Parties making jurisdictional reservations in adjudication must articulate their challenges in a manner which allows an adjudicator to ‘deal with the jurisdictional objection’

Published 22 May 2019

In Ove Arup & Partners International Limited v Coleman Bennet International Consultancy Plc [2019] EWHC 413 (TCC), Arup applied to the court for summary judgment against CBI to enforce an adjudicator’s decision.

Comment

General reservations made in response to adjudication are likely to be insufficient grounds for challenging a decision, particularly where the responding party is being seen to making no real effort to articulate specific arguments. Responding parties should determine, articulate, and sustain specific jurisdictional arguments from the outset if they want to use jurisdiction to challenge enforcement in the courts.

Background

CBI had engaged Arup to provide a feasibility study on a hyperloop linking Manchester and Leeds.  Arup set out its fees and commercial terms in a proposal letter dated 14 April 2016.  Its services included assistance with the overall project management of the study, considering tunnel design, route selection and station layout, assessing operational and transport capacity, and assessing costs. Arup fixed its fee at £350,000 plus VAT but was ‘prepared to discount the above fee to £150,000 plus VAT in exchange for a 20% share in the ownership of the enterprise’.  CBI accepted the proposal.

By October 2016, CBI had paid £75,000 to Arup.  Arup then confirmed it would not take a 20% stake in any potential joint venture if the project went ahead.  No further money was paid and Arup’s demands for payment went unanswered.  Arup launched an adjudication under the statutory scheme provided for by the Housing Grants, Construction and Regeneration Act 1996 (the “Act”), s.108.  The adjudicator awarded Arup the balance of its fee of £275,000, plus VAT and interest, statutory compensation of £300 and the adjudicator’s fees.  CBI still failed to pay, so Arup launched proceedings and issued its application for summary judgment in November 2018.

CBI resisted the application by maintaining a number of challenges to the adjudicator’s jurisdiction:

• The Agreement was not a construction contract for the purposes of Part 2 of the Act, because it did not relate to the carrying out of construction operations; or alternatively
• The Agreement included non-construction operations which were not severed from the construction-related duties, although the adjudicator had, wrongly, so severed them in his decision;
• The referral contained more than one construction dispute arising out of a potential variation on 11 October 2016;
• The adjudicator ‘s jurisdiction turned on questions of fact which could not have been determined at the time of his decision.

CBI had stated the first point in general terms in its adjudication response, but did not explain or  develop it.  The specific issues raised at points 2-3 were answered by Arup in its reply, but CBI responded with only a general reservation.  Given that first point was backed by no detail, and Arup had provided unrefuted answers to the second and third points, the adjudicator had found for Arup.

Decision

The court supported Arup’s application based upon the following principles from the Court of Appeal’s decision in Bresco Electrical Services Limited (in liquidation) v Michael J. Lonsdale (Electrical) Limited and Primus Build Ltd [2019] EWCA Civ 27:

• If the responding party wishes to challenge the jurisdiction of the adjudicator then it must do so “appropriately and clearly”. Otherwise it will be taken to have waived any jurisdictional objection and will be unable to avoid enforcement on jurisdictional grounds;
• It will always be better for a party to reserve its position based on a specific objection or objections, otherwise the adjudicator and referring party cannot determine if the objection has merit;
• If specific jurisdictional objections are rejected by the adjudicator/court, then the objector is precluded from raising other jurisdictional grounds thereafter;
• A general reservation is ‘undesirable’ and may not be effective if either the objector had (or ought to have had) specific grounds but failed to articulate them, or the court concludes that a general reservation was worded deliberately so as to keep all options open (including those not yet thought of).

In this instance the court found, in respect of the first of CBI’s challenges, that a mere general reservation was not sufficient to enable to adjudicator to understand the nature of, and deal with, the objection. It was inappropriate to keep open all lines of jurisdictional challenge, regardless of whether they were raised or not, via a general reservation. It was also ineffective to use a general reservation to answer specific points raised in Arup’s reply.