Aedifice vs Mr Ashwin Shah: Does the adjudicator have jurisdiction?

The Facts

In 2006 Mr Shah, the main shareholder and a director of the company Seighford Hall Nursing Home Ltd (“the Company”), obtained planning consents to develop a nursing home and began discussions with a firm of surveyors and property consultants, Aedifice Partnership Ltd (“Aedifice”).  Aedifice proposed acting as the project manager, QS and contract administrator for a lump sum fee. 

Aedifice emailed Mr Shah and stated that it would “refrain from invoicing […] until such time as some bank funding is available […] Please note however we are not working at risk”

Aedifice commenced work; however, the project did not come to fruition, potentially because of the impending recession. Aedifice sent Mr Shah an invoice for its fees in November 2008 which amounted to some £70,000 and Mr Shah responded saying that the invoice should be addressed to the company and that the invoice was not yet due to be raised.  Aedifice claimed that the invoice had been due for some time and that the fee agreement had been made with him personally.

After correspondence between their respective solicitors in 2009, Aedifice then served its notice in March 2010 referring the matter to adjudication. The RIBA duly appointed the adjudicator and Mr Shah responded to the adjudicator’s terms of reference stating:  “For the avoidance of any doubt, I do not accept the terms of reference … I submit that you have no jurisdiction to deal with this matter and I decline to take any further part in this matter…” 

Furthermore, in his response to the referral, Mr Shah invited the adjudicator to decline jurisdiction because there was no contract between him and Aedifice and, even if there was, it was doubtful that the agreement was made or evidenced in writing in accordance with s107 of the Housing Grants Construction and Regeneration Act 1996 (“the Act”).

The adjudicator ultimately decided in favour of Aedificie. He stated in his decision that whilst he did not have the power to determine his own jurisdiction, he was required to consider whether it was more likely than not that he had jurisdiction. As he was of the view that the parties had formed a “construction contract” within the meaning of the Act, he therefore found that it was more likely than not that he had jurisdiction.

The adjudicator’s decision was not honoured and Aedifice commenced enforcement proceedings by way of summary judgment. It argued that as Mr Shah continued to take part in the adjudication without any further reservation and indeed requested the adjudicator to give reasons for this decision, he accepted jurisdiction.

The Issues

(1)   Did the responding party adequately reserve its objection to the adjudicator’s jurisdiction?

(2)   Did the responding party then do anything thereafter by which it abandoned that reservation?

The Decision

Mr Justice Akenhead considered the relevant authorities and summarised the current law in relation to an adjudicator’s jurisdiction as follows:

“(a)  An express agreement to give an adjudicator jurisdiction to decide in a binding way whether he has jurisdiction will fall into the normal category of any agreement; it simply has to be shown that there was an express agreement;

(b)  For there to be an implied agreement giving the adjudicator such jurisdiction, one needs to look at everything material that was done and said to determine whether one can say with conviction that the parties must be taken to have agreed that the adjudicator had such jurisdiction…

(c)  One principal way of determining that there was no such implied agreement is if at any material stage shortly before or, mainly, during the adjudication a clear reservation was made by the party objecting to the jurisdiction of the adjudicator.

(d)  A clear reservation can, and usually will, be made by words expressed by or on behalf of the objecting party.  Words such as “I fully reserve my position about your jurisdiction” or “I am only participating in the adjudication under protest” will usually suffice to make an effective reservation…

(e)  A waiver can be said to arise 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…”

Accordingly, Mr Justice Akenhead held that the adjudicator had not been given jurisdiction to decide his own jurisdiction and that Mr Shah had not impliedly agreed for him to have any such jurisdiction. Mr Shah had given an adequate reservation and had effectively maintained it throughout the adjudication. Therefore, the parties agreed that Aedifice’s claim should be dismissed. It still remains open to Aedifice to institute court proceedings against Mr Shah or the company either on a contractual or quantum meruit basis.

Commentary:

This case is a timely reminder that any party wishing to object to an adjudicator’s jurisdiction would be well advised to do so clearly and by express words such as “I fully reserve my position about your jurisdiction…”  This position should be maintained and reinforced throughout the adjudication to ensure that all parties are aware of the reservation.   

Case Details:

Aedifice Partnership Limited v Mr Ashwin Shah  [2010] EWHC 2106 (TCC), 10 August 2010, Mr Justice Akenhead

Fenwick Elliott.

ssinclair@fenwickelliott.com 020 7421 1986