| Date | 15 September 1999 |
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| Judgment | Palmers Limited -v- ABB Power Construction Limited, TCC 6 August 1999 |
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| The Issue | Challenges to the jurisdiction of an adjudicator. |
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| Implication |
Whilst the adjudicator has no binding power to resolve matters of jurisdiction, he must take appropriate practical steps to investigate the question of his jurisdiction in the first instance, and proceed or refuse to proceed with the adjudication accordingly. |
printThe body of case law giving guidance for the adjudication process continues to grow apace. The case of Palmers Limited -v- ABB Power Construction Limited, decided on 6 August 1999, adds to the list. Adjudicators will frequently have to face the question of jurisdiction. There are many ploys for arguing that an adjudicator lacks necessary jurisdiction. It may be argued that the contract pre-dated the coming into force of the Act, or that no contract came into force. Alternatively it may be said that the contract is not a construction contract within the meaning of Section 104 of the Housing Grants, Construction and Regeneration Act 1996. It may also be argued that the matter has already been adjudicated, or that adjudicator's appointment is improper, or that the adjudicator is disqualified from acting for some other reason. The parties will be polarised in their views as to how an adjudicator should deal with these questions. The party arguing lack of jurisdiction will further argue that the adjudicator has no power to resolve the question. Accordingly they will say the adjudicator has no option but to refuse to act until the parties have either agreed to grant the necessary jurisdiction, or the matter has been considered and resolved by the courts. It may be said that weight has been given to this argument by the judgment of His Honour Judge Thornton QC, in the Palmers case. Palmers entered into a sub-contract to provide scaffolding works for ABB. ABB's work involved the assembly and erection of a heat recovery steam generator boiler which was part of a power generation plant being installed at the Esso Fawley Project near Southampton. Disputes arose between the parties. ABB alleged that Palmers had delayed the project, leading to its client deducting liquidated damages. In consequence, ABB sought a substantial set-off in connection with these alleged damages. Following the non payment of interim payments which it considered due, Palmers sought to invoke its rights under the Act to suspend the performance of its obligations, and served a notice seeking adjudication upon its claims for interim payment. On receipt of this adjudication request, ABB responded to the effect that the scaffolding sub-contract was not a "construction operation," and thus not a construction contract as defined by the Act. In consequence, ABB argued that Palmers had no right to seek statutory adjudication and any adjudicator who might purport to act, would lack the necessary jurisdiction. With astonishing speed, Palmers were able to bring this question to the court and to obtain a judgment upon the issues within 13 days after the dispute in question first arose. Section 104 (1) of the 1996 Act defines a "construction contract" as an agreement with a person for … the carrying out of "construction operations." Section 105 (1) then lists in considerable detail the descriptions of works which are said to be embraced by the term "construction operations." Section 105 (2) then gives a further list of operations which are "not construction operations within the meaning of this part." The parties accepted that ABB's works fell within the exclusions under Section 105 (2). Judge Thornton was clear however that it did not automatically follow that the sub-contract for scaffolding would also therefore be excluded. Judge Thornton clearly envisaged the situation where some sub-contractors would be able to seek an adjudication and rely on the statutory restrictions on a contractor's power to set-off, whereas the same contractor may not be able to seek adjudication under the relevant main contract nor require the employer to use the set-off procedures of the Act. While Section 105 of the Act was not clear, Judge Thornton concluded that by the application of the natural meaning of the words, Palmers was entitled by the provisions of the Act to call for a statutory adjudication of the dispute. Returning to a role of the adjudicator, can it be correct that he must do nothing until such issues are resolved by the court? Judge Thornton commented that it was clearly appropriate for the court to intervene, since only when it had declared that the relevant contract was a construction contract would an effective adjudication be possible. This was particularly so given that there is no statutory power available to an adjudicator, if appointed, to resolve disputes about his jurisdiction. But this is misleading. It seems clear that an adjudicator must take a practical approach to this type of problem. He owes a duty to the parties to investigate jurisdiction whenever it is raised. To refuse to act as adjudicator upon any challenge to jurisdiction, meritorious or otherwise, would emasculate the whole process. Similarly to blindly proceed to issue a decision upon the substantive dispute, where jurisdiction may be shown at the outset to be lacking, would be a disservice to both parties. Thus, whilst an adjudicator clearly cannot make a binding decision on the matter of his own jurisdiction, he should deal with the issue and either proceed or refuse to proceed upon his own findings. Whether the adjudicator elects to proceed or not, the final decision on matters of jurisdiction, whether by a separate application to the court or upon enforcement proceedings, will lie with the court.
CJ-9935
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