Building contract – Dispute resolution – Jurisdiction – Parties entering into JCT contract – Terms of contract giving rise to dispute – Parties referring to separate adjudications – Whether decision of defendant’s adjudicator binding on claimant – Ruling in favour of claimant
The claimant property developer entered into a contract with the defendant to build the structural shell and external envelope (cladding, windows, doors and roofing) for five new blocks of residential apartments, together with other landscaping and infrastructure work. The contract was in the form of the JCT Design and Build Contract (2005 ed). The contract sum was for £7.975m. Clause 9.2 of the conditions provided for disputes under the contract to be referred to adjudication under the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the scheme). The parties informally agreed a revised method of working and the works continued on that basis.
Disputes subsequently arose as to the terms that applied to the revised agreement. The defendant notified the claimant of its intention to refer the dispute to arbitration and asked the Royal Institution of Chartered Surveyors (the RICS) to appoint an adjudicator, as provided under the scheme. The defendant issued a modified notice to include a claim for a declaration that the claimant should pay the costs and fees of the adjudicator. The claimant served a notice of its own intention to refer the dispute to arbitration, and both adjudications proceeded.
The defendant’s adjudication was completed first, but the claimant contended that the adjudicator’s decision could not stand because, inter alia: (i) the appointment of the defendant’s adjudicator was invalid because, under the scheme, the request to act had to be made after the giving of the notice of adjudication, whereas the defendant’s request had been made before the modified notice was given; (ii) two adjudications on the same dispute could not run concurrently; and (iii) a term should be implied into the contract whereby time should not run in the claimant’s adjudication while the defendant’s proceeding were outstanding.
Held: A ruling was made in favour of the claimant.
(1) The appointment of the defendant’s adjudicator was invalid. The scheme contemplated that the request to the nominating body (in this case the RICS) should follow the giving of a notice of adjudication. The adjudicator had had no jurisdiction to act under the modified notice because that notice had not followed but was preceded by a request to the nominating body under para 2(1)(b) of schedule 1 to the scheme. The request could not be perceived as continuing so that it could be regarded as having been made both before and after the second notice. The scheme referred to a request in writing, which accompanied rather than preceded the relevant notice of adjudication. If the provisions that established adjudicator’s jurisdiction were not complied with, it was irrelevant whether or not the other party had suffered prejudice by that non-compliance.
In the instant case the alteration made to the notice to include a claim for the adjudicator’s fees added something that, although not insignificant, was of limited importance compared with the dispute as a whole. In other circumstances, however, the difference between one notice and a second might be more significant. Where one notice was served, a nomination was sought, a second notice followed and the adjudication proceeded pursuant to the second notice, the question of jurisdiction could not be decided by a determination of the degree of importance of the additional claim: Ide Contracting Ltd v RG Carter Cambridge Ltd [2004] EWHC 36 (TCC); [2004] BLR 172 and Palmac Contracting Ltd v Park Lane Estates Ltd [2005] EWHC 919 (TCC); [2005] BLR 301 considered.
(2) It was possible to have concurrent adjudications on the same dispute. The scheme did not provide for the resignation of an adjudicator where the dispute to be decided had previously been referred to adjudication but no decision had been made.
(3) It was not necessary, either for reasons of business efficacy or because that was what the parties must have intended, to imply a term into the contract that time should not run in the claimant’s adjudication until the existing proceedings had been resolved. The scheme provided for an extension of time in certain circumstances; but it did not include the situation where the decision of another adjudicator had been challenged. The contract was not unworkable if such a term was not implied even though the absence of such a term might lead to a race to achieve a final decision. If such a term were implied, it would be necessary to determine precisely how long the suspension should last and, in particular, whether it should continue pending any appeal or application for permission to appeal.
Jonathan Acton Davis QC (instructed by Maxwell Winward LLP) appeared for the claimant; Martin Bowdery QC (instructed by Merriman White Solicitors) appeared for the defendant.
Eileen O’Grady, barrister