This was a part 7 application by Coopers to enforce an adjudicator’s decision and was heard together with an application under part 8 for a final declaration that the claim was statute barred and therefore the decision was invalid and should not be enforced. The facts of the case were not only highly unusual but complex, so much so that the court took the opportunity to remind practitioners of what had been said by Coulson J in Hutton v Wilson , and was made clear in paragraph 9.4.3 of the TCC Guide, namely the need for appropriate listing arrangements and proper time estimates for Part 8 proceedings for final declaratory relief.

The parties had entered into a simple contract for construction works in 2014 and LJR had made three payment applications, the third of which was in effect the final payment application. The contract did not contain an adequate mechanism for determining what payments became due and when and thus the payment provisions of the contract were supplemented by Scheme payment provisions.

In 2022, LJR submitted a fourth payment application largely duplicating its previous third application and seeking release of retention, certain administration charges and interest. Coopers did not serve a pay less notice and LJR submitted the dispute to adjudication, in which Cooper submitted that the claim was misconceived if not fraudulent and was in any case statute barred.

The adjudicator decided that:

• payment application number 4 was a valid payment application;
• it was not fraudulent but genuine;
• there was no time limit under the Scheme for submitting a dispute to adjudication;
• the limitation Act 1980 s5 barred the remedy not the right to make the claim;
• the right to payment which gave rise to the claim only arose when the payment application was made in August 2022.

Accordingly, he found in favour of LJR.

The court was ultimately asked by Cooper to impugn the decision on its merits. To that end there were two essential questions:

i) Was the Decision wrong in concluding that payment application No. 4 was not statute-barred?

ii) If so, was the adjudicator's error one which it would (adopting the Hutton v Wilson test) be unconscionable for the court to ignore on the Part 7 adjudication enforcement claim?

The court first addressed limitation in adjudication proceedings.

S5 of the Limitation Act 1980 provides: "An action founded on simple contract shall not be brought after the expiration of 6 years from the date on which the cause of action accrued."

The court concluded, obiter, and with reservations, from a consideration of the Limitation Act 1980, the Scheme and case law , that the right to adjudicate must be subject to statutory limitation. Otherwise the raising of a payment application after the expiry of the usual contractual limitation period would provide an extended limitation period which could not have been the intention of the Act or Scheme. This meant that it was open to a responding party in adjudication to raise limitation as a substantive defence which the adjudicator had to consider. Alternatively, the court could consider any such issue at the enforcement stage (see Hutton v Wilson). The judge then sounded a note of caution; these were the judge’s views based on his own research and reasoning and had not been the subject of full legal argument before him.

Next, the court looked at the timing of payment application number 4 and concluded it was out of time. Payment was not exclusively covered by the Scheme. LRJ’s terms provided for monthly billing and payment application number 4 was (save in relation to an administration charge of £750) seeking sums which were said to have fallen due on 28 November 2014, following completion of the works and the submission of payment application number 3. In this case, the right to the final payment under the contract (and applying the Scheme) arose in November 2014, following completion which on the undisputed evidence occurred on 19 October 2014. Deferring the date of the application after the right to payment had arisen could not extend the limitation period. The court found that the newly introduced claims for retention, administration charge and interest were each of them time barred.

Finally, the court found that there had been no acknowledgement of the debt to start time running afresh, noting that s29(7) of the Limitation Act 1980 only revived a limitation period that had already expired and did not extend one that was yet current (as would have been the latter case here). The adjudicator’s decision was, in the court’s judgment, clearly wrong in disregarding (as not relevant) the limitation defence available to Cooper, and that error was one which it would be unconscionable for the court to ignore in accordance with the guidance in Hutton v Wilson. Declaration granted accordingly.

Comment

It may seem an oddity that the question of the application of the Limitation Act 1980 to adjudication proceedings has not been more firmly settled, even some 24 years after the Act came into force. The problem has been that the outcome of the various cases in which limitation issues have arisen has often been based on unusual facts and situations, so that no universal answer could be found. For example, the right to payment might not arise until a payment certificate has been issued as opposed to the making of a payment application. Still the lessons are clear. Payees should not delay in making a payment application following completion, or in commencing adjudication proceedings to enforce their rights. Payers should consider and raise any limitation defence in the adjudication (and if necessary in enforcement proceedings).

The claimant MCL had appointed RYC to carry out extensive works to property in South Mimms pursuant to an amended JCT SBC 2016 Contract. In November 2021, the Contract Administrator (CA) issued a notice of default to RYC by email. In December the CA issued a letter purporting to terminate RYC’s employment for failure to remedy the specified breaches including failure to proceed regularly and diligently and to remedy defaults, pursuant to clause 8.4.2.

