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“The Scheme” paras 19 (i) 19 (ii). Time for making a Decision. Time for extending 28 days. Time from which 28 days runs. Jurisdiction expiry date. “Mandatory//”directory” Quality of rules in Scheme.
Scotland’s Court of Appeal reversed the first instance Judge by majority 2-1. It decided that adjudication under “The Scheme” sees the 28 day period for the Decision run from the date of the Referral not when it is received. (Compare with JCT). The Adjudicator’s Jurisdiction expires 28 days later unless by then an extension has already been obtained by consent of the Referring Party for up to 14 days. The dissenting Judge held that the particular rules were “Directory” rather than “Mandatory” and the strict approach was no benefit to anyone.
The Defendants argued that they were not bound by the adjudication provisions in the contract by reason of the Unfair Terms in Consumer Contracts Regulations 1999 made pursuant to the European Communities Act 1972, further that they could set off against the Decision.
HHJ Mosley QC considered the judgment in Picardi -v- Cuniberti and held that it had no application to this case where the form of contract was insisted on by the Defendants, who had available both advice from solicitors and from their nominated contract administrator.
The Judge also decided that the parties had agreed by the contract that a set off would only be permitted when a withholding notice had been served. The principle in Bovis -v- Triangle that:
"the decision of an adjudicator that money must be paid gives rise to a second contractual obligation on the paying party to comply with that decision within the stipulated period. This obligation will usually preclude the paying party from making withholdings, deductions, set offs or cross claims against that sum"
applied to this contract to the same extent as it applies to contracts falling within the ambit of the HGCRA.
This was one of those rare cases where the matter proceeded to court following an adjudication and where the Court overturned the adjudicator's findings.
There was a dispute over the Hurst accounts. The Adjudicator had held that the Hurst account was of a binding nature and that no further claims could be made for events which occurred up to the date of the account. This effectively barred Hurst's final account in the sum of some ?2.5m.
Hurst said that the documents should not be binding for two reasons. First, the project manager did not have authority to enter into such an agreement and second, the document was entered into on the basis of a unilateral mistake on the part of the project manager and the documents should be rectified so as to remove reference to full and final settlement of claims. Mr Recorder Reese QC agreed and so ML could not be allowed to place reliance on the documents which therefore did not have any binding effect in respect of the claims for delay and disruption that Hurst intended to make.
RSL entered into a sub-contract with Stansell incorporating the standard DOM/2 1981 Conditions. Disputes arose in relation to the final account. The Adjudicator sought agreement to employ a colleague to assist with programming matters. Both parties consented, although Stansell asked for copies of any instructions and any report and a reasonable time to comment on such report. Although the Adjudicator asked for comments on an initial report, and although the programming issues had been discussed at a meeting with the parties, the fact that the adjudicator had reached his decision in part in reliance on a final programming report, which the parties had not seen was sufficient for there to have been a breach of natural justice.
Natural justice required the parties to know the case against them and to have an opportunity to meet it. An adjudicator should give the parties the chance to comment upon any material, from whatever source, including the knowledge or experience of the adjudicator himself, to which the adjudicator is minded to attribute significance in reaching his decision.
An offer enclosing a cheque, (even though it was made by a third party), which said that the payment was tendered as a compromise settlement which "will be deemed to have been accepted by you and therefore be contractually binding if it is presented to your bank and cleared for payment" was held to be binding on the Claimants whose application for Summary Judgment following an adjudicator's decision in their favour, was refused. The offer had been made on clear terms and the presentation and encashment of the cheque constituted the clearance acceptance of the offer of compromise.
This adjudication took place under the TeCSA rules. It was held that:
This is an example of a Judge applying the tests set out by Forbes J in Beck v Norwest Holst in order to decide whether a dispute had arisen.
Part of the dispute related to the final account. Orange submitted a final account on 2 December 2002, but served a notice of adjudication on 6 January 2003. Orange's contract had been terminated in July, but it had taken no further steps between July and December. ABB instructed an investigator to consider the final account and suggested they would be able to respond by 20 January and if no agreement had been reached within 7 days thereafter ABB indicated that they were willing to submit to adjudication.
ABB also said that there could be no dispute because the contractual machinery under DOM/1 in relation to the time given for ABB to consider the final account had not run its course before the notice of adjudication was served. Orange said that the effect of repudiation was to bring the sub-contract to an end and thus the contractual mechanism no longer existed. HHJ Kirkham agreed. Once the sub-contract was terminated, the contractual mechanism for payment of sums due also fell away.
Applying the Halki test, the fact that the ABB had not admitted the claim or paid, meant that a dispute had arisen. Applying the Sindall v Solland test was more difficult. HHJ Kirkham had to decide whether, when the adjudication notice was served, the process of discussion and/or negotiation had ended and whether there was something which needed to be decided. Notwithstanding the industry Christmas shut-down and the fact that ABB had made what they thought was a reasonable alternative suggestion in relation to the timetable the Judge concluded that by 6 January 2003, sufficient time had elapsed for ABB to have both evaluated the claim and to have concluded any discussions and/or negotiations with Orange.
MHA had acted as structural engineers in a project for the conversion of flats into an Hotel. Part way through the project, the existing roof slab was found to be inadequate as a result of a failure by MHA to produce adequate structural calculations to support its design. As a consequence, there was a 24 week delay to the project and Galliford suffered losses in excess of ?2million. Galliford sent a letter of claim to MHA but before the claim had progressed very far, in July 2002, MHA went into voluntary liquidation and a liquidator was appointed. Nevertheless, in August 2002, Galliford commenced adjudication proceedings against MHA. MHA's insurers, MCL, instructed solicitors who both disputed jurisdiction on the ground that there was no written contract and contested the adjudication. The adjudicator found in favour of Galliford. However, no money was paid by either MHA or MCL.
Galliford then, rather than issue enforcement proceedings, issued proceedings against MCL claiming a right of indemnity in respect of the amount ordered to be paid by the adjudicator under the Third Parties (Rights Against Insurers) Act 1930. MCL said that the right of indemnity could only be transferred to Galliford once a relevant liability had been established by judgment of the Court, arbitration award or agreement and that the adjudication decision was not sufficient by itself.
HHJ Behrens agreed, stating that although an adjudicator's decision creates a contractual obligation to pay, that obligation is not an absolute one. The decision will not be enforced if the adjudicator has exceeded his jurisdiction. Accordingly, liability under the insurance policy was not established until the adjudicator's decision had been enforced by a judgment of the court or by agreement. Therefore the proceedings brought by Galliford were dismissed.
The point in issue here was the Adjudicator's power to make an award in respect of the costs and expenses of the adjudication. One of the contract amendments introduced a clause, which provided that "the Adjudicator may require any Party to pay or make contribution to, the legal costs of another Party arising in the Adjudication ...". The Adjudicator ordered ERJV to pay half of Deko's costs including Deko's legal costs. Deko had claimed costs in the following five categories; claims consultant, surveyor, solicitors, internal costs and one half of the Adjudicator's fee.
Lord Drummond Young held that the Adjudicator did have the power by virtue of amended clause 21A to decide that ERJV should pay half of Deko's costs. However, that power was limited to Deko's legal costs only. Further, these legal costs were liable to taxation and the same principles as those that applied to the legal expenses of litigation (and arbitration) applied. Thus that part of the Adjudicator's decision dealing with costs would not be enforced until those legal costs had been assessed by the Court or agreed between the parties.
The parties entered into a contract which was subject to the ICE Conditions of Contract, 6th Edition. Lilley submitted an interim application for payment. In accordance with the provisions of clause 60, the Engineer concluded that no further monies were due. Lilley then served a notice of adjudication. The Adjudicator found in favour of Lilley. The Trustees paid up but then sought repayment of some of those monies.
To succeed, the Trustees needed to show that Lilley was unable to stay the matter to arbitration. The Trustees argued that when Lilley triggered the adjudication, as they had been perfectly entitled to do, they had stepped outside the provisions of clause 66 and the contractual route to arbitration provided by clause 66 was closed down. Further, there was no dispute which could be referred to arbitration as The Trustees were perfectly content with the Engineer's decision.
Lord Mackay held that the Trustees' claim was an attempt to achieve a final determination in respect of the contractual entitlement to payment. However, the dispute that remained between the parties, as to the extent of Lilley's contractual entitlement to payment, remained a dispute that could be resolved according to clause 66. By referring the dispute to adjudication, Lilley did not "step outside" the provisions of clause 66 nor did they waive their right to arbitrate. Lilley had exercised a contractual right to adjudicate that was open to them without prejudice to any contractual right they had to refer that same dispute to arbitration.
This decision of Mr Justice Forbes provides further guidance on the question of what constitutes a dispute.
First, Mr Justice Forbes quoted with approval the words of HHJ LLoyd QC in Sindall v Solland:
"For there to be a dispute for the purposes of exercising the statutory right to adjudication it must be clear that a point has emerged from the process of discussion or negotiation that has ended and that there is something which needs to be decided."
However, second the Judge further held that he did not see any conflict between this approach and the approach of the Court of Appeal in Halki v Sopex where it was said "... that there is a dispute once money is claimed unless and until the defendants admit that the sum is due and payable."
Here on reviewing the facts of the case, Mr Justice Forbes concluded it was clear that, before the Notice of Adjudication was served, the process of discussion and negotiation had ended and that something was needed to be decided, namely the correct position with regard to the outstanding items on the final account. This was notwithstanding that some two and a half weeks before the adjudication began, Norwest Holst had served 11 lever arch files of documentation on Beck. Beck had suggested that they had not been given sufficient time to consider the files before the adjudication began. However, the Judge looked at the factual context as a whole. The 11 files largely consisted of information which Beck had seen before. The files were also a response to Beck's position and were sufficient in themselves to give rise to a dispute since the serving of the files had thereby served to reject that position.
The Adjudicator here, who was named as second respondent, was required to make a decision by 7 February 2003. Various extensions were granted to the Adjudicator which left the decision date at 5 March 2003. On 5 March a secretary employed by the Adjudicator's firm informed HBG's solicitors that the Adjudicator had reached a decision but did not intend to release it until her fee had been paid. By a fax sent the following day, HBG indicated its intention to pay the whole of the fee in order to secure the release of the decision. The decision was then released on 7 March 2003 and the reasons for that decision communicated to the parties on 10 March 2003. At no time did HBG seek an extension of time required to produce a decision beyond 5 March 2003. St Andrews claimed that the Adjudicator had no power to reach her decision after 5 March 2003. Therefore the decision sent to the parties on 7 March 2003 was not a valid decision.
Lord Wheatley concluded that a decision cannot be said to be made until it has been actually provided to the parties. Further, in the circumstances of this case, the Adjudicator was not entitled to delay communication or intimation of the decision until the fees were paid. There was nothing in the Scheme or contract to allow this. No alternative arrangement had been made. However, the Judge held that the failure of the Adjudicator to produce the decision within the time limits whilst serious was not of sufficient significance to render the decision a nullity. It was not such a fundamental error or impropriety to render the entire decision invalid.
The parties entered into a contract in the Standard Form of Building Contract, 1980 Edition Private with Quantities as amended to carry out construction works at Laverstoke House in Hampshire. On 14 November 2002, Durtnell referred some disputes to adjudication. Amongst the questions referred were whether the works had achieved practical completion or in the alternative whether Durtnell was entitled to a further extension of time. There were also claims in relation to loss and expense and additional works.
HHJ Seymour QC held that there was no dispute as to the entitlement to an extension of time or to the valuation of loss and expense consequent upon any grant of an extension of time at the time the matter was referred to adjudication. On 9 September 2002, Durtnell submitted an application for a further extension of time. Under clause 25.3.1 of the Contract, the Architect was bound to determine that application within 12 weeks of receipt of the notice by which the application was made. The application should have been determined by 2 December 2002. Thus, the time allowed in the Contract for the Architect to make a determination had not expired at the time the matter was referred to adjudication. Until the Architect had made his assessment, or failed to do so within the time allowed for by the Contract, there was nothing to argue about and so no dispute.
