Adjudication
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KEYWORDS: |
Housing Grants Construction and Regeneration Act 1996, Adjudicators jurisdiction, dispute, Mr Justice Forbes. |
The decision of Mr Justice Forbes on 20th March 2003 in Beck Peppiatt Ltd v Norwest Holst Construction Ltd [2003] TCC is another case which deals with the definition of “dispute”. Justice Forbes gave an extempore judgment dealing robustly with the argument that “dispute” was to be interpreted differently in adjudication than in litigation or arbitration.
Justice Forbes first examined the law defining what is a dispute.
Beck submitted that the adjudicator had no jurisdiction to determine three claims referred to him by Norwest in a second referral to adjudication dated 17th February 2003. Beck submitted that there was no dispute between the parties with regard to any of the claims as at 17th February 2003, within the meaning of section 108(1) of the Housing Grants Construction and Regeneration Act 1996.
Beck submitted that the law with regard to what constituted a “dispute” for the purposes of adjudication was in an unsatisfactory state. Beck suggested that there was a degree of conflict between the decisions of the judges of the TCC in London and those made by the TCC judges elsewhere. Beck submitted that for the purposes of adjudication, the judgments of the TCC judges in London had correctly diverged from the decision of the Court Appeal in Halki Shipping Corporation v Sopex Oils Limited[1998] 1 W.L.R. 727, in which the Court of Appeal considered what constituted a dispute for the purposes of arbitration. Beck suggested that in Halki the Court of Appeal had defined the word “dispute” in terms that were not appropriate for the purposes of adjudication.
Beck submitted that an important feature of the decisions of the London TCC judges had been the apparent conclusion that a claim not only had to be made but that a reasonable period of time for it to be considered had to elapse before the matter could be said to have crystallised into a dispute: for example, the judgment of His Honour Judge Thornton QC in Fastrack Contractors –v- Morrison [2000] BLR 168 at p. 177.
Beck suggested that the decisions of the London TCC judges was a more restricted approach to the meaning of “dispute” in adjudication than that adopted by the Court of Appeal in Halki.
Justice Forbes held that the cases did not support the propositions advanced by Beck. Justice Forbes did not consider that the word “dispute” has been interpreted by judges of the TCC, for the purposes of adjudication, in a way that was inconsistent with Halki, a decision that was fully binding on the court at first instance.
Justice Forbes considered that the law was satisfactorily stated by His Honour Judge Lloyd Q.C. in his decision of Sindall v Solland [June 2001], in which he said that 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 had ended and that there was something which needed to be decided.
Justice Forbes considered that Judge Lloyd’s statement of principle was easily understood and was not in conflict with the approach of the Court of Appeal in Halki. As observed in Halki, “dispute” was an ordinary English word which should be given its ordinary English meaning. This meant that there would be many types of situation which could be said to amount to a dispute. Each case would have to be determined on its own facts.
Justice Forbes considered that attempts to provide an exhaustive definition of “dispute” by reference to a number of specified criteria were best avoided. Justice Forbes therefore rejected the suggestion that the word “dispute” should be given some form of specialised meaning for the purposes of adjudication.
Justice Forbes then applied the law as stated in terms of Halki to the facts of the instant case.
Beck was Norwest’s sub-contractor for construction works at the First Central Guinness headquarters. Three matters (the “Issues”) which were the subject of the referral to adjudication by Norwest on 17th February were
(1) whether Beck was entitled to any further extension of time beyond the five weeks already allowed by Norwest;
(2) the final evaluation of any loss and expense payable to Beck; and
(3) the final evaluation of the variation account.
The series of events followed a familiar pattern in construction in which the subcontractor made various claims and the contractor requested further substantiation. The first notification of delay to the progress of works was on 22nd February 2002. On 29th April 2002, Beck submitted a claim for an extension of time for the sub-contract works. On 21st July 2002, Beck notified Norwest that the delay now amounted to 15 weeks. On 9th August 2002, practical completion was achieved under both the main contract and the sub-contract. On 13th August 2002, Beck commenced adjudication proceedings in relation to 19 claimed variations to the sub-contract works. On 19th October 2002, Beck indicated a further ten matters in respect of which it was said that Norwest had required variations to the sub-contract works. On 23rd October 2002, Norwest wrote to Beck to indicate that it required documentation to be submitted for the purposes of the final account. On 24th October 2002, Beck repeated its claim for a 12 weeks’ extension of time, and on 1st November 2002 Norwest requested appropriate information from Beck to substantiate that particular claim.
On 18th December 2002 Beck wrote to Norwest in relation to the three matters referred in the instant adjudication. The letter was in the form of an ultimatum that Beck would resort to adjudication at the end of January 2003 if its claims had not been satisfactorily dealt with by Norwest by that date. On 23rd January 2003, Norwest awarded a further three weeks extension of time to Beck. On 29th January 2003, Beck received Norwest’s final account statement comprising 11 lever arch files. On 31st January 2003, Beck’s ultimatum contained in the letter of 18th December 2002 expired without any agreement being reached in respect of the final account.
