Getting serious on serial disputes

Serial adjudications can come thick and fast sometimes. It’s attractive to knock each dispute on the head as they pop up. Bear in mind that an adjudicated dispute decision is binding on those adjudicators trotting along behind. But watch out for subtleties. The issue in the interesting Scottish case Engenda Group Ltd vs Petroineos Manufacturing Scotland Ltd [2024] CSOH36 is whether the adjudicator was bound by what he had decided last time round. He said no; Engenda said yes; Petroineos said no. The court said yes.

Petroineos subcontracted a variety of engineering services works at Grangemouth Refinery to Engenda Group. Disputes cropped up. Adjudications #3 and #4 are interesting.

In #3 the adjudicator decided that Engenda was in breach of contract for delays, but declined to order damages. Engenda then claimed its balance of account of £1.1m. Nothing came, so Engenda began adjudication #4. Petroineos countered in the adjudication, with a defence being a claim in damages of £1.1m plus more.

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Petroineos relied on the declarations as to liability, in adjudication #3, for critical delays. It had not actually set out in adjudication #3 what additional costs had been incurred and had not framed its claim in #3 on that basis. It was said that there was no relevant claim before the adjudicator in #3 for loss arising from a failure to comply with the key dates. So, said the adjudicator, it was open to Petroineos in adjudication #4 to claim for its loss and expense.

Hold on, said Engenda, all this is dealt with in adjudication #3. But don’t hold your breath for long. The adjudicator reckoned Petroineos was in good order to bring its money claim.

The Construction Act 1996 says that an adjudicator’s decision binds the parties until finally decided in litigation or arbitration. And that “the adjudicator is bound by previous decisions in adjudication between the same parties and has no jurisdiction to redetermine a dispute which has been the subject of a prior decision”. A variety of previous cases have rehearsed the approach to determining whether the same or a similar dispute has been determined in an earlier adjudication.

Mr Justice Waksman set out 10 principles to fathom whether the same or similar disputes were being brought again. Pin the list on your office wall, fellow adjudicators

In this Engenda Group Ltd vs Petroineos Manufacturing Scotland Ltd case, the judge was attracted to a set of tests in the case of Lewisham Homes Ltd vs Breyer Group [2021]. In that case, Mr Justice Waksman set out 10 principles to fathom whether the same or similar disputes were being brought again. Go to Engenda Group Ltd vs Petroineos Manufacturing Scotland Ltd [26/03/2024] Scottish Court of Session, Outer House. Pin the list on your office wall, fellow adjudicators. Note in particular, principle #6: examples of disputes which might or might not be “substantially the same”. An extension of time for a new relevant event is not the same dispute. Examples of variations are given that are not the same dispute second or third time around.

Let’s recap. Engenda brought adjudication #4 saying it was owed the balance of its final account of £1.1m. It also said that Petroineos could not offset or deduct its claim for Engenda’s late completion of more than £1.1m. The reason, said Engenda, was that adjudication #3 had decided that nothing was payable for those delays. There was no jurisdiction to re-decide the point. But the adjudicator said in adjudication #4 that his decision in #3 left open the amount of damages payable by Engenda for late completion. That’s the issue that came into the Scottish Court of Session. Was the adjudicator wrong?

Put it another way: What issue was put to the adjudicator in #3 and did he decide it; and what did that decision say?

What he had to decide in adjudication #3 was whether Engenda had failed to complete by the completion date. Petroineos claimed £1.1m damages. But in the formal decision of #3, it was said Petroineos had failed to properly establish the losses. So the adjudicator decided £0.

Then, in #4, Petroineos came back with a detailed expert report about the sums involved in its losses. Engenda baulked at that, but the adjudicator said he had not previously determined the entitlement to damages for a failure to complete the works by the completion date.

It’s true that the adjudicator could not fathom whether or what the sum was that was due for late completion in #3. Nevertheless, Petroineos had alleged that Engenda had breached the contract and caused losses. But there was not enough evidence to identify the loss claimed, so he awarded £0. At that point in adjudication #3, the late completion claims made by Petroineos succeeded in proving delay but completely failed on proving quantum.

It might be said that the adjudicator did exactly as he was required in #3, albeit he awarded £0. But no door was left open for a better prepared claim to be put up in adjudication #4. The court refused to enforce the adjudicator’s position, which was that Petroineos had a £1.1m set-off against Engenda. No, no, said the judge, adjudication #3 was binding and it said zero. So the counterclaim by Petroineos failed.

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