Decision leaves door open for “adjudicator shopping” warn lawyers
Lanes Group faces substantial losses after the Court of Appeal found in favour of Galliford Try in a long running legal saga which could pave the way for “adjudicator shopping”.
In a judgment handed down on 21 December, three appeal court judges dismissed Lanes’ claims against Galliford Try on all counts, instead enforcing a prior adjudication which leaves the subcontractor facing losses well in excess of £1.5 million.
Both parties had brought appeals on three separate actions concerning an adjudication decision in which Galliford Try was awarded £1.36 million while Lanes was left to foot the £105,489 cost of the adjudicator.
Lanes, together with legal commentators, now fear the verdict will leave contractors open to reject adjudicators they see as unfavourable by restarting the process until a more agreeable adjudicator is appointed.
Lanes Group commercial director Scott Norris said: “We have read the Court of Appeal judgment and are both intrigued and surprised by the court’s decision that a referring party now has an advantage over a responding party, in that it can choose the adjudicator that it best thinks will give it the result it desires.”
Bill Barton, the senior partner at Barton Legal, the firm representing Lanes Group said: “A surprising decision that sets a very worrying precedent in that it gives a green light to forum shopping.
“It will be interesting to see what impact it has on the industry and the adjudication of disputes in the future. Although intended to restrict the ability of parties to litigate over adjudication proceedings, it may well have the opposite effect.”
Independent legal experts agreed the case set a “worrying” precdent.
Speechly Birchham’s group head of construction and engineering Steven Carey said: “This decision gives the green light to ‘forum shopping’ in adjudications. It seems inherently unfair that a party can commence adjudication and then take a view as to whether the nominated adjudicator is more likely to find in their favour. The other party has no such veto.
“Nominating bodies may wish to consider whether they will re-nominate the original adjudicator is such circumstances.”
Julian Bailey, construction specialist at law firm CMS Cameron McKenna said there were differing opinions in the legal profession as to whether “adjudicator shopping” should be allowed to take place.
“The recent amendments to the Construction Act did nothing to outlaw adjudicator shopping and in the Lanes case the Court of Appeal held that there was nothing in the Construction Act to prevent a party from shopping for the ‘right’ adjudicator,” he said.
He added: “Although the court said that shopping for adjudicators is ‘never attractive’, it upheld the right to engage in the practice.”
The original dispute concerns works carried out by Lanes for Galliford Try to the roof of the traction maintenance depot in Inverness, Scotland in 2008-9.
The value of the subcontracted works was £819,367 plus VAT.
Lanes launched legal action against Galliford Try in November 2010, accusing the main contractor of wrongfully terminating the sub-contract.
Galliford Try terminated the contract after Lanes failed to complete the work on time but contended the main contractor was responsible for the delay as it was prevented from starting on site at the agreed date.
It claimed Galliford Try should pay around £2million for wrongfully terminating the contract while the main contractor launched its own claim for £2.7m in damages.
Both parties agreed to stay the proceedings to arbitration, a case which is ongoing before Mr Justice Ramsey.
Despite agreeing to go to arbitration, Galliford also served an adjudication notice on Lanes on 9 March 2011.
The Institution of Civil Engineers appointed Mr Howard Klein as adjudicator but Galliford refused to take the next step and send referral documents because Mr Klein was, or appeared to be biased because of a “robust clash” with their solicitors that Mr Klein had had in relation to an earlier case.
The tier one contractor then served a fresh notice of adjudication which led to the appointment of Mr Daniel Atkinson.
Lanes solicitors claimed Mr Atkinson’s appointment amounted to a “repudiatory breach of contract” – or one which should see the entire claim thrown out.
But the company’s attempt to stop the adjudication proved unsuccessful in the Technology and Construction Court and the adjudication went ahead.
Galliford served its documents to Mr Atkinson leaving Lanes until 10 April to respond.
When the subcontractor failed to do so, Mr Atkinson issued his “preliminary views and findings of fact”, a document he referred to as a non binding step in making his decision.
Both parties then made submissions in relation to the document which led to a final decision issued on 17 May which awarded Galliford £1.36m.
Disputing the decision, Lanes then launched a second claim in the Technology and Construction Court which failed on the grounds that Galliford had rejected its first adjudicator but succeeded on the grounds the preliminary views document amounted to evidence of apparent bias.
As such the judge dismissed a claim by Galliford Try to have the adjudication decision enforced.
Both parties then challenged the decision and appealed to the Court of Appeal.
The appeal court judges considered whether Mr Atkinson had jurisdiction as adjudicator and whether his decision was void because of bias.
While the appeal court judges were “initially attracted” by Lanes’ claim that allowing adjudication to lapse because of disapproval of the appointed adjudicator, they ultimately found in favour of Galliford’s as there are “many situations” in which it should be possible to restart adjudication.
Lord Justice Jackson’s judgement said: “My first view of this case was that Galliford could not be permitted simply to drop the first adjudication and then adjudicate before a different adjudicator whom it preferred….(but) Galliford’s conduct was permissible under the contract and the second adjudicator did indeed have jurisdiction.”
On the point of apparent bias the judges also rejected Lanes’ claim, agreeing the final decision “was not tainted by apparent bias”.
Lanes now faces paying the original adjudication sum - £1.36m – plus, costs and interest while both parties await the outcome of the arbitration proceedings.
Galliford Try declined to comment.