Although courts are loath to overrule an adjudicator's decision on procedural grounds, there are
areas where judges have decided that time limits and contractual rules must
be enforced.
Does this mean reform is needed? asks Daniel Atkinson.
IT IS RARE for the courts to interfere with an adjudicator's decision unless it is obviously
unfair. When a decision is challenged, the courts seldom take a technical
approach to the procedures adopted.
The result is that any room for procedural wrangling is significantly reduced.
But there are three areas of procedure that are still fertile ground for those determined to
avoid adjudication.
The first is the requirement that the contract must be in writing for adjudication to be
available as a right under the Construction Act.
The second is the requirement that the referral, setting out the details of the case, should
be served within seven days of the notice of an intention to refer a matter
to adjudication.
The third area is that the adjudicator has to make a decision within 28 days.
In the recent case of Hart Investments v Fidler, Judge Coulson examined each of these areas and
came to decisions that may surprise many.
The referral was provided eight days after the notice of intention, rather than the seven
days required by the adjudication procedure - in this case the Scheme for
Construction Contracts.
Hart immediately seized upon the point that the adjudicator did not have jurisdiction.
But the adjudication continued and the adjudicator made his decision. But in the court Judge
Coulson refused to enforce the decision: the referral was invalid, he said,
because it was one day late.
Judge Coulson said there
were no reported cases on the consequences of a referral being outside the
seven day period. In fact there is one case - that of Tracy Bennett v FMK
Construction (2005) - where the referral was six days late. In that case,
Judge Havery QC effectively held that the period of seven days was only
advisory.
The contract - JCT
Private Form 1998 - contained a clause that stated that the failure by
either party to comply with any of the procedural requirements would not
invalidate the decision of the adjudicator. It may well be that this was a
factor in Judge Havery's decision.
The case of Palmac Contracting v Park Lane Estates (2005), although it did not deal with the
seven-day period for the issue of the referral, did deal with the seven-day
period for the appointment of an adjudicator.
The requirement is for both the adjudicator to be appointed and the referral to be served within
seven days of the notice of intention. In practice the notice of intention
will usually precede the appointment of the adjudicator and the referral
will usually follow it.
In the Palmac case, Judge Kirkham held that the sevenday period for appointment was not
prescriptive. If the period was exceeded then the responding party would
suffer no prejudice. Again, in this contract - the JCT 1998 With
Contractor's Design - there was a clause, similar to that in Bennett v FMK,
that the failure by either party to comply with any of the procedural
requirements would not invalidate the decision of the adjudicator.
It was clear in this case that Judge Kirkham reached the conclusion without the need to rely on
that clause.
In deciding Hart v Fidler, Judge Coulson referred neither to
Palmac v Park Lane Estates nor to
Bennett v FMK.
He relied instead on analogy to decisions on the requirement for an adjudicator's decision to be
made within 28 days. He followed the Scottish judgment of the Inner House in
Ritchie Brothers v David Philp Commercials (2005).
The majority decision here was that the 28-day limit meant what it said: any decision made after
the 28-day period, even if by just one day, was null.
Only one judge, Lord Abernethy, dissented, saying he was unable to see what constructive purpose
would be served by making the 28-day period mandatory.
On the contrary, he considered that it would seriously undermine the effectiveness of
adjudication and in that respect followed previous English judgments.
Judge Coulson's decision means that both the seven-day period for the issue of the referral and the
28-day period for an adjudicator's decision are mandatory. A delay of even
one day means the process will be a waste of time.
That was sufficient to dispose of the case. But Judge Coulson went on to consider letters of intent
and the requirement that a contract must be in writing for adjudication to
be available as a right under the Construction Act.
In this case the letter of intent, as is common in the industry, stated the intention to award a
contract, set a limit on spend under the authority of the letter of intent
and briefly set out numbered terms that applied to the work carried out
under the letter of intent.
Judge Coulson said that, even if the letter of intent was a contract, it did not satisfy the
requirements for all the terms to be in writing.
He considered that the biggest problem was that the scope of work was to be defined by future
orders, whether oral or written. Although that might be sufficient for a
binding contract, which he doubted, it was not enough for the contract to be
in writing for adjudication.
He considered that, if the contract document did not define the scope of work, then all the terms
were not in writing.
This part of Judge Coulson's judgment could have wide repercussions. On numerous construction
contracts the exact extent of work is intended to be ordered by oral
instruction.
There are many labour contracts where the agreement is to supply labour for construction
operations. The exact work is then determined onsite. On some contracts
there is only a schedule of rates that will be applied to any work carried
out that in many cases is by oral instruction.
This part of the judgment was not necessary for his decision but it is likely that his test
will be applied generally, even though it is removed from the realities of
construction.
If this is the direction that the law is to take then immediate reform is necessary. The adjudication
procedure is now fully developed; there is no longer any need to insist
contracts are in writing.
Key points
In adjudication, a delay
of only one day in the referral or in the decision-making process could
nullify the adjudicator's decision.
If one part of a contract is not in writing, the entire contract will be deemed not to be in
writing and the parties will not be able to adjudicate.
Reform is necessary. The Construction Act should no longer require contracts to be made in writing in
order to make adjudication available as a right.
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