Does an adjudicator have the jurisdiction to value a variation if it has been decided as £Nil by a previous adjudicator?

Challenges In Construction & Property

Published on July 4, 2019

Shriya Chandarana looks at the case of Hitachi Zosen v John Sisk and Son to discuss whether an Adjudicator has the jurisdiction to value a £Nil variation by a previous Adjudicator

The Dispute
In the case of Hitachi Zosen v John Sisk and Son Ltd [2019] EWHC 495 (TCC), the Court of Appeal made a key distinction between what had been decided in a previous adjudication and whether it was ‘the same or substantially the same’ as that being decided in a subsequent adjudication

The issue referred to adjudication on both occasions concerned an entitlement to costs for acceleration works. Clause 30.1 of the Contract between both parties covered the pricing of variations and entitlement to “all reasonable and unavoidable additional direct Cost and Expense incurred”

The respondent, Hitachi was employed to design, engineer, construct, commission and test a multi-fuel power plant on an existing coal-fired power station in Yorkshire. Sisk were engaged by Hitachi to provide design and construction services for the project for a consideration in excess of £44 million.
Sisk was instructed to conduct acceleration works to the boiler hall which was identified as Event 1176. Sisk provided a valuation by way of Application Six on 16 October 2015 which Hitachi rejected and responded to with a payment notice. Sisk referred this matter to adjudication [the Second Adjudication]

Second adjudication
In the second adjudication, it was decided that the additional work undertaken had amounted to a variation under Clause 30.1 of the Contract. The adjudicator valued the variation as ‘£nil’ in the absence of sufficient information. Sisk perceived this as an opportunity to seek a valuation on a subsequent application where additional information could be presented to an adjudicator.

Eighth adjudication
In the later adjudication, Sisk presented further evidence and requested that the adjudicator make an order for Hitachi to pay £994,000 in relation to Event 1176. Sisk also suggested that Hitachi should have previously submitted a variation order. The adjudicator on this occasion valued Sisk’s claim as £825,703 which Hitachi was required to pay.
Hitachi argued that the adjudicator in the second adjudication had already valued this claim as ‘£nil’ and therefore the eighth adjudicator did not have the jurisdiction to make a further decision on this point. This raised a question of whether both adjudicators had answered the ‘same or substantially the same’ question.

Stuart-Smith J relied on two cases in reaching his judgement. The first was Quietfield v Vascroft Construction [2006] EWCA Civ 1737 in which May LJ stated it way key to distinguish ‘what the earlier adjudicator actually decided’. Similarly, in Harding v Paice [2015] EWCA Civ 1231 (a Silver Shemmings Ash case) Jackson LJ stated “one must look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided, which determines how much or how little remains available for consideration by the second adjudicator.”

Stuart-Smith J applied this principle to this case by asking two questions:
1. What did the adjudicator in the second adjudication decide about event 1176?
2. Is the dispute which has been referred to the eighth adjudicator the same or substantially the same as the dispute decided by the second adjudicator?

In his judgement he concluded “the adjudicator expressly declined to take a view or make a decision about the proper value that could or should be attributed to Event 1176. His value of ‘£nil’ was not a valuation of the variation as such; the figure ‘£nil’ was merely the consequence of the lack of substantiation before him and was not intended to express any view about or to decide whether Sisk had incurred Cost and Expense for which they should be reimbursed in due course.”

The eighth adjudicator had the jurisdiction to decide the appropriate value for Event 1176 and Hitachi was required to pay the sum of £825,703.

Key Points To Note
In concluding whether an adjudicator has the jurisdiction to make a decision on a point, it is important to distinguish between what has been decided in previous adjudications and what is being decided now. Only then will it be clear whether in a future adjudication, the same or substantially the same question would be answered by an adjudicator.

A value of ‘£nil’ when there has been insufficient information presented to an adjudicator at first instance may provide parties grounds for multi adjudications in circumstances where a dispute is not same or substantially the same as a previous one, when the question in matter has not been decided but left open for decision.

Author Shriya Chandarana has 4 years’ experience working both at City law firms and in-house, reviewing JCT, NEC and FIDIC contracts and flagging key provisions including delay, notice requirements, key mile stones, payment terms, variations, liability, indemnity and termination clauses, parent company guarantees and collateral warranties, attending a Court of Appeal hearing for claims for delay, costs and damages that arose through civil war/ force majeure, attending a mediation with private individuals/ clients who have decided to terminate contracts due to breach of contract on the contractor’s side, attending and preparing for adjudication whilst working in house for the main contractor who was party to a joint venture agreement, assisting on an International Arbitration against a State for the sum of £400 million and assisting on projects relation to decommissioning (oil and gas)

Written by Shriya Chandarana
Shriya has 4 years’ experience working both at City law firms and in-house.

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