Adjudication
St Andrews Bay Development Ltd v HBG Management Limited [2003]

© Daniel Atkinson 2003 12 April 2003

Lord Wheatley on 20th March 2003 in St Andrews Bay Development Ltd v HBG Management Limited [2003] decided an issue which concerns many practising adjudicators namely, whether they can insist upon payment of their fees before issue of the decision. Lord Wheatley draws a distinction between the arrangement for payment of fees and the adjudicator's duty to comply with the time limits either by Statute or contract. Lord Wheatley decided, obiter dicta, that the 1996 Act requires a decision to be communicated to the parties within the time limit, and a decision is not a decision unless communicated. Adjudicators will now need to consider carefully how they may obtain payment of their fees.  In this case it was a term of the adjudicator's appointment that her fees should be paid within 7 days of invoice and that all fees had to be settled prior to release of her decision by first class post.  That does not appear to have been relevant to the matter of whether the decision was issued within the time limits.  Adjudicators may wish to consider advance payment by the Referring Party if they are concerned about prompt payment of their fees.  It may be that a term in the appointment letter that a failure to pay fees will automatically lead to an extension of time for the making of a decision will be sufficient, although the limits of this approach are obvious with a Responding Party objecting to jurisdiction.

The facts were as follows. St Andrews and HBG entered into a contract to build a leisure complex at Kingask, St Andrews. The contract incorporated the conditions in the standard Scottish Building Contract with Contractors Design (May 1999 Edition) with amendments. The Housing Grants Construction and Regeneration Act 1996 applied.

HBG issued a Notice of Intention to Refer on 9th January 2003. On 10th January 2003 HBG issued a Referral Notice and on 20th January 2003 St Andrews served its Response to the Referral Notice. The adjudicator was required to make a decision by 7th February 2003. Various extensions were granted and the net effect was that the adjudicator was required to reach a decision by the extended date of 5th March 2003.

By facsimile at 9.13 pm on 5th March 2003, the adjudicator confirmed that she had made her decision, included an invoice for her fee, and stated that she did not intend to release her decision until her fee had been paid.

On 6th March 2003 HBG indicated its intention to pay the adjudicator's fee in full in order to secure the release of the decision. The decision was released by fax on 7th March 2003. The adjudicator issued her reasons on 10th March 2003. At no time did the adjudicator seek an extension of the time required to produce a decision beyond 5th March 2003.

HBG applied for judicial review, seeking to challenge the adjudicator's decision, the subject of the instant motion. HBG submitted that a decision reached but not communicated was no decision at all. It was argued that in this case the adjudicator had reached a decision on 7th March 2003, the day when it was communicated to the parties, or arguably on 10th March 2003 when the reasons were issued. HBG argued that the decision intimated to the parties on 7th March 2003 was therefore not a valid decision and was issued outwith the powers then available to the adjudicator. HBG sought reduction of the adjudication decision and an interdict to prevent St Andrew from registering a decision in the books of Council and Session.

HBG referred to Clause 39A.6.3 of the Scottish standard terms which provided that the adjudicator was to reach a decision within 28 days and "forthwith" send that decision in writing to the parties. HBG relied on the fact that Clause 41A.5.3 in the English standard contract was similar to Clause 39A.6.3 and had been examined in Bloor Construction (UK) Ltd v Bowmer & Kirkland (London) Ltd [2000]. A feature of Bloor was that the adjudicator had reached his decision on the last day allowed under the agreement but had not published it until two days later. Judge Toulmin had stated, obiter dicta, that "forthwith" in Clause 41A.5.3 meant what it said and required that the process of communication of the decision should have started immediately after the decision had been reached. A Decision had two elements, first, reaching the decision and secondly, sending that decision to the parties. It was observed in that case that the Scheme laid down in paragraph 19 (2) that, where the adjudicator failed for any reason to reach his decision, any party to the dispute may serve a fresh notice for a new adjudicator to act.

HBG argued that a rigid timetable had to be adopted and applied. There was no implied agreement that parties had accepted that there would be a further extension to the adjudicator by their undertaking to pay her fees. HBG submitted that this was an impractical solution and depended entirely on when the adjudicator decided to issue her fee invoice. HBG submitted that if the adjudicator wished to make a condition that her fees be paid prior to issuing a decision, then that was a separate matter and should not affect a statutory and contractual responsibility to produce a decision timeously.

Lord Wheatley held that the adjudicator had not reached her decision within the time limits set in accordance with either the statutory provisions or the standard contract.