An issue was raised as to whether the IFC Sectional Completion Supplement was imported into the agreement. Whether or not it was accepted did not affect the nature of the agreement nor determine whether or not the IFC Conditions were part of the Contract. The appropriate approach to the issues is as follows:
Tally declined to pay the sum of ?95,483.78 plus interest and the adjudicator's fees arguing that there was no construction contract between the parties or if there was a contract, that the contract was different in content to the contract found to exist by the adjudicator.
Pegram claimed that it was one based on its own conditions of sale whilst Tally claimed that it was one based on the JCT Prime Cost Standard Form of Contract 1998. There were no adjudication provisions in the Pegram standard terms thus on its case, the Scheme would apply.
Here, HHJ Thornton QC found that the parties had entered into a construction contract in such a way that its terms were not clearly and unquestionably capable of being identified. The reason was that the negotiations consisted of a series of offers and counter offers. No complete set of contract documentation was identified. Therefore, the parties had not produced a construction contract whose terms enabled either party to give notice at any time of the intention to refer a dispute to adjudication. As the mandatory requirements for section 108 of the HGCRA had not been complied with, the Scheme applied. Therefore, the Adjudicator had been correctly appointed and had correctly applied the Scheme.
Dumarc brought enforcement proceedings. This judgment, following shortly after the decision in Levolux, was a prompt reinforcement of the principle that parties could not be allowed to use a contractual right of set off against sums owed under an adjudication decision. It was ruled that an award did not qualify as "monies due under the contract" for the purposes of exercising such a right.
This was a Court of Appeal case. The key issue was whether, pending final resolution by arbitration or litigation, an adjudicator's decision should be enforced notwithstanding that it might conflict with the contractual rights of the parties. In other words, could a "paying party" use, for example, determination provisions to get round an adjudication decision. Thus the case has certain similarities with the Bovis v Triangle case.
Here, clause 29. 8 of the contract provided that if the contractor shall determine the sub-contract for any reason mentioned in clause 29.6 then all sums of money that may then be due or accruing due from the contractor to the sub-contractor shall cease to be due or accrue. Whilst clause 29.9 provided that until after completion of the sub-contract works and the making good of defects, the contractor shall not be bound by any provisions of the sub-contract to make any further payment to the sub-contractor. Ferson claimed that the terms of the contract overrode the obligation to make payment in accordance with the adjudicator's decision. The Court of Appeal emphatically disagreed with this proposition and, agreeing with HHJ Wilcox, dismissed the appeal. LJ Mantell said:
"But to my mind the answer to this appeal is the straight forward one provided by Judge Wilcox. The intended purpose of s. 108 is plain...The contract must be construed so as to give effect to the intention of Parliament rather than to defeat it."
HHJ Thornton QC held that the decision had the appearance of having been decided by reference to the wrong conditions of contract and without recourse to the correct contractual documentation. Thus the errors were fundamental and not capable of being corrected under any implied power to correct. The question referred was not answered. The decision was a nullity.
The Judge also considered the extent to which regard may be had to an Adjudicator's reasons. If an adjudicator gives any reasons, they are to be read with the decision and may be used for the means of construing and understanding the decision. The Adjudicator had also expressed views in a post decision letter about his decision. The Judge said that strictly these views were irrelevant but they did provide some limited guidance in determining whether any error made by the Adjudicator was substantial so as to effect the validity of his decision.
Laing claimed that JPL had accepted the Adjudicator's decision by accepting payment from Laing of the amount awarded by the Adjudicator. The Judge disagreed. JPL challenged the decision before it received the cheque and informed Laing that it was only accepting the cheque generally on account of Laing's obligations under the subcontract since the Adjudicator had failed to answer the question referred to him. Accordingly, JPL could start a fresh adjudication based on the same dispute originally referred.
Finally, the Judge considered the relevance of JPL's administration. The Judge did not agree that JPL should repay the monies it had received as a condition of taking further action. JPL had a set off and equitable cross claim in the same amount, which was reasonable to allow as a means of defeating the Laing claim. In particular, Laing had already conceded that some money was due to JPL and the Adjudicator, in the abortive adjudication proceedings, had also formed the view that a balance was due.
[Case Summary to follow]
Mohammed contracted to carry out works to Dr Bowles' residence. Disputes arose and Dr Bowles instigated successful adjudication proceedings under Article 6 of the JCT Minor Works contract. Mohammed refused to pay and Dr Bowles served a statutory demand. Mohammed sought to set the statutory demand aside.
One of the key questions before the court was whether the adjudicator's decision created a debt that could form the basis of the statutory demand, and if so what was the nature of that debt. The Registrar held that, in respect of jurisdiction, the adjudicator had determined that issue and it was not for the bankruptcy court to look behind that decision. More importantly, the Registrar noted that although the applicant could have applied to set aside the adjudicator's decision or sought a declaration on jurisdiction, he had not. Therefore the adjudicator's decision was a debt that was sufficient to form the basis of a statutory demand. The nature of that debt was the binding contractual obligation on Mohammed to pay the sum quantified by the adjudicator's decision, unless and until varied by arbitration or legal proceedings. It was not disputed on substantial grounds.
As a result the application was dismissed with costs.
HHJ Toulmin CMG QC had to consider a fee claim made by the Claimant Architects against the Defendants following the refurbishment of their private dwelling house in London. Picardi had an Adjudicator's decision in their favour.
Picardi claimed that the contract between the parties incorporated the RIBA Conditions of Engagement and the model adjudication procedure published by the CIC. The Judge found that no such agreement was made. Therefore, the Adjudication was invalid.
The Judge also separately considered whether Picardi should have drawn the Cuniberti's attention to specific clauses of the RIBA conditions as required under the RIBA Notes of Guidance. He commented that - particularly because Parliament had specifically excluded private dwelling houses from the adjudication legislation - a provision including adjudication as part of a contract, was an unusual provision which therefore ought to be brought to the specific attention of a lay party if it is later to be validly invoked.
In this Scottish case (the company names were not given), Lord Young had to consider an application by A to enforce an adjudicator's decision, awarding them loss and expense totalling ?639,151.82.
B argued that the contract prohibited A from raising any action to enforce the award until either termination of the present sub-contract or actual completion of the last phase of the main contract. Appendix 8 of the subcontract stated that no party shall, save in the case of bad faith, make any application whatsoever to a court in relation to the conduct of the adjudication and the decision of the adjudicator until completion of the contract or termination of the sub-contract.
A argued that this clause was not concerned with challenges to the decision by way of judicial review but enforcement. The Judge, in a decision very much in line with the thinking of the CA in Levolux, agreed. An adjudicator's decision when pronounced is legally binding on the parties. Since an obligation arising out of a decision is binding, it must be capable of enforcement. The clause in the contract related only to judicial review of a decision - not to proceedings to enforce that decision.
Alternatively, B relied on the fact that the adjudicator had awarded an extension of time of only 46 weeks, when 112 weeks was sought. Consequently, B maintained that A was in delay for a period of 66 weeks, which would attract LADs at a rate of ?75K per week. In relation to this second argument, Lord Young noted that B did not, during the adjudication, assert that they were entitled to LADs if the Adjudicator failed to award A the full extension of time sought. B merely contested the EoT claim, admittedly with some success. However, making a claim for LADs is different to challenging a claim for an extension of time. Different questions arise, for example, is the sum claimed as LADs a penalty? Therefore, this argument failed.
Lord Johnston gave Judgment in the Scottish Court of Appeal in an appeal brought by Ballast Plc.
The original complaint was that the Adjudicator's decision did not determine the dispute as originally referred and identified in the Notice. As a consequence the decision was a nullity. Lord Johnston affirmed the original decision of Lord Reed and in doing so stressed the importance for adjudicators of answering the question actually put in the Notice of Adjudication. He noted that:-
" As regards jurisdiction...it is our opinion that the Adjudicator, while restricted to issues focussed in the dispute, has nevertheless both the power and duty to determine whether or not a claim that it put forward in respect of valuation of work done is validly asserted under the contract. He must answer that question either in the affirmative or the negative. He cannot decline to address it, which is what the Adjudicator in fact did in this case. [The power of the Adjudicator] is based on the notice of the dispute which identified the question which the Adjudicator had to address. Thereafter, it was his duty in addressing that question to consider the validity of each and all of the claims put forward, which in turn would require him to consider the basis upon which they were being asserted. If not contractually based, they must inevitably fail - either in whole or in part."
Here the adjudicator had considered that his powers were limited to considering the strict contractual terms between the parties. Therefore by limiting himself thus, he had not considered the reality of the situation between the parties and in doing so had failed to consider the "whole dispute" which had been referred to him.
A contract for the supply of a mobile crane plus driver was a contract for construction operations. The provision of the driver made the significant difference. Although the contract did not make any direct reference to the work to be carried out, taken together the crane and driver were to be used for building operations. This specific point is unlikely to crop up again since the latest version of the CPA Model Conditions, in effect from July 2001, includes an express provision that the Scheme for Construction Contracts applies.
Although Judgement was given in favour of Baldwins, Her Honour Judge Kirkham followed the principles laid down in the cases of Herschel Engineering v Breen Property and Rainford House v Cadogan, in deciding to grant a stay of execution. Where there is a potential counterclaim and the strong possibility that a claimant will be unable to repay any monies which are found to be have been wrongly paid over, then discretion will be exercised in favour of granting a stay. Here Barr were required to pay the adjudicator's award into court and commence proceedings within one month failing which the money was to be paid out to Baldwins. The stay of execution did not apply to the costs and fees of the adjudication.
Skanska sought to have an adjudication suspended by challenging the adjudicator’s jurisdiction to hear the dispute. The adjudication was the second adjudication brought by ERDC against Skanska, who claimed it centred on a dispute, which was “the same or substantially the same” as the first dispute. Accordingly, Skanska said that it could not be adjudicated and invited the adjudicator to step down. He refused.
The first adjudication had arisen from a dispute over an interim application, whilst the second arose following ERDC’s final account submission. Skanska argued that in essence both disputes concerned the quantification of the loss and expense element of ERDC’s claim. ERDC argued that it was quite different to the interim valuation dispute, albeit that it did concern similar claims and sums. Since the first adjudication, significant further information and supporting documentation had both come to light and been exchanged. Further the second adjudication centred on different sub-contract clauses and so would proceed upon a different basis.
Both the second adjudicator (deciding his own jurisdiction) and the judge hearing the petition agreed with ERDC’s arguments. Lady Paton, agreeing with the Sherwood decision, refused Skanska’s petition stating, that in the second adjudication “a different stage in the contract has been reached; different contractual provisions apply; considerably more information may be available by the date of issue of the final account; and different considerations and perspectives may apply.” Thus the fundamental nature of the dispute would be fundamentally different.
Skanska also raised a side argument that the sub-contract had required that documentary evidence and details of any loss and expense be provided within 6 months of Practical Completion date and as such ERDC had been out of time in supplying this information. Lady Paton again agreed with ERDC and held that for such a stringent time bar to apply, the sub-contract would have had to be expressed in clear and unambiguous language. Here, the sub-contract only set out a timetable. In any event, Skanska’s conduct during the first adjudication had been such as to have waived any right to maintain the time bar argument.
HHJ Bowsher QC had to consider an application for the enforcement of an adjudication decision where the sum involved was some ?7,451,320 plus VAT. Devonport alleged that the Adjudicator did not have jurisdiction because the relevant contract was not (evidenced) in writing and that no dispute had arisen prior to the service of the notice of adjudication.
The key to the first argument was whether the project was cost reimbursable. As this was a material term, following the Court of Appeal decision in RJT Consulting v DM Engineering, that term must have been evidenced in writing for the dispute to be referable to adjudication. What was in issue was an alleged oral agreement that radically changed the written agreement. The change was far greater than a typical variation made pursuant to the terms of a construction contract. Thus the Judge held that the adjudicator did not have jurisdiction.
HHJ Bowsher QC also considered the question of whether or not there was a dispute. The Judge said a broad approach was required. The fact that an application had been made but had not been paid was not necessarily enough to constitute a dispute. Devonport were neither denying the claim outright nor ignoring it. They were seeking further information and clarification. Devonport had not had time to respond to the limited clarification that was given prior to the adjudication commencing. HHJ Bowsher QC found in favour of Devonport saying:
"The conduct of the adjudication indicates that, if given a reasonable opportunity to respond, there would have been a dispute, but that is not the point."
