Bennett (Tracey) v FMK Construction Ltd. [2005] EWHC 1268 (TCC)

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Technology and Construction Court, London

His Honour Judge Richard Havery QC

30 June 2005

A dispute was referred to an adjudicator within 28 days of the issue of the final certificate under a contract based on the JCT Private Without Quantities. However, following a procedural challenge, the adjudicator resigned and the contractor re-submitted the dispute to him, but after the expiry of the 28 day period for commencing proceedings under clause 30.9.3 of the contract. The Court held that, in such a scenario, the final certificate was not conclusive evidence under clause 30.9.3 in respect of the matters relating to the first adjudication.

Mr Bennett employed FMK Construction Limited ("FMK") to carry out building and refurbishment works at his property. The form of the contract was the JCT Standard Form of Building Contract 1998 Edition Private Without Quantities. A final certificate was issued on 11 March 2005 following completion of the work. FMK disputed the validity of the final certificate on the grounds that it did not reflect the true construction of the contract under which FMK was entitled to be paid on a cost-plus basis and that the certificate wrongly showed an entitlement on the part of Bennett to deduct or levy liquidated damages against FMK.

On 6 April 2005 FMK's solicitors served on Bennett's solicitors a notice of FMK's intention to refer the dispute to adjudication. On 13 April 2005 they applied to RIBA for the nomination of an adjudicator. On 14 April 2005 RIBA appointed Mr Smalley as adjudicator. The referral notice was sent to Mr Smalley by FMK's solicitors on 18 April 2005 and the supporting documents were sent the following day.

Bennett challenged the adjudicator's jurisdiction on the basis that FMK had failed to comply with clause 41A.2.2 of the contract in that their application to RIBA was not made until the afternoon of the seventh day after the service of the notice of intention to refer and therefore not submitted with the object of appointing an adjudicator 'within 7 days of the date of the notice', as required by clause 41A.2.2. The adjudicator accepted the challenge to his jurisdiction and resigned on 21 April 2005.

The following day (22 April 2005), FMK re-served the notice of intention and applied for the appointment of an adjudicator. Mr Smalley was re-appointed on 26 April 2005. He deemed the original referral notice to have been re-served on 28 April 2005. Bennett then submitted that, as the notice of intention had been served more than 28 days after the date of the final certificate (11 March 2005), the certificate was conclusive evidence of its content in accordance with clause 30.9.1 of the contract as the exception in clause 30.9.3 of the contract no longer applied. The adjudication proceedings were stayed pending determination by the Court under Part 8 of the Civil Procedure Rules of the question of whether the final certificate was conclusive evidence of its contents.

Bennett raised the same arguments with the Court that it had with the adjudicator. However the Court rejected Bennett's claim that FMK had failed to comply with clause 41A.2.2 of the contract in relation to the first referral to the adjudicator: the Court held that clause 41A.2.2 did not impose a particular time limit of less than 7 days for making the application. The judge accepted FMK's submission that clause 41A.2.2 was merely directory (as opposed to mandatory) and, in any event clause 41A.5.6 [which states that 'any failure by either Party … to comply … with any … requirement under clause 41A shall not invalidate the decision of the Adjudicator'] validated any adjudication that proceeded to a decision.

Bennett's second submission was that, as the second referral had been made after the expiry of the 28 days in clause 3.9.3 of the contract, the final certificate was conclusive evidence of its content. Clause 3.9.3 reads "If any adjudication, arbitration or other proceedings have been commenced by either Party within 28 days after the Final Certificate has been issued, the Final Certificate shall have effect as conclusive evidence as provided in clause 30.9.1 save only in respect of all matters to which those proceedings relate". The court considered whether the issue on 6 April 2005 of the first notice of intention was sufficient to comply with clause 30.9.3 of the contract so as to prevent the final certificate from being conclusive evidence of the matters to which both adjudications related. The court accepted that if the referring party abandons adjudication proceedings by simply not pursuing them, the saving in clause 30.9.3 would not apply. However, that did not happen in the present case; here the clause 41A.3 procedure (concerning the replacement of an adjudicator who became unavailable) applied and was adopted and therefore the saving in clause 30.9.3 continues to apply. There was no reason why the position should be different where, as here, the adjudicator's unavailability and his inability to adjudicate on the dispute or difference could be cured by a further referral to the same adjudicator; the re-appointment of the same adjudicator should not negative the application of the saving in clause 30.9.3. The court concluded that the words 'those proceedings' in relation to adjudication in the saving to clause 30.9.3 was wide enough to include new adjudication proceedings brought in relation to the same dispute or difference that was the subject of an earlier adjudication which had been rendered abortive through no action or omission of the referring party. Finally, the court held that, for the purposes of clause 30.9.3, 'commencement' of the proceedings occurred when the notice of intention was issued as opposed to when the referral notice was served.

Accordingly, the Court declared that, notwithstanding the date of the defendant's application to the RIBA, the adjudicator was validly appointed in the first adjudication. Further, the Court declared that the final certificate issued on 11th March 2005 was, subject to the question of its validity, conclusive evidence as provided in clause 30.9.1 of the contract save only in respect of all matters to which the first adjudication proceedings relate.

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