Adjudication
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KEYWORDS: |
Housing Grants Construction and Regeneration Act 1996, jurisdiction, mutiple disputes, recission, certification, Scheme. |
In Barr Limited v Law Mining Limited (2001) the Court was requested to enforce two decisions of adjudicators which the Court referred to using the name of the Adjudicators – the Fleming Action and the Ross Action. There were no differences between the parties on the law developed for the enforcement of Adjudicator’s decisions but rather how the law should be applied to the particular facts of the case.
Lord Macfadyen held that adjudication is intended to provide a means of obtaining a speedy, but merely provisional, resolution of a dispute arising in the course of a construction contract. It is envisaged that ultimately, whether by litigation or arbitration or agreement between the parties, the determination of the dispute may be a different one from the provisional determination made by the adjudicator. It is, however, envisaged that the adjudicator's determination will in the meantime be implemented.
Reference was made to the principles quoted by His Honour Judge Bowsher QC in Northern Developments (Cumbria) Ltd v J & J Nichol [2000] formulated by His Honour Judge Thornton QC in Sherwood & Casson Ltd v Mackenzie:
"(i) a decision of an adjudicator whose validity (sic) is challenged as to its factual or legal conclusions or as to procedural error remains a decision that is both enforceable and should be enforced;
(ii) a decision that is erroneous even if the error is disclosed in the reasons, will still not ordinarily be capable of being challenged and should, ordinarily, still be enforced; ...
(iv) the adjudication is intended to be a speedy process in which mistakes will inevitably occur. Thus, the court should guard against characterising a mistaken answer to an issue, which is within an adjudicator's jurisdiction, as being an excess of jurisdiction. Furthermore, the court should give a fair, natural and sensible interpretation to the decision in the light of the disputes that are the subject of the reference."
It was held that an adjudicator's decision will be enforceable even if it can be shown that the adjudicator has in making his determination made an error of fact or law. On the other hand, if the adjudicator has made a determination that he had no jurisdiction to make, his decision will be ultra vires. It was held that the distinction was between a decision that was unsound but valid, and a decision that was invalid because it was not one that the adjudicator had power to make.
Lord Macfadyen had reservations about the way in which the first of His Honour Judge Thornton's propositions was expressed. He stated that he would have agreed if it had said "the soundness of which is challenged" rather than "whose validity is challenged". Lord Macfadyen had a further reservation relating to Dyson J's treatment of "procedural error" in Macob. Lord Macfadyen stated that he would not rule out the possibility that there may be a procedural error which produces the result that the adjudicator has made a decision that is beyond his jurisdiction. Lord Macfadyen agreed with His Honour Judge Thornton's fourth proposition in so far as it encouraged a pragmatic approach to the interpretation of the adjudicator's decision. The court should be careful not too readily to characterise a mistake on the part of the adjudicator as taking him out of his jurisdiction.
The contract was road improvement works on the A76 road at Garleffan, New Cumnock. The Adjudicator had ordered Law Mining to pay Barr a total of £313,760.84 (including VAT). Law Mining objected to the jurisdiction of the Adjudicator on three grounds.
First it argued that Barr had sought to have a decision of several disputes made in one adjudication, something that was not permitted under the Scheme.
The second argument was that the adjudicator had no jurisdiction to make any award in respect of work done by Barr after Law Mining had rescinded the contract, because such works could not be said to have been carried out under a construction contract. Since Barr' referral notice did not distinguish between pre-rescission and post-rescission works, the adjudicator had no jurisdiction to consider any part of the matters referred to him.
The third argument was that in respect of the claim for payment under application No. 9 Law Mining had contended that no sum could be due in the absence of a certificate. The adjudicator had failed to address that contention, and had made an award without determining that payment was due under the contract.
