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ENGENDA GROUP LTD AGAINST PETROINEOS MANUFACTURING SCOTLAND LTD [2024] ScotCS CSOH_36 (26 March 2024)
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[2024] ScotCS CSOH_36
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OUTER HOUSE, COURT OF SESSION
[2024] CSOH 36
P192/23
OPINION OF LORD YOUNG
In the petition
ENGENDA GROUP LIMITED
Petitioner
against
PETROINEOS MANUFACTURING SCOTLAND LIMITED
Respondent
Petitioner: R Howie KC; Gilson Gray
Respondent: G Moynihan KC; BTO
26 March 2024
Issue
[1]
This is a petition for judicial review seeking reduction of a decision by
Brandon James Malone, FCI Arb, issued on 13 February 2023. The decision was issued in
the fourth adjudication (Adjudication 4) between the parties arising out of a contract relating
to the execution of works by the petitioner at the respondent's premises at Grangemouth.
[2]
The petitioner contends that the adjudicator's decision was arrived at in excess of the
jurisdiction accorded to him. The petitioner argues that the adjudicator was not entitled to
find that the respondent could plead a right to set off a claim for unliquidated damages in
Adjudication 4 to defeat the petitioner's right to payment of their final account since the
2
adjudicator had decided in a previous adjudication (Adjudication 3) that the respondent's
claim for unliquidated damages had not been proved. The essential issues for this court to
determine are what the adjudicator actually decided in Adjudication 3 and whether that was
the same or similar dispute which he was being asked to determine in Adjudication 4.
Chronology of the adjudications
[3]
In November 2021, the parties entered into a contract of a turnaround nature relating
to certain works upon the respondent's plant at Grangemouth. The contract was entered
into on a standard form of engineering contract (NEC 3) as amended by various annexes
agreed between the parties. The contract was entered into on "Option C" which featured a
target price and an activity schedule for the contract works. The contract also provided for
Option W2 which detailed the right to adjudicate any dispute. In due course, disputes did
arise between the parties and a series of adjudications took place. The first and second
adjudications were completed in 2022 and it is not necessary to say any more about the
detail of those disputes.
[4]
Adjudication 3 commenced at the instigation of the respondent on 22 August 2022.
In terms of its notice of intention to refer to adjudication, the respondent sought a series of
declarators and an order for payment of £1,134,547.15 as damages for various breaches of
contract on the part of the petitioner. Mr Malone accepted appointment as adjudicator in
Adjudication 3 and he issued his decision on 29 November 2022 which was then finalised on
2 December 2022. In that decision, he found that the respondent was entitled to various
declarators that the petitioner had been in breach of contract but he declined to order
payment of damages. In the light of that decision, the petitioner submitted a demand for
payment of £1,134,547.15 which sum had been withheld by the respondent. On 9 December
3
2022, the respondent responded to that demand by serving a pay less notice on the
petitioner in respect of this amount. As a consequence, the petitioner served a notice of
intention to refer to adjudication the dispute which had arisen in relation to the petitioner's
entitlement to the sum of £1,134,547.15 which the respondent continued to withhold.
Mr Malone accepted appointment for Adjudication 4. In his decision in Adjudication 4, the
adjudicator found that the respondent was entitled to prove, and had proved, that it had
suffered damages in excess of the disputed sum as a consequence of the petitioner's failure
to complete the works by the completion date. Accordingly, he made no order for payment
in favour of the petitioner.
Relevant parts of the referrals and decisions
[5]
In its referral for Adjudication 3, the respondent sought inter alia the following
decisions and/or declarations:
"5.1
d)
Engenda was in breach of the Contract as a result of its failure to complete its
works under the Contract by the contractually agreed completion date of
17 November 2021; and/or
e)
Engenda was in breach of the Contract by causing 12 days culpable critical
delay (or such other period of culpable critical delay as the Adjudicator
considers appropriate) to the `Feed In' date; and/or
f)
Petroineos is entitled to payment (whether by way of set-off or paid as a debt)
from Engenda of the sum of £1,134,547.15, or such other sum as the
Adjudicator may determine; and/or
g)
Engenda shall pay (whether by way of set-off or paid as a debt) the sum
of £1,134,547.15, or such other sum as the Adjudicator may determine, to
Petroineos forthwith;"
[6]
In his decision in Adjudication 3, the adjudicator held at paragraph 9.126 that under
the NEC contract, there was a distinction between a failure to meet a key date under the
4
contract, a failure to meet a sectional completion date, and a failure to meet a final
completion date. For failure to meet key dates, he concluded that the respondent's remedy
in terms of clause 25.3 was restricted to the additional costs occasioned thereby. As the
respondent had not set out what additional costs had been incurred and had not framed its
claim on that basis, there was no relevant claim before the adjudicator for loss arising from a
failure to comply with key dates. However, at paragraphs 9.135 and 9.140 of the decision, he
accepted the respondent's argument that the contract did not exclude its right to claim
unliquidated damages where there was a failure to complete by the completion date.
