Three Become One, or One Becomes Three?
Locations
In the recent case of Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC), the TCC had to decide if a dispute concerning three separate, but accumulative, payment applications were to be considered "a dispute" for the purposes of section 108(1) of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act).
For those not familiar with the statutory adjudication process, parties to a construction contract, as defined by S.104 of the Construction Act, may refer a dispute that arises under the contract to adjudication (s.108 of the Construction Act). As a result, the Construction Act prohibits more than one dispute being referred to adjudication as a part of the same adjudication proceedings. Failure to comply will result in the adjudicator not having the requisite jurisdiction to decide the dispute and render any decision unenforceable, if the adjudicator hasn’t resigned before then that is.
However, in practice, it can sometimes be difficult to determine where one dispute ends and another begins. This is particularly so in circumstances where one alleged dispute is made up of several sub-issues which, as confirmed in Witney Town Council v Beam Construction (Cheltenham) Ltd [2011] EWHC 2332 (TCC) would not offend the provisions of the Construction Act. This is an issue we have seen arise in multiple adjudications over the past year, sometimes with Adjudicator's unable to decide definitively if they have jurisdiction and agreeing to hear the dispute if the Referring Party agrees to pay their fees even if their decision is unenforceable.
Background
Quadro and Creagh entered into a verbal contract pursuant to which Quadro was to supply labour to Creagh. The contract was a Construction Contract for the purposes of the Construction Act. Quadro submitted monthly payment applications to Creagh in the usual way.
By the time the dispute was referred to adjudication, three consecutive payment applications (each requesting payment for the full value of work completed, less the previous applications for payment) had been made by Quadro with neither a payment nor a payless notice issued by Creagh in reply. The final date for payment for each application lapsed and Quadro claimed to be entitled to the sums claimed in each interim application on a technical or 'smash and grab' basis.
Adjudication
Quadro referred the matter to adjudication and claimed the total of all three payment applications (a little more than £40,000) under one referral notice. Creagh immediately responded to challenge the adjudicator's jurisdiction on the basis each interim payment application was distinctly separate from the other and could be decided independently of and without reference to the other. As such, the "rule of thumb", while not determinative, strongly suggests multiple disputes and therefore the adjudicator should resign (see paragraph 38 vii of the Witney case).
The fundamental question for the adjudicator to decide was therefore whether or not each interim payment application was to be considered distinctly separate to the other thus requiring three separate adjudications to be commenced in order to comply with the Construction Act. If they were separate, the adjudicator must resign but if deemed a single dispute the adjudication could proceed.
The adjudicator ultimately confirmed that the matter referred by Quadro was "a dispute" because it was a claim for sums due under the contract but evidently made up of several sub-issues. He therefore refused Creagh's invitation to resign. Creagh refused to participate in the adjudication thereafter and the adjudicator proceeded to issue his decision in Quadro's favour.
Enforcement Proceedings
Creagh refused to comply with the adjudicator's decision and refused to make payment of the awarded sums to Quadro. Quadro commenced enforcement proceedings to which Creagh maintained its defence that the adjudicator did not have jurisdiction to decide the matter referred because it amounted to multiple disputes and offended the provisions of the Construction Act.
Creagh's position was rejected by Judge Watson in her judgment awarding Quadro summary judgment on the basis that:
- the guidance in the Witney case does not mean "…that unless each claim cannot be decided without deciding all or part of the other claims, each claim constitutes a separate dispute. Clearly a single dispute in the context of a construction contract may include several distinct issues…”
- …to allow Creagh's arguments [that there were three disputes] would put parties to significant costs and inconvenience when trying to recover a single claimed balance… contrary to the 'efficient, swift and cost-effective' principles underpinning adjudication."
This case reinforces the subtle distinction between a dispute, as envisaged by the Construction Act, and an issue to be decided as a part of a dispute. It is sometimes difficult to make the distinction and can therefore lead to difficulties later down the line with enforcement. That said, deciding on which is applicable in any given circumstance is a question of fact to be assessed at the time. There is no hard and fast rule. For example, where the applications are not cumulative and/or the paid to date amount cannot be easily reconciled could there still be scope for multiple disputes?
What the decision does do is serve as a reminder that there are a very narrow set of circumstances in which a party can successfully challenge jurisdiction. Equally, the fundamental objectives of the adjudication regime is to promote an efficient, swift and cost effective resolution and remain of paramount importance.