In Sudlows Ltd v Global Switch Estates 1 Ltd [2023] EWCA Civ 813, the parties to a construction contract, fell into dispute and a number of adjudications took place between them. The issue that arose was whether the adjudicator in a later adjudication was bound by the findings of the adjudicator in an earlier adjudication. The Court of Appeal referred to the principle that an adjudicator cannot determine a dispute which has already been decided in an earlier adjudication, the test being whether the dispute in the second adjudication is the same or substantially the same as the dispute that was decided in the first, which is a matter of fact and degree. Here, the Court of Appeal found that the Adjudicator in Adjudication 6 was bound by the findings of the Adjudicator in Adjudication number 5.
The Court of Appeal referred to the principal purpose of construction adjudication (to improve cashflow in appropriate cases, by adopting the mantra of ‘pay now, argue later’) and said that here, Global clearly wished to argue about their contractual responsibility for the cabling and ductwork issues in question, and were quite entitled to do so, but must do so later, in court or arbitration. In the meantime, in accordance with the binding decision in Adjudication 5, and primary finding of the Adjudicator in Adjudication 6, they had to pay now.
Background
Global engaged Sudlows, under a JCT Design and Build Contract to carry out fit-out works, including cabling and ductwork. The provision of the ductwork was the contractual responsibility of Global, whilst the procurement and installation of the cables through the ductwork was Sudlow’s responsibility. The ductwork should have been completed by February 2018 but was not completed until 28 May 2019. When Sudlows installed the HV-B cable on 21 June 2019, one of the cables was damaged. Sudlows claimed that this was due to defective ductwork. Global said it was due to the cable and/or installation being inadequate.
Subsequently, a different contractor pulled another set of cables through the ductwork. Global claimed that Sudlows then refused to connect and energise those new cables or facilitate others to do so, resulting in ongoing delay in the completion of the cabling work and thus the enablement of the power to be supplied to the site.
Adjudication 5
Adjudication 5 concerned Sudlows’ disputed claim for an extension of time (EOT) of 509 days for delays caused by Global’s defective ductwork. There was no dispute that the delay was caused by anything other than the cabling and ductwork issues and there were no other competing “Relevant Events”. The only issue was which party was contractually responsible for the cabling and ductwork issues.
The Adjudicator, Mr Curtis, concluded, on balance, that Sudlow’s cable-pulling methodology was adequate for the cable route based on the information provided to them by Global and that on the evidence, Sudlows had proved their allegation that the duct network was defective and not fit for purpose and that, accordingly, Global were culpable for the resulting delays. Mr Curtis also concluded that Sudlows were correct and entitled to refuse to connect and energise the HV supply provided by Global and that Global were culpable for any delays that flowed from that issue.
Mr Curtis found that the delay flowing from the cabling and ductwork issues was all that mattered for the purposes of the EOT claim and awarded Sudlows a total EOT of 482 days. Sudlows was found responsible for the shortfall of about 5 weeks. Beyond that, Global were, in accordance with Mr Curtis’ decision, responsible for the entirety of the remainder of the delay, because they were contractually responsible for the cabling and ductwork issues.
Adjudication 6
Following their loss of Adjudication 5, and in order to progress matters, Global omitted the testing and energisation of the new cables from Sudlows’ scope of work and the contract administrator certified Practical Completion as achieved on 7 June 2021. Subsequently, the new cables were successfully tested and energised by others. Sudlows sought a further EOT from 19 January 2021 to the date of Practical Completion (an additional133 days), which Sudlows described as the continuation of the delay assessed in Adjudication 5, flowing from the cabling and ductwork issues. This further claim for an EOT was refused by Global and so Sudlows commenced Adjudication 6, relying on the same Relevant Event as that relied on in Adjudication 5, and upon Mr Curtis’ finding that the defective ductwork had damaged the cables and caused the delay.
