Adjudication
R G Carter Ltd v Edmund Nuttall Ltd (2000)TCC

© Daniel Atkinson 2000    29 December 2000

In R G Carter Ltd v Edmund Nuttall Ltd (2000) TCC it was accepted by both parties that there was a contractual relationship and that that contractual relationship was, for the purpose of the Housing Grants Construction Regeneration Act 1996, a construction contract.  Nuttall had purported to exercise a contractual entitlement by appointing an adjudicator pursuant to Clause 38(a) of the DOM/I 1998 Edition of the JCT standard conditions.  Carter raised three objections to the appointment, which went to the adjudicator's jurisdiction; namely, to the validity of his appointment, and sought an injunction or as an alternative a declaration. 

First, Carter argued that there was a lack of agreement as to the way that the construction contract came into being and as to the full extent of the documents that were incorporated into it.  Accordingly, Carter argued, in the absence of any clear agreement or finding as to the full extent of the contract between the parties (in the context of the differences between the parties) it was not open to seek either statutory or contractual adjudication.  

Second, Carter argued that the parties had agreed at clause 41 (an amendment to the standard form) for mandatory mediation prior to any adjudication procedure being commenced.  Since that procedure had not yet been followed, the adjudicator's appointment was premature and was, effectively, a nullity.

Third, Carter argued that if indeed it was open for an adjudicator to be appointed, the parties had agreed on a named adjudicator,  and it was only the named adjudicator who could validly be appointed to receive the disputes and to decide them. Hence, the adjudicator's appointment by Nuttall on that ground as well was a nullity.

On the first issue, his Honour Judge Thornton examined Section 108(1) of the Act and held that for there to be an adjudication pursuant to a party's statutory entitlement, it must be shown that there is: 

1. a construction contract; 

2. a dispute and 

3. a dispute that arises under the contract. 

If a party could satisfy a court of those three preconditions, then it had shown that it had the right to have an adjudicator appointed.  In the instant case the parties had accepted that there was in existence a construction contract which contains clause 38(a).  The statutory scheme, was unprecedented and novel in this country and was intended to provide for the first time parties with a rapid, albeit interim, but binding, means of resolving disputes holding up payment within the construction industry at each tier of the often lengthy construction chain. In those circumstances, it is to be expected that the width and ambit of this statutory structure would be extensive. Judge Thornton held therefore that the construction of Section.108(1) was to be from the standpoint that it is both part of the background to the Act and the apparent wording of the Act itself that it is wide in its ambit and extensive in its effect. 

In those circumstances, there was little to support a limited construction of the words "construction contract" and to give those words the meaning of  "a construction contract, all of whose terms, including any documents incorporated into it, have been agreed or defined."   It was held that such a construction was an unnecessary, and indeed impermissible, gloss to place upon the words used.  So long as it was either established or agreed that there was a contract in existence between the parties, that that was a construction contract and, if a party wished to rely upon a contractual provision for adjudication as opposed to the fall-back statutory provision, an agreed adjudication clause encompassed within that construction contract, that was sufficient for the purpose of the Act.  Any other dispute as to the terms of the construction contract was as much a dispute arising under the contract as would be a dispute as to the working through of the terms, including the working through of any terms as to the valuation machinery.

Judge Thornton therefore concluded that, in principle, Nuttall was entitled to an adjudication so long as a dispute had arisen and so long as it was not caught by any precondition to adjudication provided for by the parties that is enforceable.

On the second issue, of the pre-condition of mediation, Clause 41 was drafted so that a difference between the parties did not become a dispute and could not be referred to adjudication until informal attempts to reach a settlement by mediation had been unsuccessful within six weeks of the appointment or attempt to appoint a mediator.  It was held that Clause 41involved a postponement of the right to refer a dispute to adjudication which was not found by the language of Section 108.  In those circumstances, whatever may or may not have been the attempts to proceed with a mediation,  to give effect to clause 41 by stopping the adjudication on the grounds that clause 41 was not complied with, would be to depart from the statutory unqualified entitlement to an adjudication.  Since clause 41 would fetter the unqualified entitlement to an adjudication provided for by the Act, Carter would not be entitled to injunctive relief even if there had been a complete failure by Nuttall to comply with the requirements of mediation provided for in clause 41.

On the third issue, of the named adjudicator, the reference to the named adjudicator appeared to refer to the set-off provisions of the unamended 1980 DOM/1 and not the 1998 DOM/1.  It was held that there was an ambiguity, or potential ambiguity.  Judge Thornton adopted as an aid to construction the "contra proferentum" rule.  What that rule provides for, in summary, is that, where there is a conflict or ambiguity in a clause that has been drafted by and proffered by one of the parties to the contract and which has been accepted by the other party to the contract, then, whichever of the constructions that is least favourable to the proffering party is the one that the court should adopt. It was held that the least favourable construction of a clause drafted by and proffered by Carter was that which would treat the reference to the named adjudicator as being references to the old DOM/I conditions.  Since they formed no part of the contractual relationship between the parties, it was to be regarded as a reference that was of no effect. It was held therefore that there was no named adjudicator.

Carter's application for  injunction and declaratory relief therefore failed.