Jurisdiction – correct adjudication procedure
By Victoria Russell, Fenwick Elliott
Ecovision Ltd v Vinci Construction UK Ltd [2015] EWHC 587 (TCC) (11 March 2015)
Vinci Construction UK Limited (“Vinci”) engaged Ecovision Ltd (“Ecovision”) to carry out the design, supply and installation of a ground source heating and cooling system for an office development called Vanguard House in Cheshire. Vinci was the main contractor for the development under a contract with the Northwest Development Agency (“the Employer”) dated 19 February 2010 (“the Main Contract”).
The Main Contract was based on the NEC3 form of contract, June 2005 with amendments June 2006, Option C. The Subcontract was based upon the corresponding NEC3 subcontract.
Part One of the Subcontract Data stated that the Adjudicator in the subcontract was the President of the RICS and that the Adjudicator nominating body (“ANB”) was named at Appendix 6 to the Subcontract.
In fact, Appendix 6 did not name an ANB and instead stated that the adjudicator was to be the President (or if he was unable to act, any Vice-President) of the RICS.
The Subcontract contained the standard EC3 adjudication clause, used both in the form of main contract and subcontract, Option W2. Option W2 states that if the adjudicator is not identified in the (Sub) Contract Data then the parties may choose an adjudicator jointly or a party may ask the ANB to choose an adjudicator.
The additional conditions of the Subcontract (the Z clauses) purported to incorporate by reference the first 50 pages of the Main Contract, including an amendment that deleted large parts of Option W2 and provided instead that the contract was subject to English law and that adjudication should take place in accordance with the TeCSA Rules.
Therefore the Subcontract contained 3 slightly different sets of terms under which a party could request adjudication: (i) Option W2 of the Subcontract; (ii) Option W2 of the Main Contract, as amended; and (iii) if neither of the first two was operable or applicable, the Scheme for Construction Contracts (“the Scheme”).
In or around March 2011, Ecovision completed the Subcontract works. In December 2012 an operational failure of the ground source heating and cooling system at Vanguard House occurred and Ecovision and Vinci fell into dispute with regard to the adequacy of the design of the system. In June 2014 Vinci decided to refer the issue of liability only to adjudication.
On 11 June 2014, Vinci served its Notice of Adjudication on Ecovision. With regard to the appointment of the adjudicator, Vinci’s solicitors (“Systech”) inquired whether the President or any Vice-President of the RICS was free to act and, on being told that they were not, filed a request for the nomination of an adjudicator with the RICS. The RICS nominated an adjudicator, on 16 June 2014. Vinci then served its Referral Notice on 18 June 2014.
On 23 June 2014, Ecovision’s solicitors (“RPC”) wrote to the adjudicator challenging his jurisdiction on the basis that the dispute had not been properly notified or referred to adjudication. In particular, RPC requested clarity as to the adjudication procedure being followed. There then followed correspondence between RPC, Systech and the adjudicator in which RPC continued to challenge the jurisdiction of the adjudicator and on 2 July 2014 RPC notified the adjudicator that Ecovision would not be participating in the adjudication. The adjudicator maintained that he had jurisdiction and issued his decision on 17 July 2014, granting Vinci a declaration as to liability and directing that Ecovision pay his fees.
Ecovision applied to the court for a declaration that the adjudicator’s decision was of no effect and Ecovision was not obliged to comply with it.
The Judge held that the correct adjudication procedure had not been followed. Accordingly the adjudicator did not have jurisdiction, his decision had no effect and Ecovision was not obliged to comply with it.
The Judge’s comments with regard to the ability of an adjudicator to decide his own jurisdiction are worth noting. In particular, the Judge stated that even where it is common ground that a construction contract exists under which there is a right to claim adjudication, the adjudicator has no power to determine what rules of adjudication apply if there is a dispute about those rules and the dispute affects (i.e. makes a material difference as to) the procedure for appointment, the procedure to be followed in the adjudication or the status of the decision.
Beyond ensuring clear drafting from the outset, the referring party in a situation such as existed in this case will always be in a difficult position unless it can obtain agreement from its opponent as to the correct procedure to follow, which may not be easy against a background of a dispute between the parties. For absolute certainty a declaration as to the correct interpretation of the contract is an option, but involves the time and cost of making the relevant application to court.