Adjudication
Barnes & Elliott Ltd v Taylor Woodrow Holdings Ltd [2003] TCC

© Daniel Atkinson 2004 11 October 2004

The decision of His Honour judge Humphrey Lloyd QC in Barnes & Elliott Ltd v Taylor Woodrow Holdings Ltd [2003] TCC provides further understanding of the process of adjudication and emphasises the importance of the adjudicator reaching his decision within the prescribed timescale.  The issue in this case was whether a decision communicated late rendered the decision invalid or a nullity.

The contract made in August 2000 was for design, refurbishment and conversion work at Long Grove, a former psychiatric hospital near Epsom. Practical completion was certified on 8 April 2003. The contract was subject to the conditions of the JCT 98 standard form with Contractor's Design.  In a decision dated 22 May 2003 the adjudicator ordered Taylor Woodrow pay Barnes Elliot the sum of £655,188.92 plus interest and 65% of his fees. Barnes Elliott sought to enforce the decision and Taylor Woodrow resisted enforcement.

The provisions for adjudication were set out in clause 39A of the contract which stated at Clause 39A.5.3:

"The adjudicator shall within 28 days of the referral reach a decision and forthwith send that decision in writing to the parties. Provided that the party who has made a referral may consent to allow the adjudicator to extend the period of 28 days by up to 14 days, and that by agreement between the parties after the referral has been made, a longer period than 28 days may be notified jointly by the parties to the Adjudicator within which to reach his decision. "

The Parties agreed the substitution of a different period for the original period of 28 days. In this case the period substituted was to expire on 22 May. On the evidence Judge Lloyd was content to treat the agreement as made under the last part of Clause 39A.5.3.

The adjudication was conducted by reference only to documents.  The Adjudicator arrived at a conclusion which he set out in a draft sent to the parties' solicitors on 20 May 2003. He asked that his draft should be checked to see that all points had been dealt with. He said that his formal decision would be issued on 22 May 2003. He obviously made some changes necessary and signed his decision on that day, 22 May 2003. However he did not then communicate it to the parties. He sent it to the parties using the Document Exchange. It therefore arrived on 23 May, later than the date of 22 May which had been agreed.

Woodrow resisted enforcement of the decision on the ground that it fell outside the authority given to the Adjudicator which was to make a decision by 22 May and that 'make' meant, under clause 39A.5.3, a decision which reached the parties before the end of 22 May 2003.

The issue was whether the adjudicator had done what he was authorised to do.  The issue was whether a decision which reached the parties after 22 May 2003 was outside the authority given to the adjudicator so that the decision itself was no longer authorised by the parties' contract and subsequent agreement and, accordingly was unenforceable.

The question turned on the interpretation Clause 39A.5.3.

Judge Lloyd referred to the decision of His Honour Judge Toulmin CMG QC in Bloor Construction (United Kingdom) London Limited [2002] BLR 314, in relation to a case where a decision had been reached on 9 February but not communicated until 11 February under Clause 41A.5.3 of the 1980 JCT standard form:

"…The word '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; i.e. that the decision has two elements: first, reaching the decision and secondly, sending that decision to the parties."

Judge Lloyd held that the question in contractual terms might be posed: does Clause 39A.5.3 'within 28 days of the referral' govern both reaching the decision and forthwith sending the decision to the parties? Or is the Clause referring to the former, and the latter is supplementary, so that, in effect the 28 day period might effectively be extended because the decision would not reach the parties until after the end of the 28 day period. he observed that Judge Toulmin clearly took the former view in this part of his judgement (conceded as obiter by Barnes & Elliott).

Judge Lloyd observed that Lord Wheatley in St Andrews Bay Development Limited took the same view. Lord Wheatley had to consider the effect of an adjudicator's decision due on 5 March 2003 but issued on 7 March, with the reasons following on 10 March. The contract included clause 39A.6.3 of the Scottish standard JCT form which was the same as the present contract. His first conclusion was (at paragraph 15):

"It is true that the statutory provisions only require the adjudicator to reach a decision. This is all that is said in terms of section 118(2)(c). However, para 39A.6.3 also requires that the adjudicator reach a decision within 28 days and further provides that he shall "forthwith send that decision in writing to the parties."

Lord Wheatley noted that the Act was totally silent on the question of intimation or communication of the decision.

