Adjudication
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KEYWORDS: |
Housing Grants Construction and Regeneration Act 1996, claim, dispute, jurisdiction, Notice of Adjudication, DOM/1 1998, Clause 38A, ambush, Judge Richard Seymour Q.C. |
The decision in Edmund Nuttall Limited -v- R.G. Carter Limited (2002) TCC examines the meaning of "dispute" and the difference between a dispute and a claim. The central matter was whether the adjudicator had jurisdiction to decided issues on the basis of arguments and facts not presented to the other party before the Notice of Adjudication. The decision arose from an application for enforcement of an adjudicator’s decision.
The project was the Norfolk and Norwich Millennium Project. R.G. Carter Ltd. ("Carter"), was a building contractor employed by Norfolk and Norwich Millennium Company to undertake the Project. Carter entered into a sub-contract with Edmund Nuttall Ltd ("Nuttall"), for the execution of the Sub-Contract Works. The Sub-Contract incorporated the terms of the standard form DOM/1 1998 sub-contract conditions.
The Sub-Contract Works were late. In May 2001 Nuttall submitted the "May Claim" for an extension of time for completion of the Sub-Contract Works. Nuttall also claimed payment of loss and expense for delays allegedly caused by Carter.
The appendix to the May Claim listed a considerable number of occurrences during the course of the execution of the Sub-Contract Works and indicated which of those occurrences was said to have caused the delay, and how much delay was said to have been caused. Nuttall made an application for payment No 21 on the basis of the May Claim. Carter responded to Nuttall’s application for payment No. 21 in a formal payment notice and valuation statement sent to Nuttall under cover of a letter dated 7 June 2001. The assessment made by Carter of the sum payable to Nuttall was a negative amount because of Carter’s alleged claims against Nuttall. As is usual in construction contracts, correspondence continued back and forth until on 14th December 2001 Nuttall’s solicitors issued a Notice of Adjudication in accordance with Clause 38A of DOM/1 1998.
The Referral Notice was served on 4 January 2002. The Referral Notice was accompanied by a document dated 19 December 2001 prepared by Mr. Anthony Caletka on behalf of Nuttall (the "Caletka Report"). The Caletka Report set out a claim for an extension of time for the execution of the Sub-Contract Works of 235 days, the same as that made in the May Claim, but the justification for an extension of time was quite different from the justification put forward in the May Claim. The Caletka Report relied on occurrences listed in the appendix to the May Claim there indicated as having no delaying effect, as being significant causes of delay, while abandoning most of the matters relied on in the May Claim as being alleged causes of delay. Carter alleged that a fair number of matters in support of the contention that Nuttall was entitled to the extension of time had not featured in the May Claim at all. The sums claimed in the adjudication as the loss and expense to which Nuttall was entitled were also different from those claimed in the May Claim, or mentioned in the Notice of Adjudication, to some degree. The total sum claimed was £1,253,495.76, rather than the £1,979,752 claimed in the May Claim or the sums set out in the letter dated Notice of Adjudication.
Carter objected to the Adjudicator that he should not consider the Caletka Report as it was a new claim which Carter had not seen before it was annexed to the Referral Notice. Despite these objections the Adjudicator determined that Carter should pay to Nuttall a sum of £834,468.90 plus Value Added Tax, amounting to £146,032.05 within 14 days of the date of the Decision. The Adjudicator also determined that Carter should pay his fees of £42,614.08 for acting as adjudicator. In the event those fees were paid by Nuttall. Nuttall application in the present case was for enforcement of that decision.
Nuttall submitted that the dispute referred to adjudication was a dispute as to
Nuttall submitted that the nature of the dispute was not affected by the fact that in the adjudication Nuttall sought to advance arguments, and to rely on facts, different from those relied on in the May Claim. Nuttall submitted that the differences did not affect the nature of the dispute referred to adjudication. Nuttall relied on the decision of H.H. Judge Anthony Thornton Q.C. in Fastrack Contractors Ltd. v. Morrison Construction Ltd. [2000]
Carter submitted that the Decision was not binding upon Carter because at the date of the Notice of Adjudication and/or at the date of the Referral Notice, the matters detailed within the Notice of Adjudication and/or the Referral Notice had not been brought to the attention of Carter. Carter had not been given the opportunity of considering and then either admitting, rejecting or seeking clarification of these substantially new claims. As such there was no dispute at the date of the Referral Notice. Carter also relied on the decision in Fastrack and also on the definition of dispute in Monmouthshire County Council v. Costelloe and Kemple Ltd (1965) and Cruden Construction Ltd. v. Commission for the New Towns [1995], the decision of H.H. Judge Humphrey Lloyd Q.C. in Sindall v. Solland and decision of H.H. Judge Lloyd Q.C. in K & D Construction v. Midas Homes Ltd.
