Difficult second albums

Following a recent Court of Appeal ruling, Michael Comba and Tiah Weekes look at how adjudications can bind subsequent overlapping ones.

Those exposed to adjudications understand that a dispute can only be adjudicated upon once. That, together with the limited ability to challenge decisions, can indeed be the source of frustration for some parties.

But what if one dispute overlaps with another and is adjudicated on separately? To what extent would a later adjudicator be bound by the decisions of an earlier one?

This judgment in Sudlows Ltd v Global Switch Estates 1 Ltd [2023] EWCA Civ 813 considered this issue in the context of overlapping, but separate, extension of time (“EOT”) and loss and expense claims.

Background

Global Switch Estates engaged Sudlows under a JCT Design and Build Contract to carry out works at an electricity substation in London. The works were significantly delayed and several adjudications ensued.

In adjudication no.5, the adjudicator decided Global was liable for ductwork issues that had caused the delay. Sudlows was awarded an EOT of 482 days.

In adjudication no.6, Sudlows sought a further 133 days EOT and related loss and expense. The adjudicator concluded he was bound by the decision in no.5 as to contractual responsibility and granted Sudlows the further EOT and related loss and expense.

Unusually, the adjudicator also issued an alternative decision to be used if he was later found to have been wrong to conclude that he was bound by the previous adjudication. This held that £209,000 was due from Sudlows to Global.

In enforcement proceedings, the court found that adjudication no.6 breached the rules of natural justice because the adjudicator considering himself bound by the previous ‘primary’ decision. It declined enforcement and held that Global was entitled to enforce the adjudicator’s alternative decision. Sudlows appealed.

Judgment

The Court of Appeal allowed Sudlows’ appeal and reinstated the adjudicator’s primary decision. It first noted (something possibly overlooked by the parties) that while a court was not automatically bound by the adjudicator’s decision that he was bound by adjudication no.5, it should nevertheless “be slow to interfere with it, unless it concluded that it was clearly wrong.” In other words, like any natural justice challenge there was a high bar to overcome. It was not “clearly wrong” in this case.

The court set out three over-arching principles that an adjudicator (or enforcing court) should apply to overlapping disputes:

• With serial adjudications, the adjudicator should be “encouraged” to give a firm and common-sense answer as to whether a previous adjudication was binding or not.
• They should look at what the earlier adjudicator decided to see if they could impinge that earlier decision. The actual decision the earlier adjudication is of more relevance than the submissions made before them.
• They should be flexible in their approach. This helps ensure that parties are prevented from re-adjudicating claims that they have clearly lost, but also helps see that parties are not unduly prevented from adjudicating on genuinely new claims.

The judgment finally suggested a rule of thumb as to whether a previous decision is binding. This was to consider, if the second adjudication is not bound by the decision in the first, whether that might lead to a result which is fundamentally incompatible with the result in the first adjudication.

Analysis

Although it is relatively uncommon for several overlapping disputes to undergo several adjudications, it does happen. This is particularly so in long-term and complex contracts and, of course, where relationships have broken down.

This judgment provides guidance for parties bringing or defending new claims following a previous adjudication. Which side is correct is to be decided based on the facts of the case.

Otherwise, the case demonstrates that overlapping disputes can be messy and result in convoluted and costly legal proceedings. It is one reason why parties with several disputes may want to be constructive; seeking to resolve all disputes rather than following a piecemeal approach.