Re-starting an Adjudication: Second chance to make a first impression.
What are your options if you start adjudication but then run into difficulties? Can you withdraw from the adjudication process and start again? The recent TCC case of Jacobs UK Limited v Skanska Construction UK Limited [2017] EWHC 2395 (TCC) considers the possibilities and consequences of withdrawal.
Background Skanska engaged Jacobs under an Agreement to provide design services for a PFI project to replace street lighting in Lewisham and Croydon (the "Agreement"). There was a dispute about the adequacy of Jacobs’ services and Skanska gave notice of intention to refer the dispute to adjudication. Jacobs raised jurisdictional challenges regarding the adjudication provisions of the Agreement complied with the Housing Grants Construction and Regeneration Act 1996 as amended (the "Construction Act). Crucially these jurisdictional issues were resolved by an ad hoc agreement between the parties which, amongst other things, included an agreed timetable for the adjudication process. The Referral to Adjudication and Jacobs’ Response were served in accordance with the agreed timetable. Skanska requested an extension of time for service of its Reply to the Response as its counsel became unavailable. Jacobs refused the request and the adjudicator would not grant an extension without the agreement of both parties. Skanska then withdrew its reference to adjudication and invited the adjudicator to resign and he did so. 10 days later, Skanska gave a fresh notice of adjudication to begin a second adjudication.
Can you lawfully withdraw from adjudication and start again? This was the first question to be decided and Mrs Justice O’ Farrell held that the referring party was entitled to withdraw its adjudication claim even after the Referral had been served, even though it had acted unreasonably. Mrs Justice O'Farrell also confirmed that where a party has legitimately withdrawn its adjudication claim there is nothing to prevent that party from pursuing the same or substantially the same claim again in a later adjudication. Although there is no principle of abuse of process in adjudication, the learned judge said that the court could grant an injunction to restrain a second adjudication if the referring party’s conduct was both unreasonable and oppressive. On the facts, Skanska had acted unreasonably in withdrawing the first adjudication but its conduct in starting again was not of itself oppressive. Helpfully, the court gave examples of conduct that might be considered to be unreasonable and oppressive: where the adjudicator does not have jurisdiction (e.g. where the same dispute had already been decided in an earlier adjudication); where the referring party had failed to comply with the adjudication agreement (e.g. failure to pay sums awarded or costs); if the further adjudication was “vexatious”, as in the case of serial adjudication in respect of the same claim.
What about costs? Referring two adjudications in relation to the same matter means that both sides will incur additional costs but will the referring party be liable for the other side’s wasted costs? The courts have made clear that unless jurisdiction was expressly conferred on the adjudicator, the adjudicator has no power to order one party to pay the other party's costs. O’Farrell J held that “many of the costs incurred in responding to the claims in the first adjudication would have been incurred in responding to the second adjudication” and that generally the costs wasted in abandoned claims will not be recoverable. In this case, however, the ad hoc agreement imposed new and enforceable actions on the parties beyond their existing contractual and statutory duties, meaning that if Jacobs could establish they had wasted or incurred additional costs due to Skanska’s failure to comply with the agreed procedure, they would be entitled to recover those costs as damages. Points for discussion: This case says nothing about the timing of withdrawal. Is it possible to withdraw from the process at a late stage say as late as the eve of the adjudicator's decision, (because, for example, you feel that the decision is likely to go against you, or you have fresh evidence improving your prospects)?
How late is too late?
O’Farrell J suggests that neither the Construction Act nor the Scheme for Construction Contracts (England & Wales) Regulations 1998 (as amended), or the law as it has developed imposes any restrictions on the referring party’s entitlement to withdraw a claim or to commence a further adjudication on the same point where an adjudicator has resigned. Although there are no statutory restrictions, it is likely that, if tested in the courts, a judge would find there are limits on how late withdrawal can take place and the adjudicator asked to resign. Does there need to be a valid reason for withdrawal? Probably not however the reason given by Skanska was held to be unreasonable and, potentially, a very late withdrawal (with no or no valid reason) might not only be unreasonable but also oppressive. Ultimately, your ability to withdraw cleanly from adjudication is dependant on your conduct in the adjudication and the actions of the adjudicator. This case will give some comfort to referring parties who find themselves in difficulty, more especially if it is of the responding party’s making. However careful consideration should be given before withdrawal. At the very least there may be a price to be paid in terms of wasted costs. The costs liability arose out of a failure to comply with the ad hoc agreement. Parties who enter into agreements as to an adjudication timetable should be aware that a default could give rise to an extra statutory costs liability. In general, parties entering into an ad hoc agreement in relation to adjudication should do so with caution. Do you have to give a reason?
If you require advice and support in relation to adjudication, Slater Heelis' Construction, Engineering and Project team can assist.
Katy Ormston, Paralegal katy.ormston@slaterheelis.co.uk 0161 672 1422 Get in touch with our team
Matthew Grellier, Associate Solicitor matthew.grellier@slaterheelis.co.uk 0161 672 1427
Kenneth Salmon, Consultant Solicitor kenneth.salmon@slaterheelis.co.uk 0161 672 1436
intouch@slaterheelis.co.uk 0161 969 3131 slaterheelis.co.uk
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