The limits of an adjudicator's jurisdiction

The recently decided case of Prater v Sisk confirms that an Adjudicator’s decision is enforceable in circumstances where it is based (in part) on a previously decided decision, which the defendant alleges was made without jurisdiction. It also provides helpful commentary on the broad definition of dispute and interpretation of NEC3 Option W2 with regards to multiple adjudication referrals.

Background

The claimant (Prater) applied for summary judgment for the enforcement of an Adjudicator’s decision. The adjudication was commenced under Option W2 of the NEC3 Conditions of Subcontract, option A (2013).

The parties had entered a Subcontract for works to a new aircraft hangar at London Gatwick Airport. The Subcontract works were subject to delay and changes and resulted in a number of separate adjudications.

An earlier Adjudicator’s decision was of particular significance to the application. In that earlier adjudication Prater sought decisions in relation to: (a) the correct Subcontract Completion Date; (b) provisional sums within the Contract; and (c) Sisk’s entitlement to deductions for indirect losses.

In the present matter Prater sought payment which (in part) relied on the findings of that earlier adjudication. The Adjudicator awarded Prater a significant sum.

The parties’ respective cases

Sisk argued that the earlier decision was not binding as the referral did not relate to a single dispute but to three separate disputes and therefore that the Adjudicator did not have jurisdiction. Accordingly, Sisk submitted that the Adjudicator did not have jurisdiction in the present matter as it was partly based on the findings of an earlier adjudication.

Prater argued that the earlier adjudication was binding and enforceable as a matter of principle and contractual obligation unless challenged in the Court. Prater submitted that there were no valid grounds to challenge the Adjudicator’s jurisdiction because a challenge to an Adjudicator’s jurisdiction in an earlier referral did not constitute a valid challenge in a subsequent referral. Prater contended that the earlier adjudication stemmed from numerous issues arising out of a single disputed payment certificate and not multiple disputes.

Issues

The issues for the Court to decide were as follows:

Whether a lack of jurisdiction in relation to an earlier adjudication decision was capable of impugning the Adjudicator’s decision in a subsequent adjudication, where that subsequent decision was made (in part) on the findings of the earlier decision. If so, whether the Adjudicator did indeed lack jurisdiction in relation to that earlier decision.

Buehrlen J held that the Adjudicator’s decision was enforceable and should be upheld, finding that the Adjudicator had the relevant jurisdiction to make the decision whether or not an earlier decision upon which it relied was made without jurisdiction.

The principal points in that judgment can be summarised under the following headings:

Issue 1 – The Adjudicator’s jurisdiction in the subsequent adjudication

Buehrlen J agreed with Prater that “until an adjudication decision is challenged, either in arbitration or in court, it is binding on the parties”. Clause W2.3(11) of the Subcontract, under which the referral had been made, expressly stated that the Adjudicator’s decision is binding unless revised by the tribunal. Sisk had served a Notice of Dissatisfaction under WC2.4(2) of the Subcontract but had not taken any further steps to refer the earlier decision to the Court. The earlier decision was therefore binding on the parties and enforceable by Prater until successfully challenged by Sisk.

With regard to whether a decision that lacked the requisite jurisdiction made a subsequent adjudication a nullity, Buehrlen J found it did not. It fell to the aggrieved party (in this case, Sisk) to challenge the underlying decision, and unless and until it did that an adjudication decision would be binding on the parties and in any subsequent adjudications.

Issue 2 – Whether the Adjudicator lacked jurisdiction in the earlier adjudication

As to whether the Adjudicator lacked jurisdiction in relation to the earlier adjudication, the Buehrlen J found that the issues which were the subject of the earlier adjudication did not comprise multiple disputes.

The judgment clarified Akenhead J’s guidance in the Witney Town Council v Beam Construction (Cheltenham) Ltd [2011] EWHC 2332 (TCC) case as to what constitutes a single dispute. A dispute may comprise several distinct issues, which may be capable of being decided independently. A common sense approach should be used when determining the meaning of ‘dispute’. In this case, Buehrlen J found that the issues which were the subject of the earlier adjudication formed part of a larger dispute.

In reaching these conclusions, the Buehrlen J was obliged to take account of whether the Adjudicator had jurisdiction under NEC3 Option W2 to deal with more than one dispute in a single adjudication. Buehrlen J found that as a matter of contractual interpretation, there was no basis for the proposition that more than one dispute could be referred. The parties had not expressly agreed to more than one dispute being referred in a single adjudication and the drafting of NEC3 Option 2 certainly did not support that.

Comment

The case highlights the importance of promptly challenging an Adjudicator’s decision where a party contends that the Adjudicator lacked jurisdiction. Parties cannot use a subsequent adjudication enforcement hearing to open up and challenge an earlier Adjudicator’s decision.

Dr Paul Hughes is a senior associate and Anna Sidebottom a trainee solicitor at Sharpe Pritchard LLP.

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