Background

The right to bring a dispute to adjudication is provided in the Construction Contracts Act 2002 (the Act). The Act’s success has been a game-changer in the industry and in construction dispute resolution. Any party to a construction contract may refer a dispute to adjudication and can bring subsequent adjudications where new disputes arise. What it cannot do is bring the same dispute, however dressed up or re-cast, if dissatisfied with a prior determination. This offends the res judicata rule.

The High Court recently issued a judgment in G K Shaw Limited v CentrePort Limited [2023] NZHC 605 reinforcing that res judicata applies to determinations under the Act, clarifying adjudicators’ jurisdiction under section 48, and answering whether a party can limit the adjudicator’s jurisdiction.

The adjudications and judicial review proceedings

G K Shaw Limited (GKS) entered into a construction contract with CentrePort Limited (CPL) for it to replace fenders at the Seaview Wharf in Petone, Wellington. During construction, GKS’ crawler crane was used beyond its operational limits by an unsupervised trainee dogman. The crane toppled into the sea. In the absence of GKS improving its health & safety policies and procedures, CPL terminated the contract.

GKS commenced an adjudication under s 48(1)(a) of the Act alleging CPL wrongfully terminated the contract and seeking common law damages under the Contracts and Commercial Law Act 2017. The adjudicator, Mr Robert Fisher KC, concluded that he did not have jurisdiction under s 48(1)(a) to grant the relief sought, but went on to consider the merits of GKS’ claim (seven issues) and dismissed each of them.

Unhappy with this result, GKS commenced a second adjudication, being essentially the same claims (and issues) as its first adjudication, but now brought under s 48(1)(b). The second adjudicator, Mr John Green, found that he lacked jurisdiction on the basis of res judicata – that Mr Fisher KC had already determined the same dispute in the first adjudication. GKS then issued judicial review proceedings in the High Court in respect of Mr Green’s determination.

The Act

The Act aims to facilitate, under a construction contract, regular and timely payments between parties; speedy resolution of disputes; and provide remedies for the recovery of payments. One of the Act’s highly effective tools is the summary adjudication process. An adjudication determination is one of ‘temporary finality’ in that it is binding and enforceable on all parties. However, the issue can be argued afresh in subsequent civil proceedings, or settled via mediation.

An adjudicator’s jurisdiction is limited. One area where the adjudicator is permitted to act is within the boundaries of ss 48(1) – (2). The effect of s48 is to always provide an adjudicator jurisdiction to determine ‘any questions in dispute about the rights and obligations of the parties under [their] contract.’ Where the two subsections differ is where a sum of money under the contract is claimed. If it is, the adjudicator is mandated to determine whether either or both parties are liable to make a payment under the contract, and to determine any questions in dispute about the rights and obligations of the parties under their contract. If no sum of money is sought, then the adjudicator proceeds under s 48(2), to determine just the questions in dispute about the rights and obligations of the parties under their contract.

The first adjudication

In the first adjudication, Mr Fisher KC decided that he, as an adjudicator, lacked the jurisdictional authority to grant the monetary relief sought (damages for wrongful termination). This was because damages were claimed under s 48(1)(a). Section 48(1)(a) deals with grievances arising from issues of payment under the relevant construction contract (e.g. for work done) and not claims for damages that are made outside of the contract terms. However, Mr Fisher KC went on to determine the merits of the GKS claims and whether CPL had validly terminated the contract. He determined that CPL had validly terminated.

GKS’ second adjudication claim mirrored the first. However, this time the claim relied on the ability of adjudicators to determine any questions in dispute about the rights and obligations of the parties under the contract (s 48(1)(b)). Mr Green found that he could not make an determination given that Mr Fisher KC had previously dealt with the same issues in the first adjudication. As a result the GKS’ second adjudication claim offended the legal principle of res judicata. The res judicata rule prevents a party from relitigating the same action.

The High Court

GKS sought judicial review of Mr Greens’ determination. It argued that Mr Fisher KC did not have jurisdiction to determine the issues (the non-monetary matters), and second, he did not in fact determine those issues. As a result, it contended that there was no determination of GKS’ claims by Mr Fisher KC an thus Mr Green was wrong and ti was free to bring the second adjudication claim.

These points were dispensed with by Isac J. quite quickly. In his view it was clear that Mr Fisher KC had intended to and did determine the question of whether CPL had validly terminated the contract with GKS. Equally, he considered that the language and structure of the provisions governing an adjudicator’s powers indicated that Parliament was unlikely to have intended to have created a binary approach to jurisdiction (e.g. where if there was no jurisdiction to award the monetary sum sought that means the adjudicator had no jurisdiction on any other matters). To the contrary, the Act  makes it clear that once a sum of money is claimed, all of s48(1) is engaged and the adjudicator must determine both liability to pay a sum under the contract and any question of rights and obligations under the contract. The claimant cannot, by the way they chose to frame their claim, limit the jurisdiction of the adjudicator.

The Court also ruled that even if GKS’ argument had succeeded it would not have awarded any relief.

First, that was GKS accepted in the judicial review that Mr Fisher KC was right to conclude that an adjudicator had no power to award damages for wrongful termination. As the second claim was identical to the first claim, Mr Green would likewise not have any jurisdiction to award damages (given Mr Fisher’s unchallenged ruling on this point). Unfortunately, the Court decided not to address whether Mr Fisher was right in reaching that conclusion. As a result, an opportunity to clarify a point of contention in relation to the jurisdiction of adjudicator’s was missed.

Second, the Court said the attempt to bring the same claim twice was an abuse and contrary to legal principles that a party must bring all its claims at once (in all its forms). A party cannot pursue the claim in part and then, if unhappy with the ruling, bearing a second claim with a different angle.

Conclusion

Parties are not prohibited from bring multiple adjudications under the same contract. Indeed, a feature of the Act’s summary adjudication process is for the speedy resolution of disputes. What the law will not permit is an abuse of process by a party dressing up or re-casting disputes already determined in an adjudication, in a subsequent adjudication.

It is also not permissible to attempt to limit the adjudicator’s jurisdiction under s48(1). If no sum of money is claimed, then the referral is under s48(2). If a sum of money is claim, then s48(1) is engaged and the adjudicator must determine both a sum of money payable and question of rights and obligations under the contract.