HGCR Act 1996 - Commencement of Adjudication

© Daniel Atkinson 2001 29 September 2001

 

Right to Adjudication
Concurrent Proceedings

 

SUMMARY
The right to adjudication is an unfettered right and cannot be restricted by terms of the contract re-defining “dispute” or making mediation a condition precedent.
Determination by an Adjudicator is entirely without prejudice to the final merits and determination by an arbitrator or court, and adjudications would be enforced even with concurrent proceedings.

 

1. The Unfettered Right to Adjudication

The contract is required to enable a party to give notice of an intention to refer a dispute to adjudication "at any time" - Section 108(2)(a). It is suggested that a contract cannot therefore prevent such a notice by for instance;

  • time restrictions based on say completion of the works;
  • procedural conditions such as conciliation or amicable settlement;
  • purported re-definition in the contract of the term "dispute" under the Act

In John Mowlem & Company plc v Hydra-Tight Ltd it was held that the Act gives an unfettered right to refer a dispute to adjudication, but obiter dicta that the effect of the contract provision was to deprive the parties of an immediate right to refer a dispute at any time to adjudication. Accordingly the Contract as amended did not comply with the Act and the Scheme for Construction Contracts applied, displacing the adjudication provisions in contract.

In R G Carter Ltd v Edmund Nuttall Ltd (2000) TCC Carter argued that the parties had agreed at clause 41 (an amendment to the standard form) for mandatory mediation prior to any adjudication procedure being commenced. It was held that Clause 41involved a postponement of the right to refer a dispute to adjudication which was not found by the language of Section 108. In those circumstances, whatever may or may not have been the attempts to proceed with a mediation, to give effect to clause 41 by stopping the adjudication on the grounds that clause 41 was not complied with, would be to depart from the statutory unqualified entitlement to an adjudication. Since clause 41 would fetter the unqualified entitlement to an adjudication provided for by the Act, Carter would not be entitled to injunctive relief even if there had been a complete failure by Nuttall to comply with the requirements of mediation provided for in clause 41.

In William Naylor v Greenacres Curling Limited (June 2001) Crt of Session the main issue was whether the dispute referred to the second adjudicator was substantially the same as the one previously referred and the actions to be taken by the Court if the Adjudicator refused to resign.  Reference was made to English authority summarised in Workplace Technologies Plc v E Squared Ltd (2000) TCC which indicated that in England it may be that there is no power to grant an injunction to restrain a party from initiating a void reference and pursuing proceedings which themselves are void.

Lord Bonomy held that what Naylor was seeking to challenge was the vires of the second adjudicator. The challenge arose out of the failure of the second adjudicator to resign as required by paragraph 9.2 of the Scheme. He had failed to implement his statutory duty. Lord Bonomy held that since 1985 it had been mandatory to present applications to the supervisory jurisdiction of this Court by petition for judicial review. Ordinary petition procedure was no longer competent. It followed that there was no primafacie case for interim decree.

In British Waterways Board (July 2001) Crt of Session the parties had been in discussions for some months on a claim for some £4.9 million which had not resulted in resolution. British waterways Board sought interim orders from the Court in a petition for judicial review.  The main issue was whether or not there was a dispute which could be sent to adjudication under Section 108 of the Housing Grants, Construction and Regeneration Act 1996. Having heard submissions Lord McCluskey held that there were substantial arguments, supported by authority, on both sides and that there was an issue to try. The matter to be decided therefore was where the balance of convenience lay.

Lord McCluskey held that in examining the prejudice that British Waterways Board would suffer if the adjudication was allowed to continue, they would simply be given yet another four weeks before the matter would have to be adjudicated upon. It was not clear that parties would be able to make any more use of those four weeks to reach an agreement that eluded them in the last five months or so. No quantification of any financial loss to British waterways Board had been offered to the Court.

Lord McCluskey held that in these circumstances the balance of convenience favoured the refusal of the motions which had been placed before the Court. Both the 1996 Act and the contract envisaged the desirability of proceeding to a speedy resolution of matters in issue between the parties. If the matter were not already in issue, 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 was likely to be not very great. No estimate was submitted of what that cost was. Accordingly it was held that the balance of convenience favoured the refusal of the motions which had been made.  Lord McCluskey declined to grant the motions.

 

2. Concurrent Proceedings

It is by no means clear what is the relationship between adjudication and arbitration/litigation, but the Act does not preclude the right being exercised during arbitration or litigation. Indeed Section 107(5) recognises that the formality of "in writing" may satisfied in adjudication, arbitration or legal proceedings, anticipating it is suggested that adjudication proceedings may be commenced during arbitration or legal proceedings.

In Herschel Engineering Ltd v Breen Property Ltd (2000) TCC the issue was the propriety of a reference to adjudication pursuant to Section 108 of the Housing Grants, Construction and Regeneration Act 1996 of a dispute which, at the time of the reference, is already the subject of pending court proceedings. 

The Honourable Mr Justice Dyson held that there was not a close analogy between the position of an arbitrator and that of an adjudicator. Where a dispute falls within the scope of an arbitration clause, the claimant may refer it to arbitration, or, in breach of the arbitration clause, he may refer it to the court. If he takes the latter course, the proceedings may be stayed to arbitration. Adjudication was different. The decision of an adjudicator is not final and cannot give rise to any estoppel. Once the county court has given judgment, then, unless overturned on appeal, its decision does give rise to an estoppel. Likewise in relation to the final award of an arbitrator.

Section 108(2)(a) of the Act expressly states that a party may refer a dispute to an adjudicator "at any time". It was held that if parliament intended that a party should not be able to refer a dispute to adjudication once litigation or arbitration proceedings had been commenced, this would have been expressly stated. There was no obvious reason why Parliament should have intended to draw a distinction between cases where litigation or arbitration proceedings had been started before a dispute was referred to an adjudicator, and those where the proceedings had been started only after the adjudication had been completed. The mischief at which the Act was aimed was the delays in achieving finality in arbitration or litigation. It is inherent in the adjudication scheme that a defendant will or may have to defend the same claim first in adjudication, and later in court or in an arbitration. It was held that it was not self-evident that it was more oppressive for a party to be faced with both proceedings at the same time, rather than sequentially. Section 108(2)(a) should be given its plain and natural meaning.

In Absolute Rentals Ltd v Gencor Enterprises Ltd (2000) TCC Gencor sought an order that Absolute Rental's claim in the proceedings be stayed or alternatively the judgment which Absolute Rentals might obtain be stayed pending the determination of Gencor's claim against Absolute rentals referred to arbitration. 

It was argued that Gencor was entitled to a stay under Section 9 of the Arbitration Act 1996 since a valid notice had been given to arbitration, relying on Halki Shipping Corporation v Sopex Oils Limited 1998. It was held that the determination by an Adjudicator was entirely without prejudice to the final merits and determination by the Arbitrator, and that Gencor had no defence. Summary judgment was granted.