First published in Construction Law.
If it is settled law that an adjudicator can only deal with a single dispute in an adjudication, why does it consistently form the basis of satellite disputes and challenges to jurisdiction in referrals to adjudication? Trust me on this one, there might not be many reported cases about it, but it does.
The principle did not take long to settle initially. Starting with the Housing Grants, Construction and Regeneration Act 1996 (the “HGCRA”) itself, the all-important mandatory provisions of section 108(2) of the Act refer to “a dispute” and “the dispute”. The provisions of the Act were quickly interpreted by the courts as meaning a single dispute. But far from closing the issue, parties have frequently raised points as to the true meaning of a single dispute. The favoured definition (albeit not universally lauded) is to be found in the judgment of HHJ Thornton QC in the case of Fastrack Contractors Limited v Morrison Construction Limited where he held:
- “During the course of a construction contract, many claims, heads of claim, issues, contentions and causes of action will arise. Many of these will be, collectively and individually, disputed. When a dispute arises, it may cover one, several or many of one, some or all of these matters. At any particular moment in time, it will be a question of fact what is in dispute. Thus the “dispute” is whatever claims, heads of claim, issues, contentions or causes of action that are then in dispute which the referring party has chosen to crystallise into an adjudication reference.”
This passage has been cited with approval in later cases, not least because of the broad interpretation which the judge gave to the words “a dispute”. In the case of David McLean Housing Contractors Ltd v Swansea Housing Association Limited, the contractor sought to recover sums claimed to be due from an interim payment application No. 19, made some months after practical completion. The claim had a number of elements including measured work, variations and loss and expense. It also included a claim for an extension of time. The referral to adjudication identified six matters in dispute. The respondent challenged the adjudicator’s jurisdiction on the basis that what had been referred to him was more than one dispute. HHJ Humphrey Lloyd QC rejected the challenge on the basis that while the referral contained a number of elements, that did not transform it into more than one dispute. As an example, the determination of the claim for an extension of time was a necessary part of the determination of the loss and expense element of the claim. In that case the court made a plea for a common-sense approach to the issue. Apparently not everyone got the memo.
Trying to refer disputes, even if between the same parties, that have arisen from different projects, is likely to be more problematic. One could hope that by now parties and their representatives would know enough not to do that. Similarly, where, as is sometimes the case, parties enter into more than one contract, in relation to the same project, care needs to be taken not to offend the “one dispute” rule by referring disputes from more than one of the contracts in a single adjudication.
You might also think that parties would also steer clear from the rookie error of referring to “disputes” in the plural in the notice of adjudication. This is to invite trouble. That happened in the case of David and Teresa Bothma (In Partnership) T/A DAB Builders v Mayhaven Healthcare Limited, a decision of HHJ Havelock-Allan QC sitting as the TCC Judge in Bristol, where he declined enforcement on that very basis.
While not every court has been impressed with the liberal interpretation advocated in Fastrack v Morrison, essentially the courts have leaned against attempts to break down a dispute into its component parts for the purpose of challenging the jurisdiction of the Adjudicator under the “one dispute” principle. If, as we have seen, a payment claim includes a wide range of different elements, it will nonetheless generally be treated as a single dispute. A clear example of this is a contractor’s final account claim, which will include the whole of its outstanding claim for payment for the works and therefore numerous disputed elements each for separate consideration which will go to make up the account.
The principles and examples decided in the earlier cases were brought together by Akenhead J in the case of Witney Town Council v Beam Construction (Cheltenham) Limited. The judgment repays a detailed reading, but in essence Mr Justice Akenhead said this:
- “33. It is important to bear in mind that construction contracts are commercial contracts and parties, at least almost invariably, can be taken to have agreed that a sensible interpretation will be given to what the meaning of a dispute is. … A particular dispute somewhat like a snowball rolling downhill gathering snow as it goes, may attract more issues and nuances as time goes on; the typical example … is the ever-increasing dispute about what is due to the contractor as each monthly valuation and certificate is issued; a later certificate may accept amounts in issue in previously not certified but then reject some more items of work.
- Drawing all these threads together I draw the following conclusions…”
The judge then set down seven conclusions, the last of which was:
- “(vii) Whether there are one or more disputes again involves a consideration of the facts. It may well be that, if there is a clear link between two or more arguably separate claims or assertions, that may well point to there being one dispute. A useful, if not invariable rule of thumb is that, if disputed Claim No. 1 can not be decided without deciding all or parts of disputed claim No. 2 that establishes such a clear link and points to there being one dispute.”
