In the world of construction contracts, disputes often arise, leading to the need for adjudication. In the recent case of Engenda Group Limited v Petroineos Manufacturing,¹ the Scottish Court explored the complexities of an adjudicator’s jurisdiction and emphasised the binding nature of adjudication decisions until and unless set aside on arbitration as well as on review.

Facts

• Engenda undertook certain works at Petroineos’s plant in Grangemouth. The parties entered into a NEC3 Option C contract, with a target price and activity schedule, which also included Option W2 detailing the right to adjudicate any dispute arising from the contract. As the work progressed, disputes emerged between the parties, leading to a series of adjudications.
• The third adjudication (Adjudication 3) was particularly relevant as it dealt with the central dispute between the parties. Petroineos claimed unliquidated delay damages for £1 134 547.15 (by set-off or paid as a debt) from Engenda based on Engenda’s delay in reaching a Key Date referred to as the ‘Feed In Date’ as well as Engenda’s failure to complete the works by the completion date.
• The adjudicator found that Petroineos was entitled to various declarators because Engenda was in breach of contract due to the delayed completion of the works. However, the adjudicator declined to order payment of damages because Petroineos failed to provide sufficient expert evidence to prove its loss.
• Engenda subsequently requested payment of the £1 134 547.15 that Petroineous had withheld, prompting Petroineos to issue a pay less notice for the same amount. As a result, Engenda initiated the fourth adjudication (Adjudication 4) seeking to recover payment of this amount. The same adjudicator presided over Adjudication 4; however, this time he ruled in favour of Petroineos because Petroineos had now presented an expert quantum report to demonstrate damages resulting from Engenda’s breach of contract.
• Engenda challenged the adjudicator’s decision to consider new evidence on an issue already decided in a previous adjudication (Adjudication 3). Engenda also questioned whether the adjudicator had the jurisdiction in Adjudication 4 to assess Petroineos’s claim for unliquidated damages for late completion.

The Court’s Conundrum

During the court proceedings, Engenda emphasised that Petroineos failed to demonstrate the extent of damages caused by its breach. It pointed out that in Adjudication 3, the adjudicator had ruled in its favour, finding Petroineos’s claim for damages unproven. Engenda argued that Adjudication 4 essentially rehashed a dispute that was the same or substantially similar to the one already adjudicated in Adjudication 3.

The court dealt with the following legal principles:

• The decision of the adjudicator is final and binding: Parties are bound by the decision of an adjudicator until the dispute is reviewed or finally determined by legal proceedings, arbitration, or agreement.
• No further adjudication on the same dispute: Parties are not permitted to seek further decisions from an adjudicator on disputes already decided.
• Adjudicator’s obligation to adhere to prior decisions: An adjudicator is bound by previous decisions in adjudications between the same parties and lacks jurisdiction to determine a dispute that has been the subject of a prior decision.

Legal Principles

In assessing Engenda’s claims, the court referred to several English authorities, including:

• Carillion Construction Limited v Smith,² the principles regarding disputes being “the same or substantially the same” were outlined as follows:
  • Consider the scope and nature of the disputed claims referred to adjudication to avoid repeat references to essentially the same dispute;
  • Different or additional evidence, arguments, or quantum claims in later adjudications do not necessarily indicate a different dispute.
  • Although the quantum is different or is claimed on a different quantification basis, it could still represent the same underlying claim.
  • Be cautious about comparing documents based solely on the amount or bulk of detail, evidence, or submissions.
  • Examine the motivation and reasons for bringing the later adjudication.
  • Notices of adjudication and referral notices are not bound by specific forms and may vary in detail and legal expertise.
  • Determine if essentially the same causes of action are relied upon in both earlier and later notices of adjudication and referral notices.
• Sudlow Ltd v Global Switch Estates 1 Limited,³ provided further context and guided as follows:
  • Construction adjudication aims for speedy resolution with temporary finality, but serial adjudications can challenge this goal.
  • The focus should be on what was truly decided in the earlier adjudication to determine if the later one would be affected by the previous decision.
  • The fact and degree test offers flexibility to allow new or wider claims while preventing re-adjudication of the same or similar claims.
• Lewisham Homes Ltd v Breyer Group plc,⁴ set out the following ten principles:
  • Parties are bound by an adjudicator’s decision on a dispute until it is finally resolved by the court, arbitration, or agreement.
  • Seeking further adjudication on an already-decided dispute is prohibited.
  • The determination of whether a dispute is the same or substantially similar to a prior one depends on the analysis of the issues and the adjudicator’s decision.
  • The focus lies on what the first adjudicator decided. This is because the decision made by the first adjudicator dictates the extent to which the second adjudicator needs to review the matter.
  • The prohibition against further adjudication applies not only to identical disputes but also substantially similar ones, to prevent circumvention of the process.
  • Whether a dispute is substantially the same is a question of fact and degree. It involves assessing the key elements of the dispute and the decision of the first adjudicator.
  • Differences in how the case is presented is not necessarily sufficient, especially if the second adjudication is no more than an attempt at an improved version of the first.
  • The second adjudicator’s decision to reject a jurisdictional point carries weight but is not binding.
  • Contractual provisions may influence the analysis of whether further adjudication is permitted.
  • The underlying bar against further adjudication is based on either an absence of jurisdiction or unfairness to one party due to the prior decision.

