Ritchie Brothers (PWC) Ltd v David Philp (Commercials) Ltd [2004] ScotCS 94

This summary was provided by CMS Cameron McKenna LLP.

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The issue of whether a party can retrospectively give consent to extension of the 28 day period for adjudications was considered. The Court effectively decided that retrospective consent was permitted provided neither party has dismissed the original adjudicator and appointed a new one.  Consequently, where an Adjudicator's decision is issued late, it is still binding on the parties. The case also casts doubt on a previous ruling that an Adjudicator's decision is not "made" until it is actually issued to the parties.

Lord Eassie, Court of Session, Scotland

14 April 2004

The key facts were as follows:-

  • An undated Referral Notice was issued under cover of a letter dated 18 September 2003 and posted to the Adjudicator on that date by Special Delivery
  • Due to a local holiday weekend, the Adjudicator did not collect the Referral Notice until 23 September 2003
  • Philp challenged the Adjudicator's jurisdiction on 21 October
  • On 21 October the Adjudicator requested Ritchie's consent to postpone his decision until at least 23 October 2003 and Ritchie gave their consent on the same day
  • On 23 October the Adjudicator wrote to the parties saying that he had made his decision and requesting payment of his fee
  • On 27 October the Adjudicator delivered his decision to the parties
  • The Scottish Scheme for Construction Contracts (which for the purposes of this decision is identical to the Scheme which applies in England) applied, as the contract did not contain adjudication provisions.

Philp argued that the Adjudicator's decision arrived late and for that reason should be set aside as void. Ritchie argued the decision was not late, but if it was that did not mean it should be set aside as void.

The first argument between the parties was over the date from which the 28 day period should run. Philp argued for 18 September, being the date of issue of the Referral Notice. Ritchie argued for 23 September, being the date the Adjudicator actually received the Referral Notice. The Court found the correct starting date was 18 September because the implication of the applicable provisions of the Scheme was that the Referral Notice would be dated and then issued on the day it was dated. If it was not received until much later, the Adjudicator could always ask for more time and if this was refused, he could resign.

On that basis, Philp argued the decision was late because the Adjudicator had sought permission for extra time in which to reach his decision after the initial 28 day period had expired on 16 October. They argued that once 16 October had passed without the Adjudicator having made his decision or obtained permission to extend the 28 day period, his jurisdiction as Adjudicator had expired. Ritchie argued that there was nothing in the Scheme to prevent the referring party from giving consent outwith the initial 28 day period – all that was required was that their consent was given. Since they had given consent and the Adjudicator had reached his decision within 42 days of 18 September, the requirements of the Scheme were met and the decision was not void.

The Court found that the intention underlying the Scheme was that once initiated, the process of adjudication would be carried through. This is because either party has power to dismiss the original adjudicator and appoint a new one (paragraph 19(3)) if a decision is not produced on time. It could not be right that the parties were compelled to appoint a new adjudicator, at additional expense and delay, when the late decision might be available only a day or two after it was due. It followed that it was not the case that unless the Adjudicator had obtained prior consent to extension of the period his jurisdiction expired after 28 days. The Court also found that, properly understood, the time limits set out in paragraph 19 of the Scheme within which an adjudicator should reach his decision are directory rather than mandatory. Therefore even if delivered late, an Adjudicator's decision is not null and void for want of jurisdiction. In doing so the Court followed the decision on this point in the earlier case of St Andrews Bay Development Limited v HBG Management Limited and "drew comfort" from the English decision in the case of Simons Construction Limited v Aardvark Developments Limited, in both of which the Court declined to hold that a late decision was void for want of jurisdiction.

Philp also argued that Ritchie had in fact only consented to extend the original 28 day period from 16 October to 23 October at the latest (i.e. there had not been consent to a further 14 days). The Adjudicator had not reached his decision until 27 October, and so the decision was late by 4 days. This argument relied on the earlier case of St Andrews Bay Development Limited v HBG Management Limited where it was held that a decision was not "reached" until communicated to the parties. The Court in the present case declined to follow St Andrews Bay on this point and found that the processes of composing a written decision and the subsequent communication of it to the parties were distinct steps. Failure to communicate the decision did not mean that the decision had not been "made". The Adjudicator had written to the parties on 23 October confirming his decision had been made on that date, so his decision was not late by virtue of the fact it was not communicated to the parties until 27 October

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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