Out-Law Analysis 7 min. read
13 Jul 2023, 3:06 pm
A landmark new ruling from the Court of Appeal in England has established a very clear set of principles that apply to serial adjudications.
The Court of Appeal’s decision is central to the subject of serial adjudications under the 1996 Housing Grants, Construction and Regeneration Act (HGCRA). The case, involving a dispute between Sudlows Ltd and Global Switch Estates 1 Ltd, also offers some much-needed guidance on how to approach matters that have already been decided in a previous adjudication, in a subsequent serial adjudication.
Pinsent Masons, led by construction law experts Michael Hopkins, Nick Kippax and Fay Sowden, acted for Sudlows in their successful appeal. Counsel for Sudlows were Roger Stewart KC and George McDonald of 4 New Square.
A serial adjudication arises in circumstances when there are two or more successive adjudications between the same parties in relation to the same construction contract. The courts have established a number of principles for serial adjudications, including that if any subsequent adjudication comprises the same or substantially the same dispute that has already been decided in a previous adjudication, the adjudicator in the subsequent serial adjudication has no jurisdiction.
Ascertaining what has been decided in a previous adjudication – and therefore what is binding on the parties – is a matter of fact and degree and requires an analysis of the terms, scope and extent of the decision made by the adjudicator in the previous adjudication.
In a previous adjudication decision (Adjudication 5), the adjudicator Mr Curtis granted an extension of time (EOT) up to a certain date based on two relevant events for delays, including delays within “window 29”. Sudlows then sought a further EOT in a subsequent adjudication (Adjudication 6), for delays within “Window 29+” based on the same relevant facts which were continuing throughout the period to which Adjudication 6 related.
In his decision in Adjudication 6, the adjudicator Mr Molloy held, following the decision in Hyder v Carillion, that he was bound by the relevant findings of Mr Curtis in Adjudication 5 since they formed “an essential component of or basis for [the decision]”. However, Mr Molloy went on to give an alternative decision (to be given effect to if he was not bound) in light of some new evidence introduced by Global.
Sudlows then argued before Mr Justice Waksman that Mr Curtis had decided that Global Switch was responsible for the delays to the installation and energisation of a high-voltage cable – referred to as the “ductwork and cabling issues” by the Court of Appeal – which were found by Mr Curtis to be relevant events. Sudlows argued that these relevant events were “an essential component of or basis for [the decision]”.
Global Switch argued that Mr Molloy, although bound by the number of days EOT decided in Adjudication 5, was not bound by the basis of the decision. Global Switch argued that Sudlows’ extension of time claim in Adjudication 6 was an entirely new claim since it related to an entirely different period.
Mr Justice Waksman held that, since the period related to delay ‘window 29+’ was a different period, it was a different dispute. The judge went on to enforce the alternative decision of Mr Molloy and to find that the adjudicator was right to consider the new evidence. The judge distinguished the decision of the court in Hyder v Carillion on its facts.
The lead judgment of the Court of Appeal, which was formally handed down on Wednesday 12 July 2023, was given by Lord Justice Coulson. In a very detailed judgment, he helpfully set out the law in relation to serial adjudications and summarised the relevant principles.
The key principles identified are:
Having identified the issues in the appeal, Lord Justice Coulson went on to analyse each of them in turn, telling the court: “It is important that, in serial adjudications, the policing of this sort of debate is primarily left to the adjudicators themselves. The court should only intervene when something has gone clearly wrong in a later adjudicator’s decision. In my view, that is not this case.”
“In my judgment…Mr Curtis’ clear view as to Global’s contractual responsibility for the cabling and ductwork issues was binding on the parties and binding on any subsequent adjudicator. Any other result – that contractual responsibility lay with Sudlows, not Global – would be fundamentally inconsistent with the binding decision of Mr Curtis. If Global wanted to challenge his decision, as they clearly did, then they had every right to do so: but the challenge had to go to court or arbitration, not by way of another adjudication,” the judge said.
He added: “I accept that care is needed with the analysis in Hyder and that the search for ‘an essential component’ of the first adjudicator’s reasoning cannot become too granular. But no such difficulty arises here: if one stands back and considers the result in Adjudication 5 and the alternative result in Adjudication 6, it will be seen that they are irreconcilable; the adjudications produced, within a matter of months, two diametrically opposed decisions. That is because the alternative result in Adjudication 6 ignored the essential reasoning that explained the result in Adjudication 5.”
“That can also be tested by assuming that Sudlows had lost in front of Mr Curtis; if so, they could never have then been able to claim the further extension in Adjudication 6. It would have been parasitic on an essential assumption as to contractual responsibility which had already been rejected. Two diametrically opposed results a few months apart are not in accordance with the principles of construction adjudication; they are instead a sign that something has gone wrong with the process,” Lord Justice Coulson said.
He told the court that Sudlows was “quite right” to say that the delay claim in Adjudication 6 was the logical extension of the decision in Adjudication 5. “It was the remainder of the delay which had been triggered by the cabling and ductwork issues which Mr Curtis had decided were Global’s contractual responsibility. ‘A logical extension’ of a successful first claim will rarely be an accurate description of a second claimed extension of time for a different period, because of the almost inevitable factual differences between the two claims. That is what the authorities show. But here it was an accurate description of the claim in Adjudication 6.”
The judge added: “The position seems to me to be this. If, as I have concluded, Mr Molloy was right, and he was not entitled to re-investigate the question of contractual responsibility for the cabling and ductwork issues, then the new evidence was irrelevant and inadmissible in Adjudication 6. It went to an entirely different matter, namely a challenge to the decision of Mr Curtis as to contractual responsibility, and that could only be made in court proceedings or in arbitration. There is a difference in principle between, on the one hand, the dispute between the parties, and on the other, the evidence that each choose to deploy in seeking a favourable answer to that dispute.”
There is now a very clear set of principles from the Court of Appeal which apply to serial adjudications. In addition, there is now some very clear and welcome guidance as to how to approach the question as to what has already been decided in a previous adjudication in any subsequent adjudication.
In essence, before entering any debate as to what has already been decided, it is necessary to identify what is the “essential component of or basis for [the previous decision]”. Having carried out that analysis, if a party to the subsequent serial adjudication is then going to ask the adjudicator to consider fresh arguments or evidence in order to reach a decision which is diametrically opposed to what has already been decided, then the party concerned will be at risk of placing itself in breach of the HGCRA.
Parties will need to be careful not to elide the question of the fundamental dispute between the parties that was decided in the earlier adjudication with the evidence deployed by the parties in pursuance of that dispute.
There will, no doubt, continue to be debates between the parties to a subsequent adjudication as to what was decided in a previous adjudication. But the Court of Appeal’s decision in Sudlows v Global Switch should be of immense benefit to the parties and to the adjudicator in approaching and in dealing with any such debates if and when they arise in the future.
03 Jul 2023