As to the statutory provisions, Section 108(2)(c) of the 1996 Act only required the adjudicator to reach a decision within the specified time limits. Lord Wheatley decided that the adjudicator had not reached her decision on 5th March 2003, although she had completed her consideration of the matter referred to a her by that date. She had made no effort to communicate the decision to the parties or to intimate the fact that she had arrived at the decision at that time. Lord Wheatley stated that the Act was totally silent on the question of intimation or communication of the decision, but that it must follow that the obligation to reach a decision included the contemporaneous duty to communicate the decision to the interested parties. Not to require such an interpretation of the obligation to reach a decision would render the whole purpose of the legislation meaningless. It would suggest that there was no obligation on the adjudicator, having once arrived at that decision, to communicate it at all to anyone else. Alternatively, it would mean that a decision once reached did not have to be communicated within any time limit to the parties interested in receiving it, thus frustrating the purpose of a speedy resolution of building contract disputes envisaged in terms of the legislation. Lord Wheatley stated that alternatively the interpretation of the statute was that the duty on the adjudicator was to intimate or communicate the decision reached within the time limits immediately or forthwith. Lord Wheatley held that in this case on either view, the adjudicator could not be said to have satisfied either definition of her duties under the 1996 Act.

In terms of the contract in this case, paragraph 39A.6.3 also required the adjudicator to reach a decision within 28 days and further provided that the adjudicator should forthwith send that decision in writing to the parties. The contract contemplated that the requirement to deliver the decision was separate from the obligation to reach a decision. Lord Wheatley held that in terms of current commercial understanding and procedure, and modern methods of communication, that the term "forthwith" meant that the decision was to be sent immediately or as quickly as possible by what was currently regarded as conventional and universally available methods of business communication. In particular therefore there would appear to be no reason why any such decision could not be immediately transmitted to interested parties by fax transmission. Lord Whitley observed that it could conceivably be argued that a decision could be communicated or intimated to the parties by first class post of delivery, although such an argument might be regarded as archaic.

Lord Wheatley held therefore that in terms of both the contractual and statutory provisions a decision could not be said to be made until it was intimated.

Lord Wheatley held that the adjudicator was not entitled to delay communication or intimation of a decision until her fees were paid. There was nothing in the Scheme or the contract which allowed this. It was perfectly permissible for the adjudicator to require parties to come to a separate arrangement about the payment of her fees, but it was not permissible for such an arrangement to frustrate and impede the progress of the statutory arrangements for resolving contractual disputes. If the adjudicator wished to impose such an arrangement upon parties, then it was her responsibility to see that that arrangement was accommodated within the statutory or contractual time limits.

Lord Wheatley held that the adjudicator could not be said to have failed to reach a decision until she produced the reasons for a decision. Clause 29A.6.4 of the contract made separate provisions for the production of reasons and the question of whether decision had been reached did not depend upon the supplementary requirement to provide reasons if requested.

Having disposed of the argument whether the adjudicator had made her decision within the time limits, he then examined the effect on the validity of the decision. Lord Wheatley held that the failure by the adjudicator to observe the time limits in the circumstances would not invariably allow a party not to comply with the adjudicator's decision when it was eventually issued. Lord Wheatley relied on the decision of Lord Reed in Ballast plc v The Burrell Company (Construction Management) in which he stated that the Scheme should be interpreted as requiring the parties to comply when an adjudicator's decision, not withstanding his failure to comply with the express or implied requirements of the Scheme, unless the decision was a nullity. Lord Reed stated in the case of Ballast that a decision would be a nullity if the adjudicator had acted ultra vires for example because he had no jurisdiction to determine a dispute referred to, or because he acted unfairly in the procedure which he followed, or because he had erred in law in a manner which resulted in his failing to exercise jurisdiction or acting beyond his jurisdiction.

Relying on and following the decision in Ballast, Lord Wheatley held that while the failure of an adjudicator to produce a decision within time limits was undoubtedly a serious matter, it did not have sufficient significance to render the decision a nullity. The production of a decision two days outwith the time limit provided was not such a fundamental error or impropriety that it should vitiate the entire decision. Lord Wheatley held that such a failure was a technical matter, but it was significant in the instant case that no challenge was offered to the merits of the adjudicator's decision. Lord Wheatley stated that although this view of the statutory and contractual provisions could be thought in some respects be unsatisfactory, and in particular offered no sanctions against an adjudicator who failed to produce a decision within the time limits, that was not something that altered Lord Wheatley's opinion. Any adjudicator who failed to comply with time limits was unlikely to find favour with those who were seeking suitable persons to adjudicate on their Disputes. That however was not relevant to Lord Wheatley's conclusions.

Lord Wheatley held that the balance of convenience significantly favoured HBG as they were in possession of what was in effect a decree arbitral which recognised that they were entitled to payment of the sums they had claimed for work done. Accordingly, even if Lord Wheatley had been persuaded by St Andrews' arguments on the merits of the Review, he would not have been prepared at that time to grant the interim orders sought.

Lord Wheatley refuse St Andrews motion for interim order.