What happens when you set two adjudicators' decisions against each other before the TCC?

Wordsworth Construction Management Ltd v Inivos Ltd T/A Health Spaces [2024] EWHC 617 (TCC)

Overview

This case involved two applications for summary enforcement of adjudicators' awards, arising under the same construction contract, unusually being set off against one another.

Wordsworth Construction Management Ltd (‘WCM’) was the construction manager for Inivos Ltd t/a Health Spaces (‘HS’) in respect of the construction of a new turnkey modular facility at Newham University Hospital in London, until its appointment was terminated in May 2023.

On 25 September 2023, in Adjudication 1, the adjudicator favoured WCM (Referring Party) and the "Jackson decision" saw HS (Responding Party) ordered to pay WCM the sum of £170,562.69. On 24 November 2023, in Adjudication 2, a different adjudicator favoured HS (Referring Party) and the "Milner decision" saw WCM (Responding Party) ordered to pay HS the £192,772.00 and £4,978.54 interest.

Both parties sought to enforce the decisions in their favour. At trial, WCM contended for the enforcement of the Jackson decision while opposing the Milner decision, with HS advocating the opposite. Nevertheless, the parties agreed that if both decisions were enforced contrary to their respective primary positions, they should be set off against each other. Recorder Singer KC presided over these applications and ordered them to be heard at a joint hearing.

1. Court's Decision

The Court addressed two main issues: 

(1) whether there had been a material breach of natural justice in the Jackson decision

1. The Court decided that there was no material breach of natural justice and the decision was enforced.
2. Although Mr Jackson inadvertently failed to consider HS's defence, this was an error of law, not a breach of natural justice. Such failures may not a render a decision unenforceable save for in certain extraordinary circumstances. The burden of proving the breach is material rests on the Party asserting it and it is important for the court to look for coherent reasoning underpinning the adjudicator's decision.
3. Mr Jackson's decision did not fail to give reasons (although they were brief and legally erroneous). An Adjudicator has no obligation to address every issue raised by the parties or give lengthy reasons. What matters is that the Adjudicator focuses on the main questions posed to them and gives coherent and adequate reasons for their conclusions.
4. It was alleged that Mr Jackson reached the decision on a basis that neither party argued. Whilst it was true that neither party suggested termination would dispose of some of the items, the responses given on related issues were brief, vague and viewed by the Court as equivocal such they may have reasonably resulted in the decision the adjudicator arrived at.  In such circumstances the Court found  it could not be said that the adjudicator had gone off on a frolic of his own or stepped outside of the case before him, in any material respect.

(2) the validity of the Milner decision in relation to the Jackson decision

1. The Court decided that the dispute was not same as that which had already been determined by Mr Jackson nor had Dr Milner been invalidly appointed. The decision was therefore also enforced.
2. For an earlier decision to bind a subsequent decision, as a matter of fact and degree, the dispute in the second adjudication must be the same or substantially the same as the dispute that was decided in the first adjudication. Three overarching principles highlight the need for common-sense, looking at the actual earlier decision and having flexibility when assessing the compatibility of claims in serial adjudications. As such, the two claims were deemed compatible.
3. The court also ruled out any invalidity of the appointment of Mr Jackson due to comments made before the nomination process. There are risks with challenging nominating bodies on their adjudicator appointments, unless there are clear conflicts of interest.
4. The judgment did not deal with the ultimate outcome of the set off, but it is fair to presume that both parties got the answer that neither owed much or anything at all.

2. Practical Takeaways

Helpful takeaways from this case are as follows:

1. Adjudicators must consider all defences raised by the parties in a dispute and deliberate refusal to consider a defence will constitute a breach of natural justice. Inadvertent failure to consider defences will only render a decision unenforceable if it is sufficiently serious and materially affects the outcome of the adjudication;
2. Adjudicators are not required to address every issue raised by the parties but must respond to the key questions posed by the dispute and provide coherent and adequate reasons;
3. Practitioners should take care to ensure that the submissions made are clear, with enough detail, and unequivocal to avoid potential pitfalls.
4. An earlier decision binds a subsequent adjudication when, as a matter of fact and degree, the dispute in the second adjudication is the same or substantially the same;
5. The principles of flexibility and fairness should guide the determination of whether a decision in a subsequent adjudication is compatible with an earlier one; and
6. Parties should raise concerns about potential conflicts of interest before an appointment is made but the mere presence of comments, unless clearly indicating a conflict of interest, does not automatically invalidate an adjudicator's appointment.