Jerome Engineering v Lloyd Morris [2002] ITC 00221

This summary was provided by CMS Cameron McKenna LLP.

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The Adjudicator's failure to follow the correct procedure did not make the interim award unenforceable because he had addressed the right question. In construing a Notice to Refer Disputes to Adjudication, it is permissible to have regard to the background known to the parties.

His Honour Judge Cockroft, Technology & Construction Court (Leeds)

23 November 2001

J sub-contracted LM to carry out mechanical and electrical installation work. The contract incorporated the standard DOM2 Without Design Conditions of Contract. Clause 38A provided for an adjudication procedure. Disputes arose concerning variations and valuations, and J served Notice of Intention to Refer to Adjudication and formally referred the matter to Mr Maxwell McCoy. The adjudicator decided that LM should make an interim payment and also pay his fees. The date for payment passed and J sought to enforce the interim award. LM counterclaimed, seeking a declaration that the adjudicator's decision was out of his jurisdiction and therefore unenforceable.

LM argued that the adjudicator's jurisdiction was set out in the Notice of Intention to Refer. This did not request interim payment or award, and following KNS Industrial Services (Birmingham) Limited v Sindell Limited this defect could not be cured by any subsequent document, nor could the grounds for dispute for resolution be enlarged or cut down. If the Notice was not defective, and the adjudicator had jurisdiction, then this jurisdiction was not exercised in accordance with Clause 21 of the DOM2 Conditions; the contract was breached and the award was unenforceable. The adjudicator's authority was constrained by the terms of the contract; he did not have wider discretion under the Civil Procedure Rules.

According to J, the adjudicator acted within his jurisdiction. LM knew that the main purpose of the adjudication was to obtain an interim payment since the formal referral particularised the relief sought. Although the Notice did not set it out expressly, it made it "abundantly obvious". Following Fastrack Contractors Limited v Morrison Construction Limited and F W Cook Limited v Shimizu UK Limited, the Notice, properly interpreted, specified the relief sought in the context in which it was sent, which was well known to both parties. The Judge was entitled to resort to the Referral if this was incorrect. There was a distinction between the words 'dispute' and 'relief', so KNS v Sindell was not relevant. The adjudicator did not follow Clause 21, however based on Bouyges (UK) Limited v Dahl Jensen (UK) Limited and Macob Civil Engineering Limited v Morrison Construction Limited, he had addressed the right question and was properly seized of jurisdiction, so it was immaterial if he gave the wrong answer.

The Judge agreed that although the Notice did not expressly specify the relief sought, it was appropriate to have regard to the background which was known to both parties at the material time. Clearly J was referring to adjudication because it wanted payment of monies due. So the Notice was a Notice of Intention to Refer to adjudication for the purposes of recovering money. Even if it was not, the relief was spelt out fully in the Referral, so both the Notice and the Referral complied with Clause 38.A of DOM2 and the Referral did not attempt to alter the adjudicator's terms of reference. The distinction between 'dispute' and 'relief' went to the very heart of the case. The adjudicator's failure to follow the correct procedure did not make the interim award unenforceable because he had addressed the right question.

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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