Decisions, decisions – re-adjudicating an existing decision?

Background

John Graham were civil works subcontractors to Tecnicas on the construction of the Tees Renewable Energy Plant Biomass Power Station. This case in the TCC was just one in a number of disputes between the parties which had resulted in at least four adjudications and two arbitrations (the second of these is still ongoing).

At the core of this dispute was a difference between John Graham and Tecnicas as to the scope of John Graham’s works.  John Graham insisted that it was only the works which were defined in a number of interim milestones within the sub-contract.  Tecnicas insisted that John Graham’s works “included all civil works in connection with the Project identified in the Unit Price List, including but not limited to the works identified in that List required to complete the foundation work broadly identified in Milestones 1-14”.

This dispute was referred to adjudication in ‘Adjudication 1’. The adjudicator agreed with John Graham that the works were limited as they had maintained.  Tecnicas referred this to arbitration in what became known as ‘Arbitration 1’.  In the intervening period, prior to the decision in Arbitration 1, John Graham left site and Tecnicas arranged for other contractors to complete the necessary civil works. The arbitrators decided, in ‘Award 1’, that Tecnicas’ interpretation of the contract was the correct one, and all of the civil works had been John Graham’s responsibility, albeit they had now been completed by others.

In Interim Payment Application 47 (“IA 47”) Tecnicas applied a contra charge of £355,724.95, described as the “provisional costs incurred appointing another subcontractors [sic] to carry out Graham's abandoned works”.  A dispute over payment for IA 47 was referred to adjudication, ‘Adjudication 4’, as a result of which Tecnicas was ordered to pay sums to John Graham.  The adjudicator found that Tecnicas was not entitled to make the contra charge.  It paid the sums ordered, other than the contra charge.  John Graham issued proceedings for summary enforcement which came before Mr Justice Morris J in the TCC.

The Issues in the TCC

The issues for decision by Morris J were as follows:

(1) Did the Adjudicator act in excess of his jurisdiction?

(2) If so, did the Defendant waive its right to object to the Adjudicator's jurisdiction?

Tecnicas resisted summary judgment on the ground that the “Adjudicator acted in excess of his jurisdiction for three separate, but interlinked, reasons, namely that the Adjudicator

(1) undermined and in substance overrode Award 1;

(2) failed to act in accordance with the powers granted to him by the Subcontract;

(3) answered the wrong question.”

Tecnicas said that, essentially, Adjudication 4 was so fundamentally wrong that the Adjudicator had no jurisdiction. It submitted that the Adjudicator refused to give effect to Award 1 and had no jurisdiction to so refuse.

This was denied by John Graham, who said that the Adjudicator resolved the dispute referred to him and expressly did not re-open any disputes decided in Award 1 to do so.  In any event, it said, any jurisdictional challenge had been waived by Tecnicas at this stage.

Tecnicas said that it did not waive its right of objection because the jurisdictional error was so fundamental as to be incapable of being waived, and it was not in a position, prior to publication of the decision to know of the jurisdictional error.

Re-deciding an Issue

The essence of Tecnicas’ objection was that Award 1 plainly decided that the disputed civil works had been John Graham’s responsibility all along, therefore it was fundamentally entitled to levy the contra charge.  Whilst directing himself to the decision in Award 1, and expressly noting that he was bound by it, the Adjudicator in Adjudication 4 had found that, at the relevant time, John Graham were abiding by the temporarily binding decision in Adjudication 1.  He essentially found that the contra charge was caused by John Graham’s compliance with the first Adjudication decision, rather than being caused by a breach of contract on their part.