The Adjudicator in Adjudication 6 (Mr Molloy) decided that he was bound by Mr Curtis’ findings and reasoning in Adjudication 5 and that therefore Sudlows were entitled to £996,898 by way of loss and expense. Mr Molloy’s alternative finding, if he was wrong about being bound by Mr Curtis’ findings and reasoning, was that, on the evidence before him, he would have concluded that the more probable cause of the failure of the cable installation was either the selection of the cable itself or cable installation method (which would have been Sudlow’s responsibility) and not the duct installation or configuration. On that basis, he would not have granted the 133 days extension of time and would have allowed Global’s claims for liquidated damages for that period, giving rise to his alternative calculation of £209,053.01 in Global’s favour.
Sudlows applied to court to enforce the award made in its favour in Adjudication 6, for £996,898. Global sought a declaration from the court that the Adjudicator in Adjudication 6 had acted in breach of nature justice, in taking too narrow a view of his own jurisdiction and in finding that he was bound by the decision in Adjudication 5.
The judge concluded that the two disputes were not the same or substantially the same and that Adjudicator 6 (Mr Molley) was not bound by the earlier decision of Adjudicator 5 (Mr Curtis) in relation to the availability of an EOT for the earlier period. He found that Global was entitled to the enforcement of Mr Molloy’s alternative conclusion in its favour.
The Law
In the UK, provisions in the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) and Scheme for Construction Contracts have been taken together as providing that a second adjudicator cannot decide a dispute which is the same or substantially the same as a dispute that has already been decided in an earlier adjudication.
Relevant Legal Principles
The Court of Appeal referred to three over-arching principles to be applied by an adjudicator, or the court enforcing an adjudication decision, when deciding the effect of an earlier adjudication decision on a later one, namely:
- If the parties to a construction contract do engage in serial adjudication, and then inevitably get drawn into debates about whether a particular dispute has already been decided, the need for speed and the importance of at least temporary finality, mean that the adjudicator (and, if necessary, the court on enforcement) should be encouraged to give a robust and common sense answer to the issue. It should not be a complex question of interpretation of documents and citation of authority.
- There is a need to look at what the first adjudicator actually decided to see if the second adjudicator has impinged on the earlier decision. Although it can be relevant to consider the adjudication notice, referral notice etc, what matters is what it was, in reality, the adjudicator decided. It is that which cannot be re-adjudicated. The form and content of the documentation with which the adjudicator was provided is of lesser relevance and can be misleading.
- The need for flexibility. The purpose of the test of fact and degree is to prevent a party from re-adjudicating a claim (or defence) on which they have unequivocally lost, but to ensure that what is essentially a new claim or a new defence is not shut out. Common sense and fairness have to be applied.
Whilst accepting that it was not an invariable guide, the Court of Appeal said that one way of at least testing whether the correct approach has been adopted is to consider whether, if the second adjudication is allowed to continue, it would or might lead to a result which is fundamentally incompatible with the result in the first adjudication. If in that second adjudication, one or other of the parties is asking the adjudicator to do something that is diametrically opposed to that which the first adjudicator decided, then that may be an indication that what they are seeking to do is impermissible.
Court of Appeal decision
The Court of Appeal held that:
- The court should be slow to interfere with Mr Molley’s decision, unless it was clearly wrong. Anything less runs the risk of undermining the adjudication process, by encouraging repeated challenges to the adjudicator’s decision. Mr Molloy was not clearly wrong to say that he was bound by the earlier decision in Adjudication 5. As a matter of fact and degree, he was right to reach that conclusion.
- Mr Molloy properly explained how and why the parties were bound by Mr Curtis’ decision. He looked at what Mr Curtis had actually decided, including the essential finding as to Global’s contractual responsibility for the cabling and ductwork issues. As that was the same issue that had been referred to him, he concluded that this was sufficient to bind him in respect of the further extension period claimed in Adjudication 6. That was the result of the application of the right test, as articulated in the authorities i.e. whether the dispute in the second adjudication is the same or substantially the same as the dispute that was decided in the first.
