Stuart Pemble considers lessons to be learned from the tale of a homeowner falling out with his builder over a claim that should never have got to court.
Key point
- A TCC judgment has highlighted the challenges homeowners face (particularly when acting without professional advice) when conducting Construction Act adjudication.
For most of us, £10,182 is a lot of money. However, it is almost certainly too small a sum to justify a dispute about it being referred to the Technology and Construction Court. The costs incurred getting to the hearing will always dwarf the amount in issue.
And that is one of the main lessons to be learned from Waksman J’s decision in ICCT Ltd v Sylvein Pinto [2019] EWHC 2134 (TCC).
The facts
Mr Pinto (P) had contracted with ICCT to stop leaks in the basement of his house. Although that would normally count as a construction operation for the purposes of the Housing Grants, Construction and Regeneration Act 1996 (the Act) – meaning there was a statutory right to refer any dispute under the contract to adjudication – the fact that the work was to P’s actual residence meant that section 106 excluded the contract from the Act’s provisions. However, neither party appreciated this.
ICCT sent P an invoice for £5,380 plus VAT. P did not pay it and did not serve a pay less notice (although, because the Act did not apply, none was required). ICCT referred the dispute to adjudication and Tony Bingham was appointed as adjudicator. He found in ICCT’s favour. P refused to pay and ICCT applied to the TCC for summary judgment of both its fees and those of Mr Bingham (which P had not paid despite losing the adjudication). This totalled the £10,182.
P raised three challenges: (i) the adjudicator lacked jurisdiction; (ii) there had been a breach of the laws of natural justice; and (iii) the underlying merits of the claim.
Jurisdiction
Because the contract was excluded from the Act by section 106, P argued that the adjudicator lacked jurisdiction. The judge rejected that argument. Taking comfort from Promet Technology Ltd v Imperial Cash and Carry Ltd [2015] 7 WLUK 596, he commented: “It is well established in law that even if there is not formal adjudication jurisdiction, an ad hoc jurisdiction can arise where both sides engage fully in the adjudication process on the merits.” Because neither side had reserved their right to challenge jurisdiction later, Waksman J felt that the adjudicator did have jurisdiction.
However, P finessed the jurisdictional challenge somewhat. First, he argued that, while accepting that the parties could bestow ad hoc jurisdiction on the adjudicator as a result of their conduct, that principle should not apply where any adjudication which subsequently arose would be illegal (in that it was not allowed by the Act). Waksman J disagreed. He stressed that there is no blanket ban on disputes under residential contracts being referred to adjudication. Rather, it was simply that the Act’s mandatory provisions do not apply automatically. Parties to residential contracts can – and “quite often” do – refer disputes to adjudication.
Second, P argued that he could not have waived his right to bring a jurisdictional challenge because he did not know that he could raise the point. That argument was rejected with the judge relying on the well known maxim that “ignorance of the law is no excuse” and the fact that he suspected the claimant (this was the first time it had been involved in an adjudication) was equally unaware of the effect of section 106.
Finally, P relied on the adjudicator’s conduct. He claimed that he was forced into accepting jurisdiction by an e-mail from the adjudicator inviting him to make a submission (an argument rejected on an analysis of what actually happened) and that Mr Bingham owed him a duty of care to point out the jurisdictional point. Again, P was unsuccessful: “as a matter of law, it is simply not the case” that such a duty was owed. Nor was there any evidence that the adjudicator “knew he had no jurisdiction but out of bad faith… somehow decided not to say anything about it”.
Natural justice – bias
P was concerned that the adjudicator might have been biased in favour of ICCT because ICCT had referred to Mr Bingham by his first name in e-mails which had begun “Dear Tony”. However, during the adjudication, and having received confirmation that Mr Bingham did not know anyone at ICCT, Mr Pinto asked Mr Bingham to “please ignore” that point.
After Mr Bingham handed down the decision, an ICCT employee who was writing to P to confirm that no-one at ICCT had ever dealt with Mr Bingham previously, said that the adjudicator “came highly recommended”. That phrase raised P’s suspicions, as did the fact that Mr Bingham’s conduct as an arbitrator had been subject to judicial scrutiny (see Viscount Hewart’s legacy, EG, 16 April 2016, p111) and an investigation by one of the institutions which appoints arbitrators and adjudicators.
The judge rejected these concerns. Mr Bingham did not know anyone at ICCT and there was no evidence that he had been anything other than impartial. And the investigation to which he was subject was irrelevant.
Merits
P argued that, notwithstanding the difficulties of challenging an adjudicator’s award on the merits in enforcement proceedings, “This was one of those cases where the adjudicator’s reasoning… is so incoherent and betrays such a lack of understanding of what the claims are all about that it hardly amounts to an adjudication award.” Again, the judge rejected this argument. The facts quite simply did not support it.
Final word
The judgment is a salutary lesson for homeowners getting involved in Construction Act adjudication. The costs of the adjudication and any subsequent TCC enforcement, coupled with the complexity of the issues, should encourage caution and obtaining professional advice.
Stuart Pemble is a partner at Mills & Reeve