[7]
Under a section entitled "Is there a relevant claim for damages?" the adjudicator set
out his reasoning for the findings which he ultimately made in relation to the respondent's
claim. For the purposes of the current proceedings, the relevant paragraphs from his
decision are as follows:
"9.141. Petroineos do not have a liquidated and ascertained damages provision in the
contract. The question of damages is at large, and Petroineos are obliged to prove
their loss.
9.145. Accordingly, in my view, Petroineos are entitled to claim for unliquidated
damages to the extent that they are able to establish that Engenda's late completion
(failure to complete by the completion date) has caused them loss.
9.148. Petroineos' claim is therefore limited to unliquidated damages for failure to
complete the works by the Completion Date.
9.149. Mr Sung's report does not approach the question of delay from the point of
view (sic) late completion of the works (i.e. failure to complete the works by the
Completion Date). Presumably because he has not been instructed to do that. In the
Joint Expert Statement, Mr Sung notes that he has not carried out an analysis on the
Engenda Completion Date.
9.150. At the hearing, I asked the experts to provide me with a view on the delay
occasioned to the completion date (in addition to the delays the feed in date) by each
of the delay events, but ultimately, given my decision on the effect of Clause 25.2, it
is only the delay to the completion date that could possibly give rise to the type of
damages that Petroineos is seeking, since they have not sought the increased costs
that clause 25.2 contemplates.
5
9.156. That leaves a failure to complete by the Completion date, which has always
been part of Petroineos' case. However, as noted above, this does not in my view
give a right to claim any damages on the basis of a lack of regular progress, but
merely for late completion. In that context, Engenda's criticisms of the Petroineos
case for claiming 12 days critical delay in respect of a 5 day delay to completion
makes sense. However, regard must be had to the omission of works from the scope.
9.157. The position is that Petroineos has not instructed, and does not therefore had
(sic) an expert report which demonstrates the effect of Engenda completing its works
late on the Feed In Date
9.159. I have accepted the position on the windows analysis, but in the absence of an
expert report demonstrating that the late completion of Engenda's work (as opposed
to any failure to meet key dates or to make regular progress) I cannot see that there is
any contractual basis for me to make a finding of unliquidated damages for late
completion.
9.160. To base analysis on the windows analysis would be to award damages for a
failure to meet key dates, which is restricted by clause 25.3 as noted above. To
establish a case for unliquidated damages, Petroineos would need to demonstrate
that a failure to complete by the completion date (as opposed to any intermediate
key date) (whatever that completion date ought to have been having regard to the
reduced scope) has caused a delay to the feed in date. Whilst it may be common
sense that a delay to the completion date of the Engenda works would indeed cause
delay to the Feed In Date, there is nothing before (sic) upon which I am able to base a
decision.
9.161. It follows that Petroineos have not established their case since it has not been
brought on the correct basis.
9.162. In summary then, I have reached the conclusion that whilst Engenda have
met a number of key dates in the programme, and whilst these delays may have
caused delay to the feed in date, and therefore loss of revenue to Petroineos,
Engenda's liability for the failure to meet key dates is restricted by clause 25.3, and
no claim has been made out under that clause. Engenda is liable for failure to meet
the completion date in terms of clause 30.1, but in the context of this contract, where
failure to make progress is regulated by clause 25.3, the cause of action arises from
failure to complete the works by the completion date, and Petroineos have neither
framed their case on that basis, nor provided an expert report demonstrating the
consequences of that failure. Accordingly, whilst they are in my view entitled to
recover a loss of revenue in principle, they have not proved any entitlement to such
an award, and accordingly, their case fails.
