Wales And West Utilities Ltd v PPS Pipeline Systems GmbH

In adjudication, the scope of the dispute is determined principally by the notice of adjudication, construed against the crystallised dispute between the parties. A party may refer only part of that dispute, but a general description may encompass all grounds supporting the claim or defence. Later adjudication documents do not alter the scope unless there is agreement, waiver or estoppel.

An adjudicator’s decision remains temporarily binding even if its validity is challenged, unless the adjudicator was not appointed in accordance with the contractual or statutory requirements or purported to decide an entirely different dispute. A party that makes unqualified payment under a decision may elect to treat it as valid and lose the right to challenge it, although a properly reserved reference to arbitration may remain available.

The parties’ contract for the construction of a gas pipeline incorporated the NEC3 Engineering and Construction Contract and provided for adjudication. Disputes arose concerning additional rock encountered during the works and increased quantities of Rockguard pipe protection.

In Adjudication No 2, the adjudicator decided that there was no compensation event for physical conditions including rock, but that the increased Rockguard quantities entitled the contractor to a change to the Works Information. In Adjudication No 3, he assessed the resulting compensation at £479,817.17.

The employer brought Part 8 proceedings, contending that the Rockguard issue fell outside the dispute referred in Adjudication No 2 and that the later decision was consequently unenforceable. It also sought the appointment of an arbitrator.

1. Scope of Adjudication No 2. The dispute had crystallised through the parties’ October 2012 correspondence. The notice of adjudication did not cut down that dispute by excluding “consequential issues”. That exclusion concerned matters such as the quantity of rock, time and quantum, whereas the principle of entitlement to a compensation event, including the increased Rockguard quantities, remained within the reference.
2. The court adopted the approach in KNS Industrial Services (Birmingham) Ltd v Sindall Ltd [2000] EWHC 75 (TCC) and Fastrack Contractors Ltd v Morrison Construction Ltd [2000] BLR 168: the court must analyse the relevant exchanges and carefully characterise what was referred. A defending party may raise any factual or legal defence to the claim referred, but later referral documents cannot enlarge or restrict the dispute except by agreement, waiver or estoppel, as explained in Cantillon Ltd v Urvasco Ltd [2008] BLR 250 and Lidl UK GmbH v RG Carter Colchester Ltd [2012] EWHC 3138 (TCC).
3. The adjudicator therefore acted within jurisdiction in deciding the Rockguard issue. Even if that conclusion had been wrong, the decision in Adjudication No 2 would remain a decision for the purposes of the statutory and contractual scheme, following the reasoning in Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] EWHC 30 (TCC). It was temporarily binding on the adjudicator in Adjudication No 3 because it had not been challenged in court or arbitration. None of the recognised grounds of material breach of natural justice, excess or absence of jurisdiction, or fraud applied.
4. Wales had paid the adjudicator’s fees and the full sum awarded without reservation. Applying Shimizu Europe Ltd v Automajor Ltd [2002] EWHC 1571 (TCC) and PT Building Services Ltd v Rok Build Ltd [2008] 3434 (TCC), Wales had elected to treat Adjudication No 3 as valid and enforceable. Its properly available long-stop remedy in arbitration remained open, including a possible claim to recover the payment. The reference to arbitration itself would not necessarily have amounted to election because the notice contained a reservation.
5. Judgment was given for PPS on the Part 8 proceedings. By consent, the Chairman of TECBAR was to appoint the arbitrator. Wales was ordered to pay PPS £13,000 net costs.