Two separate contracts, one adjudication – does the Adjudicator have jurisdiction?

In the case of Delta Fabrication & Glazing Ltd (Delta) v Watkin Jones & Son Ltd (Watkin Jones), the High Court in England had to decide whether to enforce an adjudicator’s decision which was alleged to have arisen under more than one contract.

Delta had the benefit of the adjudicator’s decision and had applied to enforce that decision. Watkin Jones sought to defend the application, arguing that Delta had referred disputes arising under two separate contracts in one adjudication.

The question for the Court to decide was whether the adjudicator had jurisdiction to make a decision in the circumstances.

Background

The parties entered into two sub-contracts for works at a student accommodation project in London in August 2019. Watkin Jones was the main contractor and sub-contracted cladding and roofing works to Delta, under two separate sub-contracts. The fact there was two separate sub-contracts was not disputed by the parties. In fact, the parties agreed that if the referral did concern disputes under two separate sub-contracts, the adjudicator did not have jurisdiction and the adjudicator’s decision could not be enforced.

In February 2020, the parties began administering payments for both sub-contracts together, including one final account sum being agreed. A dispute arose over the final account which Delta then referred to adjudication. Watkin Jones argued that the adjudicator did not have jurisdiction.

Delta’s Case

Delta’s case was that the adjudicator did have jurisdiction and the adjudicator’s decision was valid for (amongst others) the following reasons:

1. There was an agreement between the parties (by their conduct) to vary the sub-contracts so as to amalgamate them into one contract. Delta’s argument here was that Watkin Jones had issued a payment notice which related to both sub-contracts and, as such, it had accepted an offer to amalgamate the contracts.
2. Even if the parties’ conduct did not amount to a variation so that there was a single sub-contract, it had the effect of amalgamating the contracts for the purposes of the Housing Grants Construction and Regeneration Act 1996 (the Act).

The parties agreed that in order for the Court to find for Delta, it had to "be satisfied that the parties’ conduct is unequivocal and consistent only with the parties having agreed to vary the contacts so that a single contract came into existence."

The Law – Adjudication

The Construction Contracts (Northern Ireland) Order 1997 (the 1997 Order) is the legislation that governs adjudication and payment in "construction contracts" in Northern Ireland. Under the 1997 Order, a party to a "construction contract" has a statutory right to refer a dispute to adjudication at any time.

The equivalent legislation in England and Wales is the Act.

Adjudication enforcement

Adjudicator’s decisions are enforced in the Courts of Northern Ireland through a process known as summary judgment. A party seeking to enforce an adjudicator’s decision applies to the Court for judgment without the need for a full trial. The Commercial Hub, a specialist forum within the High Court, in which designated Judges hear disputes where the parties are businesses (aims to hear such applications within 4 weeks).

Summary judgment is a process by which judgment can be obtained without the need for a full trial, saving time and costs. A plaintiff can apply for summary judgment on the ground that the defendant has no defence to all or part of a claim.

One of the limited grounds on which a party can defend the enforcement of an adjudicator’s decision is that the adjudicator did not have jurisdiction.

Decision

Delta’s application to enforce the adjudicator’s decision failed, with the Judge finding that Watkin Jones "has not only a real, but a strong, prospect of successfully defending the claim on the ground that the adjudicator lacked jurisdiction."

In the Judge’s view, there was no agreement to vary or amalgamate the sub-contracts. In particular, there was no agreement by conduct as a result of processing one payment to cover both sub-contracts. The fact that the parties treated the sub-contracts as one for the purposes of making payment was not enough to conclude that they sought to treat them as one for the purposes of adjudication.

Carson McDowell View

This decision serves as an important reminder that parties cannot adjudicate disputes arising under two separate contracts through one adjudication. An adjudicator will only have jurisdiction to decide a dispute arising under a construction contract—not a dispute arising under construction contracts.

If more than one contract is entered into by the same parties on one project, parties ought to keep the payment processes on each contract separate to avoid any ambiguity.

Although the judgment was handed down by an English Court, it is likely to be persuasive to a Court in Northern Ireland tasked with determining the same issue.

If you have any queries, the Construction Law team at Carson McDowell would be happy to help.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.