This last passage in particular was referred to by Coulson J, as he then was, in Deluxe Art & Theme Limited v Beck Interiors Limited. He held that the application of the Witney Town Council principles to the facts of that case, led to the opposite conclusion.
Recently, in Prater Limited v John Sisk and Son (Holdings) Limited, Veronique Buehrlen QC, sitting as a judge of the TCC, stated: “… I do not read Akenhead J’s guidance in the Witney case as meaning that unless each claim cannot be decided without deciding all or part of the other claims, each claim constitutes a separate dispute. Clearly a single dispute in the context of a construction contract may include several distinct issues …. One needs to look at the facts of each case and to use some common sense.”
Interim payment claims are often fertile ground when it comes to finding a reason to challenge the jurisdiction of an adjudicator on the grounds that more than one dispute is being referred.
One such claim came before the courts last summer in the case of Quadro Services Limited v Creagh Concrete Products Limited. In that case, the adjudication arose out of an oral contract for the provision of labour-only services to the defendant for a project in Woking. The claimant’s claim was for payment of sums outstanding on three payment applications which it had submitted for payment in July, August and September of 2020. The payment applications were submitted on a cumulative basis, each succeeding application was based on the then full value of the work done, less the amount of the previous payment application. The first two applications were approved and the claimant was asked to submit VAT invoices for payment. The documents were silent on the third and final invoice, but no pay less notice had been served.
While the claimant had payment claims outstanding from the defendant on a number of contracts, against which the defendant appeared to be seeking to set off a claim resulting from an incident on one of the projects for which the claimant denied liability, the claimant sought to adjudicate the unpaid invoices only from the Woking project. In the adjudication the claimant sought payment of the sum of the three outstanding invoices, which was £40,026, plus interest.
The defendant challenged the adjudicator’s jurisdiction, alleging that the claimant had referred three separate disputes to adjudication under one notice and one referral. The defendant contended that each application, its validity and whether a payless notice was issued and the sums due for each, was a separate dispute. The adjudicator was invited to resign. The defendant reserved its rights and said it would take no further part in the adjudication, which in the event, it did not.
The claimant rebutted the defendant’s challenge contending that it was clear that the dispute was about a failure to pay a debt of £40,026 under one contract for works: “… the consideration of the sums agreed and rendering of the invoices are really only sub issues to be considered in resolving the one dispute (i.e. the debt)”.
The adjudicator made a non-binding decision as to his jurisdiction, which he accepted, and went on to issue his decision in favour of the claimant. The adjudicator’s decision was not paid, and the claimant issued proceedings and applied for summary judgment.
In her judgment, HHJ Sarah Watson, agreed with the analysis of Veronique Buehrlen QC. She held:
- “39. … I consider that it is clear from the authorities that one dispute can include numerous sub-issues which might be capable of being determined independently from each other. Whether they are sub-issues or separate disputes in a question of fact.
- 46. … the fact that it is technically possible to determine whether each individual invoice is due without determining whether the other invoices are due does not mean that those issues cannot be sub-issues in the wider dispute as to whether the Claimant is entitled to the sum it claims is due to it under the contract.
- 48. … The payment applications were cumulative …. There is a clear link between them.”
The judge went on to grant summary judgment and enforce the adjudicator’s decision. These two recent decisions from the TCC are to be welcomed. We can hope that they bring some clarity to the case law, particularly in relation to the degree of dependence separate elements of a claim need to have to one another, if any, to meet the criteria of a single dispute.
- It is settled law that a party can only refer one dispute at a time to adjudication.
- One dispute may comprise a number of sub-issues.
- The fact that disputed claim 1 can not be decided without deciding all or part of disputed claim 2, is a powerful indication there is only one dispute, it is not determinative.
- One dispute can include a number of issues which can be decided independently of each other.
- Whether an issue in dispute is a sub-issue or a separate dispute is a question of fact.
- In each case one needs to look at the facts and use some common sense.
  BLR 168.
  BLR 125.
  EWHC 2601 (QB).
  EWHC 2332 (TCC);  BLR 707.
  EWHC 238 (TCC);  BLR 274.
  EWHC 1113 (TCC);  BLR 474.
  EWHC 2637 (TCC).
 As quoted at para 27 of  EWHC 2637 (TCC).