Adjudication
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KEYWORDS: |
Adjudication, Housing Grants Construction and Regeneration Act 1996, at any time, abuse of process, limitation defence, Court of Appeal. |
The judgment of the Court of Appeal in Connex South Eastern Ltd v M J Building Services Group plc [2005] EWCA Civ 193 is of interest because it examines the meaning of "at any time" in the Housing Grants Construction and Regeneration Act 1996 and whether or not there can be an abuse of process in adjudication.
On 25 June 2004 His Honour Judge Richard Havery QC determined four issues in Connex South Eastern Ltd v MJ Building Services Group plc [2004] EWHC 1518 (TCC) in which Connex South Eastern Limited claimed various declarations in relation to an adjudication which MJ had initiated pursuant to the Housing Grants, Construction and Regeneration Act 1996. Of the four issues only Issues 3 and 4 were before the Court of Appeal and only Issue 4 is of direct interest to the process of adjudication.
Lord Justice Dyson gave the leading judgment. The appeal by MJ against the judge’s answer to Issue 3 was allowed for reasons which are not of general interest to the process of adjudication. The cross-appeal by Connex against the judge's answer to Issue 4 is of general interest.
Section 108(1) of the Act conferred the right to refer a dispute arising under the contract for adjudication. Subsection (2) provided that the contract should
"enable a party to give notice at any time of his intention to refer a dispute to adjudication".
Connex SE submitted that it was "an abuse of process" for MJ to start adjudication proceedings so long after it purported on 29 November 2002 to accept a repudiation of the contract by Connex SE. It was submitted that the phrase "at any time" could not be read literally. Thus, for example, a party could not refer a dispute to adjudication after the expiry of the relevant limitation period. It was submitted that there was nothing in the Act which indicated what Parliament meant by the words "at any time". Connex SE made reference to Hansard.
Dyson LJ expressed doubt as to whether it was appropriate to refer to Hansard having regard to the principles stated in Pepper v Hart [1993] AC 593, 634. He noted however that Lord Lucas, who took over responsibility for the bill from Earl Ferrers the Minister of State for the Department of the Environment, stated that the words "at any time" were necessary since otherwise
"it will be possible for a party bent on avoiding adjudication to insert a term which would allow notice to be given within an unreasonably narrow window, and we cannot allow that".
Lord Lucas continued:
"I am of course aware that some have doubted the wisdom of allowing parties to refer a dispute to adjudication so long after work under the contract has ceased. However, as long as there is any possibility of disputes arising under a contract, parties will have to live with the fact that an adjudicator’s decision may be sought. Indeed, there may be times, even at such a late stage, where it is desirable to have a quick and cheap procedure that can produce an effective temporary decision, particularly since this will not prevent parties from seeking a permanent decision through arbitration or the courts."
Connex SE submitted that Parliament was content for adjudication to take place after the cessation of work because this was seen in the context of a procedure which was (a) quick, (b) cheap and (c) a temporary decision. Once this quick, cheap and temporary decision had been taken, it could then be followed by a permanent decision via arbitration or the courts. Connex SE argued that if, as a result of the passage time, it was no longer possible to have a quick, cheap and temporary adjudication, then it was an abuse of process to permit an adjudication to take place.
Dyson LJ did not accept the submissions. He held that the phrase "at any time" meant exactly what it said. It would have been possible to restrict the time within which an adjudication could be commenced, say, to a period by reference to the date when work was completed or the contract terminated. But this was not done. It was clear from Hansard that the question of the time for referring a dispute to adjudication was carefully considered, and that it was decided not to provide any time limit for the reasons given by Lord Lucas. Those reasons were entirely rational.
There was, therefore, no time limit. There may be circumstances as a result of which a party loses the right to refer a dispute to adjudication: the right may have been waived or the subject of an estoppel. But subject to considerations of this kind, there was nothing to prevent a party from referring a dispute to adjudication at any time, even after the expiry of the relevant limitation period. Similarly, there was nothing to stop a party from issuing court proceedings after the expiry of the relevant limitation period. Just as a party who took that course in court proceedings ran the risk that, if the limitation defence is pleaded, the claim would fail (and indeed may be struck out), so a party who took that course in an adjudication ran the risk that, if the limitation defence was taken, the adjudicator would make an award in favour of the respondent.
Dyson LJ observed that in the civil courts, the concept of "abuse of process" was well understood. It applied in a number of different contexts. But neither the Act nor the Scheme for Construction Contracts (England and Wales) Regulations (S1 1998/649) gaves an adjudicator the power to strike out or stay an adjudication for abuse of process. Indeed, they contained no reference to "abuse of process".
Dyson LJ held that the only question was whether there was any limit on the time within which a party could refer a dispute to adjudication. The answer to that question depended on a proper interpretation of section 108(2) of the Act, and not on an application of the principles developed by the courts to control their own process so as to prevent abuse. There was nothing in the Act which indicated that the words "at any time" should be construed as bearing other than their literal and ordinary meaning.
Dyson LJ was willing to accept that Parliament intended adjudication to be quick and (relatively) cheap, although he observed it may not have been entirely successful in bringing this about. But that says nothing about when the quick and (relatively) cheap adjudication may be commenced. There was no link between the speed and expense of an adjudication and the time when it started. An adjudication started before practical completion may be complex, slow and expensive. Conversely, an adjudication started long after practical completion may be simple, quick and cheap. He did not understand why an adjudication conducted long after practical completion could not on that account result in a decision which had provisional or temporary effort only.
Dyson LJ agreed with the answers given by Judge Havery on Issue 4 and the cross-appeal was dismissed.
The judgment confirms that adjudication can be started at any time, whether during construction or years later. The judgment also confirms that defences of the limitation period do not prevent the adjudication process commencing, but that it is within the power of the adjudicator to decide on the basis of such a defence if it is raised. It is not clear whether the defence would be available in enforcement proceedings if it was not raised before the adjudicator.