RYC responded that MCL was in repudiatory breach because the termination was not given by the employer (as opposed to the CA), it was not properly served (via delivery by hand or by recorded, signed for or special delivery) and because MCL had previously locked RYC out of the site. MCL denied being in repudiatory breach.

RYC referred to adjudication a dispute as to whether MCL had correctly served the termination notice and or complied with the requirements for termination of clause 8.4 of the contract. In the referral RYC said the question whether MCL had substantive grounds for terminating was not part of the dispute referred. In its response MCL wanted to raise precisely that issue, arguing it was entitled to terminate at common law and that the termination notice constituted acceptance of RYC’s prior repudiatory breach.

The adjudicator found for RYC, deciding that in preventing them from entering the site, MCL committed a repudiatory breach. He decided he had no jurisdiction to decide whether MCL had substantive grounds on which to terminate but that in any case the termination notice could not amount to acceptance of any repudiatory breach.

MCL issued Part 8 Proceedings for a declaration that the decision was invalid.

The court held:

1. A referring party could define the limits of the dispute to be referred, but could not thereby circumscribe the matters that the responding party could rely on in defence.

2. The referring party could not unilaterally withdraw issues from the adjudication. Thus, RYC could not prevent the adjudicator from considering whether MCL had a substantive right to terminate the contract.

Whilst it was unfortunate the adjudicator had wrongly accepted RYC’s submission on this point, as he had considered MCL’s case on the issue and rejected it, there was no breach of the rules of natural justice. The court added its own expansion of the principles set out by O’Farrell J in Global Switch . When considering what would constitute the scope of the adjudication and what degree of failure on the adjudicator’s part to consider an issue would amount to a breach of natural justice, the court said:

• The court must assess the ‘correct level of abstraction’ at which to consider what the adjudicator was required to decide
• Failure to consider a critical or fundamental element of a defence might make the decision unenforceable
• There was a distinction between the failure to consider a defence (which might be a breach) and considering but rejecting it (which was unlikely to be a breach)
• The distinction between a deliberate or conscious decision to exclude a defence from consideration and its inadvertent omission was relevant, but not a determinative factor. The gravity of the omission was of more importance.
• Tactical manoeuvring that led to an omission might be relevant but unlikely to be important
• The court must look at the substance of the decision rather than its form.

The court decided that it had been necessary for the adjudicator to determine whether or not MCL had successfully terminated the contract at common law in order to decide the dispute. That issue had two parts: whether RYC was in repudiatory breach; and whether MCL validly communicated its acceptance of the repudiation to MCL. It was perfectly permissible for the adjudicator to begin his determination with the second part, for if there was no acceptance then there was no need to consider the first part.

MCL had not actually advanced a case in the adjudication that its prevention of RYC’s return to site by barring access was an acceptance of RYC’s repudiatory breach; thus there was no obligation to consider that question. The case MCL did advance was that its termination notice was a valid acceptance of RYC’s breach. The adjudicator had dealt “head on” with that question and concluded the notice was not a valid acceptance. In the absence of a valid acceptance, MCL’s case on repudiation failed on the merits.

Even though the adjudicator was wrong to conclude that the question of RYC’s repudiatory conduct was outside his jurisdiction, this ultimately had no bearing on his decision. There had been no breach of natural justice.

Comment

As always, each case turns on its own facts. Principles derived from previous cases may need to be refined to cover new situations, as here. It may be necessary to descend into more or less detail. Sometimes even the consideration of sub-issues can be important to the outcome. In the end, it all depends on what is necessary to determine the dispute. Once again parties are reminded that the referral notice can cut down the scope of the dispute but cannot cut out what the responding party may raise in defence.

Sudlows brought a part 7 claim against its employer, Global, to enforce a decision of the adjudicator, Mr Molloy. He had ordered Global to pay Sudlows a total of £996,898.24 plus VAT in what was the 6th adjudication between these parties. Global resisted and brought part 8 proceedings for:

(a) a declaration that Mr Molloy acted in breach of natural justice because he wrongly took too narrow a view of his jurisdiction by holding that he was bound by certain findings made by the adjudicator Mr Curtis, in the previous 5th adjudication; and

(b) enforcement of Mr Molloy’s alternative findings awarding Sudlows £209,053.01 plus VAT, interest and fees (if he was found to have been wrong to hold that he was bound by Mr Curtis's decision).

