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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