| Date | 18 April 2001 |
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| Judgment | Holt Insulation Limited -v- Colt International Limited TCC March 2001 |
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| The Issue | The consequences of overlapping disputes in adjudication. |
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| Implication |
The decision of an adjudicator is binding upon subsequent adjudicators, but it will be a matter of detailed examination to determine whether matters put before a second adjudicator concern separate "disputes". |
printIn the commercial world of the construction industry, pedantry appears to be a virtue. When Colt International Ltd referred to adjudication a dispute it had with its main contractor, Holt Insulation, it could not have anticipated the set back it would suffer. In the adjudication, Colt had set out carefully the balance it considered payable under its most recent application for payment and requested the adjudicator to order "immediate payment of the balance of the sum due". With better advice, it might have included further words in its referral to adjudication requesting the adjudicator to order payment of the sum claimed "or such other sum or sums as the adjudicator shall decide to be fair and reasonable". Although those words were absent from the Referral Notice, Colt later tried to make amends when the shortcoming was brought to their attention. This was to no avail. The adjudicator decided that his function was to decide one substantive issue, that is, whether the precise sum claimed by Colt was or was not due. He considered that his jurisdiction did not allow him to venture into deciding matters of alternative valuation. Finding that he could not agree that the totality of the sum requested was due, he issued his decision that no money was to be paid. Whilst this might be seen as clever and successful manoeuvring by the main contractor Holt, the real question would now be whether, for adjudication purposes, this would be an end to the matter. Otherwise it might be regarded simply as a costly delaying tactic, bringing about a second adjudication. Unsurprisingly, Colt could not let the matter rest there and a second adjudication was indeed soon under way. Solicitors acting for Holt, the main contractor, immediately tried to put a stop to the process drawing the second adjudicator's attention to paragraph 9(2) of the Scheme for Construction Contracts (England and Wales) Regulations 1998. "An adjudicator must resign where the dispute is the same, or substantially the same, as one which has been previously referred to adjudication and the decision has been taken in that adjudication". The second adjudicator carefully examined the Referral Notice. This time round, Colt had been careful not to fall into the same trap. Its claim was for immediate payment of the balance due under the interim application or alternatively, "such other sum or sums as the adjudicator shall decide to be fair and reasonable in the circumstances of the claims". The second adjudicator decided that this was a further and discreet issue which did not arise in the earlier referral, and on that basis he concluded that it was an issue that he should decide. Accordingly, he proceeded to go through all the amounts involved in the application and adjudication and, dealing with each claim and counterclaim made, an award for a sum payable to Colt. Holt refused to pay. In due course, the matter came before the court, with Holt seeking an order that the adjudication should be set aside on the basis that the adjudicator had no jurisdiction. Colt counterclaimed for a judgment enforcing the adjudicator's award. Holt made their case very clearly. Under paragraph 9(2) of the Scheme, the adjudicator should have resigned. Holt argued that a sub contractor who claims a large sum and fails, for whatever reason, cannot reshape his claim very slightly in the light of the award and claim a smaller sum and seek a second adjudication. In response, Colt said that the first adjudication related to a specific claim for a specific amount, which the adjudicator held was not recoverable. The second adjudication related to a much more flexible claim for valuations on different aspects of the contract. The second adjudicator had held that they were entitled to recover the sum which he awarded. This decision, Colt argued, was based firmly on that other dispute: what sum was Colt entitled to? His Honour Judge Mackay noted that the question of two adjudications over similar subject matter had been brought before the courts previously. In VHE Construction -v- RBSTB Trust Co the judge had to rationalise the effect of two decisions concerning the same contract works. It was noted that the second adjudicator should generally consider himself or herself bound by the decision of the first adjudicator. Whether the second adjudicator is bound will depend precisely upon the nature of the dispute referred to the first adjudicator, and the basis upon which the first adjudicator made his or her decision. Guidance was also to be found in the cases of Sherwood and Casson Ltd -v- McKenzie Engineering Ltd and Fast Track Contractors Ltd -v- Morrison Construction Ltd. Taking these cases into account, Judge Mackay concluded that whilst the references to the adjudicator in the present case may have related to the same matters arising out of contractual relations between the parties, they did not relate to the same dispute. The Notices of Referral were crucially different, and in his view the second adjudicator was correct in reaching the decision that he did. It followed therefore that the Defendants, Colt, were entitled to judgment in relation to the sums awarded in respect of the second adjudication.
CJ-0115
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