"In these circumstances it must therefore follow that the obligation to reach a decision must include a contemporaneous duty to communicate that 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 is no obligation on the adjudicator, having once arrived at that decision, to communicate it at all to anyone else. Alternatively, it would mean that the 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. I therefore can only conclude that the requirement to reach a decision in terms of the statutory provisions includes a duty to intimate or communicate that decision to interested parties. An alternative interpretation of the statute is that the duty on the adjudicator is to intimate or communicate the decision reached within the time limits immediately or forthwith."

"…I therefore consider that it is appropriate to conclude that in terms of both the contractual and statutory provisions a decision of this sort cannot be said to be made until it is intimated."

Judge Lloyd agreed with and adopted the reasoning of Lord Wheatley. Judge Humphrey Lloyd held that although the point might be described as "technical", Taylor Woodrow had established that the effect of the agreement reached between the parties was that the two stages contemplated by Clause 39A.3.5 had to be met within the time specified, i.e. 28 days or such further period as the parties might have agreed, in the instant case expiring on 22 May. That therefore was the authority, or, in this case, the extended authority, given to the adjudicator.

Judge Lloyd then went on to consider the effect of the late communication of the decision.

He referred to Lord Wheatley's considerations in St Andrews Bay Development Limited on whether the late adjudicator's decision was thereby a nullity:

"While the failure of an adjudicator to produce a decision within the time limits is undoubtedly a serious matter, I cannot think that this is of sufficient significance to render the decision a nullity. The production of a decision two days outwith the time limit provided is not such a fundamental error or impropriety that it should vitiate the entire decision. Such failure is a technical matter, and it is of significance in the present case that no challenge is offered to the merits of the adjudicator's decision.

In all the circumstances therefore I have decided that there is not a good arguable case which might suggest that this petition for judicial review would succeed."

Judge Humphrey Lloyd considered that Lord Wheatley's pragmatic approach to the disposition of that case might be appropriate in the instant case even having regard to his earlier conclusions.

Judge Humphrey Lloyd held that the time limits were set by Parliament and were crucial to the effectiveness to the form of adjudication required by the Act. A party was entitled to know whether or not a decision has been given and to be free to act in its own best interests if it had not got a decision within the time allowed. The requirements of the Act could be an intrusion into contractual arrangements and, as such, might have to be read and construed narrowly if they or the operation cut down or impeded a party's rights or commercial freedom.

If an adjudicator could not send the decision by email or fax, one of the parties would usually be keen to send someone to collect it. This adjudicator could have sent it by email; he could have faxed it. He could have rung up the parties and agreed with them (but not just told them) that it could be collected: "The decision is ready for collection". He did not; he simply put it in the DX. Judge Humphrey Lloyd hoped that such a practice would not be followed in the future.

Judge Humphrey Lloyd crucially considered that the fundamental purpose of the legislation was to establish a mechanism for the resolution of disputes. Part of that regime was the timing. It was not just secondary but integral to the objective. Timing was important. For a system of this kind to work properly, the time limits had to be observed (subject always to the parties' agreement as set out in the Act). But, he considered that compliance with a time limit was not the dominant and be all factor. That was the production of the decision.

As a matter of competing priorities, the completion of the decision, as such, came first. Its notification to the party should follow as night followed day, but the first and primary objective was that the decision should be there within the time limit.

It was held that an error which resulted in a day or possibly, in the view of Lord Wheatley, of two days, seemed to be excusable. It was within the tolerance and commercial practice that one must afford to the Act and to the contract. Whilst an adjudicator was not authorised to make mistakes, a decision arrived at in time was in principle authorised and valid and it was held did not become unauthorised and invalid because an error by the adjudicator in dispatching the decision meant it did not reach the Parties within the time limit. The tolerance did not extend to any longer period (unless perhaps the parties had agreed to a very long duration) nor did it entitle an adjudicator not to complete the decision within the time allowed. If the adjudicator could not arrive at a decision on all aspects of the dispute within the period required then, before time ran out, further time must be obtained as provided by the contract or otherwise by the parties' agreement.

In the circumstances of the instant case the alternative was unpalatable. It would deprive the parties not just of knowing where they stood in the eyes of the adjudicator but also of having a timely and enforceable decision upon which they might rebuild their relationship. That would not be consistent with the primary objectives of the Act.

It was held that the decision was enforceable.