Keywords: Housing Grants Construction and Regeneration Act 1996, paragraph 1(3) Scheme, dispute, jurisdiction, notice of adjudication, adjudicator’s fees.

The decision in Ken Griffin & John Tomlinson v Midas Homes Limited emphasizes the importance of careful drafting of the Notices in adjudication and deals with the interesting problem of liability for the adjudicator’s fees when he has jurisdiction only for part of his decision.

Griffin applied for summary judgment to enforce an adjudicator’s decision under a subcontract for Midas to pay four invoices. Two invoices were dated 22 February 2000 and were in the amounts of £11,300 and £617. Two invoices were dated 17th April 2000 and were for £17,126.08 and £8,632.59. The latter invoices were issued after the purported determination of Griffin’s employment under the contract and included application for release of retention. The Scheme applied.

The issue before His Honour Judge Humphrey Lloyd, was what precisely was the dispute referred to the adjudicator, and therefore what was the extent of his jurisdiction.

Judge Lloyd examined the Scheme and held that the purpose of the Notice of Adjudication as described under paragraph 1(3) of the Scheme was to inform the other party of what the dispute is, to inform those who may be responsible for making the appointment of an adjudicator so that the correct selection can be made. The Notice was also required to define the dispute and to specify precisely the redress sought so that the adjudicator knows the ambit of his jurisdiction.

Judge Lloyd held that in considering the validity of a Notice an essential question was whether or not a dispute has arisen. This was a question of fact as set out in Fastrack Contractors v Morrison Construction [2000]BLR 168. A dispute is not lightly to be inferred. Care must be taken when looking at correspondence to bear in mind by whom they were written and to whom they were addressed. In this case the relevant correspondence was two letters dated 11th April and 13th April 2000 both written by and addressed to solicitors. The first letter referred to the first two invoices. The second letter referred to the second two invoices and although dated 13th April was sent on 19th April 2000. Notice of Adjudication was given by letter dated 3rd May 2000, which simply referred to the previous two letters, stated that payment had not been made and stated that “the dispute” was referred to adjudication.

Midas’ reply to the letter of 3rd May 2000 was that the letter was not an effective Notice of Adjudication, since it had no idea from the Notice which of the numerous items would be referred to Adjudication or the grounds for doing so. Accordingly Midas objected to the jurisdiction of the Adjudicator.

Judge Lloyd noted that Griffin’s solicitors did not take the course that many, perhaps most, people would have done in the circumstances of starting again, to withdraw the notice and to specify precisely what the dispute or disputes were. Instead they went ahead. Midas continued to object to the Adjudicator’s jurisdiction throughout the proceedings.

Judge Lloyd examined the letter dated 3rd May 2000. Since it was drafted by solicitors it was to be treated as having been carefully prepared and would not be given the same latitude that might be given to a letter which had not had the benefit of external advice, whether legal or otherwise. Although the letter of 3rd May 2000 did not state the names and addresses of the parties involved and why the dispute had arisen as required by paragraph 1(3) of the Scheme, it was held that these were matters that were reasonably clear to anybody receiving the letter. The key question was what was the brief description of the dispute and what was the nature of the redress that was sought. The real dispute could not be seen from the letter since bare non-payment was rare. Rather the letter referred to previous correspondence. It was held that a Notice of Adjudication could be given by reference to other correspondence, but the correspondence needs to record the dispute with some precision.

Judge Lloyd stated that the letter of 3rd May 2000 was not well drafted. The essence of the correspondence referred should have been properly extracted and re-stated in the terms that the Scheme requires. The letter referred to a “dispute” when there were a number of disputes.

It was held that at 3rd May 2000 there was one pivotal dispute; namely who was responsible for the determination. The reference to “dispute” also covered the invoices prior to the determination since the letter of 3rd May 2000 was about non-payment. The letter was to be read as indicating that payment of the first two invoices formed at least part of the redress sought. Accordingly if the determination was incorrect as the Adjudicator found then Midas had no apparent right to refuse payment of the invoices that had been issued prior to 11th April 2000, the date of the first letter.

Judge Lloyd then examined the letter dated 13th April 2000. There were two possibilities; either that a claim was being made for damages for repudiation or that a claim for payment was being made on the basis that work could no longer be carried out. It was therefore important to state whether or not the sub-contract was at an end and whether both parties were discharged, or whether it continued. If it continued then payment had not fallen due. The letter dated 3rd May 2000 did not resolve the dichotomy.

Importantly it was held that there was no dispute referable to adjudication for the second two invoices. They had only reached Midas by 19th or 20th April 2000. There had not been time to consider the claim and no time to discuss and to resolve the matter by agreement, since only if that fails will there be a dispute. Adjudication was not a substitute for discussion and negotiation nor was it to be used to provide the agenda for discussion and negotiation where no dispute had truly existed. Even if Midas had the opportunity to properly consider the invoices, no dispute would have arisen until Griffin had responded. A dispute will not exist if the claiming party accepts or has no real answer to a justified criticism of the whole or part of a claim. Only when the stages of discussion or negotiation are at an end may there be a dispute that could be referred to adjudication. In this case Griffin could only ask the adjudicator for a decsion on the validity of determination as there could be no dispute about its financial consequences.

It was held that the adjudicator’s decision was enforceable only as to the invoices of 22nd February 2000 for £11,300 and £617 which amounts were to be severed from the decision.

Judge Lloyd then examined the issue of the Adjudicator’s fees. The ultimate tribunal of the dispute would deal with the fees and costs incurred as a result of a dispute properly referred and resolved by an adjudicator, since subject to the terms of the contract, they would arise out of the dispute and be a further dispute.

In the light of Judge Lloyds decision some of the Adjudicator’s work was unauthorised as it was beyond his jurisdiction. Midas was not liable for the fees for that part, only the party that sought adjudication was liable for fees, expenses and costs incurred in asking for a decision which the adjudicator had no authority to make and to which it was not entitled under the contract. The Scheme took effect as implied terms of the sub-contract. Griffin was only entitled to exercise its right to call for adjudication if it first complied with paragraph 1(3) of the Scheme. It did not do so and were thus in breach of contract. It was not possible to determine how much of the adjudicator’s fees was referable to that part of his decision for which Griffin had obtained judgment. Judge Lloyd held that Griffin was entitled to an interim payment order under Rule 25.7(1)(b) or (c) of the CPR for the Adjudicator’s fees. He assessed the fees as likely to be £1,500 and assessed a reasonable proportion for the purposes of Rule 25.7(4) as £1,250.