QE Hospital claim competent despite adjudication clause

A Court of Session action claiming £72.8m damages arising from the construction of the Queen Elizabeth University Hospital in Glasgow has been held competent despite an adjudication provision in the main contract.

Lord Tyre held while there was no general rule that some cases were too large and/or complicated to be suitable for adjudication, and the dispute fell within the relevant adjudication clause, the same principles applied as with arbitration clauses and the appropriate course was to sist the action pending the outcome of the adjudication.

The claim, for breach of contractual and common law duties, was brought by Greater Glasgow Health Board, shortly before the expiry of the five year prescriptive period, following the discovery of numerous defects at the new hospital, including in the water, heating and ventilation systems, doors, glazing and the atrium roof. The defenders were (first) the main contractor, Multiplex Construction (Europe) Ltd; (second) two corporate guarantors of the first defender; (third) the lead consultant, Currie & Brown (UK) Ltd; and (fourth) the project supervisor, Capita Property & Infrastructure Ltd.

The relevant contracts were the NEC3 Engineering and Construction Contract, Option C, and the NEC3 Professional Services Contract, Option A, each of which included clause W2, referring to adjudication “a dispute arising under or in connection with this contract”.

For the pursuer, supported on this point by the third defender, it was argued that the clause did not cover a multiplicity of disputes, and there could be as many as 22 adjudications here, with possibly conflicting outcomes; further the disputes were too complex for the adjudication process and timescale. The other defenders contended that the pursuer was contractually barred by the clause from bringing the action, which was incompetent and should be dismissed.

Lord Tyre said he was “not prepared to accept, on the basis of the detail contained in the summons, that it would be impossible for some or even all of the issues identified to be resolved by an adjudication process”. This applied even if there might have to be multiple adjudications; and an adjudicator was not bound by the time limits if unable to reach a decision within that time.

He added that the case law did not support “the existence of a general proposition that some disputes must be held, in advance of any referral, to be... too large and/or too complicated and/or raised too long after completion to be suitable for adjudication”.

On incompetency, which was “a somewhat elusive concept”, the case law distinguished between curable and incurable incompetency, the latter meaning an action was fundamentally null. There was no single means of removing an incompetency.

He held: “In my opinion the circumstances of the present case are indistinguishable from the cases in which court proceedings were raised despite the agreement of parties to have their disputes resolved by arbitration. The effect on the jurisdiction of the court of an agreement to submit to arbitration is long established: jurisdiction is not wholly ousted although the court is for the time being deprived of jurisdiction to inquire into and decide the merits of the case. Should the arbitration prove abortive, the full jurisdiction of the court revives”.

The appropriate course was to sist the action to await the outcome of the adjudication(s). “I agree that that is the usual course and I see no reason to depart from it”, Lord Tyre stated. “Even if I had held that the contractual bar created by clause W2 was properly to be characterised as a curable incompetency I would not have regarded dismissal as appropriate. On any view the summons is not a nullity.”

He further expressed the view that had the action been dismissed, it would not have been appropriate to grant declarator, as sought by the pursuer, that the summons was a relevant claim for prescription purposes, as that would have been a question to be determined in any subsequent proceedings.

Click here to view the opinion.