ADJUDICATION IN THE CONSTRUCTION INDUSTRY
A Panel discussion with
Tony Francis of Fenwick Elliott
Delia Dumaresq of Atkin Chambers
Simon Hargreaves of Keating Chambers
A Report on the Meeting of the Society of Construction Law on
7th September 1999 at the Lloyd George Room, National Liberal Club, London
Report by John Denis-Smith of Keating Chambers
A packed meeting of the Society of Construction Law on 7th September 1999
underlined the topicality of the subject of the panel discussion chaired by Jonathan
Hosie. Tony Francis of Fenwick Elliott and Lead Editor of the Construction Industry
Law Letter, Ms Delia Dumaresq of Atkin Chambers and Simon Hargreaves of
Keating Chambers, gave their views on the challenges and opportunities of
adjudication from the perspective of legal practitioners.
Mr Francis described his experience of adjudication under the Housing Grants and
Regeneration Act 1996. Since it came into force on 1st May last year, the pace of
references has quickened, with the IRCS recording 45 new appointments this July
compared with 15 in February. Many Sub-Contractors remain ignorant of their rights
under the Act: nonetheless references typically involve claims by Sub-Contractors
against Main Contractors or Main Contractors against Employers, most adjudications
concerning payment during works or Final Account disputes.
Mr Francis emphasised that, although there is currently little evidence of
"adjudication by ambush", the timetable under the Statutory Scheme for responding to
a claim is tight. A party seeking to resist a claim must ensure it has efficient
personnel, I.T. and experts and well-organised documentation. The overriding benefit
is financial: in his experience costs tend to be no more than 10% of the sum in
dispute, enabling adjudication to provide a forum for disputes involving relatively
small sums. The future of adjudication depends on its provision of cost effectiveness,
procedural fairness and balanced reasoning.
Ms Dumaresq explored potential problem areas in the field of adjudication:
Enforcement of adjudication awards
It had been suggested after Macob v Morrison (1999 BLR 93) that summary judgment
under CPR 24 was the correct method of enforcement. However, that had been
doubted earlier in Wescol v Galliford and, in Project Consultancy v Gray Trust (16
July 1999), the Court made it clear that it would consider whether there was a defence
to the claim based on the adjudication award. The provision under CPR 24 that
summary judgment may be refused where there is "some other reason" to do so may
offer further scope to the party resisting a claim.
The procedure in adjudication
Ms Dumaresq considered that the rules of natural justice apply to adjudications
although the Courts would be less likely to intervene where a decision involved the
declaration of existing rights than when an adjudicator effectively creates rights by his
decision. The Scheme itself requires only that an adjudicator be impartial, not that he
be fair.
Dealing with Jurisdiction Issues
In the Project Consultancy case and Palmers v ABB Mr Justice Dyson and His
Honour Judge Thornton QC considered that an adjudicator could not decide whether
he had jurisdiction. In Mercury v Director General of Telecommunications (1994 138
S.J.L.B. 183) the then Lord Justice Hoffmann had suggested that the adjudicator
should decide other issues; jurisdiction could then be decided in court. In British
Shipbuilders v VSEL ([1997] 1 lloyds Rep 106) Mr Justice Lightman had suggested
the same course: His Honour Judge Thornton QC had however suggested otherwise.
Costs
Ms Dumaresq questioned whether the recent decision in John Cothliff v Allen Build
(29th July 1999) that the Act empowered adjudicator to award costs was correct; it
implied such power in an Act which already spelled out terms to be implied into
adjudication schemes.
Ms Dumaresq suggested other problem areas:
(i) determining whether a contract is covered by the Act;
(ii) whether or not an adjudicator can consider matters other than those
referred to him - paragraph 20 refers to the power to determine other matters
arising under the contract;
(iii) whether an adjudicator can take account of future events and in effect give
interim decisions
(iv) conflicts between rules of adjudication provider bodies and those under
the Statutory Scheme. TeCSA suggests the adjudicator can decide on the
extent of his jurisdiction: the Scheme suggests not;
(v) where a contract does not fulfil the Scheme's requirements, does an
adjudicator appointed under the Scheme follow the Scheme's procedure or
those of the body to whom he is affiliated?
Mr Hargreaves compared the two means of contesting an adjudicator's jurisdiction
which had appeared in two recent cases: either to reserve ones rights and leave
jurisdictional issues to be deployed as a defence to enforcement proceedings; or
(consensually or otherwise) take pre-emptive proceedings in Court or arbitration for
declaration or award on the issue. The Claimant pursued the former route in the
Project Consultancy case, the result being that the Court refused summary judgment
on the grounds that there was a serious issue as to whether there was a contract at all.
In the ABB case, the parties agreed to take the latter route and were able to obtain a
decision on the jurisdictional issues very quickly. Mr Hargreaves suggested the latter
as an attractive option to take, given the readiness and ability of the Courts to hear
such issues quickly and that this option might well appeal also to adjudicators
themselves. A further option might be to consent to an ad hoc appointment of a
lawyer as assessor whose decision on jurisdiction issues would be treated as final by
the parties.
As to enforcement of an award by the Courts, Mr Hargreaves suggested that it would
be preferable to seek a declaration in Court rather than risk failing on a application for
summary judgment.
The question and answer session which followed canvassed issues such as whether
adjudicators should give reasons for their awards; the "stakeholder option" and the
possibility of Courts enforcing awards by injunctions. While agreeing that in general
adjudicators should give their reasons, Mr Francis considered that this might not be
necessary in the case of a straightforward claim for payment; Mr Hargreaves pointed
out that small Sub-Contractors may want reasons more than a large scale Contractor.
The panellists agreed that the "stakeholder option" contravened the spirit of the Act
and may not comply with it. Ms Dumaresq suggested that the Court's grant of an
injunction in Drake & Skull v McLaughlin (60 BLR 102) was flawed; Mr Hargreaves
however questioned whether it was right (as Mr Justice Dyson reasoned in
Macob)that decisions should not be enforced by adjudication. Parliament's remarkable
intervention into the field of construction contracts was surely reason enough to
justify the use of injunctions.
JOHN DENIS-SMITH
