Understanding adjudication and arbitration: Ensuring jurisdiction

Adjudication is a dispute resolution mechanism that applies to the UK’s construction industry.  Parties to construction contracts cannot contract out of the adjudication procedure.  It is a 28 day procedure allowing for a decision to be made which can then be enforced by the Technology and Construction Court (TCC).

Arbitration is a type of voluntary alternative dispute resolution governed by the Arbitration Act 1996.  All parties must agree to submit the dispute to arbitration for it to commence.  The arbitrator’s decision is final and binding.

Recent cases emphasise the need for parties to understand these processes prior to utilising them to ensure that each party prepare successfully.  In this series of articles, we look at a number of these cases to help you avoid mistakes and make the best dispute resolution decision.

Ensuring jurisdiction

In the recent case of Kilker Projects Limited v Rob Purton, the TCC considered an adjudicator’s jurisdiction.

Kilker employed Mr Purton to carry out specialist works at the Dorchester Hotel, Park Lane.  A dispute arose and was referred to adjudication.  The adjudicator held that Kilker had failed to serve a valid payment notice or pay less notice in relation to Mr Purton’s final account application.  The adjudicator determined that a final payment was payable to Mr Purton in the sum of £147,223.

Kilker referred the dispute to a second adjudication.  This referral was based on requesting a declaration as to the true value of the final account and the repayment of any sums found overpaid.  The adjudicator determined that the true value of the final account was less than previously determined, and ordered that Mr Purton repay £55,676 to Kilker.

Upon Kilker commencing enforcement proceedings, Mr Purton argued that the second adjudicator did not have the jurisdiction to decide the dispute as the first adjudicator had done so already.

The TCC judge held that the adjudicator had jurisdiction as a party is entitled to have the final value of sums due determined through adjudication.  The judge referred to Matthew Harding t/a MJ Harding Contractors v Paice (2015), in which the Court of Appeal determined that an employer could refer the true valuation of a final account to adjudication despite an earlier adjudication ordering payment of contractor’s final payment application.  This is because the two disputes are different.  One determined whether a final payment is payable, and the other determined the true value of the final payment.

Parties should be aware of this.  The referring party could avoid this second adjudication by reviewing the evidence and requesting that the initial adjudicator determine the amount payable alongside whether or not the payment is payable.  This will allow for a true figure to be determined and will likely leave the other party without a means of reviewing the adjudicator’s decision.  It will also likely reduce the overall costs.

For more information please contact Alexandra Withers