CFW resisted enforcement on the grounds that the Adjudicator did not have jurisdiction because there was no construction contract between the parties and/or that there was no dispute capable of being referred to adjudication.
In a previous adjudication, the Adjudicator had decided on the form of contract entered into between the parties. In the adjudication which was the subject of this case, the second Adjudicator applied that contract and decided that CFW should pay Cowlin the sum of ?275,211.51 plus VAT.
Cowlin said that the decision by the first Adjudicator on the contract was binding. CFW had initially accepted that the first Adjudicator had jurisdiction to decide the contract position and had issued a Counter Notice, they then changed their mind. However, HHJ Kirkham found that CFW had submitted to jurisdiction in the first adjudication. When they made their election, they had been represented by solicitors. Even though CFW had swiftly changed their position, this was not sufficient.
CFW then said that they (and their insurers) had not had sufficient opportunity to consider the issues referred to the Adjudicator and hence there was no dispute. On 3 May 2002 when Cowlin made a peremptory demand which required a substantive response by 17 May, CFW had already been in possession of the claim since 27 February and further details since 11 March - some 8 weeks. Therefore, the Judge adopting the Halki v Solpex analysis concluded that CFW should have known broadly whether they admitted some or all of Cowlin's claim or rejected it totally. Thus they had had sufficient opportunity to indicate their response. By not responding to the ultimatum in these circumstances, a dispute had arisen.
In this case, HHJ Thornton QC had to consider whether a party could withhold against a sum directed to be paid by an adjudicator following three adjudications between the parties. The Judge concluded by setting out a number of factors that must be in place before such a withholding can be made:
Here, Triangle, who had determined Bovis’ contract for failing to proceed regularly and diligently, was found to be entitled to rely on both the contract and the adjudicator’s third decision (that the determination was valid) to withhold payment of the sum directed to be paid under the adjudicator’s first decision. Bovis’ contention (namely that the determination of its employment was invalid) was not sufficient, in the absence of either an adjudicator’s decision to that effect or, alternatively, any sufficient evidence to sustain that contention, to enable them to counter this.
This case provides a further example of an adjudication decision ending up in the Companies Courts. Following the completion of refurbishment and refitting works, there were a number of defects. Guardi took the view that the defects were substantial and did not allow Datum to return to remedy the defective work. Guardi also withheld payment from Datum who accordingly sought redress through adjudication. Guardi had not served any section 111 notice and the adjudicator decided in favour of Datum. Since Guardi refused to pay, Datum issued enforcement proceedings and obtained judgment in its favour.
Guardi made some payment by way of instalments, but following repeated non-payment, Datum served a statutory demand. Guardi continued to make reference in correspondence to its claim in respect of defects, but did nothing further.
Datum then issued a winding-up petition. In response, Guardi provided draft particulars of claim. Guardi then sought an order restraining the advertisement of the winding-up petition. Mr Justice Ferris refused the application. Guardi had had the opportunity to serve a section 111 notice in relation to its claims, but had failed to do so. In these circumstances, the presentation of the petition was not an abuse. Had Guardi been serious about its cross-claim, then it should have provided the appropriate section 111 notice. This case demonstrates a difference of opinion within the Companies Court, since in the case of George Parke -v- Fenton Gretton Judge Boggis held that the existence of a genuine cross-claim was sufficient to defeat a statutory demand served on the basis of non-payment of an adjudicator’s decision.
Here HHJ Kirkham applied the Court of Appeal decision in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd in deciding that for an oral agreement to fall within section 107 of the HGCRA, all the terms of the agreement material to the issue or issues in dispute must be clearly recorded in writing.
Debeck had actually made an application for summary judgment arguing amongst other things that the contract was a construction contract falling within the HGCRA and that in the absence of any section 110 or section 111 notices, summary judgment should be granted. Although there was a fax from Debeck which it said contained all the relevant terms of the agreement, the Judge rejected this argument for two reasons. The fax did not set out or record all of those matters on which Debeck themselves had relied upon in pursuing its claim. For example, the fax did not explain even in summary terms the scope of the work (or the programming and sequencing) to be undertaken. Equally it was unclear from the fax whether materials were to be supplied or not. In addition, a director of T&E gave evidence that there were further terms of the contract between the parties which were not recorded in the fax. These matters included references to the quality of the work and the time within which the work was to be undertaken. In these circumstances, HHJ Kirkham concluded that, Debeck could not rely upon the fax to bring the oral agreement within section 107. A claimant cannot cherry pick and identify those parts of an agreement upon which it relies and ignore matters which the defendant says were agreed between the parties.
The Judge suggested that one way for a party to obtain the benefit of the HGCRA in circumstances such as these, would be for that party to seek to clarify the terms which he believes have been orally agreed and invite the other contracting party to agree that those are indeed the terms of the agreement.
Here Lord Macfadyen had to consider a dispute arising in relation to the Small Isles and Inverie Ferry scheme. The defenders resisted payment of an adjudicator's decision in the sum of ?250k.
By clause 66 of the contract, the parties had to give "effect forthwith to every decision of ... the Adjudicator on a dispute given under this clause" unless that decision was revised by agreement or the dispute had been referred to arbitration and an arbitral award had been made. The Highland Council argued that the effect of awarding summary judgment would be to give a final judgment in place of an interim decision. Lord Macfadyen disagreed, saying that not to allow enforcement would obstruct the purpose of section 108 of the HGCRA. One of the points of adjudication was to obtain payment on a provisional basis. CCGL were not asking the Court to endorse the soundness of the adjudicator's decision but were asking the Court to recognise that the parties had committed themselves contractually to implement that decision.
The Highland Council also argued that as they had a claim against CCGL for the payment of liquidated damages (quantified at a sum in excess of ?250k), they were entitled to refuse to pay the sum awarded. A valid notice had been served in pursuant to section 111 of the HGCRA. CCGL argued that as the liquidated damages claim could have been advanced before the adjudicator, the Highland Council could not rely on it now to resist enforcement. Further, CCGL submitted that section 111 referred to notices in relation to payment certificates and not to notices in respect of adjudicator's decisions.
Lord Macfadyen held that as the Highland Council had chosen not to advance their retention argument before the adjudicator, they could not rely upon it now. That said, the right of retention was not lost and that right remained against any future sum, which might fall due to CCGL under the contract. However, there had been nothing to prevent the Highland Council from putting forward their claim for liquidated damages in the adjudication. It was now too late. Section 111 was not intended to permit the giving of a withholding notice in respect of an adjudicator's award.
Lord Macfadyen concluded that "it would...be destructive of the effectiveness of the institution of adjudication if a responding party could decline to put forward an available defence in the course of the adjudication, then give a section 111 notice seeking to withhold on that ground the sum awarded by the Adjudicator".
Here the Edinburgh Royal Joint Venture had resisted payment following an adjudicator's decision in favour of Broderick Structures Ltd. The adjudication rules were based on the 1998 ORSA Rules. One amendment stated that no party should make any application whatsoever to a competent court in relation to the conduct of the adjudication or the decision of the adjudicator until completion of the last phase of the works or termination of the sub-contract and until the prior written consent of both contractor and sub-contractor had been obtained. However, the adjudication rules also stated that every decision of the adjudicator was to be implemented without delay and the parties "shall be entitled to summary enforcement" of an Adjudicator's decision regardless of whether it was subject to any challenge or review.
ERJV claimed that the adjudication rules meant that all disputes were to be postponed (and this included enforcement of any adjudicator's decision) until after conclusion of the contract, such that they could all be raised at one time. Coutts QC considered that this position was unsound and selective in that it did not take account of all of adjudication rules and therefore could not be sustained. Broderick were not seeking to challenge the decision of the adjudicator, but merely to enforce their contractual rights. A distinction was made between an application to the Court after completion of the work, and an application for summary enforcement of an adjudicator's decision made during the work.
In this case, HHJ Seymour QC had to consider an attempt to refer a dispute under an ICE contract to arbitration. Previously there had been two adjudications under the contract which had been favourable to Mackley. Gosport, the Employer, sought to arbitrate the disputes.
However, clause 66(6) of the ICE Conditions states that a decision of the engineer was a condition precedent to the entitlement of a party to a contract to refer a dispute to arbitration. Here there had been no reference of the dispute to the engineer, who had had no part in the adjudication.
HHJ Seymour held that the requirement for a decision of the engineer under clause 66(6) applied even where a party was seeking to challenge the decision of an adjudicator. References to arbitration had to be made in accordance with the relevant arbitration clause.
The Judge held that the form of words of section 108 of the HGCRA:
"makes it plain...that arbitration is only available as a means of challenging the decision of an adjudicator if the relevant contract so provides or an ad hoc arbitration agreement is made. Where it is sought to rely on an arbitration clause in the relevant contract, it seems to me to be obvious that the ability to do so, and the terms upon which such may be done, fall to be determined under the relevant arbitration clause."
Therefore although the matters had been the subject of an earlier adjudication, under the terms of this contract, a reference to the engineer had to be made before any reference to arbitration could be contemplated.
Lady Paton, in Scotland, had to consider an adjudication concerning a professional negligence claim. PJW employed Diamond as contract administrators on a refurbishment contract in Glasgow. During the course of the works a dispute arose which resulted in the termination of Diamond's appointment. PJW employed others in Diamond's place, brought a claim for professional negligence against Diamond and then referred that claim to adjudication.
The adjudicator found against Diamond who resisted paying, claiming that the adjudicator did not have the power to award damages and that an appointment as a contract administrator was not a construction contract as defined by the HGCRA. Lady Paton held that Diamond's contract administration services qualified as surveying work thereby falling within the HGCRA. By agreeing to carry out contract administration services, Diamond had entered into an agreement to do surveying work.
It is interesting that although Lady Paton expressed doubts about the merits of the decision, she concluded that she could not interfere with that decision. Lady Paton recognised the potential difficulties caused by the short time limits imposed by adjudication but stated:
"There is nothing in the 1996 Act...in precedent or principle, to suggest that an adjudicator seeking to resolve a dispute...is not entitled to reach conclusions about the manner in which a professional person has carried out his or her duties in the course of the construction contract - and that includes conclusions as to whether there might have been any professional negligence. ...While therefore, it may on one view seem startling that a professional person acting as an adjudicator should be invited to rule within 28 days on the important and often difficult and delicate question as to whether a fellow professional has failed in his or her duty to such extent that there has been professional negligence, yet it seems that a proper construction of the statutory language...permits this very result - although importantly, a "provisional interim" result."
Thus Lady Paton has provided judicial confirmation that there is nothing to stop a claim of professional negligence being made in an adjudication.
HHJ Thornton QC had to consider various issues concerning the interpretation of a contract, which incorporated the 1981 JCT Standard form with Contractor's Design. These included whether the court had jurisdiction to consider a number of the claims in relation to defects. The contract had a complex dispute resolution procedure. This provided that certain disputes, (including whether the works were carried out in accordance with the contract), arising prior to Practical Completion, could not be referred to arbitration but adjudication. Following that adjudication, the result could be arbitrated but only once Practical Completion had been achieved. An "adjudication matter" could not be arbitrated upon unless there had been an adjudication first. Equally no adjudication could arise once practical completion had occurred.
Impresa said that the Cola's counterclaim, based on breaches of contract that lead to defective work, was covered by the adjudication provisions of the contract. As they had not been adjudicated, they could not be arbitrated (or litigated since it appears that the right to arbitrate had been waived). HHJ Thornton QC rejected this argument. First, the disputes about the existence and effect of the alleged defects came to light after termination of the Works. The dispute was about damages recoverable as a result of that termination. Second, the dispute related to whether works had been executed in accordance with the contract conditions and not whether the works were being executed in accordance with the contract conditions. The adjudication provisions in the contract related to works that were ongoing and not the state of works once that work had been completed or terminated.
R G Carter sought an order that the appointment of an Adjudicator should be revoked and that some other person should be appointed in his place or a similar declaration in undefined terms. Carter had referred a dispute under a DOM/1 subcontract to adjudication specifically asking the RICS not to appoint the particular adjudicator it had subsequently appointed.