9.164. As regards the redress sought by Petroineos I do find that Engenda was in
breach of the Contract as a result of its failure to Provide the Works in accordance
with the whole terms and conditions of the Contract; and as a result of its failure to
6
complete the works in accordance with the Contract; and as a result of its failure to
Provide the Works in accordance with the Works Information (that included carrying
out its works in accordance with the Petroineos Manufacturing Scotland Limited
2021 CREF TAR Level 3 Plan); and was in breach of the Contract as a result of its
failure to complete its works under the Contract by the contractually agreed
completion date of 17 November 2021. However, I am not able to find that Engenda
was in breach of the Contract by causing 12 days culpable critical delay (or any other
period) to the `Feed In' date since that has not been established, and I am not able to
find that Petroineos is entitled to payment (whether by way of set-off or paid as a
debt) from Engenda of the sum of £1,134,547.15, or any other sum. Accordingly, I
will not order Engenda to pay (whether by way of set-off or paid as a debt) the sum
of £1,134,547.15, or any other sum."
[8]
It was a matter of agreement at the substantive hearing that the word "not" appeared
to have been omitted in error at the end of the first line of paragraph 9.162 between the
words "have" and "met". It was also suggested by the petitioner that the word
"contractual" in line 4 of paragraph 9.159 was likely an error and that the word "evidential"
made more sense in the context of the discussion at that paragraph and the subsequent
paragraph.
[9]
As a consequence of his reasoning, the adjudicator's formal decision in
Adjudication 3 contained the following findings:
"11.2.4. Engenda was in breach of the Contract as a result of its failure to complete its
works under the Contract by the contractually agreed completion date of
17 November 2021.
11.3.
Without prejudice to the parties joint and several liability for the
adjudicator's fees and expenses, I find the parties equally liable for my fees and
expenses amounting to £56,235 including VAT. Payment is due on receipt of invoice.
11.4.
I dismiss all other reliefs sought"
[10]
In Adjudication 4, the adjudicator acknowledged at paragraph 9.3 that he was bound
by his decision in Adjudication 3. However, he concluded that the respondent's position in
Adjudication 4 was sufficiently different to that advanced in Adjudication 3. After referring
to paragraphs 9.162 and 9.164 from his previous decision, he stated:
7
"9.47. The position of Engenda is that I have no jurisdiction to consider, in this
adjudication, the new evidence advanced by Petroineos in support of their position
that they are entitled to set off sums due them in respect of unliquidated damages
because I have already decided that their claim for unliquidated damages has
`failed'.
9.48.
Engenda seems to set a great deal of store in my use of the phrase `their case
fails' and I understand why they wish to do so. However, as I think I make clear in
the decision, I have not considered a case by Petroineos that they are entitled to
unliquidated damages because of a failure on the part of Engenda to complete the
contract by the completion date, because, as I set out in my decision, Petroineos did
not frame their case on that basis, and did not provide an expert report
demonstrating the consequences of that particular contractual failure.
9.49.
I am content that the defence in the present adjudication is being advanced on
a different basis to that in the previous adjudication. The previous adjudication
concerned a claim by Petroineos that Engenda had failed to progress works in
accordance with key dates, and that Engenda had failed to make regular progress of
the works. I found that this was not the correct basis of claim. The defence in this
adjudication is that Petroineos has a claim for unliquidated damages on the basis of
Engenda's failure to complete the works by the completion date. It is supported by a
new report by Mr Sung analysing the delay on that basis. Thus, the claim has a
different contractual underpinning and is supported by new evidence. The question
is whether or not Petroineos' position is sufficiently different to that in respect of
which there has already been an adjudication decision.
9.62.
I have come to the view that the defence advanced by Petroineos in this
adjudication, namely that they are entitled to set off losses incurred as a result of
Engenda's failure to complete the works by the completion date against Engenda's
claim, is a matter which has not previously been determined in an adjudication
decision, and is a defence `available' to Petroineos.
9.63.
Petroineos are advancing a different legal argument, as I have noted above,
and have supported that argument, with a new expert report. Having regard to the
relevant authorities noted above, it would in my view be wrong to exclude
consideration of this argument and report.
