Building contract – Adjudication – Conclusive evidence – Claimant university engaging defendant company to refurbish property – Contract requiring adjudication to be commenced within specified time period where disputes arose – Defendant seeking to commence adjudication – Adjudicator invalidly appointed and resigning – Claimant applying for declaration that final certificate becoming conclusive evidence – Whether defendant commencing adjudication within time limit – Application dismissed
By a contract executed as a deed and incorporating the Intermediate Building Contract with Contractor’s Design (2005 ed), revision 2 (2009), the claimant university engaged the defendant company to carry out refurbishment works to its premises for a contract sum exceeding £2.5m. The contract provided that the Scheme for Construction Contracts (England and Wales) Regulations 1998 were to apply in the event of a dispute arising under the contract which either party wished to refer to adjudication. Clause 1.9.2 of the contract provided that the final certificate should not be conclusive evidence of the satisfaction of its terms as set out in clause 1.9.1 until 14 February 2014.
The contract administrator issued a final certificate but a dispute arose regarding the defendant’s entitlement to extensions of time, the proper valuation of adjustments to the contract sum, the defendant’s liability for the claimant’s costs to address incomplete and defective works and the defendant’s entitlement to recover loss and expense in respect of delay and/or disruption to the works. In February 2014, the defendant served a notice of adjudication (the first notice) pursuant to Part 1 of the scheme and on 14 February it requested the appointment of an adjudicator. The adjudicator subsequently resigned on the ground that he had no jurisdiction, having been appointed under the wrong nominating body.
The claimant applied for a declaration that the final certificate had become conclusive evidence of the matters stated in clause 1.9.1 of the contract. The central issue was whether the defendant had commenced adjudication proceedings within the meaning of clause 1.9.2 of the contract by 14 February 2014. The claimant contended that the first notice had been ineffective to commence adjudication proceedings since, under the scheme, an adjudication was not commenced until a referral notice was served on a properly appointed adjudicator pursuant to para 7(1) of the scheme. The defendant contended that the adjudication proceedings had commenced on the giving of notice under para 1.
Held: The application was dismissed.
Conclusive evidence clauses had a clear commercial purpose, being intended to provide contractually agreed limits to the scope of disputes and to provide clarity as to the parties’ obligations once a project was complete. They allowed the parties to dictate if, and to what extent, a final certificate was to be treated as conclusive as between them. The real foundation for the legal efficacy of such a clause was contract. If parties expressly agreed on the modalities for determining a matter, such an agreement should be upheld in the absence of any relevant public policy considerations: Agro Company of Canada Ltd v Richmond Shipping (The Simonburn) [1973] 1 Lloyd’s Rep 392 and Bache & Co (London) Ltd v Banque Vernes et Commerciale de Paris SA [1973] 2 Lloyd’s Rep 437 considered.
A notice of adjudication under the scheme was a critical document, which defined the scope of the matters to which the adjudication proceedings related. The giving of notice under para 1(1) of the scheme was to be treated as something more than mere notice of intention; nothing in the body of the scheme militated against the notice of adjudication amounting to commencement of proceedings. Looking at the wording of clause 1.9.2 of the contract and the scheme together as a whole, proceedings were commenced for the purpose of clause 1.9.2 when a notice of adjudication was given under para 1 of the scheme. That result was consistent with the fact that the arrangement between the parties was a contractual one and accorded with commercial common sense: Letchworth Roofing Company v Sterling Building Company [2009] EWHC 1119 (TCC) and Bennett v FMK Construction Ltd [2005] 101 Con LR 92 considered.
An invalid referral did not render invalid a notice of adjudication for the purpose of commencing adjudication proceedings within the meaning of clause 1.9.2 of the contract. Where adjudication was not pursued, the right to adjudication was not lost forever. There was no distinction in that regard between circumstances where adjudication was thwarted by error on the part of the referring party or for some other reason: Lanes Group plc v Galliford Try Infrastructure Ltd [2011] EWCA Civ 1617; [2012] 1 EGLR 27 applied. Accordingly, the invalidity of the referral and the resignation of the first adjudicator had not negated the sufficiency of the notice of adjudication for the purpose of commencing proceedings.
The saving provision in clause 1.9.2 had been triggered by commencement of adjudication proceedings. Once triggered, the proviso remained in operation during the currency of any subsequent adjudication proceedings: Schuler (L) AG v Wickman Machine Tool Sales Ltd [1974] AC 235, Linnett v Halliwells LLP [2009] EWHC 319 (TCC); [2009] BLR 312, KNN Colburn LLP v GD City Holdings Ltd [2013] EWHC 2879 (TCC), Willmott Dixon Housing Ltd v Newlon Housing Trust [2013] EWHC 798 (TCC); [2013] 2 EGLR 23 considered.
Lucy Garrett (instructed by Berwin Leighton Paisner LLP) appeared for the claimant; Serena Cheng (instructed by Thomas Eggar LLP) appeared for the defendant.
Eileen O’Grady, barrister