The grounds for the declaration were that the adjudicator (it was claimed) appeared to have pre-judged the issue before the matter was referred to him and furthermore had expressed a willingness to proceed to a Decision without the matter having been referred to him.
HHJ Bowsher QC refused to grant the relief sought, but in relation to second ground, provided guidance as to what was required before a Decision could be made:
"RG Carter Limited also object that Mr Richards has indicated a willingness to decide the dispute without having received a Referral Notice from RG Carter Limited. The scheme of the contract, like the scheme set out in the Schedule to the HGCRA 1996, provides that first a notice of adjudication is sent to the respondent and to the adjudicator and then not more than 7 days later a Referral Notice is sent to the Adjudicator and the respondent. In litigation terms, that is rather like the service of a Claim Form followed by a Statement of Case, or in old fashioned terms, a Writ followed by a Statement of Claim. Mr Furst QC for Edmund Nuttall Limited says that Mr Richards is in a quandary about how to proceed. I do not know how he knows that, Mr Furst QC submits that the adjudicator has a duty to proceed and that the referring party, R G Carter Limited, cannot stop the adjudication by failing, in breach of contract, to serve a Referral Notice. Mr Richards seems to have decided that he should go ahead and determine the dispute referred to in the Notice of Adjudication without a Referral Notice. That is like a judge saying that he is going to try an action having received only a generally indorsed writ without a Statement of Claim or a Defence.... The adjudicator has not received the “referral” nor any accompanying documentation and so the time for the giving of his decision has not begun to run and he has no further duty or jurisdiction."
Balfour Beatty sought to enforce the decision of an adjudicator in relation to an extension of time and loss and expense claim, and the application was opposed by Lambeth on the grounds of bias and breach of contract by the adjudicator in that he had employed others to carry out some of his tasks.
In the adjudication, the Referral did not include a critical path analysis in the accepted sense nor a reliable as-built programme, so the Adjudicator requested further details from both parties and also proceeded, with the help of colleagues, to check the as-built information adduced and to produce his own critical path analysis.
HHJ Lloyd QC observed that:
"It is now well established that the purpose of adjudication is not to be thwarted by an overly sensitive concern for procedural niceties ... Adjudication under the HGCRA is necessarily crude in its resolution of disputes. Errors of fact and law do not vitiate the decision which has to be complied with, unless of course it was not authorised and thus made without jurisdiction. On the other hand adjudication under the JCT conditions (which are typical of other forms) envisage that some basic procedural principles have to be applied in order that each party is treated fairly."
HHJ Lloyd QC went on say that:
"...in my judgment, the adjudicator not only took the initiative in ascertaining the facts but also applied his own knowledge and experience to an appreciation of them and thus, in effect, did [Balfour Beatty's] work for it.... In my judgment Mr. Richards exceeded his jurisdiction by himself making good fundamental deficiencies in [Balfour Beatty's] material, namely the lack of a critical path and the method of analysis adopted for demonstrating the criticality or otherwise of the Relevant Events.... In my judgment constructing (or reconstructing) a party's case for it without confronting the other party with it is such a potentially serious breach of the requirement of either impartiality or fairness that the decision is invalid for it is a not a decision which the adjudicator was authorised to make."
HHJ Lloyd QC also found on the facts that the adjudicator had informed the parties that he intended to use assistants to carry out some of his tasks, so the ground to resist enforcement did not appear to have any prospect of success.
The Court of Appeal had to consider an appeal from the judgment of HHJ Kirkham. Parsons had been successful in an ad hoc adjudication carried out in accordance with the terms of the sub-contract and not pursuant to the HGCRA.
Six days after the adjudicator’s decision was given and before paying any money pursuant to that decision, Purac served a withholding notice pursuant to the contract. Purac claimed that the costs to complete the works exceeded the sum owing under the adjudication decision. The CA, agreeing with the Judge, held that under the terms of this particular contract it was open to Purac to set off against the adjudicator’s decision any other claim they had against Parsons, as long as that claim had not been determined by the adjudicator.
HHJ Seymour QC had to consider arguments being made by McAlpine to resist enforcement of an adjudicator's decision. The Chamberlain Notice of Adjudication listed eight heads of claim. Thus McAlpine argued that Chamberlain had sought to refer not a single dispute but a number of disputes. HHJ Seymour QC (just as HHJ LLoyd QC had in McLean v Swansea) accepted that it is possible to contemplate a substantial dispute with a number of different elements. Here it was plain that the dispute referred by Chamberlain was how much it was due to be paid by McAlpine.
McAlpine had included its own adjudication rules as part of the contract. These included that the referring party (provided it was not McAlpine when each party would bear their own costs) should be responsible for all of the costs incurred by all of the parties in the adjudication on a full indemnity basis. Thus one of Chamberlain’s requests, following these rules, was that the adjudicator made an assessment of the costs incurred by McAlpine. McAlpine said this was a separate dispute. The Judge disagreed saying that requesting an assessment of costs was a natural consequence of the referral.
Finally McAlpine suggested that, since the adjudicator had to go “hunting through” the material presented to him by Chamberlain to find out which the relevant interim application was, the dispute had not been identified with sufficient clarity. This was given short shrift, although of course any documentation should be submitted to an adjudicator in as “user-friendly” a way as possible.
HHJ Seymour QC refused to enforce the decision of an adjudicator since he had no jurisdiction.
When Nuttall commenced adjudication proceedings, the notice included a claim for an extension of time based on a claim document prepared in May 2001. When the Referral Notice was served, it included a delay analysis prepared by an expert on behalf of Nuttall, which made a claim for an identical extension of time. However, the justification for the extension was different to that put forward in the May claim.
The question the Judge had to answer was not whether there was a dispute between Nuttall and Carter as at the date of the Adjudication Notice, but whether the dispute upon which the adjudicator adjudicated was that which was the subject of the Adjudication Notice. The Judge rejected the submission that the dispute should be identified by reference, at least principally, to what was being claimed. Nuttall suggested that it was enough that the extension of time being sought was always the same and irrelevant that the facts and arguments relied upon in the expert report were significantly different from the facts and arguments relied upon in the previous claim.
The Judge said:
“the whole concept of adjudication is that the parties to an adjudication should first themselves have attempted to resolve their differences by open exchange of views and, if they are unable to, they should submit to an independent third party for decision the facts and arguments which they have previously rehearsed amongst themselves. If adjudication does not work in that way there is the risk of premature and unnecessary adjudications in cases in which, if only one party had had a proper opportunity to consider the arguments of the other, accommodation might have been possible”.
Here, as the adjudicator had considered the expert report, the Judge ruled that he had considered and made decisions upon something which had not been referred to him for a decision. The decision was made without jurisdiction and was therefore unenforceable.
The judgment if the Court of Appeal is important because it helps to clarify the requirement of Section 107 of the HGCRA, namely that to take advantage of adjudication, the relevant construction contract must be in writing or, at least, evidenced in writing.
At first instance, HHJ MacKay had taken what he termed to be a “purposive” approach to considering whether a contract was evidenced in writing. He had held that it was not necessary to identify all the terms of a contract and that since there was in this case a “comparatively great” amount of written material this would suffice. This material included a fee account, which identified the parties and place of work and meeting minutes, which identified the type of work being carried out.
The Court of Appeal disagreed with HHJ MacKay’s approach. Invoices, for example, are evidence of the existence of a contract. They do not define it. The whole of the agreement had to be evidenced in writing. The CA said that:-
“Certainty is all the more important when adjudication is envisaged to have to take place under a demanding timetable. The Adjudicator has to start with some certainty as to what the terms of the contract are…The written record of the agreement is the foundation from which a dispute may spring but least the Adjudicator has to be certain about is the terms of the agreement which is giving rise to the dispute.”
A record of an agreement must be a record of a complete agreement. However one of the Appeal judges, Auld LJ had a slightly different view. He considered that it was the terms of the agreement material to the issue or issues giving rise to the dispute, which were important, not that every term however trivial must be expressly recorded or incorporated.
HHJ Toulmin CMG QC had to consider a jurisdictional challenge to an adjudication. Imperial alleged that the parties named in the contract were not the parties to the adjudication.
There was considerable confusion about the names of the contracting parties. By the letter of appointment, written by CN Associates (who were acting as agent for Imperial Homes), Gibson Construction Ltd were appointed as contractor. There was no Gibson Construction Ltd as at the date of the letter. Later, Mr Gibson registered a company in the name of Gibson Construction (UK) Ltd. However, Mr Gibson commenced the adjudication in his own name.
The key question was whether the claimant could have been anyone other than Mr Gibson suing on his own behalf or as agent for Gibson Construction (UK) Ltd, a company in the course of formation at the time the contract was made. As the company had not been formed at the time the contract was made, Mr Gibson was personally liable on the contract, but equally was entitled to sue on that contract. Here, therefore, it did not matter whether the referring party was Gibson himself or Gibson, the limited company.
The Judge also made some interesting comments about the course adjudication itself seems to be taking:
"This is not the first dispute which has come before me relating to an adjudication commenced after the contract has been completed. If instead of starting the adjudication process an ordinary action had been started in this Court in March 2001, even allowing time for a mediation which might well have been successful, the trial on the merits would already have taken place and the parties will now have a final decision...Instead, I am considering a provisional decision by the Adjudicator which the losing party will have an opportunity to overturn at a later stage on the merits...the Claimants are entitled to...adjudication, but I am not sure that it is appropriate to do so when forms of final dispute resolution are immediately available."
HHJ Wilcox had to consider an application for the enforcement of a decision where ABB held that the Adjudicator had no jurisdiction to determine the dispute because the Notice of Adjudication had been given in the name of a different company. HHJ Wilcox rejected this argument since at all times both parties had been well aware at all stages of the true identity of the contracting party. No one had been misled. However he did caution parties to be careful where there are similar company names or a number of subsidiaries in a group of companies. Here precision might well be required.
Total had also tried to recover their costs of the adjudication as a separate head of damage. These costs were considerable, being almost ?93k – Total having been awarded ?462k in the adjudication. It was suggested that if a party fails to pay under a construction contract than it was foreseeable that the other party to that contract would go to adjudication and incur costs. HHJ Wilcox did not allow this. There was no provision in the HGCRA for the recovery of the costs of an adjudication. Therefore, they could not be recovered as damages. To allow such a claim would be to “subvert” the Scheme.
ABB claimed that the adjudicator did not have any jurisdiction to base his decision on additional works carried out by Total. These were a series of separate oral agreements. Again the Judge disagreed. The additional works were the same type of work, which was the subject of the original sub-contract. Thus the scope of that work was enlarged. S107(3) of the HGCRA refers to agreements made otherwise than in writing. Provided that the agreement refers to terms, which are in writing, then it is an agreement in writing. This was a contract varied orally by the parties. The contract as varied fell within the scope of S107.
Finally, at the end of his judgement HHJ Wilcox ordered that ABB pay into court (and not direct to Total) pending a full hearing, that part of the claim which related to a set off claim by ABB. The adjudicator had refused to consider the merits of that part of the claim in the absence of a valid withholding notice.
Daraydan resisted a claim for summary enforcement of an adjudicator's decision on the grounds that it was entitled to raise now matters said to be relevant to what sum should be paid as a result of an adjudicator’s decision.
Daraydan claimed a right to set off a claim for liquidated damages under a related contract, which exceeded the total amount awarded. It also maintained that it had a claim for allegedly defective works and it was entitled to abate the sums awarded by the adjudicator by the amount of these claims, which were disputed by Solland.
HHJ Seymour QC held that the fact that there were apparently other disputes between the parties did not constitute any reason not to enter judgment for the sums awarded by the adjudicator. The parties had entered into a contract, which said that the decision of an adjudicator was binding pending final determination by the Court. There was no provision in that contract to set off or deduct against that award.
The judge was also asked to stay enforcement on the grounds that the adjudicated dispute was but one of a series of complex disputes concerning far greater sums than current one. He declined to do so. The question here was who should hold the money, which the adjudicator had decided, should be paid to Solland while the disputes between the parties were resolved. On the facts here, “the function of the Court” was to enforce that decision.
HHJ Seymour QC had to consider Earls Terrace's claim for a declaration that the adjudication commenced by Waterloo should be restrained on the basis that the agreement, as amended by a subsequent variation agreement, was not a construction contract within the definition of the HGCRA.