9.64.
It is in my view Waksman J's sixth principle, rather than his seventh, which
applies here."
[11]
The relevant authorities which he was referring to in paragraph 9.63 included
8
able to consider the respondent's claim for damages, he concluded on the evidence that the
respondent had proved damages for late completion in excess of £1,134,547 with the
consequence that the petitioner's claim for payment was defeated. He made no order
beyond one relating to the payment of his own fees.
The legal principles
[12]
There was no significant disagreement between the parties as to the legal principles
in play when dealing with successive adjudications. Parties are bound by the decision of an
adjudicator until the dispute is finally determined by legal proceedings, arbitration or
agreement, (Housing Grants, Construction and Regeneration Act 1996, section 108(3)). An
adjudicator is bound by previous decisions in adjudications between the same parties and
has no jurisdiction to determine a dispute which has been the subject of a prior decision.
The parties' disagreement related to the application of the principles derived from the
authorities to the facts of the present case.
[13]
The approach to determining whether the same or a similar dispute has been
determined in an earlier adjudication between the parties has been synthesised in a series of
Akenhead J at para [56] and Brown v Complete Building Solutions Ltd 2016 EWCA Civ 1 per
Simon LJ at para [20]). The most recent iteration is set out in Lewisham Homes Ltd v Breyer
Group plc, by Waksman J at paragraph 34, which the Court of Appeal in Sudlows Limited v
Waksman J set out the following ten principles,
"34.
I echo the need to avoid misleading paraphrase and tendentious
interpretation. Synthesizing that case law into a set of principles that builds on those
9
set out by Coulson J (as he then was) in Benfield, I would, for my part, express them
as follows.
(1)
The parties are bound by the decision of the adjudicator on a dispute
or difference until it is finally determined by the court, or an arbitration or
agreement.
(2)
Parties cannot seek a further decision by the adjudicator on a dispute
or difference if that dispute or difference has already been the subject of a
decision by an adjudicator.
(3)
The extent to which a decision or dispute is binding will depend upon
the analysis and the terms, scope and extent of the dispute or difference
referred to the adjudication and the term, scope and extent of the decision
made by the adjudicator. In order to do this the approach has to be to ask
whether or not the dispute or difference is the same or substantially the same
as the relevant dispute or difference and whether the adjudicator has decided
the dispute or difference which is the same or fundamentally the same as the
relevant dispute or difference now before him.
(4)
The emphasis on what the adjudication actually decided, however the
issue referred was described or formulated, is important. This is because
ultimately it is what the first adjudicator decided which determines how
much or how little remains for consideration by the second adjudicator.
(5)
The fact that the bar to a further adjudication is engaged not only
where the dispute in question is the same, but also where it is substantially
the same is again important. It is because disputes or differences encompass
a wide range of factual and legal issues. If there had to be complete identity
of factual and legal issues, then the ability to re-adjudicate what was in
substance the same dispute or difference would deprive para. 9.2 of the
scheme of its intended purpose.
(6)
Whether the dispute is substantially the same as another is a question
of fact and degree. It seems to me that the inquiry is likely to focus on the key
elements of the dispute before and the decision of the first adjudicator, even if
the underlying subject matter is the same. For example, an application for an
extension of time based on a particular relevant event. The particulars of its
expected effects and/or the evidence used to prove them may lead to the
conclusion that overall the dispute second time round is not the same as the
first. Another example of that can be seen in Hitachi itself where the issue
concerned whether the adjudicator in a second adjudication had decided
about the variation which had to be valued, which in fact he did not value,
and whether that was substantially the same. In that particular case, the first
adjudicator had decided there was a variation that required a valuation, but
for want of evidence decided that no sum was payable for the purpose of one
particular payment application. He went on to find that the valuation for any
10
other purpose in the context of the claim had not been decided, and therefore
the jurisdiction point did not run. That is a good illustration of how the
exercise of comparison is one of fact and degree.
(7)
On the other hand the mere fact of some differences between the way
the case is put on each side is not necessarily sufficient. It is especially so if in
truth the second adjudication is no more than an attempt at an improved
version of the first. Of relevant here, but not determinative, will be whether
the point now taken could have been taken before. It seems to me overall that
the exercise of comparison in addition should be conducted in a realistic and
common-sense fashion.