- The fact that the decision in Adjudication 5 related to a different period of time was, on the particular facts of this case, of little weight.
- The dispute in Adjudication 5 was the same or substantially the same as that in Adjudication 6. In Adjudication 5, the only significant dispute was which of the parties was contractually responsible for the cabling and ductwork issues. That self-same issue was also at the heart of Adjudication 6.
- That made this a very unusual delay case. It is almost always the case that, in disputes of this kind, the arguments about delay range across different competing Relevant Events, the different alleged effects of those different Relevant Events, and consequences of different critical path analyses. However, here, in both adjudications, it was agreed that the cabling and ductwork issues were the only cause of the relevant delay and the period of delay was also agreed. The only substantive dispute was which party was contractually responsible for those issues, and therefore that delay. Mr Curtis decided that it was Global who were responsible and came to that conclusion on the basis of a huge volume of both factual and expert evidence.
- Mr Curtis’ clear view as to Global’s contractual responsibility for the cabling and ductwork issues was binding on the parties and on any subsequent adjudicator. Any other result – that contractual responsibility lay with Sudlows, not Global – would be fundamentally inconsistent with the binding decision of Mr Curtis. If Global wanted to challenge his decision, they had every right to do so, but the challenge had to go to court or arbitration and not by way of another adjudication.
- The substantive dispute between the parties in the present case was and remained the contractual responsibility for the cabling and ductwork issues. That did not change between Adjudication 5 and Adjudication 6. That issue was decided by Mr Curtis and could not be re-adjudicated.
- As regards the fact that a different EOT was sought in Adjudication 6, in most cases, a claim for an EOT for period X will self-evidently be a different claim to a claim for an extension for period Y, in respect of which a second adjudicator will not be bound by a decision on the earlier claim. However, this case was different, and made such a distinction artificial. Here, although the period of the EOT claimed in Adjudication 6 was obviously different to that claimed in Adjudication 5, nothing else had changed and there were still no other competing Relevant Events. Importantly, during this second period, no further work was undertaken by Sudlows, just as no work had been done for much of the period that was the subject of Adjudication 5. During the period covered by the claim in Adjudication 6, Sudlows remained doing nothing, waiting for the relevant instructions from Global. There was no “new narrative” at all. Indeed, the only event of any relevance which occurred during this period was Adjudication 5 itself.
- Sudlows were quite right to say that the delay claim in Adjudication 6 was the logical extension of the decision in Adjudication 5. It was the remainder of the delay which had been triggered by the cabling and ductwork issues which Mr Curtis had decided were Global’s contractual responsibility. “A logical extension” of a successful first claim will rarely be an accurate description of a second claimed extension of time for a different period, because of the almost inevitable factual differences between the two claims. That is what the authorities show. But here it was an accurate description of the claim in Adjudication 6
- It was only because of Sudlows’ decision to commence Adjudication 5 that the deadlock was broken at all. The cessation of the second period at Practical Completion, which itself had only been certified as the result of the decision in Adjudication 5, logically brought down the curtain on the claim which Mr Curtis had first considered and decided. Therefore, on these unusual facts, there was nothing in the point that the two extensions of time claimed were different and had been the subject of two different claims by Sudlows.
Accordingly, the Court of Appeal concluded that Adjudicator 6 was bound by the decision in Adjudication 5. The appeal was therefore allowed and Adjudicator 5’s decision in favour of Sudlows for £996,898.24 reinstated.
Although the result in this case turned on its own unusual facts, it is a useful judgment, as it sets out how an adjudicator (or an enforcing court) determines whether a dispute in a later adjudication is the same or substantially the same as the dispute in an earlier adjudication and also makes it clear that primarily the policing of a debate concerning such overlap is to be left to the adjudicators themselves and the court will be slow to intervene, unless something has gone clearly wrong in the later adjudication decision, which was not the case here.
For further information, please contact:
Joseph Chung, Partner, Deacons
joseph.chung@deacons.com
