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One at a time please: Deluxe Art & Theme Ltd v Beck Interiors Ltd and Penten Group Ltd v Spartafield Ltd

31 May 2016
In recent months, the Technology and Construction Court ('the Court') has noted a growing trend whereby parties commence serial adjudications against each other, commenting that some cases have been “bedevilled by the almost maniacal desire of the parties to issue notices of adjudication against each other”. In this bulletin we consider some of that recent case law and (1) whether an adjudicator has jurisdiction to deal with two different adjudications between the same parties at the same time and (2) the underlying and related question of how you can tell if you have multiple disputes or a single dispute with multiple issues.  

Does an adjudicator have jurisdiction to deal with more than a single dispute at any one time?

This issue arose in Deluxe Art & Theme Ltd v Beck Interiors Ltd1, which related to claims arising out of work at the Lanesborough Hotel at Hyde Park Corner, London, where Beck Interiors Ltd ('Beck') employed Deluxe Art & Theme Ltd ('Deluxe') to supply and install joinery items.  

Three disputes arose between the parties and Deluxe referred each dispute to adjudication. The same adjudicator was appointed for all three adjudications, with two ongoing simultaneously. Beck objected to the adjudicator dealing with two disputes at the same time and did not comply with the decisions in the second and third adjudications. Deluxe sought summary judgment of those adjudications, arguing in part that the second and third adjudications comprised only one dispute.

Decision

The Court held that the second and third adjudications comprised two separate disputes. It noted the following: 
  1. Deluxe had obviously considered there were two separate disputes, because it had commenced the third adjudication, and there would have been no need to do so if the issues could have been addressed in the second adjudication.
  2. The adjudicator had ruled at the outset of the third adjudication that the disputes in that adjudication were distinct. This reasoning was incorporated into the second adjudication, on which Deluxe was seeking to rely. This was important, because of the ‘law of election’, which provides that a party cannot attempt both to assert that an adjudicator's decision is valid and at the same time seek to challenge the validity of the decision.In any event, the Court itself considered that there were two disputes and there was no authority to support a proposition that two different disputes, deliberately raised by the claiming party in two separate adjudication notices, could somehow be part of the same dispute.  
This finding was important, because in the Court’s view the weight of authorities made clear that an adjudicator only has jurisdiction to deal with a single dispute at any one time.  

The Court considered whether obiter comments in Willmott Dixon Housing Ltd v Newlon Housing Trust2 might form a possible exception to the single dispute rule. In that case, the Court there thought that a party could give more than one notice of adjudication at the same time. This was based on s108(2)(a) of the Construction Act3, which states that a party can “give notice at any time of his intention to refer a dispute to adjudication” (our emphasis). However, the analysis in Willmott Dixon was in relation to the CIC adjudication procedure and therefore did not help Deluxe, since the adjudications here were all subject to the Scheme for Construction Contracts4 (the Scheme), Paragraph 8(1) of which states that “The adjudicator may, with the consent of all the parties to those disputes, adjudicate at the same time on more than one dispute under the same contract”. The Court considered that the lack of consent here was an insurmountable barrier to the decision in the third adjudication being enforceable. (The second adjudication did not face this problem and that decision was enforced.)

The Court also made clear that it thought the position was the same in relation to “related disputes under different contracts, whether or not one or more of those parties is a party to those disputes” (Paragraph 8(2) of the Scheme)5. It did not comment on the position with regard to unrelated disputes under unrelated contracts. 

One dispute with multiple issues, or multiple disputes?

If you are considering the validity of concurrent or overlapping adjudications, it is clearly important to understand if you have two disputes, or one dispute with multiple issues. In Deluxe, the Court referred to helpful guidance in Witney Town Council v Beam Construction (Cheltenham) Ltd6 in this regard: 
  • a dispute can comprise a single issue or any number of issues within it
  • a dispute can change over time and a dispute which has been validly referred to adjudication can increase in scope and change its nature and extent
  • you should not adopt an overly legalistic analysis of what a dispute is. Remember that when entering into their contract the parties will not have contemplated that every issue between them would necessarily have to attract a separate reference to adjudication
  • the Notice of Adjudication and the Referral Notice are not necessarily determinative of what the true dispute is or as to whether there is more than one dispute. You should look at them but also at the background facts
  • whether there are one or more disputes involves a consideration of the facts. If there is a clear link between two or more arguably separate claims or assertions, that may well point to there being one dispute. A useful if not invariable rule of thumb is that, if disputed claim number one cannot be decided without deciding all or parts of disputed claim number two, that establishes such a clear link and points to there being only one dispute. 
In Witney, Beam Construction had commenced a single adjudication, claiming (in broad terms) the sums set out in the draft and final accounts it had sent to Witney Council ('the Council'), and asking for decisions in relation to the date of practical completion, the amount of retention due, and the purported termination of its contract. The Council alleged that there were four disputes, meaning that the adjudicator’s decision was not enforceable. Applying the above guidance, the Court held that there was only one dispute, being “what was due and owing to Beam”