By an agreement dated 4 December 1996 Waterloo had agreed to act as a developer for Earls Terrace. The agreement was later amended by a deed of variation dated 20 July 1998. The 1996 agreement came within the definition of a construction contract. However, it also pre-dated the operative date of the HGCRA, 1 May 1998. The deed of variation was entered into after 1 May 1998, the effective date of the HGCRA. However, that deed of variation merely amended the fee due to the defendant, and deleted one sub-clause in the main agreement. Thus the variation agreement was not a contract for construction operations.
The key question here was whether the making of a deed of variation on 20 July 1998, which was not in itself a construction contract, but which varied the terms of the main agreement dated 4 December 1996, would have the effect of bringing the entirety of the agreements within the HGCRA, notwithstanding that the earlier agreement was not a contract to which the HGCRA applied because that agreement pre-dated the operative date of the HGCRA.
HHJ Seymour QC held that whilst it was possible that a variation to a construction contract made before 1 May 1998 could amount to a construction contract (and therefore come within the HGCRA) here, since the deed of variation merely modified the fee provisions, it was not sufficient to bring the earlier agreement within the scope of the HGCRA. Thus the adjudication which had been commenced was void and of no effect since the adjudicator had no jurisdiction to act.
Here Quality Street sought an injunction to prevent the appointment of an adjudicator. Elmwood had sought to refer a dispute in relation to the ascertainment of its final account and payment of loss and expense. Quality Street sought the injunction on the basis that Elmwood was seeking to refer issues which were currently being litigated at Court, that the Final Account was agreed and that Quality Street were seeking to refer to adjudication more than one dispute.
Sheriff Principal Bowen QC held (thereby following Hershel v Breen) that adjudication could be commenced at any time and this was not inconsistent with the Court proceedings. However, he decided that, both parties having agreed that one can oust the jurisdiction of an adjudicator by reaching a compromise agreement, there was a triable issue as to whether there was such an agreement between the parties. The balance of convenience favoured allowing a full hearing on this issue first. If it were resolved in Quality Street's favour then the costs of the adjudication would have been avoided.
Having ruled in Quality Street's favour on the "agreement" point, the Sheriff held that he did not have to come to a decision on the "dispute" point. However, he did indicate, obiter, that he had some difficulty with the view expressed in Fastrack by HHJ Thornton QC that the dispute which may be referred to adjudication "is all or part of whatever is in dispute at the moment that the Referring Party first intimates adjudication reference". The Sheriff thought that the fact that an adjudicator only had 28 days to come to a decision, might suggest that Parliament did not have in mind for an adjudicator to consider a "conglomeration of claims".
The Court of Appeal overturned the first instance judgment of Mr Recorder Moxon-Browne QC.
Unfortunately, although the CA recognised that the question of whether failing to give a withholding notice within the stipulated of time was one of some importance to the construction industry and one where there has been a difference of judicial opinion, they did not think it right (in the absence of argument from Isobars who were not represented) to express a view which would only be obiter (i.e. not binding).
Instead, the only question, which the CA believed, it was necessary to consider was whether the error on the part of the adjudicator, who had failed to appreciate that the contractual provisions had been superseded by the Scheme, went to his jurisdiction or was merely an erroneous decision of law on a matter within his jurisdiction.
It is only when the adjudicator decides matters beyond the dispute referred that he has no jurisdiction. Here the scope of the dispute was agreed, namely the employer’s obligations to make payment or otherwise. Thus the adjudicator had to resolve as a matter of law whether certain contractual clauses applied or not and if they did what the effect was of the failure to serve a timeous notice. Whist the adjudicator was as a matter of law incorrect, that error was within the scope of the dispute agreed between the parties. The adjudicator therefore answered the right question but in the wrong way and the claimant was therefore entitled to enforcement of the adjudicator’s decision by means of summary judgment.
The Appeal Court upheld the judgment at first instance and the decision of the adjudicator.
Since the original Judgment, Sweeney had gone into liquidation. Karl’s position was that the dispute referred to the adjudicator had changed as a result of Sweeney’s written response to points made in the adjudication by Karl. Quite simply, the CA disagreed with this contention stating it to be unsound. The adjudicator had been charged with ascertaining the law and therefore had no option but to apply the relevant law as she saw it.
HHJ Seymour QC had to consider whether an adjudicator had exceeded his jurisdiction. Part of the award related to alleged variations. Included in the calculations of these variations were amounts in respect of alleged variations to smoke ventilation works. This was notwithstanding that the adjudicator did not consider that there had been any variation in those works.
Automajor believed that this represented an error, which went to the jurisdiction of the adjudicator. Accordingly, the Adjudicator was invited to amend his decision pursuant to the slip rule
HHJ Seymour QC commented that if the Adjudicator had made an error, and he did not say that he necessarily had, then the proper mechanism for correcting that error was either in the course of final account negotiation or by referring the dispute to arbitration.
Here, Automajor had only paid up that part of the decision, which they did not challenge. HHJ Seymour QC commented that it could not be right that it is open to a party to an adjudication to both “approbate and to reprobate a decision of the adjudicator.” Either the whole of the relevant decision must be accepted or the whole of it must be contested.
That said, HHJ Seymour QC continued, if an adjudicator had a made decision both on the question of how much money is due to a party and as to what (if any) extension of time a party is entitled, it may be open to a party to that adjudication to accept the determination in relation to the sum due but to dispute the assessment of the extension of time or vice versa. Here, two separate questions had been referred to the adjudicator. However, what you cannot do is challenge part of a financial award or part of an extension of time decision.
Finally, HHJ Seymour QC held that, Automajor by inviting the adjudicator to correct the award under the slip rule, had accepted that the award was valid. The invitation to correct the award could only be consistent with recognising that award as valid. Presumably, therefore, Automajor would have been estopped from challenging the jurisdiction had their other arguments succeeded.
In a previous adjudication, Watkin Jones had been awarded almost ?350k on the basis that no notice had been served by Lidl against application 11 in accordance with clause 30.3.3 of the JCT Standard Form of Contract with Contractor’s Design. By clause 30.3.5, without such a notice, the sums applied for became due and payable.
Lidl said that the new dispute related to the question of what was the properly calculated sum due under application 11. HHJ LLoyd QC held that the subject matter of the new adjudication was a dispute about the value of application 11. That issue had been resolved in the first adjudication where the adjudicator had considered the application for payment and the terms of the contract. Accordingly, there was no dispute.
Deputy Judge Berry QC was invited to extend the principle of set off in insolvency cases from companies in liquidation to companies in administration.
When the CA heard the case of Bouygues v Dahl-Jensen, it held that where there were latent claims and cross claims between the parties, Rule 4.90 of the 1986 Insolvency Rules would apply to provide for a mutual set off. In such circumstances, summary judgment was not the appropriate way to proceed. Dahl-Jensen had of course, gone into liquidation. Here, the DJ awarded summary judgment in favour of the claimant, but refused to stay the judgment hearing pending the hearing of a cross claim. Although the case related to payment of certificates under a DOM Sub-Contract, there had been no adjudication and the Deputy Judge was not persuaded that the Herschel principle (that a stay may be granted if there was a real doubt as to the claimant’s ability to repay if it subsequently loses a related action) applied here.
HHJ Cockcroft upheld the decision of an adjudicator and awarded summary judgment in Jerome's favour. Jerome had referred a dispute to adjudication under clause 38.A of the DOM/2 conditions of contract. Lloyd claimed that the adjudicator did not have jurisdiction since the Notice of Intention to Refer did not comply with clause 38A and/or did not provide a statement of the relief or remedy sought.
Jerome submitted that this was a valid referral because clause 38.A makes no provision for the need for a precise statement of relief within the Notice. The clause says that the party referring the dispute must give notice of the intention to refer and must briefly identify the nature of the dispute. The clause continues that it is the Referral, which shall include a statement of the relief or remedy, which is sought.
HHJ Cockcroft agreed that the Notice did not express the exact relief sought, but thought it appropriate to consider the background known to both parties at the material time. Both parties knew that Jerome was owed money, which had been withheld. The "officious bystander" could not have come to any other conclusion than that Jerome had gone to adjudication because they wanted payment of an interim valuation.
Further, the Judge agreed that as the contract was governed by clause 38.A of DOM/2, then provided the relief sought was set out fully in the Referral, this would be sufficient.
Finally, as the adjudicator had asked the right question namely "how much should be paid", the approach he had adopted was immaterial.
Etherton J had to consider an application to set aside a statutory demand. Although the parties had intended to enter into to the NAM/T form of contract, no formal contract was ever concluded. Oakley paid Airclear after deducting various sums for delay costs and other items. Airclear did not agree with this.
Airclear then referred the dispute to adjudication in which Oakley took no part. The adjudicator decided that Oakley should pay Airclear. Oakley did not pay. Airclear issued a Statutory Demand. Oakley applied to set that aside arguing that as there was no contract, the adjudicator did not have jurisdiction, having been appointed pursuant to a contract or that if there was a contract it was not in writing, as required by Section 107 and so the debt was disputed.
Etherton J held that the judge was entitled to find that the parties shared an assumption that the agreement was governed by NAM contracts. However, although Oakley could have been estopped from resiling from that assumption, there was insufficient evidence to show that it was unconscionable for Oakley to do so. Thus the adjudicator had not been validly appointed and his decision was a nullity. As a result the Statutory Demand could not be based on a debt and so the Demand was set aside.
Jarvis tried to rely upon the “pay when paid” clause contained in the subcontract to prove that it need not pay Durabella. There had been proceedings between Jarvis and the ultimate employer following the termination of Jarvis’ contract. In those proceedings, Jarvis had maintained that Durabella’s work was not defective. In the latest proceedings, Jarvis maintained a contrary position.
HHJ LLoyd QC found that the settlement in the first proceedings had no evidential value in showing whether Jarvis had been paid in full for the work carried out by Durabella. The Judge also held that Jarvis could not rely upon the pay when paid clause if the reason for the non-payment was in fact, its own breach of contract or default. Further Jarvis could not rely on the pay when paid clause when its employment came to an end under its own default and/or it had failed to pursue its remedies promptly and effectively.
An adjudicator's fees fall within the words "anything done or omitted in the discharge or purported discharge of his functions as adjudicator." These fees may be challenged if, and only if, the adjudicator has acted in bad faith.
The criterion of the reasonably competent solicitor is not a relevant test in determining the reasonableness of an adjudicator's fees. A court must be very slow indeed to substitute its own view of what constitutes reasonable hours.
The pursuers contended that it was entitled to an interim payment in terms of a document which it characterised as "Application for Payment No. 10".
Lord Macfadyen held that the application did not constitute a "claim by the payee" within the meaning of paragraph 12 of the Scheme,
Further the application did not meet the specific contractual requirements of an Application for Interim Payment nor the requirement that it be accompanied by a detailed build-up of the values of the work executed.
Section 111 does not apply only for the purposes of adjudication.
The claimant sought summary judgment in respect of ten unpaid invoices.
HHJ Gilliland QC said, "the effect of Section 111 is to prevent the paying party if he does not give appropriate notice from exercising his right to retain or withhold payment of monies which would otherwise be due and payable, but for the existence of some right to withhold payment. Section 111 refers to "withholding" payment generally. It must have been intended to include situations where the paying party was legitimately entitled under the general law under the terms of the contract to withhold monies which were otherwise payable".
The Judge concluded that the claimant would not have been entitled to summary judgment on the merits of the claim. However, he gave summary judgment because no valid withholding notice had been given under Section 111.
HHJ Havery QC had to consider whether a contract between the parties was a construction contract within the meaning of section 104 of the HGCRA. There was an original contract dating from August 1995, which preceded the HGCRA, and a novation agreement dated August 1998, which would be covered by the HGCRA.
Costain suggested that if the novation agreement constituted a construction contract within the meaning of the HGCRA then the HGCRA would have retrospective effect. The claimant could thus refer a dispute to adjudication at any time, which could relate to work done as far back as 1995. Costain submitted that it would be absurd for the Act to be able to apply retrospectively.
HHJ Havery QC disagreed and found that the wording of the act was clear so that the novation agreement did fall within section 104 of the HGCRA and that Yarm Road could proceed to adjudicate any disputes which had arisen.
