In Babcock Marine (Clyde) Limited (“Babcock”) v HS Barrier Coatings Limited (“HSB”), reported in June 2019, the Technology and Construction Court (TCC) considered whether the English Courts had jurisdiction in a Scottish case concerning adjudication enforcement.
Babcock engaged HSB to carry out ship lift docking cradle re-preservation works at Her Majesty’s Naval Base Clyde. The contract was based on the NEC 3 Engineering and Construction Short Contract (June 2005). It was subject to Scots law and contained an arbitration clause based on the Scottish arbitration statute.
However, the contract did not include a choice of court clause. By later agreement between the parties (“the Variation Agreement”), the parties agreed to revise the contract in certain respects. This agreement contained a choice of court clause, being the courts of Scotland.
On 7 February 2019, Babcock notified HSB that it intended to refer to adjudication the dispute concerning the true value of the works. The adjudicator issued his decision on 22 March 2019. He decided the gross valuation of the works at termination was £1,524,420.58 and directed HSB to pay to Babcock the sum of £613,338.03 (inclusive of VAT) plus interest and fees.
HSB failed to pay the sum awarded and wished to challenge the validity of the decision. Babcock therefore raised proceedings in the TCC on 17 April 2019 to enforce the adjudicator’s decision against HSB.
On 29 May 2019, HSBC applied to set aside service of the claim form and particulars of claim, or alternatively to ‘stay’ (put on hold) the proceedings based on a jurisdictional challenge.
Delay to application to challenge jurisdiction
Under the Civil Procedure Rules in England and Wales (CPR 11) an application challenging jurisdiction should be made within 14 days after filing the acknowledgment of service. In this case the acknowledgement of service was filed on 14 May 2019. Therefore, the jurisdictional challenge application should have been made by 28 May 2019. The application was issued on 29 May 2019, one day late.
The court agreed to extend the time to challenge jurisdiction to 29 May 2019.This was on the basis that the delay was neither serious nor significant. The court took into account the lack of prejudice to Babcock, the absence of any impact on the conduct of the litigation, and the disproportionate effect on HSB of refusing an extension.
Challenge to jurisdiction
HSB argued that the English courts did not have jurisdiction, or should not exercise it, because:
- the Variation Agreement incorporated a choice of court clause into the Contract, namely, the Scottish courts, and that choice of jurisdiction should be respected;
- the place of performance was Scotland, giving the Scottish courts special jurisdiction; and
- the court should stay the current proceedings because the Scottish courts were the most appropriate forum for resolution of the matter.
Babcock argued the court should refuse a stay and determine the adjudication enforcement application because:
- the choice of court clause in the Variation Agreement conflicted with the arbitration agreement in the Contract, which has priority;
- the choice of court clause was limited to disputes under the Variation Agreement;
- if the choice of court clause applied under the contract, it did not prevent adjudication enforcement proceedings in the English courts; and
- the court should not interfere with Babcock's choice to sue HSB in its place of domicile in England.
The Judge accepted HSB’s position that the choice of courts clause in the Variation Agreement sat alongside the adjudication provisions and the arbitration agreement in the Contract. It was the parties’ choice to have disputes dealt with by the Scottish courts, except for adjudication and arbitration.
Babcock had a right to sue HSB in its place of domicile, in England. However, the Scottish courts were the more appropriate forum because the project and place of performance are in Scotland, the parties chose Scots law and the Scottish courts, and the applicable adjudication procedure rules were Scottish. The court therefore granted HSB’s application to stay the adjudication enforcement proceedings.
This case is a reminder to carefully consider the correct forum for court proceedings, depending on the terms of the construction contract and any subsequent agreements or variations. It should not be assumed that proceedings to enforce an adjudicator’s decision can be raised anywhere in the UK, simply because the adjudication regime is governed by a statute that applies UK-wide.
With additional reporting by Chiara Pieri