The earlier first reference to adjudication by Beck was still proceeding in respect of contra charges. Beck had withdrawn other matters including the Issues, after the adjudicator indicated that he did not have jurisdiction to deal with them. It was his view that the disputes on the Issues had not crystallised. At that stage, Norwest was content to accept that position. On 7th February 2003 Norwest recorded that Beck had received full information by the 11 lever arch files, and gave notice that unless the account was agreed by close of business on 12th February 2003 that there would be a dispute and that the contract adjudication procedure would be immediately commenced. On 11th February 2003 Beck stated that it required a reasonable time to examine the 11 lever arch files. On 13th February 2003 Norwest recorded that Beck already had the vast majority of the contents of the 11 lever arch files during the course of the subcontract and set this out in its letter.
Thereafter Norwest commenced the second adjudication on 17th February 2003.
Beck submitted that Norwest’s documents, served in 11 lever arch files on 29th January 2003, made it necessary for Beck to have a sufficient and reasonable period of time to decide what its position was in relation to those claims before it could be said that a dispute had crystallised.
Justice Forbes held that Beck’s submission was an unrealistic and wholly supportable view of the overall facts of the case.
Justice Forbes considered that Beck’s communication of 11th February 2003 to be disingenuous, given the tone and content of Beck’s letter of 18th December 2002. In that letter Beck had put forward its position with regard to the Issues on which Norwest put its position forward in the 11 lever arch files sent on 29th January 2003. Justice Forbes held that a dispute came into existence from 29th January 2003, if not before. Norwest rejected Beck’s position as put forward in its December 2002 letter, by the service on Beck of Norwest’s position with regard to the various items that remained outstanding for the purposes of resolving the final account.
Justice Forbes considered that it was pointless to simply look at Beck’s 11 lever arch files in isolation. That was to take the 11 lever arch files entirely out of the factual context in which they appeared. That factual context made it quite clear that those 11 lever arch files were Norwest’s response to Beck’s asserted position in December 2002 in respect of the Issues. On a simple view of the facts, the mere service of the lever arch files in the factual circumstances of the case would be sufficient to give rise to a dispute. It was quite clear that Norwest was rejecting Beck’s stated position in its letter of 18th December 2002 and was putting forward a position of its own.
Justice Forbes observed that as it was, Norwest, very sensibly, agreed to give more time to Beck in order to consider the matter. That was sensible because, in the event, it might have been possible to resolve matters by agreement. To say that meant that there was no dispute was totally at variance with the ordinary meaning of the word “dispute”, as used in the English language. Plainly there was a dispute by the end of January 2003, if not before.
Justice Forbes held that the factual circumstances of the instant case, when considered in the light of the observations of His Honour Judge Lloyd in Sindall v Solland plainly satisfied the requirements of a dispute. It was clear, that a point was reached in February 2003 when the process of discussion and negotiation had ended and that something was needed to be decided, namely the correct position with regard to the Issues. Justice Forbes held that position had been reached as early as the end of January 2003, although it was not necessary for the purposes of the judgment to state that as a concluded decision. On any view, that position had been reached by the time Norwest’s so-called ultimatum of 7th February 2003 had expired. Accordingly, the declaratory relief Beck sought was dismissed.
The decision of Justice Forbes is helpful guidance to both adjudicators and parties. It is suggested that there is no difference between the decision of Judge Thornton in Fastrack and the statement of principle of Judge Lloyd in Sindall and the Court of Appeal in Halki. The problem in all cases is to identify the end of the process of discussion and negotiation, and this will vary with the facts. There can be no single test. It is suggested that two situations need to be considered. First, if there is a clear rejection of a claim, then a dispute will have crystallised. That was the position in Beck, where Norwest had given an extensive 11 lever arch file rejection. A dispute can arise when there has been a bare rejection of a claim to which there is no discernable answer in fact or law. If on the other hand there has been no response, then it may be necessary to decide when the dispute crystallised. Rejection can occur when an opposing party refuses to answer the claim. In that case a dispute may only arise once the subject-matter of the claim, issue or other matter had been brought to the attention of the other party, and that party had the opportunity of considering and admitting, modifying or rejecting the claim or assertion Fast Track Contractors Ltd v Morrison Construction Ltd (2000). In Hitec Power Protection BV v MCI Worldcom Limited (2002) Judge Seymour held that there had to be an opportunity for the protagonists each to consider the position adopted by the other and to formulate arguments of a reasoned kind. If the parties had agreed that a third party was to give an independent assessment or evaluation, the common role of the Architect or Engineer under standard forms for extensions of time for instance, then no dispute can exist before he had given that decision or the time for doing so had passed R Durtnell and Sons Ltd v Kaduna Ltd (2003). The problem then is to decide when a party has had a reasonable opportunity to consider its position. A robust application of this principle is the decision in Orange EBS Ltd v ABB Limited [2003] decided after Beck. What is clear is that there is no special test for adjudication, but the short timescales involved have focussed the courts on the detailed definition of "dispute".