HHJ LLoyd QC had to consider various applications arising out of an adjudication. One question involved whether more than one dispute had been referred. The Judge noted that one should approach the interpretation of any document in relation to an adjudication in a “sensible manner” and “try to give effect to its intentions”. Paragraph 8 of the Scheme does preclude reference of more than one dispute, without consent. No consent was given. The Notice of Adjudication referred to six separate matters, including an entitlement to loss and/or expense, an entitlement to an extension of time and various valuation issues.
Upon examining the contents of the Notice, the Judge found it plain that the real dispute was about what payment ought to have been made as a result of Application No. 19. This included all the elements reflected in the Notice of Adjudication. For example, loss and expense may not properly be ascertainable until any right to an extension of time has been determined. There was thus only one dispute.
All the money flowing from the decision had been paid save for the liquidated damages, which were disputed. The decision was corrected and the following day the Employer wrote a letter advising that as work was not completed within the contract period (as extended by the adjudicator) it was entitled to deduct liquidated and ascertained damages.
The time for payment of the Adjudicator’s decision fell after the letter had been written. Therefore, the Judge held that the defendant had an arguable prospect of successfully maintaining that an effective notice had been given which was sufficient to resist payment of the amounts due.
The defendant had advanced the case in relation to the LADs by way of counterclaim. The claimant sought to stay this to arbitration. However, the Judge refused to do this, holding that the actions taken by the claimant to enforce the decision (which were intimately connected with the subject matter of the counterclaim) and also to strike the counterclaim out amounted to a step in the proceedings.
In Section 105(3) of the HGCRA "fittings forming part of the land" was a reference to fixtures. Gibson Lea's work involved shop fitting.
HHJ Seymour QC thought it clear that shop-fitting did not amount to construction operations unless it consisted of the construction of "structures forming, or to form, part of the land (whether permanent or not)" or "installation in any building or structure of fittings forming part of the land", as per sections (105)(1)(a) and (c) of the HGCRA. None of the items supplied by Gibson Lea were fixtures. The Act did not apply.
Court proceedings are not an appeal against the decision of an adjudicator.
The defendant had argued that the effect of the adjudicator's award of a five-week extension of time was that City Inn had to demonstrate that the award was not justified.
Lord Macfadyen confirmed that adjudication provided for an interim determination of the issues between the parties. Should the dispute ultimately go to litigation or arbitration then the matters will be decided afresh as if there had been no adjudication.
This was an action for judicial review. The petitioners submitted that there was no "dispute" between the parties, having regard to the terms of the contract between them. The joint venture maintained that there was a dispute within the meaning of section 108 of the Housing Grants, Construction and Regulations Act 1996 and that any provision in the contract that purported to redefine a "dispute" fell to be disregarded, in the light of section 108(5).
Having decided that there was an arguable case as to whether there was a dispute the Court then had to decide whether, on the balance of convenience, the Court should not permit an adjudication to proceed pending resolution of that case.
Lord McCluskey refused to disallow the adjudication on the basis that both the 1996 Act and the substituted Clause 90 envisaged the desirability of proceeding to a speedy resolution of matters in issue. If the matter was not already in issue, as argued, it could be put in issue without delay, but the resolution thereof would be delayed for some four weeks or thereby. The parties having had some months to investigate and consider their respective positions and to research matters, the extra cost of putting these matters in an appropriate form before an adjudicator were likely to be not very great.
Error of fact or law on the part of the adjudicator will not afford ground for refusal of enforcement, unless the error was of such a nature that the adjudicator's decision was, as a result, one which he had no jurisdiction to make.
The adjudicator erred in:
However, the adjudicator's error did not take him out of the proper scope of his jurisdiction. He made an intra vires error rather than one which rendered his decision ultra vires. His decision was wrong, but not in such a way as to be invalid and reducible.
The Act does not qualify the expressed intention that an adjudicator's provisional award should be enforced pending final resolution of the dispute, to the effect of making an exception in the case where the claimant, although not in liquidation, can be shown to be insolvent.
The Petitioners were seeking interdict and suspension of a second adjudication started by the Respondents on essentially the same dispute as the second adjudicator had not resigned as required by paragraph 9.2 of the Scheme.
Having earlier granted such an interdict and suspension during a hearing at which the Respondents were not represented, Lord Bonomy recalled the interim interdict, holding that the Court of Session was being asked to exercise its supervisory jurisdiction and that since 1985 it had been mandatory to present applications to the supervisory jurisdiction of the Court by petition for judicial review rather than by ordinary petition (Rule 58.3.-(1) of the Rules of the Court of Session applied in two respects).
Comment: In so doing, he was neither ruling that the second adjudication should proceed nor be stopped; he was ruling that an ordinary petition was the wrong approach that required to be taken. This is a technical and procedural matter in relation to the Rules of the Court of Session which would require a petition for Judicial Review to have it resolved.
Lord Reed had to consider an application for judicial review of the decision of an adjudicator. The adjudicator here, who had been appointed on three previous occasions in disputes concerning this same project, refused to grant the redress sought in the Adjudication Notice. He decided that the claim was "not valid". Ballast sought a declaration that the adjudicator had failed to make any decision in respect of the matters claimed.
The Respondent submitted that the adjudicator could validly decide that he was unable to exercise his statutory jurisdiction. Even if an incorrect decision had been issued by the adjudicator, the matter was decided until finally resolved and thus no subsequent adjudication proceedings on the same dispute could be instigated by the petitioners. If, the adjudicator was in error that was an error, which fell within his jurisdiction and was one, which the Court could not interfere with.
Lord Reed found the adjudicator's decision difficult to understand. The adjudicator appeared to have decided that he could not carry out any valuation, or find any payment due, because the parties had departed from the terms of the pre-printed Contract. He did not take into account the fact that other matters could be agreed between the parties. Such an approach was wrong in law. The error was a material one. Thus, the decision was a nullity and the Petition was granted.
It was held that an error in law made by the adjudicator constituted an excess of jurisdiction with the result that the court refused enforcement.
Recorder Moxon Browne QC agreed with Isobars that if no election was made between payment alternatives A and B of Appendix 2 of the JCT Design & Build Contract payment provisions, the entirety of clause 30 of the contract must fall away and the Scheme applied. The adjudicator had erred in law in basing his decision upon the provisions of clause 30.3.5.
The adjudicator had answered the 'wrong question' and thus he had acted in excess of his jurisdiction. Enforcement of the decision was refused and Isobars was given leave to defend the action and pursue its counterclaim.
HHJ Humphrey Lloyd QC considered the question of whether a dispute had arisen that could then be referred to adjudication.
The issue of a purported determination of the employment of the contractor in this instance also meant that the underlying basis for that purported determination, i.e. extensions of time, had also properly been considered by the adjudicator.
Lord Macfadyen expressed some reservations about the comments made by HHJ Thornton QC in Sherwood & Casson -v- McKenzie that the decision of an Adjudicator whose validity is challenged as to its factual legal conclusion or as to procedural error remains a decision that is both enforceable and should be enforced.
Lord Macfadyen made a distinction between a decision that is unsound but valid and a decision that is invalid because it was not one that the Adjudicator had power to make. In addition, he did not rule out the possibility that that a procedural error may produce a result that the Adjudicator makes a decision that is beyond his jurisdiction. This is in slight contrast to the treatment of the "procedural error" by Mr Justice Dyson in Macob.
The defenders contended that since the dispute between the parties included three separate elements, issues as to the amounts due in two separate interim certificates and a claim for an extension of time, there were in fact three disputes. However, Lord Macfadyen said that at first instance the Adjudicator must decide for himself whether what is at issue is a dispute or several disputes. It is easy to sub-divide and analyse what is in substance one dispute into its component parts and label each part a separate dispute. This is not the correct approach. A realistic view must be taken. Here, the dispute was what sum is due and owing to the pursuer.
Defences were also raised on the basis that the adjudicator did not have jurisdiction to consider applications for payment which had not been certified (i.e. therefore no sums were due). This was rejected.
Finally, since the contracts were rescinded by the Defender, it was argued that since the adjudication notices did not distinguish between sums allegedly due before and after that rescission, where the adjudicator decided that the contract had indeed been rescinded he could not continue. In one of the adjudications Lord Macfadyen agreed that the adjudicator had not considered this point. Therefore any sum which flowed from this part of the decision could not be enforced.
It was submitted that it was possible to separate the "good parts" from the "bad parts" of the decision. This was not disputed by the parties and nothing further was said about the question as a legal issue. It is of course in contrast to the KNS and Farebrother cases.
Mitsui sought Judicial Review of a decision by an Adjudicator that she did not have jurisdiction to consider a dispute which concerned the construction of two boiler plants on a site leased to a company within the overall site at BP Grangemouth whose primary activity was the processing of chemicals and oil on the petrochemical complex.
The Adjudicator had viewed the situation as being a dispute which fell within the exclusion contained in section 105(2)(c) of the 1996 Act.
Mitsui's position was that as the combined heat and power complex was within a site on land leased to a separate company, the primary activity of the site was the generation and supply of steam which was therefore not within the section 105(2)(c) exclusion.
Lord Hardie decided that on the facts of the case the installation of the boiler plant was to further the primary activity of the processing of chemicals and oil on the petrochemical complex and hence fell within the exclusion, and dismissed the petition accordingly.
An adjudicator had awarded James R Knowles payment for invoices for providing evidence as witness of fact and assisting in an arbitration. It was held that these were not matters falling within the definition of a construction contract within sections 104(2) of the HGCRA.
The Judge thought it clear that while giving factual evidence or assisting at an arbitration was not in itself a construction operation as defined by section 105, it did not necessarily follow that these activities were not carried out in relation to construction operations.
However the giving of factual evidence by an architect is not the "doing" of architectural designing or surveying work itself. Similarly, providing litigation support at an arbitration is not the same as providing advice on the building or engineering. They are different and distinct activities.
Disputes in relation to payment of fees properly payable for services rendered as a witness of fact or assisting at an arbitration or litigation are not disputes in relation to construction operations, even if that dispute concerns construction operations. They are disputes in relation to litigation support work and arise under a contract provision of litigation support services.
Application by an adjudicator against Arcal Limited and Messrs Martin and Dawson of Deloitte and Touche (the Receivers) for payment of his fees.
It was held that:
In the absence of a Section 111 Withholding Notice, a contractor has an undisputed debt for the amount demanded in an application for payment. This debt may form the basis of a statutory demand, which if unpaid within 21 days may justify a petition to wind up the debtor.
The main contractor's surveyor had certified the sums were due and the right to withhold had been forfeited as a result of the main contractor's breach of Section 111. The Court refused to restrain the winding up petition. It also refused to exercise its discretion to dismiss the petition because the main contractor had failed to take any steps to pursue its cross claim for set off and/or abatement (which could have extinguished the debt claimed) in adjudication or other proceedings.
HHJ MacKay considered an application for a declaration that the agreement between the parties was not an agreement in writing as provided for by section 107 of the HGCRA. HHJ MacKay said that section 107 was an inclusive not an exclusive piece of legislation. The purpose of the act was to bring in agreements which would not be caught otherwise by the act to enable parties to construction agreements to take advantage of the procedure set out in the act.
The material between the parties by way of written subsidence (i.e. such as to evidence the agreement in writing) was "comparatively great". If it were necessary to insist upon a recitation of the agreement when the existence of the agreement, the parties to the agreement, the nature of the work and a price of that agreement are clearly to be found in documentary form then this would be contrary to the terms of the HGCRA.
This case relates to an adjudication carried out in accordance with the TeCSA adjudication rules version 1.3. In particular there is discussion of paragraph 12 of the Rules which provide that an adjudicator "may rule upon his own substantive jurisdiction and as to the scope of the adjudication".
HHJ Gilliland QC states that "so far as jurisdiction is concerned, if he [the Adjudicator] decides that something is within his jurisdiction, that is binding. Thus jurisdiction is for the Adjudicator to decide and not a court on summary application."
The Defendant argued that he was entitled to deduct or set-off from the amount of money awarded by a claim which is before the adjudicator which was not, as submitted, challenged. The award was good in part, but not in full.
