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Posted June 6, 2017 | Published in Dispute resolution

Blowing hot and cold

“’Cause you’re hot then you’re cold
You’re yes then you’re no
You’re in then you’re out
You’re up then you’re down”

Katy Perry, “Hot n Cold”

Blowing hot and cold is known more formally as approbation and reprobation and, in construction adjudication as well as in relationships (according to Ms Perry), it is considered unacceptable.

Following the long-standing doctrine of election, a party must either accept the whole of an adjudicator’s decision or contest the whole of it; a party is not able to maintain that the decision is effective for one purpose but that it is a nullity for another. It must elect one or the other.

This was made clear in one of the first High Court decisions on adjudication, Macob Civil Engineering Limited v Morrison Construction Limited 1999. Morrison tried (unsuccessfully) to argue that the adjudicator’s decision was valid for the purposes of a reference to arbitration but was not temporarily binding in respect of the payment it was ordered to make to Macob. Morrison was held to have elected that the decision was valid in order to allow the arbitration to proceed so could not therefore argue that it was invalid in terms of the payment ordered.

"Marsh could not blow hot and cold as to the validity of the decision depending upon the adjudicator’s response to the request to correct “slips”. Marsh was therefore no longer able to challenge the decision on the grounds of natural justice."

Approbation and reprobation came up recently in Dawnus Construction Holdings Limited v Marsh Life Limited. Marsh engaged Dawnus to design and build a hotel, retail units and restaurants in Poole. There were various issues with the project, which culminated in a contentious termination by Marsh of Dawnus’ employment. Of the various disputes that arose, it was the valuation of Dawnus’ post-termination account that gave rise to a fourth adjudication between the parties and, as a result of Marsh’s dissatisfaction with the decision and a failure to pay to Dawnus the sums awarded, this TCC decision.

The adjudicator decided that Marsh should pay Dawnus over £1 million, in a decision which both parties contended contained errors. Under the amended Construction Act, parties have five days from the date of the decision to correct a clerical or mathematical “slip”.

Marsh asked the adjudicator to correct what it described as “slips”, but which were in fact substantive challenges to the decision based on natural justice. The adjudicator declined to correct Marsh’s “slips”. Marsh did not reserve its rights as to jurisdiction or natural justice when making its request under the slip rule.

Dawnus argued that by inviting the adjudicator to correct errors in the decision under the slip rule, without making a general reservation of rights, Marsh accepted the validity of the decision and thereby elected to forego any opportunity it might otherwise have had to challenge the decision.

Marsh argued that there was a difference between accepting the adjudicator’s jurisdiction and challenging a decision based on natural justice. Further, Marsh argued that it was clear from its request to the adjudicator to amend his decision to take into account its natural justice arguments that it would challenge the decision if that request was not granted.

The Judge found that Marsh’s arguments were conceptually unsound as both natural justice and jurisdiction challenges result in an adjudicator’s decision being found to be a nullity. The Judge found that Marsh’s failure to expressly reserve its right to challenge the decision on the basis of natural justice when making its slip rule request was significant as, in the absence of a reservation, in asking for “slips” to be corrected Marsh had elected to treat the decision as valid. Marsh could not blow hot and cold as to the validity of the decision depending upon the adjudicator’s response to the request to correct “slips”. Marsh was therefore no longer able to challenge the decision on the grounds of natural justice.

Including a general reservation of rights in correspondence with adjudicators has, for some practitioners, become second nature. Marsh’s failure to reserve its rights here was significant and a useful reminder of the importance of doing so.

If you have any experience of or views on this issue, please let us know by leaving a comment.

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