On the first argument, the several disputes issue, Lord Macfadyen held that paragraph 1 of Part I of the Scheme contemplated the reference to adjudication of a dispute. Although, if the contrary intention did not appear from the terms of the Scheme, section 6(c) of the Interpretation Act 1978 would allow paragraph 1 to be read as if it referred to "a dispute or disputes", it was held that the contrary intention does appear from paragraph 8(1), which permits the adjudicator to adjudicate at the same time on more than one dispute under the same contract only with the consent of all parties to those disputes. Law Mining clearly withheld their consent in the present case.
The question therefore was whether more than one dispute was referred to the adjudicator and whether the adjudicator was correct in holding, or was at least entitled to hold, that all of the issues referred to him constituted a single dispute.
Law Mining argued that the ratio of Fastrack Contractors Ltd could not be sound. If, as His Honour Judge Thornton had said at paragraph 20, the "dispute" was whatever claims, heads of claim, issues, contentions or causes of action then in dispute were crystallised in the adjudication reference, it was difficult to see any scope left for the application of paragraph 8(1). There was a danger that, if a multiplicity of unrelated issues could be focused in one adjudication, the supposedly speedy process of adjudication would be overburdened. A party had a legitimate interest to withhold consent to several disputes being determined in a single adjudication, since multiplication of issues might be incompatible with the speedy and summary nature of the process. It might be that it was open to an adjudicator to hold that a range of issues all formed one dispute, but before taking that course he was required to address the matter and find a basis for regarding the issues as sufficiently connected for that purpose. In the present case, on the face of the adjudicator's own decision there was no sufficient connection between the issues. The adjudicator said nothing to justify rejecting the contention that he was being asked to address more than one dispute. All that he said in his decision was that he was satisfied that he could deal with the matters put before him within a single adjudication. Law Mining argued that the Adjudicator’s decision did no disclose an assessment of whether the issues were sufficiently inter-related.
It was held that the issue of whether there is one dispute or several disputes was a matter of circumstance which the adjudicator must, in the first instance, decide for himself if the point was raised. It was held that it was not the correct approach to subdivide and analyse what was in substance one dispute into its component parts and to label each part a separate dispute. A realistic view must be taken.
Lord Macfadyen stated that there was some force in law Mining’s criticism of His Honour Judge Thornton's analysis in Fastrack Contractors Ltd of what constituted a dispute. If everything in dispute between the parties formed a single dispute, paragraph 8(1) was severely restricted in scope or perhaps even deprived of content. Lord Macfadyen did not derive assistance from Whiteways Contractors (Sussex) Ltd because, although what was there treated as a dispute was similar to what Barr sought to have regarded as a dispute, it did not appear that the "several disputes" argument was advanced in that case.
The Adjudicator’s made a number of decisions 1 to 4. There was a closer connection between Decisions 2, 3 and 4 than there was between that group and Decision 1. The adjudicator did not clearly demonstrate in his decision that he had addressed the question of whether there was a sufficient connection among the various issues to enable him to treat them as one dispute, or set out his reasons for holding that they could be so treated.
It was held that the adjudicator had not fallen into error in holding that the whole matters referred to him constituted a single dispute, namely what was due under the contract by Law Mining to Barr. The adjudicator had not gone beyond the proper scope of his jurisdiction. It was not disputed that the matters referred to the adjudicator were matters that could competently be made the subject of adjudication. The adjudicator, faced with the "several disputes" argument advanced by Law Mining, held that it was open to him to regard the matters before him as one dispute. Lord Macfadyen held that he was not wrong to take that view.
The adjudicator had an obligation in terms of paragraph 22 of the Scheme to provide reasons for his decision. It was held that the inadequacy of the adjudicator’s explanation of his view on the "separate disputes" issue was not sufficient to lead to the conclusion that he went beyond the proper scope of his jurisdiction, or affected the validity or enforceability of his decision. It was held that the "separate disputes" argument did not afford a defence to the action.
On the second argument, the rescission issue, it was common ground that the adjudicator did not have jurisdiction to decide a dispute as to work done after rescission of the contract. It was also common ground that the adjudicator did not have jurisdiction to determine a dispute over a claim presented in a form which did not distinguish between work done before and work done after rescission. There was, however, a dispute as to whether the contract had been rescinded at all. It was held that the adjudicator's jurisdiction therefore depended on his holding that the contract had not been rescinded. If he had held that the contract had not been rescinded, that would have removed the basis of this challenge to his jurisdiction.
