Adjudication rights under The Construction Act - its all or nothing

The Construction Act, which gives the parties to a construction contract the right to adjudicate their disputes, specifically excludes certain construction operations. These include erection of steelwork for the purpose of supporting or providing access to plant or machinery on a site where the primary activity is the production, transmission, processing or bulk storage of gas.

What happens if part of a dispute relates to excluded operations and part of it doesn’t?

That was the situation facing Cleveland Bridge in the recent case of Cleveland Bridge (UK) Ltd –v- Whessoe-Volker Stevin Joint Venture. The Joint Venture had engaged Cleveland Bridge to carry out works at the Dragon Liquefied Natural Gas (“LNG”) terminal at Milford Haven. At this terminal LNG is off-loaded from bulk LNG carriers which arrive by sea and is pumped to storage tanks. Part of the works involved the erection of steelwork to the pipebridges and piperacks. Cleveland Bridge commenced an adjudication against the Joint Venture claiming the sum of £365,125 outstanding under the Final Account.

Recognising that part of the works to which the outstanding payment related was arguably excluded from the Act, Cleveland Bridge asked the adjudicator either to decide the whole dispute or, if she felt that she didn’t have jurisdiction to decide the bit that related to the erection of steelwork, to decide just the bit that didn’t.

The adjudicator went ahead and decided the whole dispute in Cleveland Bridge’s favour. The Joint Venture refused to pay up and, when Cleveland Bridge issued enforcement proceedings in the TCC, argued that the decision was unenforceable because the adjudicator had decided things she had no jurisdiction to decide.

Much of the hearing was taken up with the parties arguing over how much of the adjudicator’s decision related to excluded operations and how much didn’t. The Joint Venture said there were all sorts of other elements of the dispute that were excluded, like the steelwork necessary to support the compressor house crane and electrical transformers and cabinets. Broadly speaking, Cleveland Bridge won that argument.

However, as it turned out, this was all fairly academic because Ramsey J decided that, although the adjudicator had jurisdiction to decide the bits of the dispute that related to items not excluded by the Act, the fact that she’d decided the whole dispute meant that her decision wasn’t enforceable at all. The decision was either enforceable or it wasn’t - the court couldn’t pick and choose the bits it liked and enforce those bits and not others.

Conclusion

This again serves as a lesson, if further lesson were needed, to be very careful what you include in a referral to adjudication. Include things the adjudicator has no jurisdiction to decide and you could end up with an unenforceable decision even on the good bits.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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