The proceedings concerned Section 2 of fit-out works of a data hall at East India Docks and specifically the installation from a private substation of high voltage electrical cables by Sudlows in ducting provided by Global. In the 5th adjudication, Sudlows succeeded on its claim that the cables were damaged on installation because the ducting was not fit for purpose and they were justified in refusing to energise the cable to complete the installation, and the ensuing delays were Relevant Events entitling it to an extension of time for that part of Section 2, known as Window 29, which ran from 29 May 2020 to 18 January 2021. They also claimed and were awarded Extensions of Time (EOTs) for earlier delays in Windows 14, 18, 2, in total an EOT of 482 days.

Following that decision, Global omitted the energisation from the contract and the cables were successfully tested and installed by another contractor. Sudlows then brought the 6th adjudication before Mr Molloy claiming further EOT from 19 January 2021 to the date of practical completion on 7 June 2021 together with loss and expense and other sums claimed due upon an interim payment application. Global in defence produced two experts’ reports which said the ducting had been fit for purpose, and denied the claimed entitlement to further time and money. They accepted that they could not reverse the previous EOT awarded by Mr Curtis, but said Mr Molloy was not bound by the findings of Mr Curtis; that Mr Molloy was entitled to consider in relation to this ‘new’ claim whether the further delay was caused by a relevant event (and relevant matters) as alleged, or not.

Mr Molloy had to decide whether the dispute he was being asked to consider was the same or substantially the same as the one decided by Mr Curtis and thus whether he had jurisdiction to hear it. He suggested, and the parties subsequently agreed, to his approaching the dispute by deciding first whether he was bound by Mr Curtis’ findings. If not bound, he could proceed to decide the dispute. If he was bound he would say what decision he would have reached on the merits, had he been free to do so.

In his decision, Mr Molloy took the view that he was bound by the findings of Mr Curtis meaning Sudlows was entitled to a further EOT and loss and or expense and other monies amounting to £996,898.

In case he was wrong about that, he then proceeded to make an alternative finding on the merits in which he decided in light of the new expert evidence that the ducting was fit for purpose and Sudlows was not entitled to refuse to energise the cables. The result was that Sudlows was only entitled to a further 133 days EOT, and were liable to Global in the sum of £209,053.

The court now had to decide two issues.

First issue: The Prior Decision Issue
Was Mr Molloy bound by Mr Curtis’s decision in the 5th Adjudication and to award Sudlows a further 133 days EOT with prolongation and other costs if the relevant events found by Mr Curtis continued to apply. In this case he could not take account of the new expert evidence or assess the matter differently. If he was not bound he could take account of the new evidence. It was common ground that if Mr Molloy was wrong to find he was bound, then that wrongfully narrow view of his jurisdiction would amount to a breach of the rules of natural justice and his primary decision could not be enforced.

Second Issue: The Alternative Finding Issue
If Mr Molloy was not bound by Mr Curtis’ findings, could Global rely on the detailed alternative findings to lead to an enforceable award in its favour?

First issue: The Prior Decision Issue
The law was shortly stated.

S 108(3) of the Act: once a dispute was decided, the decision was binding until the dispute was finally determined by legal proceedings, arbitration or agreement.

Paragraph 9(2) of the Scheme provided that:
“An adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication, and a decision has been taken in that adjudication.”

The issue could arise at the outset if an adjudicator was asked to resign; or more commonly on enforcement or a part 8 claim and had been considered in a large number of cases, only a few of which the court found it necessary to refer to . The court emphasised that context was important and that it was both disputes and decisions (i.e. what has been decided) that must be looked at and compared.

Although both the 5th and 6th adjudication concerned the same relevant events, that was plainly insufficient to make the disputes the same. That was because:

(a) they related to underlying EOT’s for different periods of time,
(b) the dispute in relation to the new EOT involved new relevant materials and the event of testing which were not, and could not, have been part of the dispute leading to the prior adjudication, and
(c) this particular issue formed only one part of a much wider dispute between the parties as to the true value of the contract works as a whole, engendered by Sudlows Interim Application for Payment Number 46; the latter was in fact its final payment claim, on the basis that practical completion had by then taken place. In the judgment of the court, elements (a) and (b) alone would have sufficed.

The court held the two disputes were not the same or substantially so and Mr Molloy was not bound by the findings of Mr Curtis in relation to the availability of an EOT for the earlier period.

