Tuesday, October 14, 2008

No second chances: Birmingham City Council -v- Paddison Construction

Adjudication of disputes - can you have a second bite at the cherry?

Summing upThe case: Birmingham City Council -v- Paddison Construction Limited [2008] EWHC 2254 (TCC).The issue: The extent to which a party may adjudicate a dispute that has already been the subject of an adjudicator's decision.The implication: It is not possible to refer to adjudication for a second time a dispute that is based on the same grounds and is supported by material that is essentially the same.

Section 108(3) of the Housing Grants Act provides that the decision of an adjudicator in respect of the dispute referred is binding until the dispute is finally determined by legal proceedings, by arbitration or by agreement. This means that once an adjudicator has reached a decision in relation to a dispute, it cannot be referred to adjudication for a second time.


No second chances: Birmingham City Council -v- Paddison Construction


The recent TCC case of Birmingham City Council (BCC)-v-Paddison Construction Limited (Paddison) considered an application to prevent a second adjudication on the basis that it was to consider the same, or substantially the same, dispute as had previously been referred and decided in an earlier adjudication.

In February 2008, Paddison brought adjudication proceedings against BCC in respect of delays and loss and/or expense incurred on a community centre project that it had completed some 18 months earlier.

The adjudicator awarded a full extension of time, but in respect of the loss and expense element, he said that he was not prepared to grant any further monies. Furthermore (and rather unfortunately in the Court's opinion, as he had no power to do so), he proposed in his decision that Paddison would be able to pursue its loss and expense claim via a further adjudication having stated that, in view of the tight timescales associated with adjudication, he believed that a dedicated adjudication would be required to consider that element of the claim.

Accordingly, Paddison commenced a second adjudication against BCC before a different adjudicator, seeking reimbursement of its loss and expense BCC sought to prevent this via Part 8 court proceedings on the basis that the first adjudication had already decided the matter.

The Court took account of BCC's adjudication scheme that applied to the first adjudication, which stated that "an adjudicator shall resign where a dispute arises that is the same or substantially the same as one that has previously been referred to adjudication and a decision has been taken in that adjudication".

Primary case

Paddison's primary case was that (without calling into question the fact that the first adjudicator had actually made a decision) he had made "no decision" in relation to the loss and expense and that it was therefore able to pursue this via a second adjudication. Its secondary case was that if the Court found a decision had been made on the issue, the dispute now being adjudicated was "not the same or substantially the same" as had been previously referred.

The judge concluded that the first adjudicator had made a decision in respect of Paddison's loss and expense claim.

With respect to its secondary case, Paddison sought to differentiate the present claim for loss and expense from that contained in the first adjudication. It was argued that the amount claimed was different, including the fact that overheads and profit were calculated differently and there was also a revised report prepared by a firm of quantity surveyors. Furthermore, included within the dispute was BCC's refusal to re-assess the loss and expense, following the increased extension of time awarded in the first adjudication.

However the Court's position was that there was no real difference in the matters being considered they were for loss and expense consequent upon delayed completion and were rooted in precisely the same contractual conditions. Both adjudications were made on precisely the same grounds and the material being relied upon was essentially the same. Also BCC's refusal to reconsider such a claim could not give rise to a dispute capable of reference to a fresh adjudication either.

The judge considered that to arrive at a conclusion that there was a difference between the two disputes would "permit Paddison to have a second bite at precisely the same cherry" and that this would amount to an abuse of process greater than that which might occur in litigation, as in the case of adjudication there was commonly no provision for recovery of costs.

The message is clearly that referring parties need to ensure that they put their best foot forward and properly prepare their claims before considering adjudication. The words of the first adjudicator who considered the contractor's claims to be "extravagant and exaggerated" and "nothing other than an attempt to claim as much as possible on the proviso that they may achieve some success if not all their claim", illustrate the inherent danger of failing to do so.