Adjudication
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KEYWORDS: |
Engineering Construction Contract 2nd Edition, main options, Option Y(UK), Housing Grants Construction and Regeneration Act 1996, definition of dispute, the scheme for construction contracts, paragraph 2.1, identification of adjudicators jurisdictions of nominating body to act, judge Toulmin. |
The decision in John Mowlem & Company plc v Hydra-Tight Ltd on 6th June 2000 has important implications to those involved in adjudication in the construction industry. It particularly affects adjudications under the standard forms published by the Institution of Civil Engineers.
The project in this case was work on the District and Circle Lines in the London Underground system. Hydra-Tight were subcontractors to Mowlem for the steel erection to covered ways.
Re-Defining the Meaning of Dispute
The standard form of contract was the Engineering Construction Contract 2nd Edition Subcontract This form is published by the Institution of Civil Engineers and comprises core clauses to which are added one Main Option selected from six (A to F) which define the payment terms. Further clauses are added by selection of any or none of the Secondary Option Clauses (G to Z). The core clauses and the selected Option Clauses together make up the full terms of the Contract.
Main Option A applied in this case which is a lump sum contract. In order to comply with the adjudication provisions of the Housing Grants, Construction and Regeneration Act 1996, the standard Option Y (UK) was selected. A term records that the parties have agreed that no matter shall be a dispute unless a Notice of Dissatisfaction has been given and the matter has not been resolved within four weeks. In effect the parties attempted to redefine the meaning of dispute under the Act. The question that arose was whether this standard Option Y complied with the Act.
It was held that the Act gives an unfettered right to refer a dispute to adjudication, but that the effect of Option Y was to deprive the parties of an immediate right to refer a dispute at any time to adjudication. Accordingly the Contract as amended by Option Y did not comply with the Act and the Scheme for Construction Contracts applied, displacing the adjudication provisions in Option Y.
Since this approach of redefining the meaning of dispute is found in the ICE 7th Edition the decision will have a profound effect on the conduct of adjudications under the ICE forms of contract.
Having decided that the Scheme applied the next issue which arose was whether the appointed Adjudicator had jurisdiction to act, which depended on whether he had been properly appointed under the Scheme. The Court was required to interpret paragraph 2.1 of the Scheme which sets out the procedure for appointment of the Adjudicator and is in two parts (a) and (b).
Paragraph 2.1(a) requires the person specified in the contract to act as adjudicator. If no person is named then under Paragraph 2.1(b) the specified nominating body is required to select an adjudicator, in this case the Institution of Civil Engineers. The adjudicator had indeed been appointed by the Institution. Mowlem sought an injunction to prevent further steps being taken in the adjudication.
The question was whether there was a person specified in the Contract so that paragraph 2.1(a) applied, or whether the Adjudicator had been properly appointed under Paragraph 2.1(b).
The contract did not identify a single individual by name, but instead provided for the Adjudicator to be selected from a list of Adjudicators. That list was not a list of individuals included in the contract, but was defined as the list of those adjudicators considered suitable by the contractor Mowlem. Only after the dispute had arisen did Mowlem identify the list as consisting of members of a barrister’s chambers in London. The question therefore was whether under paragraph 2.1(a) of the Scheme "person" can constitute a person nominated out of those named in a list or must be a previously identified and named individual person.
It was held that the list did not need to be a piece of paper headed "Approved List of Adjudicators" but should only be capable of identification and be able to be communicated on request. The list of barristers of a particular chambers gives a range of possible adjudicators depending upon availability, the size and complexity of the dispute and allowed the appointment of an adjudicator free from conflicts of interest.
On this basis the Adjudicator appointed by the Institution of Civil Engineers did not have jurisdiction to act. The court granted an injunction restraining Hydra-Tight from taking any substantive step in the adjudication or seeking to enforce or implement any decision which the appointed adjudicator may make without the agreement of Mowlem.
This disposed of the matters, but it is interesting to observe that Judge Toulmin CMG Q.C. in giving judgment considered that the Engineering Construction Contract was "rather convoluted". An indication possibly of how courts will view the form in future proceedings?