Adjudication: Cherry picking what is submitted to Adjudication

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Charles Edwards, Barrister and TECBAR Adjudicator reviews a case which considers whether a party in adjudication should be allowed to prune their claim which forms part of a larger claim submitted to adjudication, in essence cherry picking that which they submit to adjudication from a larger claim?  A recent case in the Technology and Construction Court enforcing an Adjudicator’s Decision provides useful guidance for parties in Adjudication: St Austell Printing Company Ltd v Dawnus Construction Holdings Ltd [2015] EWHC 96 (TCC). Dawnus Construction Holdings Ltd (“Dawnus”) was seeking to enforce an Adjudicator’s decision and had issued a Part 7 claim, whereas St Austell Printing Company Ltd (“St A”), the party who lost the adjudication had issued pre-emptive Part 8 proceedings seeking a declaration that the Adjudicator did not have the jurisdiction to decide that £417,919.66 was due to Dawnus. St A entered into a contract with Dawnus to carry out and complete the design and construction of two warehouse/industrial units in St Austell, Cornwall. The contract incorporated the JCT Design and Build Contract Form, 2005 edition. The Contract Administrator was Davis Langdon, now known as AECOM.  Practical completion of the works was achieved on 6 February 2013 and on 26 April 2013, AECOM issued Interim Valuation 17 in the gross sum of just over £6,000,000. On 10 December 2013, Dawnus issued an interim application for payment No.19 which included a significant amount of supporting documentation in the gross sum of almost £8,000,000. Dawnus’s application amounted to a net sum claimed of £2,300,000. This included a claim in respect of changes and variations of about £1,900,000, of which around £900,000 reflected the measured work element of those changes and variations.  The due date for payment of Dawnus’s interim application was 4 January 2014. On 17 December 2013, Dawnus mistakenly believed that AECOM had failed to serve a payment notice in due time and therefore sent a sales invoice in the sum of £2.3 million seeking payment by 4 January 2014. On 19 December 2013, AECOM delivered to Dawnus Payment Notice No.18 which advised that the sum so far paid to Dawnus which was just over £6 Million by way of the valuation and payment made in April remained the correct valuation and that no further sum was due to Dawnus.  AECOM also advised amongst other things that:
  • They were currently reviewing Dawnus’s revised final account dated 10 December 2013;
  • That during a site visit it was clear that a number of defects had not been addressed at this stage and that they would be writing to Dawnus formally detailing these outstanding defects;
  • That AECOM would endeavour to send Dawnus their final version of the account early in the New Year and that they considered this to be reasonable following Dawnus’s recent response to the measured accounts;
  • That with regards to Dawnus’s loss and expense claim, there had been a meeting with the client and his advisors to establish an accurate understanding of the events Dawnus had detailed within their claim document and that there was a further meeting to progress with these discussions arranged during week commencing 6 January 2014, following which a response would be sent separately to Dawnus with regards to the loss and expense, early in the New Year.
Notwithstanding the above, the Court noted that neither AECOM nor St A (nor their “advisors”) reverted to Dawnus in the New Year, or at all. Therefore, no defects were identified, there was no version of the final account provided to Dawnus and no response to the loss and expense claim.  The Court further noted that nothing of any substance happened at all until 26 August 2014, when Dawnus commenced adjudication proceedings.  Dawnus’s adjudication proceedings were limited to the measured value of 115 specific changes and variations as set out in their Notice of Adjudication and the Referral. St A challenged the enforcement of the Adjudicator’s decision on two jurisdictional points:
  • The first jurisdictional challenge stated that no dispute about the changes had crystallised at the time of the Notice of Adjudication in August; and
  • The second jurisdictional challenge stated that the Adjudicator had no power to order payment of part only of interim Application 19 in the Adjudication.
In connection with the second jurisdictional challenge, St A in the Adjudication proceedings set out their submission in the following way (paragraph 13 of their Rejoinder): “What DCL cannot do is to refer a dispute in respect of an element of the application (and strictly limit the jurisdiction of the Adjudicator to just this element) and then to seek payment in respect of just this element referred without consideration of DCL’s or SAPC’s entitlement in respect of the other elements of the application. The Contract does not envisage or give DCL an entitlement to payment in respect of an element of interim application as opposed to its entitlement, which is not contested, to payment in respect of the entire application.” The Adjudicator concluded amongst other things that St A’s jurisdictional challenge was “entirely without merit” and ordered St A to make payment to Dawnus in the sum of £417,919.66 together with the Adjudicator’s fees. The Court, in connection with the enforcement proceedings following an analysis of the relevant authorities in respect of St A’s first jurisdictional challenge, was in no doubt that, however it is analysed, the dispute about what, if any, sums were due to Dawnus on the basis of interim application 19, had crystallised long before the Notice of Adjudication.  Indeed, the Court considered that the contrary was unarguable. The Court’s view was that if the application of 10 December 2013 and the response of 19 December 2013 were considered, it would immediately be noted that the detailed claim was considered by AECOM on behalf of St A and that it was rejected on its merits. In the circumstances, the Court’s view was that a claim had been asserted and then expressly rejected and nothing more was required for a dispute to have crystallised.  The Court also noted that following the rejection of Dawnus’ claim, there was a period of eight months in which AECOM had promised to respond on a whole raft of matters, but had failed to do so.  Such a long period of inactivity, particularly in the light of the specific promises that were made in the letter of 19 December 2013, again clearly and obviously amounted to a rejection of Dawnus’s claim. With regards to St A’s second jurisdictional objection to enforcement, that the adjudicator did not have the power to order St A to make any payment to Dawnus, because the dispute that was referred to the Adjudicator was strictly limited to just one part of interim application 19, which St A submitted was not simply “cherry-picking” of the measured work element of the 115 changes that gave rise to this submission, but more particularly the passages in the Notice of Adjudication and in the Referral which sought to limit the dispute referred to those claims only. The Court following consideration of the relevant authorities and as a matter of both law and common sense concluded that the second jurisdictional challenge maintained by St A must also fail. The Court stated that: “…the decision in Fastrack makes plain that a claimant is entitled to prune his original claim for the purposes of his reference to adjudication.  So if his interim application for payment is for measured work and loss and expense, he may decide that, because the loss and expense claim could be difficult to present in an adjudication, he will instead focus in those proceedings on just the straightforward claim for measured workThat is not only permissible, but it is a process that is to be encouraged.  Claims advanced in adjudication should be those claims which the referring party is confident of presenting properly within the confines of that particular jurisdiction.  What if, in my example, the claim for loss and expense is recognised by the referring party as being very difficult to sustain.  What if he in fact decides that he no longer intends to pursue it?  It would be a nonsense if he had to include such a claim in his notice of adjudication merely because that claim formed part of his original interim application…”.  [Emphasis added] In summary, the Court found that both St A’s jurisdictional challenges to enforcement of the Adjudicator’s decision failed and that Dawnus was entitled to summary judgment in relation to the sums ordered by the Adjudicator.  The Court also made it quite clear that a claimant is entitled to prune his original claim for the purposes of his reference to adjudication and that this is not only permissible, but it is a process that is to be encouraged.  Whereas St A’s Part 8 claim seeking declarations in respect of the Adjudicator’s lack of jurisdiction was dismissed.

Charles Edwin Edwards MSt(Cantab) MSc(Lond) FCInstCES Barrister
2nd Floor Berkeley Square House
Berkeley Square
London W1J 6BD
Tel: +44(0)207 887 6098

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