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Approbation and Reprobation in Adjudication – Another Jurisdictional Challenge Fails [February 2019]

Introduction

As a means to resist enforcement of an adjudicator’s decision, or otherwise frustrate the adjudication process, parties regularly challenge an adjudicator’s jurisdiction. The first challenge is often that the referring party has not followed the correct procedure in appointing the adjudicator. However, a party cannot “blow hot and cold” in asserting an adjudicator’s decision is valid for one purpose while also challenging its validity for another; a principle known as approbation and reprobation (“A/R”).

These two issues were considered in Skymist Holdings Ltd v Grandlane Developments Ltd, as to which Waksman J provided guidance on the principles of A/R in adjudication. The TCC held that the adjudicator’s findings were not inconsistent with the manner in which jurisdiction had been conferred on him. Further, the A/R claim was rejected.

Facts
Skymist Holdings Ltd (“Skymist”) engaged Grandlane Developments Ltd (“Grandlane”) to provide development and project management services at its property. The key terms of the contract were evidenced in a document entitled the Draft Deed of Appointment (the “DOA”) which the parties circulated amongst themselves. However, the DOA was never signed nor was there evidence that both parties agreed to all of its contents. Following Skymist’s termination of Grandlane’s employment, Grandlane claimed that it was owed substantial sums and sought to adjudicate.
The First Adjudication
The DOA identified the Chartered Institute of Arbitrators (the “CIArb”) as the adjudicator nominating body (“ANB”). Grandlane issued a notice of adjudication (a “Notice”) to Skymist pursuant to paragraph 2(1)(b) of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended) (the “Scheme”) and the CIArb nominated an adjudicator. Skymist challenged the adjudicator’s jurisdiction on a number of grounds, one of which was that the DOA had not been agreed and so there was no agreement to have the CIArb as the ANB. As a result, Skymist contended the adjudicator’s appointment was a nullity and Grandlane withdrew the adjudication.
The Second Adjudication
Grandlane issued a second Notice with some important changes. In the absence of a contractual term specifying a particular ANB, Grandlane had to choose an ANB to nominate the adjudicator pursuant to paragraph 2(1)(c) of the Scheme. In this instance, Grandlane applied to the RICS Dispute Resolution Service (the “RICS”).
Once again, Skymist challenged the adjudicator’s appointment. Skymist contended that, since Grandlane’s case was that the relevant contract was constituted by the DOA, the request to the RICS was incorrect on the basis that the DOA expressly provided for the appointment to be made by the CIArb. Ironically, this is exactly what Grandlane had sought to do, and what Skymist had objected to, in the first adjudication.
The adjudicator determined that he did have jurisdiction and issued a decision in favour of Grandlane. Skymist issued a Part 8 claim. Its position was that:
  1. By his decision, the adjudicator had found that the relevant contract was the DOA (or, at least, a contract which included the adjudication clause under the DOA) and so the appointment of the adjudicator should have been made by the CIArb.
  2. Further or alternatively, Grandlane approbated and reprobated the DOA in that Grandlane had relied upon it in the adjudication but had reprobated, at least, part of it (the adjudication clause) when seeking a nomination from the RICS. As a result, Grandlane was precluded from applying to the RICS.
Judgment
Issue 1: the DOA as the relevant contract
Waksman J observed that Grandlane did not contend, in either its Notice or its Referral, that the contract was wholly evidenced by the DOA. Further, the dispute referred to adjudication turned on mostly factual (rather than contractual) issues, as to which the relevant contract terms were not contentious. Therefore, the adjudicator did not make (nor did he have to make) any detailed or comprehensive findings as to the scope of the DOA or the contract more generally.  
Waksman J concluded that the adjudicator did not find that there was a contract which contained sufficient of the DOA’s terms so as to include the adjudication clause. The adjudicator’s decision was not a nullity for want of jurisdiction since his findings were not inconsistent with the manner by which he was appointed.   
Issue 2: Approbation and Reprobation
In dismissing Skymist’s claim, Waksman J considered the relevant case law and provided guidance as to the principles of A/R in adjudication:
  1. the approbating act or conduct must be clearly defined and unequivocal;
  2. the party must gain a benefit from the approbation; and
  3. the reprobating act must be clearly inconsistent with the approbation (and so itself must be clearly defined and unequivocal).
Skymist’s case was that Grandlane had approbated the DOA (necessarily including the adjudication clause) in its Notice and Referral, and in claiming the adjudicator’s decision as binding, and that it had reprobated the DOA in its means of securing the appointment of an adjudicator via the RICS.  
Following on from issue 1, Waksman J did not consider Grandlane to have approbated the DOA since Grandlane did not suggest that the contract between the parties was wholly evidenced by the DOA. In any event, Waksman J held there was no reprobation when Grandlane requested the RICS to nominate an adjudicator. As Grandlane had withdrawn its first adjudication and reformulated its Notice, Grandlane was clearly proceeding on the basis that the contract, whatever its scope, did not contain the adjudication provision in the DOA. Accordingly, Skymist’s A/R claim failed.
Commentary
Curiously, Skymist claimed Grandlane had approbated the DOA. Waksman J had serious doubts as to whether A/R could be used in this way. Previous cases had only dealt with A/R in the context of an adjudicator’s decision and so it is difficult to reconcile the basis of Skymist’s claim. The first adjudication was voluntarily withdrawn by Grandlane and so there was no decision to approbate. Similarly, the second adjudicator’s decision did not decide on the scope of the DOA.
Further, on Skymist’s analysis, Grandlane was stuck in a ‘catch 22’ situation. On one hand, it was unable to appoint an adjudicator via paragraph 2(1)(b) of the Scheme since Skymist’s case was that the DOA was not agreed. Yet, at the same time, Skymist contended that, since Grandlane’s case was based in part on the DOA, it could only appoint an adjudicator through paragraph 2(1)(b). Ironically, if there was any A/R it was on the part of Skymist.
While the question of jurisdiction is crucial to the enforceability of an adjudicator’s decision, this case is a reminder that the courts will not engage in highly technical (but legally unmeritous) arguments. You might ask what was Skymist’s goal in resisting enforcement in this way? Even if Skymist had been successful in its claim, Grandlane could have pursued a third adjudication or litigation to decide the original dispute which would have racked up further costs and time for both parties. As it happened, Skymist was unsuccessful and the additional costs and time incurred was for no apparent benefit. If Skymist genuinely believed it had a legitimate case as to the original dispute, surely it would have been better to channel its resources into finally determining it via litigation rather than merely delaying it through satellite litigation.
The moral of this story is to ensure you have followed the correct procedure in appointing an adjudicator or perhaps, more simply, it is to ensure you have finalised the terms of agreement when entering into contract so that all parties know what they have signed up for.
Case: Skymist Holdings Ltd v Grandlane Developments Ltd
This article and/or any information contained herein is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking, or refraining from, any action as a result of the contents of this article.

20/02

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