After a helpful review of the relevant authorities Morris J decided that the Adjudicator had not been seeking to re-decide Award 1, nor was his decision in conflict with it (at [54-56]):

• “First, whilst the test to be applied has been expressed in a variety of ways (i.e. undermine, override, re-decide), in my judgment, there is a key distinction to be drawn between, on the one hand, the nature of the first decision (what it decided) and the consequences of that decision. There is a difference between "overriding" and "failing properly to apply": see Amey Wye Valley §§28, 34 and 35. Where the first decision is a decision on a dispute as to the construction of contractual terms, then that dispute is to be distinguished from a dispute as to the application or consequences of a particular construction. Thus the decision in the latter case, whatever that decision is, does not override, undermine or re-decide the first decision. That is so, even if the second decision is wrong as a matter of law or fact. The second decision is not "in excess of jurisdiction
• Secondly, in the present case, applying the test in paragraph 29(3) and (4) above, the question determined by the Decision is not the same or substantially the same as the question determined in Award 1. The dispute in Award 1 was as to the terms and interpretation of the Subcontract. There was no reference to, or consideration of, the financial consequences of the scope of the work. By contrast, the dispute in Adjudication 4 was as to the financial consequences of the true interpretation. In Award 1 the dispute related to the scope of the work to be carried out under the Subcontract and whether the scope related to all civil works or was that described in the intermediate milestones. It did not address any dispute about the financial consequences – such as entitlement to payment or to damages or to levying contra charges flowing from the Subcontract as properly interpreted. By contrast, Adjudication 4 concerned the Claimant's entitlement to payment in respect of various matters, including the Defendant's entitlement to levy the Contra Charge. The Adjudicator was not "re-deciding something that was not before him": Amey Wye Valley §35. He did not decide (or purport to decide) that the scope of the works under the Subcontract was anything other than that as decided in Award 1. Far from "overriding" Award 1, the Adjudicator expressly acknowledged that Award 1 was binding as to scope (paragraphs 6.2.1 and 6.3.1); he did not re-open that dispute. He did not accept the Claimant's submission that it was not in breach of contract. Rather he considered whether the effect of Award 1 was that the Defendant was entitled to levy the Contra Charge. He decided that it was not so entitled and whether he was wrong about that is irrelevant to his jurisdiction. Whether he has correctly "given effect to" or found the correct "consequences" is a separate matter. The Defendant's case in substance is that the Adjudicator "failed properly to apply" the decision in Award 1 as to the scope of work. The Adjudicator may have failed to apply Award 1 correctly, but he has not undermined it.".

This decision helpfully clarifies that the grounds for challenging a decision for re-deciding a previous decision are relatively narrow.  In a case with serial adjudications careful thought will therefore need to be given to any proposal to challenge the adjudicator’s jurisdiction.

‘Unwaivable’ Jurisdictional Objections

Given his decision on the first issue, Morris J’s comments on the concept of a jurisdictional objection so fundamental as to be unwaivable are obiter.  Tecnicas submitted, relying on the judgment of His Honour Judge Bird in Aqua Leisure International Limited v Benchmark Leisure Limited [2020] EWHC 3511 (TCC), that there is a category of jurisdictional objection that is so "fundamental" as to be incapable of being waived. Morris J disagreed with this contention [77]:

• “ I do not accept the Defendant's contention here. First, I am not satisfied, on the basis of the decision in Aqua Leisure alone, that there is a distinct class of jurisdictional objection (such as the absence of power by reason of statutory provision) which is so fundamental that it cannot be waived. The judge's decision in the case was that there was no waiver because the right to object was not known at the relevant time (§45). Thus his analysis in the ensuing paragraphs was obiter and moreover had not been the subject of argument by the parties. Moreover, in a general sense, any jurisdiction objection to an adjudicator's decision is based on the fact that the adjudicator has no statutory power to act.”

The judge went on to express doubt that the concept of such a distinct class of objection could be reconciled with the approach of Coulson LJ in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27.

Coulson LJ’s comments at [91] in Bresco are worthy of re-reading in this context.  If a party thinks it may have an objection in respect of the adjudicator’s jurisdiction, then it should be raised at the relevant time.  A general reservation is unlikely to benefit a party in enforcement proceedings, and it seems unlikely, following Morris J’s comments that argument for a category of ‘unwaivable’ jurisdictional challenges will find much judicial sympathy.