Cubitt Building & Interiors Ltd v Fleetglade Ltd [2006] EWHC 3413 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

This case provides a reminder that where the contractual adjudication framework is compliant with the HGCRA, the contract will govern the adjudication rather than the legislation.  The court interpreted the contractual provisions relating to timetabling in a sensible and commercial way to reach the conclusion that the adjudicator had been validly appointed even though the referral notice was served just outside the seven-day period.  Further, a decision reached within the agreed extended date (just), but only communicated to the parties twelve hours later and after expiry of that period was held to have been communicated ‘forthwith’.  The adjudicator’s decision was upheld.

His Honour Judge Coulson QC – Queen’s Bench Division, Technology and Construction Court

The court was called upon in this summary judgment application to make declarations that:

1.  the adjudicator had been properly and validly appointed and had the necessary jurisdiction to reach his decision; and

2. that the decision itself was issued in time and therefore was valid.

Issue 1

Cubitt faxed the notice of the intention to refer a dispute arising out of the Final Certificate to adjudication at 4.42 pm on Wednesday, 20 September.  The following day, Cubitt wrote to the RICS seeking the appointment of an adjudicator.  However, it was not until 5.35pm on Wednesday 27 September that the adjudicator confirmed his acceptance of the appointment.  The same day Cubitt’s solicitors offered to fax through to Fleetglade’s solicitor the referral notice without the accompanying documents, which were elsewhere, which offer was refused.  Service of the referral notice took place the following day (Thursday, 28 September).
Fleetgate took the point that the referral notice was not served within seven days of the notice of the intention to refer the dispute to adjudication.  Ordinarily, this could be remedied by re-serving these notices.  However, this option was not open to Cubitt as the 28-day period in the contract within which they could contest the Final Certificate had expired shortly after they had issued their notice of intention to refer the dispute. 

Therefore, in order to contest the certificate they had to continue with this adjudication rather than re-start the process. 

Cubitt submitted three arguments in support of its contention that the adjudicator had been validly appointed and had the necessary jurisdiction to reach his decision:

1. The effective date of service of the notice of adjudication was in fact Thursday, 21 September, in accordance with the CPR rules on service of documents (which provides that documents faxed after 4pm will be deemed to be served the following business day), therefore the referral notice had been served within the seven-day period.  The court disagreed.  The CPR rules relating to service did not apply to adjudications, therefore the notice of adjudication was served on the day that it was faxed.

2. The contract did not prohibit the provision of a referral notice outside the seven-day period – the provisions of the contract did not make this period mandatory and, in any event, the service of the referral notice was made immediately after the appointment and therefore complied with the contract.

 Judge Coulson QC found that the wording of the clause relating to the seven-day period was mandatory rather than directory (unlike the relevant provision in the HGCRA, which has been held to be directory).  However, the clause had to be operated in a sensible and commercial way: the contract provided for what should happen where the appointment of the adjudicator occurred within the seven days and what should happen where the appointment occurred after the seven-day period.  Although it did not expressly provide for the situation where, through no fault of the referring party, the appointment did not occur until very late on the seventh day, a sensible interpretation of the clause would be to deal with it as if it had occurred after the seven-day period, as it was nonsensical for the referring party to be better off if the appointment occurred on day eight rather than late on day seven.  The contract provided that where the appointment was only confirmed after expiry of the seven day period, the referral notice must be served as soon as possible thereafter in order to constitute good service.  In this case, this was precisely what had occurred.  The referral notice was therefore validly served.

3. If contrary to their second argument, the referral notice was not served immediately, Cubitt had submitted that the contract provided that any failure to serve the referral notice on time did not invalidate the adjudicator’s later decision.  Judge Coulson commented obiter that it would be unwise for a party to rely on a provision stating that any failure on their part would not invalidate the decision of the adjudicator.

Issue 2

The adjudicator’s decision was only issued to the parties after expiry of the agreed extended date.  The second question that arose was whether the decision was valid or out of time.

The court found that the contract provided for a two-stage process.  Stage 1 constituted the completion of the decision by the adjudicator and Stage 2 was the communication of that decision to the parties.  An adjudicator was bound to reach his decision within 28 days (or any agreed extended date) – failure to do so made the decision a nullity.  A decision reached within the agreed period but not communicated until after the expiry of that period would be valid, provided always that it could be shown that the decision was communicated forthwith.

On the facts, Judge Coulson QC found that the decision was reached shortly before expiry of the agreed extended date and communicated to the parties just after noon the following day.  Accordingly, he held that the adjudicator had reached the decision within the agreed extended date and that the communication was ‘forthwith’ in accordance with the contract.  The decision was therefore valid.

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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