Judge Seymour Q.C. identified that the real question in the present case was not whether there was a "dispute" between Nuttall and Carter as at 14 December 2001 when the Notice of Adjudication was issued but, whether the dispute upon which the Adjudicator acted was that which was the subject of the Notice. If it was, the Decision was valid and binding. On the other hand, if the Adjudicator decided a "dispute" which was not, on proper construction of the letter dated 14 December 2001, the subject of the Notice of Adjudication, he had no jurisdiction to decide that dispute, the Decision was invalid and the action should be dismissed. The central issue was how to identify the "dispute" which was the subject of the Notice of Adjudication.
Judge Seymour Q.C. held that a "dispute" is something different from a "claim" relying on West Wake Price & Co. v. Ching [1956] 3 All ER 821 in which Devlin J had to consider the meaning of the word "claim". Judge Seymour held that while a "dispute" can be about a "claim", there is rather more to a "dispute" than simply a "claim" which has not been accepted.
Judge Seymour held that for there to be a "dispute" there must have been an opportunity for the protagonists each to consider the position adopted by the other and to formulate arguments of a reasoned kind. It could be that there is a "dispute" in a case in which a party which has been afforded an opportunity to evaluate rationally the position of an opposite party and
Where a party has had an opportunity to consider the position of the opposite party and to formulate agreements in relation to that position, the extent of the "dispute" between the parties will not only be a "claim" which has been rejected, if that is what the dispute is about, but the whole package of arguments advanced and facts relied upon by each side.
For the purposes of a reference to adjudication under the 1996 Act or equivalent contractual provision, a party could refine its arguments and abandon points not thought to be meritorious without altering fundamentally the nature of the "dispute" between them.
Judge Seymour held that, what a party cannot do, was abandon wholesale facts previously relied upon or arguments previously advanced and contend that because the "claim" remains the same as that made previously, the dispute is the same.
The construction of the word "dispute" for the purposes of the 1996 Act and equivalent contractual provisions, was not simply a matter of semantics, but a question of practical policy. Judge Seymour held that considerations of practical policy favoured giving to the word "dispute" the meaning he had identified. The whole concept underlying adjudication was that the parties to an adjudication should first themselves have attempted to resolve their differences by open exchange of views. If they were unable to, they should submit to an independent third party for decision the facts and arguments which they had previously rehearsed among themselves. If adjudication did not work in that way there was the risk of premature and unnecessary adjudications in cases in which, if only one party had had a proper opportunity to consider the arguments of the other, accommodation might have been possible. There was also the risk that a party to an adjudication might be ambushed by the new arguments and assessments which had not featured in the "dispute" up to that point but which might have persuaded the party facing them, if only he had had an opportunity to consider them.
Having defined the meaning of the word "dispute" Judge Seymour turned to the proper construction of the Notice dated 14th December 2001, adopting the principles enunciated by Lord Hoffman in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998].
Judge Seymour held that, objectively construed, "dispute" referred to adjudication in the Notice dated 14 December 2001 was the May Claim. That claim was unresolved, as was apparent from the correspondence passing between Nuttall and Carter. It was not "a dead duck". Viewed objectively it was very much a live mallard, even if, unknown to anyone save perhaps Mr. Caletka, it was about to be transformed into the swan of the Caletka Report. The Caletka Report was not, apparently, completed until 19 December 2001 and there was no reason, on the evidence, to suppose that Nuttall had taken any position on what it would do with the Caletka Report once it became available.
Judge Seymour held that what was referred to adjudication by the letter dated 14 December 2001 was the "dispute" as to the May Claim, comprising the package of facts relied upon by each side in support of the respective positions of Nuttall and Carter, and the arguments, which had been rehearsed. That package did not comprehend any of the fruits of the reconsideration of the May Claim later set out in the Caletka Report. Those fruits, once Carter had had an opportunity to consider the new facts relied on and the new arguments could potentially ripen into a new "dispute", but they were not part of the "dispute" which existed as at 14 December 2001.
Judge Seymour held that what the Adjudicator decided in the Decision was not something which had been referred to him for decision. The Decision was thus made without jurisdiction and was unenforceable. Accordingly the action failed and was dismissed.
The decision in Edmund Nuttall Limited -v- R.G. Carter Limited (2002) TCC is of interest not only in assisting to define the term "dispute", but also as a demonstration of the steps that the Courts will take to avoid the "ambush" in adjudications. This is seen in Nuttall as very much a policy decision to ensure that that the rapid procedure of adjudication is not inherently unfair and to avoid the Referring Party gaining an unfair advantage by premature referral to adjudication.