The issue became one of interpretation of the adjudicator’s decision. The adjudicator stated that the question of repudiation and rescission is unresolved and would only be resolved by the Courts at some future date. The Adjudicator stated that he proceeded on the basis that the parties' obligations, one to the other, remained as set out in the contract or as governed by statute and that the matters in dispute could be decided under the terms of the 1996 Act.
It was held that the adjudicator proceeded as if he had held that there had been no repudiation. However, the proper interpretation of the adjudicator’s decision was that the adjudicator regarded the question of rescission or no rescission as unresolved, declined to resolve it, and regarded it as capable of resolution only by the court at a future date. The adjudicator was right to the extent that a final resolution of the question whether the contract had been rescinded could only be made in due course by the court or an arbiter. But that did not mean that it was not part of his task to make a provisional determination of the question of rescission as a necessary preliminary to his exercising jurisdiction over the dispute in question. On the contrary, it was held that the adjudicator would only have had jurisdiction if he had first decided that there had been no rescission. Having made no such decision, he had no jurisdiction to determine the part of the dispute affected by that issue.
Clause 60 of the ICE Conditions of Contract 5th Edition applied in this case and set out the terms for certification and payment. A letter dated 16th September 1999 appeared to amend the provisions to require payment 30 days from certification.
The adjudicator decided that neither payment mechanisms submitted by the parties in their Referral and Response complied with Section 110 of the 1996 Act. He decided that it was not possible to establish a final date for payment without assuming a date for certification and no such date was stated in the contract. He then decided that the full mechanism of the Scheme applied.
Barr argued that the adjudicator had addressed the submission on the certification issue by Law Mining, and had held that because the provision for certification did not state a date for certification, the matter fell to be regulated instead by the Scheme. Right or wrong, that was a determination by the adjudicator of the defenders' contention on the certification issue. It therefore could not be said that the adjudicator had made a jurisdictional error by not addressing a contention put to him.
Law Mining argued that in concluding that the contractual certification and payment mechanism did not comply with section 110 of the 1996 Act and therefore did not apply, the adjudicator had addressed and determined a question not put to him by the parties. In so doing, he had exceeded his jurisdiction (Watson Building Services Ltd, per Lady Paton at paragraph [26]; Bouygues, per Buxton LJ at paragraphs 12 and 14). Barr had not submitted in the Referral that the payment mechanism did not comply with section 110. In avoiding the question of the absence of certification by holding that the contractual payment mechanism did not apply and the Scheme therefore did, the adjudicator was deciding a question on which Barr had made no submission, and Law Mining had had no opportunity to make submissions. The adjudicator's decision on that matter therefore fell into the category of deciding a question not put to him, which was a jurisdictional error which invalidated his decision in relation to application No. 9 and rendered it unenforceable.
Lord Macfadyen observed that the certification issue only related to the dispute between the parties that concerned application No. 9. It was in relation to that matter that Law Mining took the point that no payment could be contractually due because there had been no certification. The passage in the adjudicator's decision to which Barr referred was not concerned with the claim for payment in respect of application No. 9, but rather with application No. 7. It was part of Decision 1, not part of Decision 2. There was nothing in the adjudicator's decision dealing with Decision 2 that expressly mentioned the certification issue. Lord Macfadyen suggested that the adjudicator’s reason for making no mention of that point at that stage could be that he considered that he had already dealt with the point in Decision 1, or it could be that he simply rejected the submission of Law Mining about the need for certification without explaining his reasons for doing so.
