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Dawnus Construction Holdings v Marsh Life [2017] EWHC 1066 (TCC)

In a judgment handed down today, 11 May 2017, HHJ McKenna (sitting as a High Court Judge in the TCC in London) enforced a £1.25m adjudication award in favour of the contractor, Dawnus.

Background

Marsh Life had engaged Dawnus under a JCT 2011 Design & Build Contract to design and build a hotel together with retail and restaurant units on a site known as the Lifeboat Quay in Poole. The contract price was approximately £6.9 million. The works started in September 2014 and the original completion date was 13 July 2015. The project suffered from various delays and in November 2016, by which stage the project was effectively complete and a number of commercial tenants had moved in, the contract was terminated in disputed circumstances.Various disputes arose between the parties and there had been a total of four adjudications. The Court was concerned with the decision in the fourth adjudication, which was a referral by Marsh Life seeking a valuation of the account upon termination. Marsh Life sought to resist enforcement on the basis that the adjudicator had allegedly committed serious breaches of the rules of natural justice in failing to consider the defences Marsh Life had advanced in relation to Dawnus’ claims for loss and expense.

The Arguments

Dawnus contended that:

  • It was not open to Marsh Life to challenge the decision, since it had invited the adjudicator to correct alleged errors in the decision under the slip rule, and had thereby elected to affirm the decision and to waive any challenges it might have had to its validity. Dawnus relied on Shimizu Europe v Automajor [2002] BLR 113 and Laker Vent Engineering v Jacobs [2014] EWHC 1058 (TCC).
  • In any event, there had not been a material breach of natural justice, because although the decision inaccurately described Marsh Life’s defences, the adjudicator had answered the question Marsh Life put to him and in awarding loss and expense had considered and rejected Marsh Life’s defences.

In response to the election point, Marsh Life argued that there was a distinction between a jurisdictional challenge and a natural justice challenge, and that on a proper reading of the invitation to the adjudicator to correct errors under the slip rule, Marsh Life were not waiving the right to rely on the very same matters as breaches of natural justice.

The TCC’s Decision

Acknowledging that the election point raised “an important point of principle” HHJ McKenna concluded:

“To my mind the distinction which the Defendant seeks to draw is conceptually unsound and contrary to the authorities. It presumes that there is a clear distinction between excess of jurisdiction and breach of the rules of natural justice when, in reality, there is often no such clear distinction, with challenges frequently being framed in the alternative (Pilon v Breyer [2010] EWHC 837 (TCC) at paragraph 19 being such an example.) In both cases the effect is that the Decision is said to be a nullity. The Defendant could have, but did not, expressly reserve its right to pursue a claim of breach of the rules of natural justice when inviting the Adjudicator to make corrections under the slip rule. In the absence of so doing, having regard to all the circumstances of the case, by inviting the Adjudicator to exercise his powers under the slip rule, in my judgment the Defendant waived or elected to abandon its right to challenge enforcement of the Decision since it had thereby elected to treat the Decision as valid. It cannot be right that in such circumstances it is open to a party to an adjudication simultaneously to approbate and to reprobate a decision of the Adjudicator. Assuming that good grounds exist on which a decision may be subject to objection, in the absence of an express reservation of rights, either the whole of the relevant decision must be accepted or the whole of it must be contested. It follows in my judgment that the Defendant is now precluded from challenging the Decision and the Claimant is entitled to succeed in its application for summary judgment.”

The Judge went on to conclude (obiter) that there had been no breach of the rules of natural justice because, on a proper analysis of the adjudicator’s decision, he had accepted Dawnus’ argument that there was a contractual entitlement to loss and expense and had thereby rejected Marsh Life’s argument that there was not.

Comments

The case is an important reminder that parties must be astute to reserve their position if they wish to challenge the validity of an adjudicator’s decision, otherwise they risk losing any right they may have had to do so. It is also a reminder that the TCC will not be sympathetic to a close textual analysis of the pleadings exchanged in an adjudication, or to the decision itself, in considering natural justice challenges, but will instead look at matters on a macro level to identify in broad terms what claims were made, what defences were raised, and what decision was reached.

Crispin Winser acted for Dawnus, instructed by Douglas-Jones Mercer.

Click here to access the judgment.



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