It was still necessary to turn to Mr Molloy’s decision in relation to his jurisdiction where he found he was bound by Mr Curtis’ decision in material respects. The court was bound to afford the decision due respect. Notwithstanding Mr Molloy’s careful analysis and reasoning consideration he was clearly wrong for the following reasons. First, the cases made clear that the jurisdictional question involved an analysis of what both disputes were about, and whether they were the same or substantially so. Mr Molloy did not apply that test at all.

Second, he failed to give any real weight to the fact that the decision in the 5th Adjudication was as to an EOT for a prior period. Third, he made no reference to the new material adduced before him and which, he considered to be so significant to his alternative finding. This was more than argument; it was new evidence. In consequence he did have jurisdiction, there was a breach of natural justice and his principal decision could not be enforced.

Sudlows contended that if the principal decision fell, enforcement of the alternative decision would require severance, and in this case, it could not be severed as the alternative findings were not part of the decision. The court said that severance was not a relevant consideration here. The alternative findings were just as detailed as the primary findings. There was no point in making them, or the parties agreeing to them being made, if they were not to be regarded as binding if the primary findings fell away.

Mr Molloy had jurisdiction to make the findings. The parties had agreed to his making alternative findings. They constituted a separate decision, even if not referred to in the ‘Decision’ part of his written decision. They were not to be regarded as ‘obiter’ – the convention of precedence did not apply to adjudication since decisions were intended to have temporary binding effect.

The alternative findings were to be enforced.

Comment

Two points emerge. The question whether two disputes are the same or substantially so may require deep analysis and is not always obvious. Here, two disputes featured questions of EOTs over different periods supported by different evidence, yet relied on the same relevant events.

It was the causes of the delay(s) which were at issue. Findings that a particular cause operated in an earlier period did not mean it could not be disputed as being the cause of delay in a later period (even though this involved the benefit of hindsight). Notably here there was fresh evidence and the cause of the earlier delay was not challenged, but was accepted by the previously unsuccessful party. The second point of note is that if the parties agree, the adjudicator can make alternative findings and they are likely to be given effect where the primary decision falls away.

The claimant (NWL) contacted with the defendant joint venture (D) on an NEC 3 form for the design and construction of a waste water treatment works. Although part of the water treatment work did not fall within the ambit of the Act by reason of s105(2), the parties agreed to adopt Option W2 and to provide under a tiered dispute resolution clause for adjudication followed by arbitration.

A complex dispute arose over the validity of NWL’s termination and its consequences with a difference between the parties of some £80m. NWL referred the dispute to adjudication seeking determination of the net sum due on the termination account. Although the adjudicator granted D an extension of time, NWL was substantially successful and were awarded just under £22.5m. Without complying with the award, D served a notice of dissatisfaction and commenced arbitration proceedings for the final determination of the termination account. They did not raise any jurisdictional issue in relation the award. NWL issued proceedings in the TCC to enforce the award and D countered with an application for a stay of the court action to arbitration under s9 of the Arbitration Act 1996.

The court held that the contractual tiered dispute resolution provision made it clear that the adjudication award was final and binding unless and until following a notice of dissatisfaction, a final determination was made at arbitration. The notice of dissatisfaction did not raise any jurisdictional issues about enforcement and thus there was no dispute about enforcement capable of being referred to arbitration. What D was submitting would require an intermediate step between the adjudicator’s award and enforcement, namely the need to refer the award to arbitration to confirm the right to enforce it, and then back to court to enforce the arbitral award. That construction of the contract was uncommercial and contrary to the policy of the Act. However, since this was a contractual adjudication, the court had to look at the terms of the contract to decide their true meaning and effect.

Doing so, the court placed significant weight on the parties’ having agreed that the adjudication award was binding on an interim basis. Enforcement by the lengthy process suggested would deprive it of efficacy and it would render it not ‘binding’ in any real sense. The court decided that such presumed intention meant reading the arbitration clause as excluding disputes concerning the enforcement of adjudicator’s decisions. D faced a further difficulty. Either the award was valid and enforceable, or it was a nullity. If a nullity, then following Macob it was not caught by the arbitration clause, because it had no status under the contract and could not therefore be the subject of a dispute arising ‘under or in connection with’ the contract.

The decision follows the judgment earlier in 2022 of Metropolitan Borough Council of Sefton v Allenbuild Ltd where faced with similar issues, the court reached similar conclusions, albeit in that case the contract was subject to the Act and adjudication was pursuant to the Scheme, meaning that public policy considerations and the ‘pay now, argue later’ principle were key to the decision.

Comment

This is another example of the court looking to treat ‘contractual’ adjudication in the same manner as its big brother statutory adjudication, at least when it comes to enforcement and provided the terms of the contract so permit.