Following the decision in KNS v Sindall, HHJ Gilliland QC disagreed and took the view that it was not right for the court to dismantle or reconstruct the decision of an adjudicator.
An adjudicator under the HGCRA is not a public authority and thus is not bound by the Human Rights Act 1998 to not act in a way incompatible with a convention right.
Applying the definition of 'tribunal' in section 21 of the 1998 Act, an adjudicator is not a person before whom legal proceedings could be brought. Considering the whole of the process, including enforcement proceedings, there would necessarily be a public hearing before the decision could be enforced and all the other requirements of Article 6 of the 1998 Act would be satisfied at that stage.
It is not open to a party to an adjudication, who has not asked for publicity, to wait until he has lost and then complain of the lack of publicity.
This case considered once more the application of the Rules of Natural Justice to adjudication. Having declined to summarily enforce the Adjudicator's decision - see below - HHJ Bowsher now considered whether to enforce the decision with a full defence alleging such a breach having now been entered.
Having considered the parties' submissions, the court would decline to enforce a decision by an adjudicator which had been reached after a substantial breach of the rules of natural justice.
Lady Paton held:
Lady Paton also reconfirmed the four options open to those who challenge jurisdiction outlined by HHJ Thornton QC in Fastrack v Morrison. These are as follows:
The claimant submitted that there was a compromise agreement on the strength of which the claimant forbore from pursuing adjudication. The defendant submitted that there was no such agreement and applied for a stay of proceedings under Section 9 of the Arbitration Act on the basis that arbitration was the proper forum in which to determine whether or not there was such an agreement.
It was held that:
The claimant submitted that the dispute referred to an adjudicator was the same as that as had been decided in an earlier adjudication. The claimant submitted that the adjudicator in the second adjudication was precluded from deciding the matter as Paragraph 9(2) of the Scheme for Construction Contracts required him to resign.
It was held on the facts that in the second dispute whilst the references to the adjudicator may have related to the same matters arising out of contractual relations between the parties, they did not relate to the same dispute.
Structures on the sea bed below low water mark do not form part of the land for the purposes of s 105(1) of the Construction Act. Land, by s 104(6)(b), had to be in England, Wales or Scotland.
Summary judgment will be stayed in circumstances where there is a serious doubt on the ability of the claimant to re-pay the monies awarded under an adjudicator's decision once the matter has been finally determined. Rainford fell into such a category by the very fact that they were in administrative receivership. The Judge also set out guidelines as to how the Court will approach such an application in the future.
Summary judgment would not be automatically given where an adjudicator had also acted in a mediation role between the parties as there could be an arguable case of perceived bias of the adjudicator.
The Judge considered at length the current position of the law in respect of bias.
Kershaw was seeking to defend an application for summary judgment on the basis that the adjudicator did not have jurisdiction to decide how much was due for anything other than one specific application for payment.
It was held that the adjudicator was construing the meaning of the contract when deciding what was payable, and whether he was right or wrong, the court must give effect to his decision until a trial or arbitration on the amounts due under the specific application was fully heard out. An error of law or interpretation was not outside jurisdiction.
Palmer, the owner of a company called Lords of Princetown Ltd, defending enforcement proceedings raised the defence that the adjudicator had acted without jurisdiction in reaching his decision as he had been wrong when he decided that Palmer (the individual) was the proper party to the electrical contract and not his company.
Judge Havery QC rejected this defence saying that it was not open to him to look into the adjudicator's decisions in fact or law. Only if the adjudicator had exceeded his powers under the HGCRA would the court have the right to question the award. Here the adjudicator had made a decision, which he was empowered by the HGCRA to make. If he made any error, it was an error of fact which it was certainly within his jurisdiction to determine.
Karl sought Judicial Review of an adjudicator's decision on the basis that she had acted ultra vires in finding that the payment provisions of the sub-contract were not compliant with the Scheme for Construction Contracts (Scotland) Regulations 1998 and making her decision accordingly.
There are two points in this interesting Judgment: (1) Did the Adjudicator answer a question not put, and therefore outwith Jurisdiction? (2) Can an Adjudicator take a question for herself, and answer that question without referring to the parties?
Comment: It would be wrong to "tag onto" an existing dispute an issue that created a substantive alteration to the dispute already brought. Only a pre-existing dispute (a claim which had crystallised by both sides taking, and being able to take positions), may be referred to Adjudication.
If the new issue or contention creates a fundamentally different or significantly different claim, it may be a different dispute than that referred or even may not have reached the status of a dispute at all. And if the tagged-on issue was brought in and decided by the Adjudicator that might amount to a trespass outwith Jurisdiction.
Comment: Lord Caplan appears to reflect the Dyson J approach whereby a decision of an Adjudicator whose validity is challenged as to its factual or legal conclusions, or as to procedural error remains a decision that is both enforceable and should be enforced.
According to better-understood procedures in litigation or arbitration such procedure would almost certainly be characterised as unfair and in breach of natural justice, to say nothing of Article 6 of the Human Rights Act. However, the Adjudicator was on this occasion examining the construction of the contract using her undoubted competence to contrast that with the requirements of the Payment Provisions required by S110 of the Act. It may go too far to suggest that if an Adjudicator investigated facts and decided not to put the evidence to the parties for comment a court would merely remain "uncomfortable".
ABB Zantingh sought an order that contracts between the claimant and the defendant for the supply, installation, labelling, termination and testing of all field wiring (including the supply and installation of certain metal containment systems and secondary steel support) in connection with the installation of standby generators were not construction contracts as defined by the Housing Grants Construction and Regeneration Act.
The basis for the contention was that works on a site where the primary activity is power generation are excluded from the Act. The counter-argument was that the primary activity of the site was printing and that the works in question were therefore included within the scope of the Act.
The Judge found on the facts of the case that the HGCRA applied.
Maymac sought to enforce an Adjudicator's decision. On the basis of a letter from Maymac, which was not before the Adjudicator, Faraday submitted that there was no written contract and/or no contract and so the HGCRA did not apply. Maymac submitted that there was a construction contract, alternatively that Faraday was estopped from now maintaining that there was no construction contract having not raised the Maymac letter during the course of the adjudication.
The Judge found that there was a contract to which the HGCRA applied. He went on to say that in the event he was wrong, Faraday were in any event estopped by representation and convention from now maintaining that the Adjudicator had no jurisdiction.
Any points which are to be made as to whether the Adjudicator has jurisdiction must be raised in a timely manner during the adjudication itself. The Judge also commented that if no contract existed and the referral was not under the HGCRA, then the adjudication took place by agreement between the parties on the same terms as the HGCRA and the Scheme.
The Courts will refuse to enforce an adjudicator's decision where an adjudicator acts in a way which appears not to be impartial whatever the attitudes of the parties to the adjudication proceedings. In this case, the adjudicator's actions during the adjudication and when the decision required enforcement raised questions as to whether the adjudicator had remained neutral.
Article 6 of the European Convention on Human Rights, particularly the right of every party to have a reasonable opportunity of presenting its case, does not apply to adjudication proceedings under the HGCRA, since they do not involve a final determination of the rights of the parties - that determination is only binding pending final determination by arbitration or litigation.
Whether this would also be the case if the adjudicator's decision is stated to be final or becomes final if not contested within a specific time under the contract, remains to be seen.
The claimant sought a declaration that the provisions of the HGCRA did not apply to a dispute between it and the first defendant since there was no construction contract between them; the third defendant having been retained as project managers in relation to the works and being responsible for entering into any relevant construction contracts as principal rather than as the agents for the claimant.
It was held that on the evidence presented the Court was satisfied that the third defendant was the duly appointed agent of the claimant and in that capacity had entered into a contract with the first defendant with the claimant as principal. It followed that the contract between the claimant and first defendant was a construction contract within the meaning of the Act.
This case considered the application of the Rules of Natural Justice to adjudication. Having considered the facts, HHJ Bowsher declined to summarily enforce the Adjudicator's decision.
The action complained of was the Adjudicator's failure to consult with one of the parties on important submissions that were made by the other party. Judge Bowsher said:
"If the rules of natural justice had been complied with, the Adjudicator might have reached a different decision. If he had reached his decision, different or not, after complying with the rules of natural justice, I would have enforced it. Since the Adjudicator did not comply with the rules of natural justice, and since compliance with those rules might have produced a different decision on his part, I decline to enforce his decision."
HHJ Bowsher QC stressed that he fully understood the difficulties imposed on every Adjudicator by the strict time limits in adjudication. Further he also cautioned against parties "searching around" for breaches of the rules of natural justice. Each case is to be judged on its own facts. Here the Adjudicator had "overstretched the rules".
The parties invited the Adjudicator to decide on jurisdiction in relation to which his decision was, by virtue of Clause 38A.7.1 of DOM/1, binding on the parties until final determination.
Judge Bowsher said that he saw no reason why a distinction should be made between set off and abatement for the purposes of the Act. It is open to an Adjudicator to make abatements in valuing a claim which had been referred to him, whether or not the abatement had been raised in a notice of intention to withhold payment. However, he could not look at abatements outside the ambit of the dispute referred unless they had been specifically included in a S.111 notice.
The Chancery Division had to consider whether to set aside a Statutory Demand served by the Defendant seeking payment of an adjudication decision. Mr Parke argued that he had a valid cross claim which exceeded the amount of the Decision. He had commenced proceedings for recovery of an alleged overpayment in the TCC.
HHJ Boggis QC decided:
The claimant asked for declarations as to the Adjudicator's jurisdiction during the course of the adjudication. ABB argued that the subcontract for the supply and installation of insulation came within s.105(2)(c) of the Act so no right to adjudication existed.
The judge said that section 105(2) should be read as a whole, and in the context of sections 104 and 105(1). He found from doing so, that "it was the intention of Parliament that exemption should be given by applying an additional and different test: was the object of the "construction operation" to further the activities described in section 105(2)(c) (and in paragraphs (a) and (b)) since in those industries or commercial activities it was not thought necessary that at any level there need be a right to adjudicate or to payment as provided by the Act ... Section 105(2)(d) is to be read subject to section 105(2)(c) - so that if the installation work is excluded under 105(2)(c) the exception to the exception in section 105(d) will not apply."
It was held that the Adjudicator did not have jurisdiction and Norwest Holst should not proceed with the adjudication.
The Court of Appeal upheld the judgment of Mr Justice Dyson, and confirmed that the purpose of the adjudication procedure in section 108 of the HGCRA was to provide the parties to a construction contract with a speedy method of resolving disputes, which although not finally determinative could be enforced through the courts by way of summary judgment. Even where, as in Bouygues, an adjudicator had answered the question put to him in the wrong way, the court would not interfere with the adjudicator’s decision.
Dahl-Jensen, the successful party, had gone into liquidation. Significantly, the CA stated that where there were latent claims and cross claims between the parties, 4.90 of the 1986 Insolvency Rules would apply to provide for a mutual set-off. In those circumstances summary judgment was not the appropriate way to proceed. This was because the amount due under the decision to the insolvent party would become part of the fund for distribution amongst its creditors. Accordingly, Bouygues would only receive a pro-rata dividend on its cross-claim and would be deprived of the benefit of setting off its own claim under the construction contract against Dahl Jensen’s claim as envisaged by rule 4.90. As a consequence, there would be a reasonable prospect of successfully defending the claim and no real reason to dispose of the claim summarily in circumstances where the account between the parties would have to be re-opened.
In other words, had this argument for set-off been raised before Mr Justice Dyson, then for reasons peculiar to this actual case, summary judgment would not have been granted. Nevertheless, the Court of Appeal had the opportunity to disagree with the robust approach taken by the TCC. It declined to do so.
Breen refused to pay the money owing to Herschel and brought a further application seeking a stay of the judgment on the grounds that Herschel would be unable to repay the money if the existing litigation in the County Court went against them.
The TCC had no sympathy with this application and dismissed it on the basis that the evidence did not show in any way that Herschel would not be in a position to repay the money should it become necessary.