More recently, the Court took a similar approach in Penten Group Ltd v Spartafield Ltd7. Like Deluxe, the matter involved multiple adjudications (the Court was aware of five, but there may have been as many as nine, albeit with only one completed adjudication(!)), with the proceedings relating to the completed adjudication. Spartafield had commenced the adjudication, seeking amongst other things a declaration that “a valid Construction Contract exists between the parties, and the terms of that Contract include the provisions of ICD 2011”. The adjudicator decided that the parties did have a valid construction contract, but that the terms of the contract were to be found in a letter of intent and not the ICD 2011. The issue in front of the Court was whether or not the adjudicator had the jurisdiction to decide on the form of contract. The Court held that the adjudicator did have such jurisdiction, since it would not have been possible for him to decide whether or not there was a valid contract without deciding whether basic terms had been agreed and, if so, what precisely those terms were.  

Comment 

Deluxe and Penten raise some important practical considerations for parties who have numerous issues arising on a project at the same time. Whilst commencing multiple adjudications might appear to offer some tactical advantages (not least tying up the resources of an opposing party), the outcome in Deluxe shows that it can be far from easy to steer each adjudication to a decision, let alone a successful outcome.

In this context, it is important that parties take time to consider what forum is best for the disputes or issues they face. It is true that adjudication offers several attractive benefits, not least that it is much quicker than full court proceedings or arbitration, and is also binding (at least in the interim). However, it also has weaknesses – for example, a party’s satisfaction with the decision it receives is likely to depend on its happiness with the quality of the adjudicator appointed, and there is no opportunity to cross examine witnesses (we have seen some statements which we suspect would have been drafted differently had cross examination been on the cards). 

So it is worth considering the alternatives. The Courts have been keen recently to stress the benefits of Part 8 proceedings, which can be heard relatively quickly, but are suited only to matters of contract interpretation or law, where there is little or no disagreement about the facts, and parties might consider expert determination8 or early neutral evaluation9.  

If you do choose adjudication, then if you wish to have the same adjudicator decide more than one dispute at the same time, then you need to check your adjudications rules to find out if you need the consent of your counter-party (remember that in Deluxe the Court’s decision leant heavily on the words of the Scheme). It is also worth bearing in mind that a party may provide its consent impliedly, for example by not raising the point as a jurisdictional challenge after a dispute has been referred to the same adjudicator.  

With regard to the question of whether you have one or more disputes, the situation is unfortunately not straightforward, since the answer in any given situation will depend on the facts. However, it is worth bearing in mind that in Penten, the Court approved the approach in Witney, noting that “at least in an ordinary case, a dispute about terms and a dispute about the claims under those terms are all part of a single dispute. Otherwise the whole basis of adjudication becomes unworkable.” This pragmatic approach is likely to give some comfort to parties who are faced with allegations of having referred more than one dispute to adjudication.
1 [2016] EWHC 238 (TCC)

2 Willmott Dixon Housing Ltd v Newlon Housing Trust [2013] EWHC 798 (TCC)

3 Housing and Grants (Construction and Regeneration) Act 1996, as amended

4 Scheme for Construction Contracts (England and Wales) Regulations 1998, Part 1

5 Referring to Pring and St Hill Ltd v CJ Hafner (Trading as Southern Erectors) [2002] EWHC 1775 (TCC)

6 [2011] EWHC 2332 (TCC) 

7 [2016] EWHC 317 (TCC)

8
This is generally a binding process, typically used for disputes of a specialist or technical nature where the scope of dispute about the law / facts is likely to be limited.  It is usually cheaper, quicker and less formal than arbitration or litigation.  Note that a right of appeal or challenge is limited and may not exist at all.

9
Parties appoint an independent and impartial evaluator to give an objective and realistic assessment of the merits each party’s case with the aim of using this as a basis for commercial negotiations. Since no binding decision is provided, the success of this process depends on an agreement being reached.

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