Aedifice Partnership v Ashwin Shah [2010] EWHC 2106 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

summary

Where there is no agreement between the parties, whether express or implied, as to the power of the adjudicator to decide his own jurisdiction, then an adjudicator’s ruling on that issue will not be determinative and the challenger can defeat enforcement proceedings by showing a respectable case that the adjudicator has reached an erroneous conclusion as to jurisdiction.  One principal way of determining that there is no implied agreement is if the party objecting to the jurisdiction of the adjudicator makes a clear reservation.  No particular form of words is required to make this reservation.  Everything said and done during the course of the adjudication can be analysed to see whether a reservation was intended.

Technology and Construction Court, Mr Justice Akenhead

background

The claimant (“Aedifice”) was a surveyor and property consultant.  The defendant (“Mr Shah”) was the main shareholder and director of a company (the “Company”), which wished to develop a nursing home owned by the Company.  Aedifice carried out a number of services in relation to the project, including collating construction contract documentation and securing tenders.  Ultimately the project to develop the nursing home did not go ahead.  Aedifice billed Mr Shah £73k (inc VAT) in professional fees.  Mr Shah responded that the sum should be billed to the Company, and not Mr Shah.  Aedifice replied that the fee agreement had been made with Mr Shah personally; Aedifice said that there had been no fee agreement between it and the Company. 

Aedifice alleged that it had undertaken the work pursuant to a contract.  Aedifice asserted that this contract consisted of a letter sent to Mr Shah, and email from Mr Shah accepting the terms of the letter.  Mr Shah said that he had never received such a letter.  Aedifice was unable to produce the alleged email of acceptance from Mr Shah; Aedifice said this was because the email had been stored on a laptop, which had subsequently been stolen.

Aedifice referred the dispute concerning unpaid fees to adjudication.  Mr Shah was the responding party.  Mr Shah sent a letter to the Adjudicator challenging his jurisdiction on the grounds that Mr Shah had not been a party to an agreement with Aedifice.  Notwithstanding this, Mr Shah continued to take part in the adjudication.  The jurisdictional point was raised by Mr Shah’s solicitors in the Response to the Referral.  Notwithstanding Mr Shah’s jurisdictional challenge, the Adjudicator awarded Aedifice c.£51k (inc VAT and interest) and ordered that Mr Shah should pay his fees of c.£4k.  In his Decision, the Adjudicator noted that he did not have the power to determine his own jurisdiction but considered it “more likely than not” that he did have jurisdiction to deal with the dispute referred.  Mr Shah refused to pay, and Aedifice sought to enforce the Decision by way of summary judgment.    

 issues

Aedifice had conceded that there was a triable issue as to whether or not a contract existed between Aedifice and Mr Shah and if so on what terms and whether all the terms were evidenced in writing.  Unless, therefore, Mr Shah had abandoned his jurisdictional objection during the course of the adjudication, the Adjudicator’s Decision could not be enforced by way of summary judgment.  Thus the only issue addressed by the Court was whether the continued participation of Mr Shah in the adjudication without any further reservation on jurisdictional grounds meant that Mr Shah had accepted jurisdiction.

decision

The Court held:

  • Unless the parties have agreed to be bound by the result of an adjudicator’s investigation into his own jurisdiction, his ruling on that issue will not be determinative and the challenger can defeat enforcement proceedings by showing a respectable case that the adjudicator has reached an erroneous conclusion as to jurisdiction.  The agreement that the adjudicator’s decision on jurisdiction is to be binding may be either express or implied.  An implied agreement may arise where the objecting party fails to reserve its position, or there has been a unilateral waiver of any jurisdictional objection.  In determining whether there was an implied agreement, the Court will look at everything material that was done and said. 
  • One way of determining whether there was such an implied agreement is to see if the party objecting to the jurisdiction of the adjudicator made a clear reservation of its rights.
  • A clear reservation can be made by express words such as "I fully reserve my position about your jurisdiction" or "I am only participating in the adjudication under protest".  However, these forms of words whilst desirable are not absolutely essential.  All things said and done during the course of the adjudication can be taken into account to see whether by words and conduct what was clearly intended was a reservation.  It will be a matter of interpretation of what was said and done to determine whether an effective reservation was made.
  • A waiver arises where a party, who knows or should have known of grounds for a jurisdictional objection, participates in the adjudication without any reservation of any sort.  (It would be difficult to say that there was a waiver if the grounds for objection on a jurisdictional basis were not known of or capable of being discovered by the challenging party.)
  • In this case it was relevant that the Adjudicator did not actually decide the jurisdictional issue.  He proceeded expressly on the basis that he did not have jurisdiction to decide that he had jurisdiction.  This lent strong support to the view that the Adjudicator was merely indicating his thought process based on what he knew as part of his enquiry into his jurisdiction, and did not consider that there had been an express or implied agreement that he had power to determine his own jurisdiction.
  • Mr Shah had raised an effective jurisdictional challenge.  This was maintained throughout the adjudication.  Enforcement by way of summary judgement would therefore be refused.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

 

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