(8)
Since the jurisdictional point will usually be taken before the
adjudicator in the second adjudication, their decision to reject it should be
given significant weight, although of course that decision does not bind the
parties or the court. The reason for according that respect, as it is put in some
of the cases, is simply that the second adjudicator is the decision-maker and is
being asked to say what that particular decision entails or does not entail and
is therefore particularly well placed to undertake that analysis. All the more
so if, as here, the identity of the second adjudicator is the same as the first.
(9)
I would add that where a particular contract provision governs the
point as opposed to para. 9.2 of the scheme, the court will need to consider
whether the particular language of that provision affects the exercise to be
undertaken.
(10)
Since the underlying bar is expressly provided for in para .9.2 of the
scheme or in a related contractual provision, the juristic basis for it is of
secondary importance, but it can be seen as a straightforward absence of
jurisdiction or a process which is unfair to whichever party had the benefit of
the prior decision."
[14]
In Sudlows Limited v Global Switch Estates 1 Limited, at paragraphs [55]-[58],
Coulson LJ identified three over-arching principles which underpinned the approach in
these cases. First of all, the purpose of construction adjudication is to deal with disputes in a
robust and speedy manner which gives rise to at least temporary finality. Serial
adjudications will often challenge that basic aim. In the second place, the focus should be to
look at what was decided "in reality" in the earlier adjudication to see if the later
adjudication would be impinged by that previous decision. In the third place, the fact and
degree test for assessing whether the earlier decision is the same or similar to the later
11
dispute provides a degree of flexibility which should not bar new or wider claims, but can
be used to prevent re-adjudication of the same or similar claims.
Decision
[15]
In the passages from his decision in Adjudication 4 set out in paragraph [10] above,
the adjudicator concluded that he had not previously determined the entitlement of the
respondent to unliquidated damages for a failure to complete the works by the completion
date. As set out in the eighth principle of Lewisham Homes Ltd v Breyer Group plc, that view is
to be accorded weight although it cannot bind parties or this court. The respondent urged
me to accept the adjudicator's own view of his jurisdiction as a tenable one which should
only be discounted if plainly wrong thereby echoing the words of Coulson LJ in Sudlows
Limited v Global Switch Estates 1 Limited (at para [65]) that the court should only interfere if
the adjudicator's view was "clearly wrong".
[16]
In my view, the adjudicator's reasons in Adjudication 4 do not stand up to scrutiny
and I am satisfied that he was "clearly wrong" in his comparison of the issues for decision in
the two adjudications. His statement that the respondent did not frame their case on the
basis that they were entitled to unliquidated damages due to the petitioner's failure to
complete by the completion date (see para 9.48 of Adjudication 4 decision) is contradicted by
numerous references in his decision in Adjudication 3. For example, at paragraphs 5.1.4,
5.4.1 and 5.5 of his decision in Adjudication 3, he summarises the dispute before him as
including the respondent's claim for unliquidated damages for breach of contract caused,
inter alia, by a failure to complete by the completion date. In the analysis section and after
dealing with other aspects of the respondent's claim for damages, he states at
paragraph 9.156 "That leaves a failure to complete by the Completion date, which has
12
always been part of Petroineos's case". He then proceeds in paragraphs 9.158-9.162 to
consider whether there is expert evidence to prove the extent of damage caused by the
petitioner's failure to complete by the completion date and concludes that, as their expert
had not analysed loss on the appropriate basis for that particular breach of contract, the
respondent had not proved an entitlement to an award. He gives effect to his reasoning by
way of his formal finding at paragraph 11.2.4 that
"Engenda was in breach of the contract as a result of its failure to complete its works
under the Contract by the contractually agreed completion date of 17 November
2021"
but without making any formal finding on damages. I find it impossible to agree with the
adjudicator that the respondent did not frame its case in Adjudication 3 based, at least in
part, on a failure to complete by the completion date. In a decision where the adjudicator
sets out the framing of such a case in his decision; discusses the evidence (and lack of
evidence) relative to that case; and makes a finding of liability based on that case, the only
logical conclusion is that the respondent did advance a case on that basis which was then
determined by the adjudicator when he upheld the liability finding but rejected the claim for
damages.