However HHJ LLoyd QC did indicate that, an application for a stay on the basis that the successful party in the adjudication would not be able to repay the money once the dispute had been finally resolved, provided that it was supported by solid information in support, would be treated with some sympathy by the Court. HHJ LLoyd QC also commented on the complete failure by Breen to have taken any further steps to pursue the County Court action (since the first hearing at the TCC), an inactivity which clearly "did not square with the underlying intention of their application. "
Shepherd sought a declaration that no right to adjudicate arose in a situation where the parties had agreed a full and final settlement of the disputes between them. Mecright argued that the settlement had only been made under duress since it needed (and Shepherd knew that it needed) cash quickly. HHJ LLoyd QC agreed with Shepherd. Adjudication is only available for disputes under a particular contract and not those in connection with or arising out of it. In this case the settlement agreement stood until held to be invalid (but not by an adjudicator).
Balfour Kilpatrick Ltd sought to enforce the decision of an adjudicator.
The defendant argued that the notice to refer was defective in that it sought to refer more than one dispute in a single reference. The contract between the parties incorporated the TeCSA Rules (Version 1.3), which, at rule 3, adopts the singular word "dispute".
They also argued that the number and complexity of the disputes made it unsuitable for adjudication, and given the short time scale the process was unfair and in breach of the rules of natural justice.
Judge Gilliland held that:
This case provides a warning on the need for care when drafting a Notice of Adjudication. The court ruled that a Notice, which referred to various earlier invoices and letters, had failed to describe precisely which disputes had been referred. Only one dispute out of a series had been suitably defined in accordance with the provisions of the Scheme. Thus only part of the Adjudicator's decision was enforceable and the referring party was liable for the fees and expenses incurred in respect of the remainder of the decision, which was outside of the Adjudicator's jurisdiction since it had been improperly referred.
Halki Shipping Corporation -v- Sopex Oils Limited [1998] 1WLR does not apply to the enforcement of adjudications.
The maintenance and repair of domestic gas appliances is a Construction Operation within the meaning of section 105 of the HGCRA. Therefore, a contract to carry out an annual service on each gas appliance in Nottingham's properties, and supply a responsive repair and breakdown service, was a Construction Contract under the HGCRA.
The court refused to recall arrestments on a submission that an adjudicator's decision in relation to the underlying debt in a lesser sum than claimed had been satisfied. The adjudicator's decision, as an interim measure, had not affected the debt that was due at the outset of the adjudication (in relation to which the arrestments had been made) and did not make the debt "contingent" on success in arbitral or legal proceedings.
There was no suggestion that the original claim was made with anything other than a proper motive and a normal basis. The arrestment were not to be regarded as nimious and oppressive notwithstanding the adjudicator's decision that a lesser sum was due.
Carter applied for an injunction on the basis that the appointment of the adjudicator was not valid because:
The judge rejected all these grounds and refused to grant the injunction, noting that:
- the respondent had waived its entitlement to rely on that estoppel; and
- parties could not in any event, by estoppel, prevent the claimant from relying on the HGCRA since its terms are mandatory and they cannot be contracted out of.
A party has the right to include in its standard form of contract a provision providing for the appointment by the Claimant of an adjudicator from its chosen list. The Claimant successfully obtained a Declaration to restrain the Referring Party from taking any further steps in the adjudication since the Court found that the adjudicator, who had not been nominated in accordance with the provisions of the contract, did not have any jurisdiction.
The Judge commented that if only some of the Adjudication provisions within a contract are compliant with the Scheme then that is not enough. Either the contract is compliant or the Scheme applies. Both parties agreed that the contract provisions, which required the service of a Notice of Dissatisfaction (typical in, for example, ICE contracts) prior to the commencement of an adjudication, were unlawful since they contradicted the statutory requirement that adjudication can be commenced at any time.
An effective notice to withhold under section 111 of the HGCRA must be in writing and cannot be given before the application for payment to which it is intended to apply has been made.
HHJ Gilliland QC rejected a suggestion that just as parties cannot contract out of the HGCRA, they cannot contract in and so confer jurisdiction on an adjudicator if that is what the parties agree. On the facts here there was a clear and unequivocal statement that it would accept and be bound by the adjudicator's decision as to whether the contract was a construction contract within the meaning of sections 104 & 5 of the HGCRA.
The adjudicator had the power to correct a decision after it was delivered, providing that correction was made within a reasonable time of giving his decision; Bloor -v- Bowmer & Kirkland considered.
It was not an implied term of the contract between the parties that liquidated and ascertained damages could be deducted from a payment following a decision of an adjudicator where a claim to deduct those damages had not been made at the relevant time in accordance with the contractual machinery.
Enforcement of adjudicator's decision when current court proceedings on the same issues.
A party is clearly entitled to refer a dispute to adjudication at any time. By commencing proceedings a party had not waived or repudiated the benefit of the adjudication provisions contained within the Contract.
A court might not always enforce a decision of an Adjudicator in circumstances where:
A stay of enforcement may be granted.
The question of whether there is a construction contract is for the court to decide and not for an adjudicator.
An adjudicator can decide the terms of a construction contract.
Mackay J in the Liverpool District Registry of the TCC upheld a contractual provision which provided that the referring party would be responsible for all the costs and expenses of any adjudication (including those of the Adjudicator and the responding party) .
Although it was contended that such a provision might inhibit smaller parties from pursuing adjudication, the judge noted that here the contract had been freely negotiated by the parties. The provision which was disputed related solely to costs upon which subject the HGCRA is silent. There were no public policy reasons as to why this provision should be declared void.
The adjudicator did have power to correct a decision after it was delivered.
Clause 107(5) of the HGCRA is only effective to make adjudication available for a contract not in writing if:
Paragraph 8 of the Scheme prevents an adjudicator from adjudicating on more than one dispute or disputes under more than one contract at the same time without the consent of all parties (regardless of whether those other disputes were properly referred to him by nomination).
Application to enforce decisions of an Adjudicator by way of Summary Judgment. Mr Catton contended that no contracts had been concluded (but he had not done so before the Adjudicator). The parties agreed that the Adjudicator would decide whether Mr Catton or one of his companies was the contracting party.
The Judge decided that the Court could not go behind the adjudicator's decision:
"...The parties had agreed to be bound by the Adjudicator's decision as to jurisdiction. By necessary implication (had the evidence justified it) it would have been open to the Adjudicator to find that in relation to one or other of the contracts relied upon by the claimants that no agreement had in fact been concluded. The more so since mistake was actively canvassed before him in the submissions of the respondent..."
Both parties had applied for costs and had, thereby, conferred jurisdiction on the Adjudicator. Northern Developments (Cumbria) Limited -v- J & J Nichol followed.
Mr Catton’s application for a stay of execution of the summary judgment on grounds relating to his means was refused as to do otherwise would "...drive a coach and horses through the adjudication scheme...It would frustrate Parliament's intention."
An application for enforcement became a hearing on jurisdiction in which it was found that the HGCRA applied.
During enforcement proceedings the judge decided that the question of the existence of a construction contract should be determined by the court. The contract was held to have been made after 1 May 1998 so that the HGCRA applied.
The adjudicator was asked to decide particular matters relating to a final account. Some were decided in favour of the Referring party and others were not. The Adjudicator required that "all sums payable pursuant to this decision shall be paid by the Respondent to the Referring Party within seven days of the date hereof...". The Court agreed with the Respondent that this did not mean immediate payment of all sums mentioned in the decision but rather that some of the items which had been disputed were to be treated in a particular way under the terms of the sub-contract.
Contract for work on converting two barns into dwellings, one for occupation by a residential occupier who was a contracting party. 64- 65% of the contract sum related to work on the barn to be owner occupied. The Judge decided:
The Adjudicator was wrong in law in deciding that matters arising out of a repudiatory breach did not arise under the contract. If they had been mentioned in the notice of intention to withhold payment, the Adjudicator would have had a discretion under paragraph 20 of the Scheme to take them into account if he considered them to be necessarily connected with the dispute.
If there are two conflicting adjudication decisions, it may be appropriate to set one off against the other in enforcement proceedings, but that is not an authority for making a set-off within adjudication proceedings of matters sought to be introduced in breach of the statutory payment provisions.
The Adjudicator had no jurisdiction to consider the repudiation claim because it was not mentioned in any notice of intention to withhold payment.
In general, an Adjudicator has no jurisdiction to decide that one party's costs of the adjudication be paid by the other party, but he may be granted such jurisdiction by implied agreement of the parties.
The effect of enforcement proceedings is to enforce the contractual obligation to comply with the decision of the adjudicator.
Section 111 constitutes a comprehensive code governing the right to set off against payments contractually due.
A requirement to comply with an adjudicator's decision means to "comply, without recourse to defences or cross-claims not raised in the adjudication".
Where no effective notice of intention to withhold payment has been served prior to an adjudication award the employer is not entitled to exercise a right of set off against any sum awarded.
A dispute under a construction contract may be in the form of "what sum is due?" so that it is not necessary for full details of quantum to be established before reference of the dispute to adjudication.
The guiding principles of adjudication are as follows:
Following on from the opinion on 10.11.99 that the adjudicator did not have power to make that part of his decision relating to pipework, it was open to the court to:
If a mistake in a Decision was such that the Adjudicator decided a dispute that was not referred to him, then his decision on that dispute was outside his jurisdiction, and of no effect. But if the adjudicator decided a dispute that was referred to him, but his Decision was mistaken, then it was and remains a valid and binding Decision, even if the mistake was of fundamental importance.
The installation of pipework was an operation which fell within the scope of the exception in section 105(2)(c)(ii) of the Construction Act, and was accordingly not a construction operation. The disputes relating to that work were therefore not disputes on which the adjudicator had power to make a decision.
If an adjudicator falls into error of law as to the scope of his jurisdiction it is open to the court in proceedings to set aside the decision, or at least to decline to give it the temporary binding effect which statute gives to a valid decision of an adjudicator.
While the adjudicator's decision could not stand to its full extent, the whole of the adjudicator's decision was not beyond the proper scope of his jurisdiction.
The defendants had a reasonable prospect of success in establishing that a building dispute with the claimant was the subject of a binding compromise (on the final account), and hence was not amenable to adjudication.
Meaning of "Construction Contract" and "Construction Operation"
Notice of withholding.
The Court may use its discretion to grant a declaration of law as to the jurisdiction of an adjudicator.
Under the Scheme, an adjudicator has an implied power to award costs (NB but see Northern Developments (Cumbria) Limited -v- J & J Nichol above).
In proceedings to enforce a decision of an Adjudicator, a Defendant may challenge the decision on the grounds that the Adjudicator had no jurisdiction to determine the dispute?
On the facts, the Defendant was not precluded from making such a challenge to jurisdiction because it had agreed that the Adjudicator should determine the question of his jurisdiction
On the facts, the Defendant has a real prospect of defending the claim on the grounds that the Adjudicator’s decision was wrong because the contract was concluded before 1 May 1998 or alternatively because no contract was ever concluded between the parties.
On the facts, in making a peremptory order as to payment, where a number of other suggestions had been made all involving no order for immediate payment, the Adjudicator had not made an error of law going to the root of his jurisdiction in failing to take account of matters he was required to take account of.
The adjudication provisions implied into a contract by virtue of the Scheme survive the determination of the contract.
The Court does not have power to open up and review a decision where the adjudicator has been properly appointed and is considering matters under the contract properly within his remit.
Adjudication proceedings are "other proceedings" within the meaning of Section 11(3)(d) of the Insolvency Act 1986 therefore leave is required to commence adjudication against a company under an administration.
On the facts, leave would not be given.
Although payment automatically stays enforcement proceedings, in such circumstances it was still open to the court to lift the stay in order to decide the issue of the Plaintiff’s entitlement to costs.
Protective measures cannot be used in pending Court proceedings in security for claims previously before the adjudicator.
Protective measures can be used to attach monies, which are being paid over by the same pursuer in implementation of a previous obligation except where bad faith is shown on the part of the pursuer.
Summary judgment is an appropriate procedure for enforcement of an Adjudicator’s decision.
A decision whose validity is challenged is nevertheless binding and enforceable.
Serving a notice of arbitration was an election to treat the Adjudicator’s decision as one capable of being referred to arbitration. The Defendant was thus also bound to treat it as a decision which was binding and enforceable unless revised by the Arbitrator. Such an election precludes the Defendant from seeking a stay under section 9 of the 1996 Arbitration Act.
Last updated 09 July 2008
