Adjudicate without delay.

Although courts are loath to overrule an adjudicator's decision on procedural grounds, there are areas where judges have decided that time limits and contractual rules must be enforced.

Does this mean reform is needed? asks Daniel Atkinson.

IT IS RARE for the courts to interfere with an adjudicator's decision unless it is obviously unfair. When a decision is challenged, the courts seldom take a technical approach to the procedures adopted.

The result is that any room for procedural wrangling is significantly reduced.

But there are three areas of procedure that are still fertile ground for those determined to avoid adjudication.

The first is the requirement that the contract must be in writing for adjudication to be available as a right under the Construction Act.

The second is the requirement that the referral, setting out the details of the case, should be served within seven days of the notice of an intention to refer a matter to adjudication.

The third area is that the adjudicator has to make a decision within 28 days.

In the recent case of Hart Investments v Fidler, Judge Coulson examined each of these areas and came to decisions that may surprise many.

The referral was provided eight days after the notice of intention, rather than the seven days required by the adjudication procedure - in this case the Scheme for Construction Contracts.

Hart immediately seized upon the point that the adjudicator did not have jurisdiction.

But the adjudication continued and the adjudicator made his decision. But in the court Judge Coulson refused to enforce the decision: the referral was invalid, he said, because it was one day late.

Judge Coulson said there were no reported cases on the consequences of a referral being outside the seven day period. In fact there is one case - that of Tracy Bennett v FMK Construction (2005) - where the referral was six days late. In that case, Judge Havery QC effectively held that the period of seven days was only advisory.

The contract - JCT Private Form 1998 - contained a clause that stated that the failure by either party to comply with any of the procedural requirements would not invalidate the decision of the adjudicator. It may well be that this was a factor in Judge Havery's decision.

The case of Palmac Contracting v Park Lane Estates (2005), although it did not deal with the seven-day period for the issue of the referral, did deal with the seven-day period for the appointment of an adjudicator.

The requirement is for both the adjudicator to be appointed and the referral to be served within seven days of the notice of intention. In practice the notice of intention will usually precede the appointment of the adjudicator and the referral will usually follow it.

In the Palmac case, Judge Kirkham held that the sevenday period for appointment was not prescriptive. If the period was exceeded then the responding party would suffer no prejudice. Again, in this contract - the JCT 1998 With Contractor's Design - there was a clause, similar to that in Bennett v FMK, that the failure by either party to comply with any of the procedural requirements would not invalidate the decision of the adjudicator.

It was clear in this case that Judge Kirkham reached the conclusion without the need to rely on that clause.

In deciding Hart v Fidler, Judge Coulson referred neither to Palmac v Park Lane Estates nor to Bennett v FMK.

He relied instead on analogy to decisions on the requirement for an adjudicator's decision to be made within 28 days. He followed the Scottish judgment of the Inner House in Ritchie Brothers v David Philp Commercials (2005).

The majority decision here was that the 28-day limit meant what it said: any decision made after the 28-day period, even if by just one day, was null.

Only one judge, Lord Abernethy, dissented, saying he was unable to see what constructive purpose would be served by making the 28-day period mandatory.

On the contrary, he considered that it would seriously undermine the effectiveness of adjudication and in that respect followed previous English judgments.

Judge Coulson's decision means that both the seven-day period for the issue of the referral and the 28-day period for an adjudicator's decision are mandatory. A delay of even one day means the process will be a waste of time.

That was sufficient to dispose of the case. But Judge Coulson went on to consider letters of intent and the requirement that a contract must be in writing for adjudication to be available as a right under the Construction Act.

In this case the letter of intent, as is common in the industry, stated the intention to award a contract, set a limit on spend under the authority of the letter of intent and briefly set out numbered terms that applied to the work carried out under the letter of intent.

Judge Coulson said that, even if the letter of intent was a contract, it did not satisfy the requirements for all the terms to be in writing.

He considered that the biggest problem was that the scope of work was to be defined by future orders, whether oral or written. Although that might be sufficient for a binding contract, which he doubted, it was not enough for the contract to be in writing for adjudication.

He considered that, if the contract document did not define the scope of work, then all the terms were not in writing.

This part of Judge Coulson's judgment could have wide repercussions. On numerous construction contracts the exact extent of work is intended to be ordered by oral instruction.

There are many labour contracts where the agreement is to supply labour for construction operations. The exact work is then determined onsite. On some contracts there is only a schedule of rates that will be applied to any work carried out that in many cases is by oral instruction.

This part of the judgment was not necessary for his decision but it is likely that his test will be applied generally, even though it is removed from the realities of construction.

If this is the direction that the law is to take then immediate reform is necessary. The adjudication procedure is now fully developed; there is no longer any need to insist contracts are in writing.

Key points

In adjudication, a delay of only one day in the referral or in the decision-making process could nullify the adjudicator's decision.

If one part of a contract is not in writing, the entire contract will be deemed not to be in writing and the parties will not be able to adjudicate.

Reform is necessary. The Construction Act should no longer require contracts to be made in writing in order to make adjudication available as a right.