It was held in the circumstances that it would not be right to hold that the adjudicator committed a jurisdictional error. The issues before him were the assessment of the amount due in respect of application No. 9 and whether an order for payment of that amount should be made. The position of Law Mining on those issues was that the amount due should be assessed at nil, and no payment should be ordered, because nothing was contractually due in the absence of certification. Whatever his reasons for doing so may have been, the adjudicator had rejected the contention of Law Mining. In so doing, he was answering the question put to him. He may have done so on a ground not clearly focused in the parties' contentions. It may be that he had failed to express his reasons for doing so clearly. It may also be that he was wrong in law in doing so. But it was held not to be right to characterise the decision as one which resulted from the adjudicator addressing the wrong question, and thus as involving his acting in excess of his jurisdiction.
The effect of the conclusions reached by Lord Macfadyen meant that Barr was not entitled to summary decree for the whole sum claimed. It was common ground that some of the amount claimed was unaffected by the invalidity of the adjudicator’s decision on the rescission issue. Lord Macfadyen therefore granted summary decree in full for Decision 1 and a restricted amount of Decision 2.
The same three lines of defence were relied upon in the Ross Action as relied upon in the Fleming Action, although the points raised were in a different form.
The "several disputes" issue took the form of a contention by Law Mining that the adjudicator acted on erroneous legal advice in rejecting the submission that he had no jurisdiction because he was being asked to decide more than one dispute in one adjudication without Law Mining' consent.
Law Mining argued that the adjudicator’s decision disclosed that the adjudicator had not applied his own mind to the "several disputes" issue, but had delegated the taking of that decision to a legal adviser. The legal adviser had erred on the point it was argued. No attempt was made by the legal adviser or by the adjudicator to consider whether there was a sufficient connection between the matters referred to enable them to be treated as a single dispute.
It was held that the various matters referred to the adjudicator formed a single dispute as to the sums due. The adjudicator did not exceed his jurisdiction in determining the whole matters referred to him. He took advice on the "separate disputes" issue, as he was entitled to do in terms of paragraph 13(f) of Part I of the Scheme. It could not be inferred from the adjudicator’s decision that the adjudicator did not apply his mind to the advice tendered by the legal adviser. It was held that the adjudicator sought advice as he was entitled to do, obtained advice which was based on and accurately reflected the authority then available, albeit that authority may not be wholly satisfactory, and reached a conclusion which was in the result sound. The adjudicator did not fall into jurisdictional error on the "separate disputes" issue, and his decision was therefore not on that account unenforceable.
The rescission issue took the form of a contention by Law Mining that the adjudicator, in rejecting the submission that the contract had been rescinded, acted on legal advice instead of making his own assessment of the circumstances.
It was held that by incorporating the legal adviser’s opinion in his own decision, the adjudicator gave a clear indication of the approach which he had adopted to the rescission issue. Reading the two documents together showed that he held that there had been no rescission. That was a decision of mixed fact and law for the adjudicator to take. It was held that law Mining had not demonstrated that that decision was wrong. This ground of attack on the validity and enforceability of the adjudicator's decision therefore failed.
The certification issue took the form of a contention that the adjudicator failed to address the argument that in the absence of certification no sum was contractually due in relation to application No. 9.
It was held that the adjudicator was aware that law Mining was contending that there could be no payment without certification. He recorded the submission to that effect in his decision. There was no discussion of the point in the part of the decision that dealt with the claim in connection with which the issue did arise. The adjudicator had either contrived to lose sight of the submission after recording it or had rejected it without expressing any reasons for doing so.
In those circumstances it would not be correct to hold that the adjudicator failed to address a question put to him by the parties, and thus fell into jurisdictional error. The question which the parties had put to the adjudicator was what sum was payable by Law Mining to Barr in respect of application No. 9. It was held that the adjudicator answered the question put to him, by deciding the amount to be paid. In answering that question, the adjudicator may have failed to take account of the contention about certification, or may have rejected it. If he rejected it, he may have been wrong in doing so. It was unsatisfactory that his reasons for his decision did not make it clear that he dealt with the contention, and, if he rejected it, why he did so. Lord Macfadyen decided that it would not be right to hold that any of those deficiencies had the effect that the adjudicator exceeded his jurisdiction.
The effect of the conclusions reached by Lord Macfadyen meant that Barr was entitled to summary decree for the whole sum claimed.