MDA Law
Jacobs UK Ltd v Skanska Construction UK Ltd (2017) EWHC 2395 (TCC)
Judge: Mrs Justice O’Farrell DBE
This case involved an application by the claimant (“Jacobs”) against the defendant (“Skanska”) for a court order restraining Skanska from proceeding with an adjudication, following Skanska’s withdrawal from an earlier adjudication in respect of the dispute between the parties. The material question raised by the dispute is whether a party to an adjudication is entitled to withdraw a dispute from adjudication and refer the same, or substantially the same, dispute to a second adjudication.
Background
- In February 2011, Skanska entered into a formal agreement with Jacobs for the design and replacement of street lighting in Lewisham and Croydon (“the Design Agreement”) for a PFI project.
- A dispute arose between the parties as to the adequacy of the design services provided by Jacobs to Skanska.
- Skanska argued that Jacobs provided the design and advice in which Skanska relied on, when submitting its bid for the PFI project, which was successful. The design prepared by Jacobs following commencement of the PFI project differed materially from the design provided for the purposes of the bid. Skanska claimed that as a result of that difference, together with delays in the production of the design and the poor quality of the design, it had suffered loss and damage.
The Design Agreement is a construction contract for the purposes of section 108 of the Housing Grants Construction and Regeneration Act 1996 (“the 1996 Act”) and Clause 21 of the Design Agreement contains an adjudication provision.
On 8 February 2017 Skanska gave notice of its intention to refer the dispute to adjudication. Thereafter, the parties agreed the procedural rules and timetable for the adjudication. Furthermore, that the statutory scheme for adjudication (“the scheme”) would apply subject to the agreed timetable.
The adjudication proceeded, an adjudicator was appointed, and the parties subsequently served their referral and response documents in accordance with the agreed timetable. However, Skanska’s counsel became unavailable and Skanska was unable to serve its reply as agreed.
Skanska requested an extension of time from Jacobs and the adjudicator, but the request was denied from both parties. As a result, Skanska withdrew its reference to adjudication and invited the adjudicator to resign.- On 21 June 2017 Skanska issued a new notice of intention to refer the same dispute to a second adjudication.
The claim
On 4 July 2017 Jacobs commenced these proceedings, seeking the following relief:- a declaration that in proceeding with Adjudication No.2 Skanska are acting unlawfully;
- an order restraining Skanska from taking any further steps in furtherance of Adjudication No.2;
- an order requiring Skanska to withdraw from Adjudication No.2;
- a declaration that Jacobs are entitled to be paid their costs of Adjudication No.1; and
- further or other relief.
Jacobs argued that the parties agreed that the reference of this dispute should be to an adjudicator appointed under the Scheme and that the adjudication should be conducted in accordance with an agreed timetable. Jacobs argued further that the court should grant appropriate relief to protect their right to a procedurally fair process of the dispute which is not unreasonable and oppressive.
Skanska argued that there is no concept of abuse of process in adjudication and a referring party is free to obtain whatever tactical advantage it can. A party has the right to start adjudication in relation to a dispute at any time. Therefore, a party has an unrestricted right to start, abandon and pursue consecutive adjudications in respect of the same dispute.
The issues for the court to decide were:- whether a party to an adjudication is entitled to unilaterally withdraw a dispute referred to adjudication and commence a second adjudication in respect of the same, or substantially the same, dispute;
- whether, in such circumstances, the court has power to grant an order to restrain the pursuit of the second adjudication;
- if so, whether the court should exercise its discretion on the facts of this case; and
- whether Jacobs is entitled to its wasted costs in respect of the first adjudication.
The 1996 act and the scheme
Section 108(1) of the 1996 Act provides:
“A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.”
Section 108(2) of the 1996 Act provides:
“The contract shall-
(a) enable a party to give notice at any time of his intention to refer a dispute to adjudication;
(b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice;
(c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;
(d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;
(e) impose a duty on the adjudicator to act impartially; and
(f) enable the adjudicator to take the initiative in ascertaining the facts and the law.”
