Jacobs UK Ltd v Skanska Construction UK Ltd

[2017] EWHC 2395 (TCC)

Here, Jacobs sought an injunction to restrain Skanska from proceeding with an adjudication, following Skanska’s withdrawal from an earlier adjudication. Jacobs said that a party to an adjudication is not entitled to withdraw a dispute from adjudication and refer the same, or substantially the same, dispute to a second adjudication.

On 8 February 2017 Skanska gave notice of an intention to refer a dispute as to the adequacy of the design services provided by Jacobs to adjudication. The parties reached agreement as to the applicable procedural rules and a detailed timetable for the adjudication, which was recorded in an exchange of emails on 13 February 2017. The Referral would be served on 17 February 2017, the Response on 24 March 2017 and the Reply on 7 April 2017. The Referral and Response were served in accordance with the agreed timetable and Jacobs incurred substantial costs in responding to Skanska’s claim in the adjudication.

However, Skanska’s counsel became unavailable and Skanska was unable to serve its reply by 7 April 2017 as agreed. Skanska requested an extension of time from Jacobs but the request was refused. The adjudicator would only agree an extension if both parties agreed. On 7 April 2017 Skanska withdrew its reference to adjudication and invited the adjudicator to resign. On 11 April 2017 the adjudicator resigned. On 21 June 2017 Skanska gave a fresh notice of an intention to refer the dispute to a second adjudication. This contained broadly the same claims against Jacobs, albeit the scope of the dispute was narrowed, and the methodology and quantum of the damages claimed were revised.

Jacobs commenced Part 8 proceedings seeking a declaration that in proceeding with the second adjudication Skanska were acting unlawfully. Jacobs said that the parties had agreed that the reference of this dispute should be to an adjudicator appointed under the Scheme and that the adjudication should be conducted in accordance with an agreed timetable. Jacobs had a right to a resolution process which was fair to both parties and did not confer an uncovenanted advantage on the referring party beyond that implicit in the rough and ready adjudication process. The way Skanska had acted meant that the process was unfair, unreasonable and oppressive.

Skanska said that there was no concept of abuse of process in adjudication and a referring party was free to obtain whatever tactical advantage it can. A party has the right to start adjudication in relation to a dispute at any time. This gave a party an unrestricted right to start, abandon and pursue serial adjudications in respect of the same dispute.

Mrs Justice O’Farrell agreed that the adjudication procedure envisaged by the HGCRA was a rough and ready one. A referring party has a clear advantage in selecting the timing and scope of the dispute. The timetable is very tight, regardless of the size and complexity of the dispute. Any inherent unfairness in the adjudication process is justified by the advantage of speed and efficiency in obtaining a decision and balanced by the temporary effect of any decision.

The Judge noted that a party can withdraw a claim even after the referral. In Midland Expressway v Carillion [2006] EWHC 1505 it was held that a party could withdraw its claim which had been inadequately formulated and which could not succeed as it presently stood, and that there was nothing in the HGCRA or the Scheme to suggest otherwise. In Lanes Group plc v Galliford Try Infrastructure Ltd [2012] EWCA Civ 1617, a referring party withdrew and started again, following the appointment of an adjudicator they preferred not to have.

However, the Judge was clear that it did not follow that the courts will never intervene to prevent a party from pursuing a claim in adjudication. Under section 37 of the Senior Courts Act 1981 the court had a power to grant an injunction restraining a party from commencing or continuing an adjudication that was unreasonable and oppressive. This was a question of fact. Potentially, if a party started and stopped serial adjudications in respect of a claim and so required the other party to incur irrecoverable costs, then this could amount to unreasonable and oppressive behaviour.

Here, the adjudicator in the first adjudication did not reach a decision. Therefore the adjudicator in the second adjudication would have jurisdiction to determine the dispute referred. The Judge considered that Skanska’s withdrawal of the claim was unreasonable. The unavailability of counsel was

“rarely a good excuse for failing to meet an agreed timetable, especially where the party in default is the referring party who controls the timing and scope of the reference”.

However, the court would not intervene unless the further reference was both unreasonable and oppressive. Here, the substance of the claims remained the same and therefore Jacobs would be entitled to rely in large part on its prepared response. There was new material, including new quantum expert evidence, and it was anticipated that there might be new arguments raised by Skanska following Jacobs’ response. Therefore Jacobs would probably seek the right to submit a rejoinder. However, the Judge did not consider that the inconvenience and additional costs suffered by Jacobs as a result of the second adjudication were so severe or exceptional as to warrant intervention by the courts by way of injunctive relief.

That said, Mrs Justice O’Farrell did consider that Jacobs was entitled to any wasted or additional costs caused by Skanska’s failure to comply with the agreement of 13 February 2017. It was common ground that, in the absence of agreement giving the adjudicator jurisdiction to award costs, a party’s costs of adjudication proceedings are not recoverable. However, here the parties had entered into an ad hoc agreement under which the procedure and timetable to resolve the referred dispute in the first adjudication were agreed and fixed. That went beyond mere agreement as to the timetable to be directed by the adjudicator in respect of an existing contractual or statutory adjudication and imposed new enforceable obligations on the parties.

Skanska’s failure to serve its reply or continue with the first adjudication was a breach of the ad hoc agreement, entitling Jacobs to its wasted or additional costs as damages. This was not all the costs incurred in connection with the first adjudication, only those wasted or additional costs caused by Skanska’s failure to comply with the agreed procedure and timetable.

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