[17]
The adjudicator states at paragraph 9.49 of his decision in Adjudication 4 that the
respondent's claim in that adjudication being "for unliquidated damages on the basis of
Engenda's failure to complete the works by the completion date" thereby "has a different
contractual underpinning" to that in the previous adjudication. This is simply not borne out
by an analysis of either the respondent's own referral for Adjudication 3 or the adjudicator's
decision in Adjudication 3. I set out at paragraph [5] of this Opinion the terms of the referral
which makes clear that one of the contractual claims underpinning the respondent's request
for damages was for failure to complete by the contractual date. There would be no reason
13
for the adjudicator in his decision in Adjudication 3 to discuss the failure to complete by the
completion date or make a finding in relation to that if it was not part of the respondent's
case before him.
[18]
The petitioner made a submission that it was a well-established principle in Scots
law that an adjudicator required to exhaust the matters referred to him for decision. An
adjudicator had to determine each issue referred to him. Thus, it was argued, where it was
clear that the respondent had referred the issue of damages for breach of contract on account
of a failure to complete, there was a "presumption of regularity" that the adjudicator dealt
with that in his decision leaving no scope for a gap between what was referred and what
was decided. This, it was argued, created a presumption when construing the decision in
Adjudication 3 that it had included a decision in relation to this particular claim for damages
for breach of contract. I do not consider that there is any assistance to be gained from
resorting to such a presumption in this case. For the reasons set out in paragraphs [16]-[17]
above, I had no difficulty finding on an objective assessment of the decision itself that
Adjudication 3 did purport to deal with the respondent's claim for damages due to a failure
to complete by the completion date.
[19]
The adjudicator refers at paragraphs 9.48, 9.49 and 9.63 of his decision in
Adjudication 4 to the lack of expert evidence in the earlier adjudication to establish damages
on the appropriate basis, and the new expert evidence which was before him in the later
adjudication. He also expressed his view at paragraph 9.64 that the sixth principle outlined
by Waksman J in Lewisham Homes Ltd v Breyer Group plc, rather than the seventh principle,
was applicable in this case. The sixth principle emphasises that it is a question of fact and
degree as to whether the matter in dispute has been the subject of an earlier decision. In
expanding upon that point, Waksman J discussed the decision in Hitachi Zosen Innova AG v
14
John Sisk & Son Ltd. It may be that in aligning the present case to the sixth principle, the
adjudicator was viewing the approach in Hitachi as comparable to the present case and I
shall come to deal with Hitachi shortly. The seventh principle which the adjudicator
indicates is of lesser or no importance in the present case is that the later adjudication should
not be "no more than an attempt at an improved version" of the earlier one. In considering
whether that is the case, it is relevant to consider whether the point being taken in the later
adjudication could have been taken before in the earlier adjudication.
[20]
From the earliest authorities, the English courts have been alert to the risk of an
unsuccessful party seeking to make good a shortcoming in an earlier adjudication by re-
raising the matter in a subsequent adjudication with the benefit of improved evidence,
(Quietfield Ltd v Vascroft Construction Limited per Dyson LJ at paragraph [48]). The fact that
different or additional evidence is deployed in the later claim will not normally alter what
the earlier decision was about and whether the later adjudication gives rise to the same or a
similar dispute, (Carillion Construction Ltd v Smith at para [56(b)]. The Court of Appeal has
recently in a decision which post-dates the decision in Adjudication 4 - underscored that
the existence of further more detailed evidence is not a factor of any real significance in
support of the notion that the new dispute differs from the previous decision, (Sudlows
Limited v Global Switch Estates 1 Limited, per Coulson LJ at paras [68] & [87]). Insofar as the
adjudicator at paragraph 9.49 and 9.62 of his decision viewed the existence of a new expert
report as a factor in support of the proposition that a different issue was before him in
adjudication 4, I consider that he was in error. New evidence does not, in itself, say
anything about whether the subsequent dispute is different from the previous decision
taken.
15
[21]
In the course of the substantive hearing, the petitioner sought to distinguish the
decision in Hitachi Zosen Inova AG v John Sisk & Son Ltd while the respondent placed some
emphasis on the similarity between its position and that of the sub-contractor in Hitachi. It is
important to analyse what was actually decided in that case.
