Out-Law News 2 min. read

New evidence allows second valuation of works in adjudication dispute

A contractor has won a case in England over payment for work which was valued at nil by an adjudicator, after bringing new evidence to a later adjudication which the High Court said that the second adjudicator had jurisdiction to consider.

The Court said the contractor was able to enforce the later decision over the value of work carried out as a variation on a contract, despite an earlier adjudication where the adjudicator had found the variation was valid but its value was nil.

Contractor John Sisk & Son was carrying out work for Hitachi Zosen Inova on the construction of a new power plant at Ferrybridge in Yorkshire. The piece of work under dispute was valued by Sisk at just over £1 million, but Hitachi said it would not pay for it, claiming that Sisk had been overpaid.

At adjudication the adjudicator concluded that the piece of work disputed, known as ‘Event 1176’ required valuation but that there was insufficient evidence to value it. Accordingly he put the value at “£nil”.

Sisk pursued efforts to get payment for Event 1176, and in a later, eighth adjudication the adjudicator decided that it had substantiated a claim for around £825,000. He made ordered Hitachi to pay that amount, plus interest, which Hitachi disputed at the High Court.

The High Court said the eighth adjudicator did have jurisdiction to decide the dispute, as the earlier adjudicator had declined to put a value on the works due to lack of evidence. Sisk’s efforts to find evidence meant the works could be valued properly.

Hitachi claimed that the earlier adjudication decided the value of Event 1176, and that the fact Sisk did not refer the case to court quickly enough made the valuation binding. The judge said if that argument was correct, Sisk would have had nothing to refer to the court for decision.

“The other consequence, if Hitachi's submissions were correct, would be that the smaller the margin by which Sisk failed to prove an item in an early adjudication, the more powerful would be the argument that it was precluded from bringing back that item for payment in a later Payment Application and adjudication. So, a major item of cash-flow could be lost for want of an evidential horseshoe nail,” the judge said.

“This seems quite contrary to the well-known policy considerations lying behind arrangements for interim payments and interim adjudications, which is to secure cash-flow relatively quickly and cheaply but with the possibility of correcting adjustments later if necessary,” the judge said.

The judge said that previous rulings on this issue had focused on the adjudicator's own view of whether one dispute is the same as another, which he said was not the only factor to consider. He said that an overlap of evidence submitted in two adjudications would not lead to the conclusion that they concerned the same dispute.

Disputes expert Douglas Simpson of Pinsent Masons, the law firm behind Out-Law.com, said that the ruling provides some clarity on when an issue can be looked at again.

"The ruling does not establish a new principle, but emphasises that the starting point for considering whether two disputes are the same or substantially the same is a comparison of what was actually decided by the first adjudicator, with what was referred to the second. It is also a reminder that there are cases where new evidence means that a second dispute is not the same as the first. The relevance of these points to other disputes will depend on the specifics of those disputes," he said.

"This ruling might encourage referring parties dissatisfied with some aspect of an adjudicator's decision, to refer issues to a second adjudicator if it is arguable that the first adjudicator left some part of the claim undecided or new evidence for the referring party's position becomes available," he said. "I don't think this was the Court's intention in this ruling, and the case will not necessarily make it easier for such arguments to succeed," said Simpson.

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