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Binding Nature of Previous Adjudicator’s Decisions
The general position is that an adjudicator cannot determine a dispute that has already been determined in a previous adjudication. For example, paragraph 9 of the Scheme confirms that an adjudicator must resign where the dispute is the same or substantially the same as one previously referred to, and decided in, a previous adjudication.
This leaves the door open for challenges to the adjudicator's jurisdiction where a defending party believes the claim has already been decided, in whole or in part. This is common in circumstances where an interim payment is the subject of adjudication proceedings, and the same parties enter into further adjudication proceedings in relation to a later interim payment or final account. For example, where the first adjudicator has determined the value of a variation, does this bind the second adjudicator?
The answer is that it depends on the specific facts. However, this can pose a conundrum for adjudicators, as it did in the recent Scottish case of Engenda Group Limited v Petroineous Manufacturing Scotland Limited [1].
Engenda Group Limited v Petroineous Manufacturing Scotland Limited
In a previous adjudication, Petroineos had asked the adjudicator to decide that it was entitled to withhold around £1.1m in unliquidated delay damages under an NEC3 Option C contract which included Key Dates and a Completion Date. Petroineos focussed its evidence on proving delay to a Key Date rather than the Completion Date. The adjudicator decided that delay damages could not be applied in relation to Key Dates, but as Petroineos had not discharged the burden of proof with respect to the Completion Date, he was unable to conclude that Petroineos was entitled to withhold the damages.
Engenda commenced subsequent adjudication proceedings seeking repayment of the delay damages withheld by Petroineos and this was defended by Petroineos with new expert evidence in relation to the delay to the Completion Date. Engenda asserted that the adjudicator did not have jurisdiction as the delay damages point had already been decided by the previous adjudicator. The adjudicator disagreed and decided that Petroineos was entitled to withhold the delay damages, on the basis of the new evidence and what he considered to be a different legal argument.
Engenda challenged the validity of the adjudicator's decision and the court upheld the challenge, noting that Petroineos had failed to discharge the burden of proof in the first adjudication. The fact that Petroineos had focussed its evidence on the Key Date, rather than the Completion Date, did not matter. It had not proven its claim and was not entitled to correct its evidential deficiencies in a subsequent adjudication.
Petroineos relied on the previous case of Hitachi Zosen Inova AG v John Sisk & Son Ltd [2]. In that case, the adjudicator had confirmed in the decision that the value for a specific variation was £nil, but for the purposes of the interim application only. When a later adjudicator provided a different valuation for the same variation, it was held they were entitled to do so and the claimant was permitted to present new evidence in support of its claim.
The court distinguished Hitachi on the basis that it was predicated on a “subtle distinction…between a situation where the decision maker says that the lack of appropriate evidence is such that he or she is not making any decision on the same issue at all, and a situation where the decision maker makes a decision that the claim has failed due to lack of proof.” The court suggested that it was clear from the previous adjudication decision that Petroineos had failed to prove its claim.
Commentary
It is notable that, in both the Hitachi and Petroineos cases, the adjudicators acknowledge that sums were likely to be due to the claimant, however, both also noted that the evidence presented was inadequate to allow a valuation to be undertaken. In the Hitachi case, the adjudicator stated a value of £nil whereas in Petroineos, the adjudicator declined to provide a valuation at all. It could be argued that the adjudicator’s decision in the Hitachi case was more a decision “that the claim had failed” than the adjudicator’s decision in the Petroineos case.
The court’s reference to a situation where an adjudicator “is not making any decision” due to lack of appropriate evidence poses a difficult dilemma for adjudicators who run the risk of breaching the rules of natural justice and/or failing to exhaust their jurisdiction by refusing to determine certain parts of a claim due to lack of evidence.
However, this affirms the courts' general approach that an adjudicator cannot 'open up' an issue already decided by a previous adjudicator, except in limited circumstances. Claimants would be well advised to ensure the necessary evidence is available and presented the first time around. A failure to do so may be fatal and it is unlikely they will get ‘another bite at the cherry’ in adjudication proceedings. The implication is that they will need to pursue their claim in litigation (or arbitration where an arbitration agreement exists).
[1] Engenda Group Limited v Petroineous Manufacturing Scotland Limited [2024] CSOH 36
[2] Hitachi Zosen Inova AG v John Sisk & Son Ltd [2019] EWHC 495 (TCC)