The Court’s Decision

In light of these legal principles, the court identified flaws in the adjudicator’s decision in Adjudication 4. Despite the adjudicator’s assertion that Petroineos’ entitlement to damages for late completion had not been addressed in Adjudication 3, the court disagreed. It found that Petroineos’ case in Adjudication 4 was essentially the same as that advanced in Adjudication 3, it was just presented differently and with new supporting evidence.

The court concluded that Petroineos’s attempt to raise the issue of damages for late completion in Adjudication 4 was invalid and that the claim should be pursued through litigation or arbitration proceedings.

South African Law Perspective

In South Africa, the role of adjudication in resolving disputes within construction contracts has become increasingly significant. From addressing the authority of adjudicators to revisiting disputes and rectifying mistakes, the cases discussed below offer valuable insights into South Africa’s stance on adjudication as a means of dispute resolution in construction contracts.

• In Sasol South Africa (Pty) Ltd v Murray & Roberts Limited,⁵ one of the arguments raised by Sasol was that the adjudicator decided on the same matters twice, which is something he was contractually prohibited from doing. However, the court held that the contract empowered the adjudicator to review and revise any action or inaction of the project manager. Therefore, the adjudicator did not reconsider a decision but simply performed a contractual function.
• In Framatome v Eskom,⁶ the Supreme Court of Appeal (SCA) held that the adjudicator’s decision remained final, binding and enforceable on the parties “until and unless” set aside on review or appeal.
• In Ekurhuleni West College v Segal and Another,⁷ it was held that the parties are bound by the decision of the adjudicator and ‘…the tribunal has the power to reopen the dispute. Mistakes will be made by adjudicators, but that is inherent in the scheme of adjudication. Such mistakes can be rectified in subsequent arbitration or litigation.’

Commentary

While cases addressing an adjudicator’s inability to decide a previously adjudicated dispute are rare in South Africa, the Sasol case stands out as one of the few examples tackling this issue. While the judgment in Engenda Group Limited v Petroineos Manufacturing is not legally binding in South Africa, it relies extensively on English authorities. Given that South African courts follow English cases on adjudications, it is therefore likely that this judgment will be considered persuasive in South African courts.

In conclusion, this judgment highlights the courts’ consistent stance that an adjudicator cannot revisit an issue already resolved by a previous adjudication except in certain circumstances. It highlights the critical importance for parties to meticulously gather and present all pertinent evidence during the initial adjudication, as failure to do so could severely impact their case. Repeating adjudications to introduce new evidence is discouraged, emphasising the finality of adjudicator decisions unless appropriately challenged.

¹  Engenda Group Ltd v Petroineos Manufacturing Scotland Ltd [2024] CSOH 36 (26 March 2024) (Lord Young).
²  Carillion Construction Limited v Smith [2011] EWHC 2910(TCC) at para 56.
³  Sudlow Ltd v Global Switch Estates 1 Limited [2022] EWHC 3319 (TCC) para 55 to 58.
⁴  Lewisham Homes Ltd v Breyer Group PLC [2021] EWHC 1290 (TCC) at para 34.
⁵  Sasol South Africa (Pty) Ltd v Murray & Roberts Limited (Case no 425/2020) [2021] ZASCA 94 (28 June 2021).
⁶  Framatome v Eskom Holdings SOC Ltd [2021] ZASCA 132; 2022 (2) SA 395 (SCA) (1 October 2021) para at 23.
⁷ Ekurhuleni West College v Segal and Another (26624/2017) [2018] ZAGPPHC 662 (29 August 2018).