For some years, contractors and subcontractors have been using an effective tactic in adjudication. That is to pick off discrete elements of a large time or money claim and to obtain a series of favourable declarations in adjudications on those elements.
The declarations can then be used as a bargaining tool to leverage a settlement of the full claim. Or they can be converted into payment orders by way of a further adjudication.
The practice of carving a dispute into its constituent parts has had the nod from the Technology and Construction Court (TCC). Coulson J, as he then was, considered the example of a contractor that chose to run only its straightforward measured work claim (say) leaving aside for the time being its more tricky loss and expense claim. He described this as “not only permissible, but …. a process that [was] to be encouraged” (St Austell Printing Company Limited v Dawnus Construction Holdings Limited (TCC 2015)).
The potential benefits of this approach are clear. But the Housing Grants Construction and Regeneration Act 1996 prevents the referral to adjudication of more than one dispute. Is that a problem?
In Prater Limited v John Sisk & Son (Holdings) Limited (April 2021) TCC, Prater sought declarations in one adjudication on three separate issues namely: the correct subcontract completion date; the status of certain provisional sums; and Sisk’s claim (as main contractor) to be entitled to deduct certain indirect losses. Were these, as Sisk said, three separate disputes that should have been referred separately to three adjudications? Or were they, as Prater maintained, all part of one dispute, namely the dispute as to what it was owed?
Before deciding that, the judge had to deal with a preliminary point by Prater which, if correct, would give Prater the victory regardless of the outcome of the “multiple disputes” issue. Prater was asking the court to enforce a payment order in the fourth adjudication between the parties (for some £1.7 million). Yet Sisk’s “multiple dispute” argument related to the second adjudication between the parties (Prater had successfully obtained declarations in Adjudications 1-3, and then a money decision in Adjudication 4). Prater said that Sisk could not come to a hearing that was concerned with Adjudication 4 and argue about the validity or otherwise of Adjudication 2.
The judge agreed. Sisk was too late now to argue the “multiple disputes” point in relation to Adjudication 2. It should have done so at the time, via proceedings relating to Adjudication 2 itself.
This meant that the judge did not now need to address Sisk’s “multiple disputes” argument at all. Prater had won. Helpfully, however, the judge considered it anyway, together with one further point.
The judge applied a set of rules formulated by Akenhead J in Witney Town Council v Beam Construction (Cheltenham) Limited (TCC 2011). She held that the three issues were in fact part of one larger dispute. That dispute was as to what sum Sisk was obliged to certify and pay as an assessment of Prater’s account. Each of the three issues was merely one aspect of that larger dispute.
The further point was the question of whether the NEC3 drafting amounted to an agreement by the parties (which is permitted, in principle) to allow multiple disputes to be referred to adjudication. No, it did not, said the judge. Option W2 of NEC3 refers to “a dispute” – in the singular. If the parties had intended multiple disputes to be capable of being referred, the drafting would have made that clear.
Two points of interest arise.
First, the decision continues the trend in the Witney Council and St Austell cases towards allowing a party to pick elements of a larger dispute without contravening the “multiple disputes” rule. But where does this leave the rule? It is not easy to come up with practical examples where the rule would bite. On the Prater reasoning, it would be possible for a subcontractor, for example, to take 2, 3, or indeed 17 or 25 issues to adjudication, so long as they can all be characterised – as will usually be possible - as all part of one large dispute.
Looking at the fairness of all of this, one might say that a payer can hardly complain at having to deal with a snap adjudication on (say) only 60% of a payee’s claim when it was always at risk of having to deal with 100% of it. But there is a potential for some unfairness. Adjudicators will be making decisions on an unbalanced set of issues chosen by the payee that may have little in common with each other - apart from being ones that the payee expects to win (of course, it is open to payers to retaliate with adjudications on their “best” issues).
The second point of interest is the failure of Sisk’s belated attempt to challenge the decision in Adjudication No. 2. The judge said:
“It must… have been obvious to Sisk given the nature of the parties’ dispute that the findings the subject of Decision 2 would be relied upon by Prater in a subsequent adjudication to determine what, if any, sums were owed to it.”
If a subcontractor is building up declarations in its favour, warning bells should indeed sound for a main contractor. At some point these declarations will be “cashed in” for an order for payment. Similar considerations apply as between employers and their contractors, of course.