Challenging an adjudicator’s jurisdiction – a genuine challenge or resistance at the eleventh hour?

Ove Arup & Partners International Limited (Arup) v Coleman Bennett International Consultancy Plc (CBI) [2019] EWHC 413 (TCC)

On 29 January 2019 Mrs Justice O’Farrell in the Technology and Construction Court handed down a judgment regarding the extent to which a party can rely on challenging an adjudicator’s jurisdiction.

Facts

In early 2016 Arup was approached by CBI regarding the provision of engineering services relating to Hyperloop technology to link Manchester and Leeds as part of the Northern Powerhouse regime.

In April 2016 Arup provided CBI with its proposal including an outline scope of works and a quotation. The quotation was for £350,000 plus VAT or, alternatively, for £150,000 plus VAT on the basis that Arup would obtain a 20% stake in the joint venture.

It became clear in October 2016 that Arup would not be offered a 20% stake and so they requested payment from CBI under a payment plan. Arup had already received £75,000 but they did not receive further payment. Arup, having been told by CBI that they would not be paying its fees, commenced an adjudication seeking a balance of the sum due. Arup won the adjudication requiring CBI to pay the balance due along with interest and the adjudicator’s fees. Arup then commenced TCC proceedings for summary judgment after CBI failed to pay the sums in accordance with the adjudicator’s decision.

CBI resisted the application for summary judgment on the basis that the adjudicator did not have jurisdiction on 3 grounds, namely:

1. the contract between the parties was not a ‘construction contract’;
2. the referral concerned with more than one contract (being the April 2016 agreement and the 11 October 2016 payment arrangement); and
3. the disputed jurisdiction turned upon issues of fact that could not be properly determined in adjudication or decided in a court on a summary basis.

Judgment

Mrs Justice O’Farrell made reference to Bresco Electrical Services Limited (in liquidation) v Michael J. Lonsdale (Electrical) Limited and Primus Build Ltd [2019] EWCA Civ 27 where Coulson LJ stated “the purpose of the 1996 [Construction] Act would be substantially defeated if a responding party could, as a matter of course, reserve its position on jurisdiction in general terms… thereby avoiding any ruling by the adjudicator… and then, having lost the adjudication, was allowed to comb through the documents in the hope that a new jurisdictional point might turn up at the summary judgment stage”. Coulson LJ then set out four applicable principles for challenging an adjudicator’s jurisdiction as follows:

1. a responding party must challenge the jurisdiction “appropriately and clearly”. A failure to do so would be a waiving any jurisdictional objection;
2. a party should always look to reserve its position based on a specific objection or objections. A failure to do so would not allow an adjudicator to investigate the point;
3. an objector would be precluded from raising other jurisdictional grounds which might otherwise have been available if the adjudicator rejects the jurisdictional objections already raised; and
4. a general reservation of position on jurisdiction may be effective but it turns on the wording of the reservation. A general reservation will likely be ineffective if (a) at the time it was provided the objector knew or should have known of specific grounds but failed to articulate them; and/or (b) the court concludes that the general reservation was worded to ensure that all options were kept open.

Having applied the principles, Mrs Justice O’Farrell ruled that the jurisdictional challenges made by CBI failed because the basis for their challenges were not appropriate and clear. It was therefore unclear to the adjudicator what the detail of such challenges might be during the adjudication. This, in turn, meant that the adjudicator was unable to investigate the jurisdictional objections raised vis-à-vis the construction contract and multiple contract arguments. Also, having ruled on CBI’s jurisdictional objections, the adjudicator disposed of CBI’s right to raise subsequent objections at the summary judgment hearing. Lastly, CBI attempted to keep their options open when they set out a general reservation on issues that had CBI allegedly did not have the opportunity to investigate which was clearly against Coulson LJ’s ruling in Bresco.

Comment

This ruling provides useful guidance on the application of Bresco and the importance of setting out sufficient information to allow an adjudicator to understand the jurisdictional objections a party is relying on.

This case serves as a reminder for parties who wish to challenge the jurisdiction of an adjudicator. Parties wishing to do so should consider the facts before them and whether it would be sensible to either set out specific jurisdictional objections and potentially lose the right to raise further objections if the aforementioned ones are rejected; or if it would be best to set out a general reservation and risk it being rejected on the basis of the adjudicator/judge ruling that the party challenging the jurisdiction ought to have known the potential challenges and/or a ruling that the general reservation is merely a last ditch attempt to keep all options on the table.

A full transcript of the judgment can be found here.

For further information, please contact Philip Eyre or Ghilas Lounis.