Section 108(3) of the 1996 Act provides:
“The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement. The parties may agree to accept the decision of the adjudicator as finally determining the dispute.”
The Scheme contains the following material provisions:
Paragraph 1(1):
“Any party to a construction contract (the “referring party”) may give written notice (the “notice of adjudication”) of his intention to refer any dispute arising under the contract, to adjudication.”
Paragraph 7(1):
“Where an adjudicator has been selected in accordance with paragraphs 2, 5 or 6, the referring party shall, not later than seven days from the date of the notice of adjudication, refer the dispute in writing (the “referral notice”) to the adjudicator.”
Paragraph 9(1):
“An adjudicator may resign at any time on giving notice in writing to the parties to the dispute.”
Paragraph 9(3):
“Where an adjudicator ceases to act under paragraph 9(1) –
(a) the referring party may serve a fresh notice under paragraph 1 and shall request an adjudicator to act in accordance with paragraphs 2 to 7; and
(b) if requested by the new adjudicator and insofar as it is reasonably practicable, the parties shall supply him with copies of all documents which they had made available to the previous adjudicator.”
Paragraph 11(1):
“The parties to a dispute may at any time agree to revoke the appointment of the adjudicator…”
Paragraph 13:
“The adjudicator may take the initiative in ascertaining the facts and the law necessary to determine the dispute, and shall decide on the procedure to be followed in the adjudication …”
Paragraph 14:
“The parties shall comply with any request or direction of the adjudicator in relation to the adjudication.”
The decision
The court stated the following:- In terms of the adjudication procedure under the 1996 Act and the Scheme, the referring party has an advantage in selecting the timing and scope of the dispute. Adjudicators have wide powers to determine the procedure and evidence considered to reach their decisions.
- There is no express or implied restriction in the 1996 Act or the Scheme that prevents a party from withdrawing a disputed claim which has been referred to adjudication: Midland Expressway Ltd v Carillion Construction Ltd [2006] EWHC 1505 per Jackson J at para [100] and [101]: The entitlement of a party to withdraw its claim continues even after the referral and does not prevent that party from pursuing the claim in a later adjudication: Lanes Group plc v Galliford Try Infrastructure Ltd [2012] EWCA Civ 1617 per Jackson LJ at para [38] – [40].
- The principle of abuse of process does not apply to adjudication: Connex South Eastern Ltd v MJ Building Services Group plc [2005] EWCA Civ 193 per Dyson LJ at para.[40].
- Justice O’Farrell held the following:
- There can be instances in which the courts will intervene and prevent a party from pursuing a claim in adjudication.
- Subjecting a party to serial adjudications in respect of the same claim and requiring it to incur irrecoverable costs could amount to unreasonable and oppressive behaviour. This is a question of fact, which is dealt with on a case by case basis, as to whether the behaviour of the party initiating the adjudication is found, on an objective basis, to be unreasonable and oppressive.
- The court has the power to grant an order preventing the second adjudication if it is established that it is unreasonable and oppressive.
- Skanska’s withdrawal of the claim was unreasonable. However, initiating a second adjudication two months later was not oppressive as the substance of Skanska’s claims remained the same. Therefore, Jacobs would be entitled to rely on its prepared response. The court will not intervene unless it is both unreasonable and oppressive to allow the second adjudication.
- Jacobs is entitled to any wasted or additional costs caused by Skanska’s failure to comply with the procedure and timetable as agreed between the parties.
- Conclusively, a party to an adjudication is entitled to withdraw a dispute referred to adjudication and commence a further adjudication in respect of the same, or substantially the same, dispute. The court has power to grant an order restraining the pursuit of the further adjudication if it is unreasonable and oppressive. In terms of this case, the second adjudication is not unreasonable and oppressive.
