Inadvertent waiver of right to challenge an Adjudicator's Decision

19/09/2017

Those involved in dealing with contentious matters within the construction industry will be all too well aware of the importance of reserving its position on any jurisdictional grounds if it continues to participate in adjudication proceedings.  The threat of the adjudicator's decision being unenforceable if the jurisdictional challenge is pursued to the Courts and decided to be well founded is a concern for both the other party to the adjudication and the Adjudicator himself/herself if a jurisdictional challenge is raised in submissions.

But, if you get to the end of the adjudication and the Adjudicator issues his/her decision, what happens if a party asks the Adjudicator to correct a "slip" in the decision, for example a typo or a correction to a calculation, without a reservation, even on general terms, to challenge the Adjudicator's decision on grounds of jurisdiction or of natural justice?

This point has been considered recently in the case of Dawnus Construction Holdings Ltd v Marsh Life Ltd [2017] EWHC 1066 (TCC). The judgment resulted from the contractor's (Dawnus') application for summary judgment relating to the enforcement of an adjudication decision.

The adjudication (which was the fourth between the parties) centred on the contractor's final account and considered the contractor's loss and expense claims under a JCT 2011 Design & Build Contract for the construction of a hotel and retail complex in Poole. The delays, which the claims in question resulted from, arose from the discovery of an incorrectly sited electricity cable which needed to be re-routed by SSE. The delay in organising that meant weather sensitive works were pushed into winter thereby causing further delay.

In the Adjudicator's decision, over £1 million was found to be payable by Marsh Life to Dawnus. Both parties raised issues with the Adjudicator under the "slip" rule seeking corrections to the decision; Dawnus on the basis of mathematical errors and Marsh Life on the basis that it said that the Adjudicator had failed to take account of its defences in reaching the decision.

In enforcement proceedings, Marsh Life sought to challenge the enforceability of the Adjudicator's decision on the basis that it argued that the Adjudicator had breached the rules of natural justice by failing to consider and deal with the defences it had put forward in relation to the loss and expense claims.

However, Dawnus argued that when Marsh Life invited the Adjudicator to correct errors under the "slip rule", there had been no general reservation of rights and as a result Mash Life had waived its right to challenge the enforceability of the Adjudicator's decision.

The Court agreed with Dawnus and in doing so referred to the judgments in Shimizu Europe v Automajor[1] and Laker v Vent Engineering[2]. In effect, by inviting the Adjudicator to correct the decision under the "slip rule" without a general reservation of rights, Marsh Life had accepted that the Adjudicator's decision was valid.

What that means is that if you get to the end of the adjudication and you raise a query regarding a "slip" in the Adjudicator's decision, you must reserve your position in respect of the jurisdiction of the Adjudicator or the grounds of natural justice at the time of making the query or else you are at risk of being found to have waived your right to challenge the enforceability of the Adjudicator's decision.

Whilst this may seem like a harsh decision, and many commentators would appear to agree, in reality Marsh Life's submission went beyond simply correcting a "slip" and contained substantive points about issues that Marsh Life considered the Adjudicator had not considered in reaching his decision. Nothing prevented Marsh Life continuing to reserve its position at that point and it was not possible on the one hand to seemingly accept the decision of the Adjudicator yet also seek to challenge its enforceability on the other.

It may well be that the application of this case is rather limited going forwards however, our recommendation would be to continue to clearly reserve your position in respect of any jurisdictional challenges or challenges based on natural justice throughout the entirety of the adjudication process, including if you are to raise any queries arising from the Adjudicator's decision.

 

If you would like to discuss this topic in more detail please contact Zara Rattray.


[1] [2002] EWHC 1571 (TCC)              

[2] [2014] EWHC 1058 (TCC)              

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