[22]
In that case, Hitachi were the principal contractors for the design and construction of
a multi-fuel power plant. Sisk provided design and construction services by way of a sub-
contract which included the right of either party to refer disputes to adjudication.
Additional works instructed by Hitachi were called "Events" under the contract. Sisk
sought payment under payment application no. 6 of which approximately £1m related to
what was categorised as Event 1176. Hitachi refused to make payment for various items of
work including Event 1176 and claimed that Sisk had been overpaid. Sisk referred the
dispute to adjudication. This was the second adjudication between the parties. The
adjudicator found that Event 1176 was a variation instructed by Hitachi which required to
be valued but went on to say "I do not have sufficient details to value the works and hence
for the purposes of Payment Notice 6 my value is £nil" (see Hitachi per Stuart-Smith J at
para 8(v)). The adjudicator also stated
"I have been unable to conclude a valuation for the purposes of Interim
Application/Payment Notice 6. This is not to say that no value is due on a
subsequent application, but rather, that none could be ascertained as due for this
Application 6/Payment Notice 6".
The following year, Sisk made a further attempt to recover monies for Event 1176 within a
further application for payment. Once again, Hitachi refused to make payment for
Event 1176 and Sisk instigated an eighth adjudication between the parties. The same
adjudicator was appointed for the eighth adjudication as had dealt with the second
adjudication. Despite Hitachi's argument that Adjudication 2 had decided the value to be
16
placed on Event 1176 as nil, the adjudicator decided that he did have jurisdiction to
determine a valuation for Event 1176 and, after hearing valuation evidence, awarded
Sisk £825,703 of the monies it had sought. Hitachi challenged the adjudicator's jurisdiction
to make this decision in the eighth adjudication but this was rejected by Stuart-Smith J.
[23]
The position in Hitachi has some similarities to the present position in that the earlier
adjudication did not result in an entitlement to payment as the adjudicator was not satisfied
that adequate evidence had been led to prove the sum due. However, I consider that the
petitioner was correct to focus on the critical part of the reasoning of both the adjudicator
(see Hitachi, at para [8]) and Stuart-Smith J (see Hitachi at paras [35]-[39]). In his decision in
the earlier adjudication, the adjudicator stressed that he was not purporting to value the
Event other than for the purpose of payment application no 6. He expressly held open the
possibility that a value could be ascribed to the variation on a subsequent application for
payment. When the same adjudicator required to assess his own jurisdiction in the eight
Adjudication 8 he stated,
"249. My decision was that the Event 1176 Works constituted a Variation that
require a valuation, that is, I decided the liability issue as between the parties.
250.
I cannot and do not reconsider that decision here, but I accept that in reaching
a decision as to the valuation of the Event 1176 Works, such decision having not been
made in the Second Adjudication, I do need to consider whether the requirements of
the Contract have been met as regards that valuation."
[24]
Stuart Smith J concluded that when the whole of the earlier decision was considered,
it became clear that the adjudicator's decision was restricted in its scope. Given the want of
substantiating detail, the adjudicator had expressly limited the approach taken by making
clear that he was not purporting to decide if there was any value for Event 1176 and he was
leaving that issue to be decided at a later date on a subsequent application. Properly
understood, his value of "£nil" was not a valuation of the variation at all. He was not
17
expressing any view about the appropriate valuation for that Event, nor was he deciding
whether Sisk should be reimbursed in due course on later applications for payment. Stuart-
Smith J concluded that the decision in the second adjudication had not decided the valuation
of Event 1176 so it was open for the valuation to be determined in the eighth adjudication.
This is a subtle distinction, effectively distinguishing between a situation where the decision
maker says that the lack of appropriate evidence is such that he or she is not making any
decision on the issue at all, and a situation where the decision maker makes a decision that
the claim has failed due to lack of proof.
