Challenges to adjudication: keep it plain and simple

Scotland’s stunning new Queensferry Crossing, at 1.7 miles long, is the world’s longest three-tower cable-stayed bridge. The project cost all in (with new road network) was £1.3bn. There are accolades galore. But it was a failure for international elevator company Maspero Elevatori S.pa. Its subcontract was for the three lifts in those three towers, but the joint-venture design and build contractor Forth Crossing Bridge Constructors terminated the subcontract part way through the works. The JV, which included Hochtief and Galliford Try, said Maspero’s progress was not up to the mark, and out it went. Worse still, the JV told Maspero that none of its design, materials or works hitherto done could be used. The bill it then issued was the result of having another lift contractor effectively start afresh and redo Maspero’s works. The scene was set for a dispute. The adjudicator entered onto the stage.

Maspero told the adjudicator the termination was invalid. No, said the adjudicator, it was sound. The adjudicator awarded £1.297m to be paid by the lift company forthwith. That was last August. Maspero refused to comply with the mandatory order. The JV then sought to enforce via the Scottish Court of Session. It got an enforcement but still Maspero resisted, so it decided to appeal in the Scottish Inner House, Court of Appeal. Three judges heard the appeal.

There were four points to consider:

• Did the adjudicator go beyond his jurisdiction by considering a document (see below) agreed after the original contract was formed? Maspero said the document was not part of the contract.
• Was the scope of the dispute as wide as the adjudicator considered?
• Was any point about scope or jurisdiction of the dispute specifically taken at the time of the adjudication?
• In any event, was any jurisdiction challenge made at all?

As to the first point: Maspero and the JV first entered into a contract in 2012. Then, once the design and manufacture was under way, the parties met on 24 July 2018 at Maspero’s Lake Como offices and agreed what they called a new agreement, the “Como agreement”. The adjudication was brought on the basis that the contract was made in 2012 and the Como agreement was a variation under the contract such that there was a new agreement on price, programme and resource supply.

The court will only interfere in the plainest of cases; it is chary of technical defences

Scottish Court of Appeal

Maspero said that went too far. The Como agreement was, it said, the new and only agreement. It followed that the adjudicator had no jurisdiction, because the referral took the adjudicator to the original contract as well. But that was overtaken, said Maspero.

The adjudicator rejected this argument and carried out the adjudication. Eventually Maspero raised the point in court, saying he had gone beyond his jurisdiction by considering the contract included the Como agreement.

The first judge and then the Court of Appeal judges agreed with the adjudicator. His award regarded the Como Agreement as a variation to and as being within the original 2012 contract.

The adjudicator’s award then went on to say that if he was wrong in rejecting the argument about contract content, “I consider that the challenge to my jurisdiction has not been made at the outset of the adjudication procedure when it ought to have been known. The respondent has not set out any challenges to my jurisdiction clearly.” The first court and the Court of Appeal considered this point: whether the jurisdiction challenge or challenges had been made properly.

The position is helpfully made clear by the Scottish court.

It is plain that Maspero argued early in the adjudication that the adjudicator was being incorrectly asked in the referral to decide the dispute on the wrong contract. As I see it, there seem to be two challenges mixed together: (1) You have the wrong contract; and (2) This is a challenge to the right to adjudicate because there is no right arising out of the wrong contract.

There is a snag in all this. The policy of courts in Scotland, England and Wales is to support construction contract adjudication. The Court of Appeal in this case gave a nudge in that direction, saying “the court will only interfere in the plainest of cases; it is chary of technical defences”.

So, did Maspero properly make a jurisdiction challenge? The Court of Appeal judges looked at what the English Court of Appeal says. They approved Lord Justice Coulson’s remarks in Lonsdale vs Bresco: “[…] the purposes of the 1996 act would be substantially defeated if a responding party could, as a matter of course, reserve its position on jurisdiction in general terms at the start of an adjudication, thereby avoiding any ruling by the adjudicator or the taking of any remedial steps by the referring party; participate fully in the nuts and bolts of the adjudication, either without raising any detailed jurisdiction points, or raising only specific points which were subsequently rejected by the adjudicator (and the court); and then, having lost the adjudication, was allowed to comb through the documents in the hope that a new jurisdiction point might turn up […] in order to defeat the enforcement of the adjudicator’s decision at the eleventh hour”.

Maspero had not been plain and certain in its jurisdiction challenge. No challenge was permitted.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple