Air Design (Kent) Ltd v Deerglen (Jersey) Ltd

An adjudicator may determine whether additional work formed part of the contract containing the adjudication clause, even where that issue overlaps with the merits. A mistaken conclusion about whether later arrangements were variations or separate contracts is ordinarily an error within the adjudicator’s jurisdiction, not a jurisdictional excess. A broadly worded adjudication clause should be construed commercially. A stay of execution requires special circumstances, such as demonstrated insolvency or probable inability to repay. A claimant’s weak financial position will not usually justify a stay where it is no worse than when the contract was made.

Air Design sought summary enforcement of an adjudicator’s decision awarding it £139,964, plus interest, for mechanical services work at Liberty Wharf Phase 3. Deerglen argued that the parties had entered into several contracts, including arrangements for CPA fit-out and building-management-system works, and that the adjudicator lacked jurisdiction over disputes arising from contracts without adjudication clauses. Deerglen also sought a stay of execution because Air Design appeared to have limited net assets. The issues were whether the adjudicator had jurisdiction and whether the financial evidence justified a stay.

1. Jurisdiction. Deerglen had expressly reserved its jurisdiction objections. The adjudicator had not purported to decide his own jurisdiction. His statement that he could investigate the challenge and report a non-binding view did not amount to an agreed decision on jurisdiction.
2. The Basebuild Contract incorporated an adjudication clause. The CPA and BMS arrangements were capable of being treated as variations of that contract. The BMS arrangement referred to the existing contract, while the CPA documentation referred back to the original base-build contract. The Supplementary Agreement treated the parties’ relationship as one main contract by referring to a single contract sum, a single variation list and unified maintenance and defects obligations.
3. More importantly, deciding whether there was one contract or several, and whether later work constituted variations, was part of the substantive decision-making process. Substance and jurisdiction may overlap. An adjudicator appointed under a contract may therefore decide whether later arrangements varied that contract, even if the conclusion reached is wrong in fact or law. Such an error does not ordinarily deprive the adjudicator of jurisdiction.
4. The adjudication clause covered a dispute or difference arising under the sub-contract. Applying the commercial approach in Fiona Trust [2007] UKHL 40, the disputes could properly be treated as arising under the Basebuild Contract and its variations.
5. Stay of execution. The principles summarised in Wimbledon Construction Co 2000 v Derek Vago [2005] BLR 374 applied. Adjudication decisions are intended to be enforced summarily. A stay may be justified by insolvency or probable inability to repay, but not usually where the claimant’s financial position is the same or similar to that when the contract was made, or results substantially from the defendant’s non-payment.
6. Air Design was not shown to be insolvent. Its limited net assets did not establish that its position was materially worse than at the time of contracting. The stay was therefore refused. Judgment was entered for Air Design for the sums claimed, with interest, and there was no stay of execution.