Adjudicators should be encouraged to give “robust and common sense” answers when dealing with debates about whether a particular dispute has been decided. Adjudication is supposed to be fast and produce a decision of “at least temporary finality”.
- The decision of the first adjudicator needs to be considered to determine whether the second adjudicator has impinged on the earlier decision. Adjudicator’s decisions cannot be re-adjudicated.
- The test for whether disputes are the same or substantially is one of “fact and degree”. This flexibility is required to (i) prevent parties from re-adjudicating disputes they have lost, and (ii) ensure that new disputes can still be adjudicated.
- If the result of the second adjudication would be “fundamentally incompatible” with the decision in the first adjudication, this may be an indication that a party is trying to do something “impermissible”.
Take Home Points
- Whether or not disputes are the same or substantially the same is a matter of “fact and degree”: each case will be decided according to the particular facts.
- Courts will generally respect the binding nature of previous adjudication decisions on later adjudications and will aim to leave the “policing” of serial adjudication debates to adjudicators.
- A party wishing to raise proceedings in respect of a dispute which has already been adjudicated, is advised to raise proceedings through the courts or arbitration.
- The underlying principles of adjudication, namely facilitating cash flow and providing quick interim binding decisions, are “not easy to reconcile” with serial adjudication.
This article was co-authored by, Alejandro Coghill, Trainee, Construction, Engineering and Infrastructure Disputes.