[25]
In the present case, when issuing his decision in Adjudication 3, the adjudicator did
not seek to limit the scope of his determination that the respondent had failed to prove their
damages claim. The language used is of a failure to prove its case as opposed to declining to
take a decision on quantum at all. He did not state that damages could be valued in a
subsequent adjudication as he was confining his decision to one on liability alone. He did
not expressly decline to make a decision on remedies due to the lack of evidence (see
Lewisham Homes Ltd v Breyer Group plc at para [12] where this possibility was identified in
the referral). Indeed, at paragraph 9.150 of the decision, he narrates that he asked the
experts at the hearing for their further views on the delay occasioned to the completion date.
While I agree with Mr Moynihan that paragraph 9.150 is somewhat obscure, it does indicate
that the adjudicator was actively seeking further guidance relevant to the quantification of
damages. This further supports the conclusion that the adjudicator was seeking to decide
the issue of damages for failure to complete by the completion date in this adjudication. I
also agree with Mr Howie that an important background factor in the present case is that the
respondent's referral for Adjudication 3 proceeded after the works had been completed and
the petitioner was off site. This was not an ongoing contractual relationship with
18
developing rights and obligations as the contractual works played out. The respondent
ought to have been able to put forward their definitive case for damages for failure to
complete. It seems to me that Mr Howie's observation is supported by Sudlows Limited v
Global Switch Estates 1 Limited per Coulson LJ at paragraph 78 who notes that the substantive
issue in dispute did not change between the two adjudications in that case, even if the
documentation changed. For these reasons, I agree with the petitioner that Hitachi falls to be
distinguished from the present case.
[26]
There are also two other features of Hitachi which are special and which make the
ultimate decision in that case readily understandable. In the first place, the contract between
Hitachi and Sisk contained a clause that if an adjudicator's decision was not referred to the
Court within ten business days it became final and binding on the parties (Hitachi at
para [4(vi)]). Stuart-Smith J at paragraph 42 was concerned that Hitachi's arguments
coupled with this clause could cut off a right to payment for variations in inequitable
situations. The second feature which is worth noting is that in an intermediate adjudication
between Hitachi and Sisk, Hitachi's position had been that Adjudication 2 had determined
liability but not quantum in relation to the various events (see Hitachi at paras [11]-[16]).
While this was not part of Stuart-Smith J's reasoning, it is hard not to conclude that Hitachi's
prior attitude fully supported the adjudicator's own view of what he had decided in the
second adjudication.
[27]
In my view, Hitachi falls to be regarded as a somewhat unusual case on its facts in
which the adjudicator expressly limited what he was deciding and made that clear in his
decision to the parties. In relation to adjudications where a party seeks but fails to prove its
loss due to a lack of evidence led before the adjudicator, the normal consequence will be that
a further adjudication seeking to establish the loss will be barred. That, in my view, is borne
19
out by the decision in Carillion Construction Ltd v Smith. In Carillion Construction Ltd, an
adjudicator found in the earlier adjudication that there had been delays and disruption
caused by additional works and variations but that the sub-contractor had not proved any
direct loss and/or expense flowing from this (as per Akenhead J at para [22]). After an
analysis of the issue raised in the new adjudication, Akenhead J at paragraph [67] concluded
that the new information advanced by the sub-contractor related to the same issue which the
sub-contractor had failed to prove previously. Accordingly, the adjudicator in the
subsequent jurisdiction had no jurisdiction to consider this new evidence and award
payment to the sub-contractor. The court declared the decision of the subsequent
adjudicator to be of no effect. Carillion Construction Ltd supports the proposition that, a
failure to prove quantum in a contractual claim due to inadequate documentary
substantiation will normally prevent the unsuccessful party seeking to re-adjudicate that
issue.
[28]
For these reasons, I consider that the adjudicator has erred as to the extent of his
jurisdiction in Adjudication 4. He ought to have concluded that he had no jurisdiction to re-
consider the respondent's claim for damages for late completion which claim was being put
forward as a defence to the petitioner's claim for payment. Having sought but failed to
prove its loss in Adjudication 3, the respondent was not entitled to re-raise that issue as a
defence in a subsequent adjudication. Rather, the respondent's remedy was to advance that
claim in litigation or arbitration proceedings.
Disposal
[29]
I shall sustain the petitioner's plea-in-law and grant decree reducing the decision. I
was not addressed in relation to expenses so I shall make no order at this time. If parties are
20
unable to reach agreement on expenses, they should ask for the matter to be put out by
order so that I can be addressed on that issue.
