CIB Properties Ltd v Birse Construction [2004] EWHC 2365

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Common sense should be applied when deciding whether a dispute had crystallised. The complexity of a claim referred to adjudication will not prevent the enforcement of an adjudicator's award, providing that the adjudicator could reach a fair decision in the light of the time limits agreed between the parties. In the event that an adjudicator makes a slip in his decision and refuses to correct it, it would not be open to the court's review.

His Honour Judge Toulmin CMG QC, Technology and Construction Court

19 October 2004

Birse Construction Limited ("Birse") was the main contractor for works to be carried out at a new building owned by CIB Properties Limited ("CIB") under a contract dated 8 August 2000. CIB terminated the contract on 21 December 2001. In 2002, without advance warning to CIB, Birse commenced an adjudication claiming that CIB's termination of the contract was wrongful; the adjudicator disagreed and found in favour of CIB. On 28 July 2003, CIB sent a letter to Birse demanding payment within 30 days of sums totalling in excess of £16.5m, which included the costs of completing the works after Birse had left the site. The letter was accompanied by an expert report and both the letter and the report made reference to 52 files of supporting documents, which were said to be available for inspection. After some correspondence and a meeting between the parties about the claim, on 14 November 2003 CIB issued a notice of referral to adjudication.

The notice of adjudication set out the demand dated 28 July 2003 and identified the documents sent with the demand. Having received the notice, Birse's representatives responded to CIB stating that they were surprised at the course of action CIB had adopted in light of CIB's agreement to hold further discussions in December 2003 in which to discuss the claim. CIB disputed that the parties had agreed to hold a meeting. On 25 November 2003, following his appointment, the adjudicator wrote to the parties to acknowledge numerous communications from the parties. In his letter, the adjudicator immediately raised the question of an extension of time for determination of the adjudication in view of the volume of material so far provided by CIB and he asked whether the parties had agreed any proposals for the provision of further statements of case and further evidence and documentation.

Birse raised a number of concerns based on the size and complexity of the dispute, claiming that they had been ambushed with the referral and that the process was inherently unfair for the dispute in question. They also claimed that no dispute had arisen. Their letter stated that:

"The sums of money involved, together with the amounts of documentation, render this matter inappropriate for resolution by way of adjudication. It is not possible to deal with this matter in the time available."

Having regard to previous authority, the adjudicator stated that he would only reach a decision if (a) he had sufficiently appreciated the nature of any issue referred to him before giving a decision; and (b) he was satisfied that he could do broad justice between the parties. Following a number of submissions by both parties, experts' meetings, oral hearings, extensions of time for the decision and a decision by the adjudicator that a dispute had crystallised and therefore he did have jurisdiction, the adjudicator delivered his decision on 24 February 2004. The decision, in favour of CIB, ran to 139 pages and was divided into a number of sections.

Birse complained to the adjudicator that he had made a slip in the award and said that he had jurisdiction to, and therefore should, remedy it. The adjudicator responded by saying that if "the parties or the court decide that there is any error I should be happy to review the decision and to receive further submissions from the parties…" Birse claimed that this was an invitation for the court to review the matter and refused to pay. CIB applied to the court to enforce the award.

The issues that arose in court were:

Whether a "dispute" had crystallised before the referral to adjudication, given that, so Birse argued, discussions were still ongoing at the time of the referral;

The conduct of CIB before the notice of adjudication did not render the whole process unfair or put Birse at an overwhelming disadvantage, nor had CIB acted in bad faith in not explicitly referring to the possibility of an adjudication in its discussions and correspondence with Birse;

Whether some disputes were so complex that, having regard to the provisions of section 108 of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"), they were not suitable for adjudication; and

Whether, in the light of the adjudicator's letter, the court could review a matter which the defendant claimed was a slip.

In relation to each of these issues, the court held:

That the claim notified by CIB on 28 July 2003 was disputed by Birse and that the dispute had therefore crystallised by the date of the referral on 14 November 2003. The court said that in the 15 intervening weeks there had been a proper opportunity for Birse to consider the claim and provide a constructive response which may or may not have led to further discussion. Instead, it said, Birse attempted to manoeuvre tactically so that it could make the claim that the dispute had not crystallised. Accordingly, the adjudicator did have jurisdiction.

That it was clear that the claim was complex and therefore if the adjudicator was to reach a fair decision he clearly needed more than the 42 days to which he was statutorily entitled under the Act (provided that CIB, as the referring party, had agreed). In these circumstances, more than 42 days were needed and the adjudicator sought and obtained the agreement to extensions of time. This enabled him to reach a fair conclusion, having given both parties a proper opportunity to put their case.

Even if the adjudicator had invited the court to determine whether the matter complained of had been a slip, it would not be open to the court's review. The court said that adjudication was intended to be an interim process which, if carried out fairly and in a manner which is procedurally correct, is not subject to review by a court.

The court concluded that the adjudicator's decision should be enforced.

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