Check which adjudication rules apply before you appoint the adjudicator… and follow them!

Ecovision Systems Ltd v Vinci Construction UK Ltd (Rev 1) [2015] EWHC 587 (TCC)

When appointing an adjudicator, the referring party must follow the provisions of the contract between the parties or the Scheme for Construction Contracts 1998 (the Scheme) (if applicable).

In this recent decision, the TCC held that an adjudicator lacked jurisdiction because he had not been properly appointed and had followed the wrong rules in an adjudication. His decision was therefore invalid.

The Facts

Vinci, the contractor, entered into a subcontract with Ecovision under which Ecovision was to design, supply and install a ground source heating and cooling system. The system failed and a dispute arose over the adequacy of the design.

Vinci served a notice of adjudication and approached the president and vice president of the RICS to see if they were free to act as the adjudicator. As they were unavailable, Vinci applied to the RICS for an appointment and the adjudicator was nominated. Vinci’s application form to RICS did not state whether the application was being made under the provisions of the subcontract between the parties or under the Scheme.

A dispute then arose over which adjudication rules applied to the adjudication, and under which the adjudicator was said to be appointed. A large amount of correspondence passed between the parties and the adjudicator on this issue.

Vinci served its Referral, but Ecovision said it was not participating in the adjudication and declined to serve a Response. The adjudicator made his decision and awarded Vinci the declaration that it had requested.

Ecovision commenced Part 8 proceedings in the TCC, seeking a declaration that it was not bound by the adjudicator’s decision.

Which adjudication rules applied?

The subcontract had been put together in such a way that there were three adjudication procedures that might possibly apply to the dispute:

• Option W2 of the NEC3 ESC Subcontract which named the adjudicator as the president of the Royal Institution of Chartered Surveyors (RICS) and the adjudicator nominating body (ANB) as the president or vice president of the RICS;
• Option W2 of the NEC3 ECC main contract, as amended by Clause Z16. This Option did not name an adjudicator, but it referred to the ANB as the chairman of The Technology and Construction Solicitors’ Association (TeCSA); or
• The Scheme, under which there was no named adjudicator and the parties could apply to any ANB.

Decision

The choice of adjudication rules is fundamental to the jurisdiction of the adjudicator. However, the TCC held that an adjudicator lacks jurisdiction to determine whether he has jurisdiction and this includes choosing between two or more sets of adjudication rules if the choice makes a material difference to how he should be appointed.

The court considered that Vinci’s notice of adjudication and application for appointment of an adjudicator did not assist the adjudicator in deciding which adjudication rules applied. That said, the court was not prepared to hold that the notice or the application were invalid simply because of this lack of information.

In this case, the court considered three particular features: Vinci did not stipulate the rules on which it was relying in its notice; the potential rules all put forward different routes to the appointment of an adjudicator; and, the potential rules all contained real differences of procedure.

Given this uncertainty, the judge believed that the adjudicator should have asked Vinci to explain its position on the rules to clarify his jurisdictional position although it was acknowledged that his failure to do so was inadvertent and not a result of bias.

It was argued that where there is a dispute about which adjudication procedures apply (a ‘battle of the forms’), then identifying the right one ‘goes to the heart of the adjudicator’s jurisdiction and is therefore essential’ (paragraph 39 of the judgment). A substantial review of the contract was needed to determine which rules applied and the court concluded that, contrary to Vinci’s position, the second option applied which specified TeCSA as the ANB and the TeCSA adjudication rules.

The TCC therefore found that the adjudicator was not properly appointed and had purported to follow the wrong adjudication rules. He lacked jurisdiction.

Comment

Care should be taken when putting a contract together to ensure that the dispute resolution procedure is clear and easy to follow. This is particularly important in the context of large projects where conflicts might arise between the main contract and subcontracts as to which dispute resolution procedures apply.

The court gave assurance that a notice of adjudication or an application to an ANB will not be automatically invalid if it fails to state which adjudication rules are being invoked. However, as a matter of best practice, parties faced with any ambiguity as to which rules apply should view the notice and the application as an opportunity to explain the rules they consider to apply and why. This will avoid the time and costs of arguing about the issue during the adjudication and reduce the possibility of declaratory relief proceedings being commenced.

This article was published by Walker Morris on 01/05/15.

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