Eurocom Limited v Siemens PLC [2014] EWHC 3710 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

summary

1. Where the application form requesting the nomination by the RICS of an adjudicator on a construction contract includes a fraudulent misrepresentation this invalidates the process of appointment and consequently the adjudicator appointed does not have jurisdiction. Although the application form states that the RICS will automatically copy the form to the responding party this is merely best practice and its failure to do so does not nullify the nomination. Further, if a party, in breach of contract, subverts the adjudication process in a way which goes to the heart of the appointment then the adjudicator does not have jurisdiction.
2. By considering and deciding claims that were determined in a previous adjudication the adjudicator had exceeded his jurisdiction. He had not, however, breached the rules of natural justice by admitting further submissions and documents (in respect of which he may exercise his discretion), nor by the imposition of short timeframes, within which in any event the parties had shown they were able properly to respond.
3. Where the applicant for summary judgment is unlikely to be able to meet the costs of final determination, in circumstances where its poor financial position is due only in part to the respondent’s failure to pay an adjudication award, the Court will grant a stay of enforcement.

Technology and Construction Court, Mr Justice Ramsey

BACKGROUND

On 20 April 2011 Siemens Plc (“Siemens”) and Eurocom Limited (“Eurocom”) concluded a subcontract under which Eurocom was to install communications systems at Charing Cross and Embankment underground stations (the “Subcontract”).

Disputes arose between the parties concerning delay to the commencement of the work, variations, prolongation, delay and disruption. On 20 July 2012 and subsequently on 8 August 2012 Eurocom served notices of adjudication on Siemens. The decision of the adjudicator (the “First Adjudication”) was given on 27 September 2012 in which it was determined that a net amount of £35,283.98 was due from Eurocom to Siemens but Eurocom made no payment at this stage.

Over a year later, Eurocom issued a claim document dated 21 October 2013 which was served by Eurocom’s representative, Knowles Limited (“Knowles”), to which Siemens responded by requesting documents and stating that the claim was “currently rejected”.

On 21 November 2013 Knowles served notice of adjudication on Siemens in relation to the claim (the “Second Adjudication”). On the same day Mr Peter Giles of Knowles submitted an application to the RICS for appointment of an adjudicator. On the application form, in a box underneath the question “Are there any Adjudicators who would have a conflict of interest in this case?”, Mr Giles provided a list of adjudicators he “advise[d] … should not be appointed”. This list included the adjudicator in the First Adjudication (the “First Adjudicator”) with the remark that he had “acted previously”. Upon investigation by the RICS it transpired that there was no conflict of interest on the part of any of the individuals listed.

Although a RICS explanatory note in relation to conflict of interest states that the application form will automatically copied to the responding party, the RICS did not send Siemens a copy of the form until on 7 January 2014 when it was requested by Siemens.

An adjudicator was duly nominated in the Second Adjudication (the “Second Adjudicator”) and he produced a written decision on 28 January 2014 which, as amended under the slip rule, decided that Eurocom was entitled to £1,521,313.75, together with £93,029.38 interest, making a total of £1,614,343.13.

Siemens did not pay and Eurocom commenced court proceedings on 25 July 2014 and applied for summary judgment to enforce the Second Adjudicator’s decision.

ISSUES

The Court was asked to decide:

Whether the appointment of the adjudicator in the Second Adjudication was invalid because of the information provided by Mr Giles of Knowles to the RICS in making the application for the appointment of an adjudicator and/or by the action of the RICS in failing to raise conflicts of interest with Siemens in accordance with the procedure in their explanatory notices.
Whether the decision in the Second Adjudication sought to adjudicate again on the same or substantially the same matters as had been referred to and/or decided in the First Adjudication.
Whether the adjudicator in the Second Adjudication adopted a procedure which contravened the rules of natural justice.
Whether there should be a stay of enforcement of any sums awarded by way of summary judgment.

DECISION

The Court dismissed Eurocom’s application for summary judgment and held that:

In completing the RICS application form for the appointment of an adjudicator on behalf of Eurocom Mr Giles deliberately or recklessly answered the question in respect of conflicts of interest falsely and that therefore he had made a fraudulent representation to the RICS.
This statement was material and was made improperly to eliminate candidates on the basis they had a conflict of interest when they had none. The fraudulent misrepresentation would invalidate the process of appointment and make the appointment a nullity with the effect that the Second Adjudicator did not have jurisdiction.
A party applying for a nomination of an adjudicator by the RICS should not act dishonestly and there may be an implied term that the parties should not act dishonestly. In this case there would be a breach of that implied term through the failure to follow the correct adjudication process in a way which goes to the heart of the appointment and therefore this provided an alternative basis on which the Second Adjudicator did not have jurisdiction and the appointment was invalid.
While it is good practice for the RICS to copy the application form to the other party where are alleged conflicts of interest, this is not required as a matter of procedural fairness under the principles of natural justice. The role of the adjudicator nominating body is limited to a proper exercise of their discretion to make the nomination. Nothing in the process followed by the RICS invalidated the nomination of the Second Adjudicator.
Given that the majority of the heads of claim in the Second Adjudication had already been raised and determined in the First Adjudication the Second Adjudicator did not have jurisdiction to decide those elements.
As the Second Adjudicator did not make any allowance for the claims decided in the First Adjudication but treated the claims as being new in the Second Adjudication, it is not possible to isolate the new elements of claim. It is therefore not possible to server the decision in the Second Adjudication so as to enforce part of those claims in respect of those new elements for which the adjudicator did have jurisdiction.
The procedure adopted by the Second Adjudicator did not contravene the rules of natural justice. The time periods in which a party has to respond to submissions and material produced in the course of adjudication are necessarily short and an adjudicator has discretion as to any further submissions and documents he admits.
If summary judgment had been granted the Court would have allowed a stay of enforcement on the grounds that the financial position of Eurocom meant that it would be unlikely to be able to repay part of the award if it were later determined that these sums should not have been awarded to Eurocom. Had the Second Adjudicator had jurisdiction a sum much less than the sum awarded in the decision in the Second Adjudication would have been payable and Eurocom could not rely on its impecuniosity as being caused by Siemens’ failure to pay.

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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