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20 years of statutory adjudication

The Construction Act 1996 turned 20 this month, which means that for the last 20 years the UK’s construction industry has been subject to its statutory adjudication and payment rules. I was just a couple of years out of university 20 years ago, so I’ve never really known a world without these things (something that Lucy Garrett QC noted in her video for Practical Law). I remember doing presentations to clients in the months leading up to May 1998 on the implications of the Act and, in particular, the payment and withholding notices regimes. It seems a long time ago now!

Looking back, a lot has happened since May 1998 and I thought that I would highlight just a few aspects of adjudication. Given the volume of case law and the limited space I have here, this is by no means a comprehensive review.

 And God said, “Let there be light” and there was light

No review could start without mentioning Macob v Morrison. We may now all take for granted how to enforce an adjudicator’s decision, but this was the first adjudication enforcement case. The judgment was ground breaking in a number of ways, not least because Dyson J (who was the Judge in Charge of the TCC at the time) pretty much invented adjudication enforcement on the spot. It is also where he:

  • Referred to “a coach and horses” being driven through the Scheme for Construction Contracts 1998 if he didn’t enforce the adjudicator’s decision.
  • Commented that by imposing a provisional and speedy dispute resolution procedure on the construction industry, Parliament clearly intended an element of “rough justice” and a process in which mistakes and injustices were more or less bound to happen.

A procedure for adjudication enforcement was born. I’m not sure when this procedure first appeared in the TCC Guide, but it is when parties started using CPR 7 (or CPR 8) and CPR 24.

One thing that is all too often forgotten about Macob v Morrison is that the adjudicator was Eric Mouzer. I think some credit needs to go to Eric because, without the well-reasoned and clear decision he wrote, Dyson J may have had a harder time enforcing it.

“At any time”

Fundamental to the process. “At any time” means exactly what it says. Think Dyson LJ’s words in Connex South Eastern Ltd v MJ Building Services Group plc.

Contracts in writing (RIP)

An area that generated significant case law, particularly with regard to the “evidenced in writing” bit of section 107. Generally, it meant that all the terms had to be in writing (not just material terms), which gave rise to issues over letters of intent, implied terms and oral variations.

The industry gave a huge sigh of relief when the LDEDC Act 2009 came into force and repealed section 107 (even if this is one feature of the amendments that has proved unpopular with the judiciary!).

Costs

We moved a long way from the original concept of each party bearing its own costs with Tolent clauses (which we finally got rid of in 2011). The courts had to establish the parties’ liability for the adjudicator’s fees (Linnett v Halliwells LLP) and how issues of jurisdiction and natural justice will affect an adjudicator’s right to payment (PC Harrington Contractors Ltd v Systech International Ltd). It was also established early on that we don’t have a lien over the decision.

Decisions

Thou shall not reach your decision late, but you may get away with serving it a wee while later (Cubitt Building & Interiors Ltd v Fleetglade Ltd). Whether the parties may have agreed to an extension of time may also be contentious, and silence may be deemed consent (for example, see KNN Colburn LLP v GD City Holdings Ltd, Actavo UK Ltd v Doosan Babcock Ltd and AC Yule & Son Ltd v Speedwell Roofing & Cladding Ltd).

Dispute

What is a dispute? In Fastrack Contractors Ltd v Morrison Construction Ltd, HHJ Thornton QC held that the reference must refer to a single dispute, although that single dispute may embrace a number of issues. “Dispute” was described as:

“…whatever claims, heads of claims, issues or contentions or causes of action that… the referring party has chosen to crystallise into an adjudication reference.”

Jackson J set out seven propositions in Amec Civil Engineering Ltd v Secretary of State for Transport, including that the the word “dispute” should be given its normal meaning, which was confirmed by the Court of Appeal. See also Bovis Lend Lease Ltd v The Trustees of the London Clinic and Cantillon Ltd v Urvasco Ltd.

Dispute not disputes

Unless the contract allows it or the parties consent, an adjudicator is not normally permitted to adjudicate at the same time on more than one dispute under the same contract. This is because the Construction Act refers to a “dispute” and not “disputes” (think Fastrack Contractors Ltd v Morrison Construction Ltd, Witney Town Council v Beam Construction (Cheltenham) Ltd and Penten Group Ltd v Spartafield Ltd).

Paragraph 8 of the Scheme for Construction Contracts 1998 is in similar terms (see Pring & St Hill Ltd v C J Hafner (t/a Southern Erectors) and Pentland Investments Ltd v Aitken Turnbull Architects Ltd, which was concerned with related disputes under different contracts).

Enforcement

The key principles applying to enforcement were set out in Carillion Construction Ltd v Devonport Royal Dockyard, where Chadwick LJ in the Court of Appeal said:

“The objective which underlies the [Construction] Act and the statutory scheme requires the courts to respect and enforce the adjudicator’s decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should only be in rare circumstances that the courts will interfere with the decision of an adjudicator… In short, in the overwhelming majority of cases, the proper course for a party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the Adjudicator… To seek to challenge the adjudicator’s decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead to a substantial waste of time and expense.”

Errors of fact or law

To an extent, adjudicators can make these. If the correct question has been answered, the adjudicator’s decision is not reviewable on the grounds that the answer is incorrect, even if the error is obvious (Bouygues UK Ltd v Dahl-Jenson UK Ltd). Also, provided adjudicators answer the right question, even if they have answered the question in the wrong way, their decisions will still be enforceable (Nikko Hotels (UK) Ltd v MEPC plc).

Human Rights Act 1998

It took HHJ Bowsher QC to tell us that the Human Rights Act 1998 didn’t apply to adjudicators (see Austin Hall Building Ltd v Buckland Securities Ltd).

Impartial and unbiased

An adjudicator must be both of these and must not demonstrate apparent bias (see Amec Capital Projects Ltd v Whitefriars City Estates Ltd and Paice v Harding (t/a MJ Harding Contractors)).

Interest

There is no freestanding power to award interest under the Scheme for Construction Contracts 1998. There must be an entitlement and it must be claimed. Alternatively, the parties can confer jurisdiction on the adjudicator to determine the interest payable.

Interim binding

An adjudicator’s decision is interim binding until finally determined by legal proceedings or arbitration (or by agreement) and must be complied with.

Jurisdiction

Where do I start? We have seen so many jurisdictional challenges over the years, you might have thought that parties would have run out of ideas by now but not quite. Key cases include Amec Capital Projects Ltd v Whitefriars City Estates Ltd, Carillion Construction Ltd v Devonport Royal DockyardQuietfield Ltd v Vascroft Contractors Ltd and Cantillon Ltd v Urvasco Ltd.

A party must raise a jurisdictional challenge as soon as the circumstances giving rise to the challenge occur, otherwise the opportunity to challenge during enforcement proceedings is likely to be lost. This also applies to natural justice challenges.

LDEDC Act 2009

Major changes were afoot in the form of the LDEDC Act 2009, which brought about significant changes to the Act’s payment regime and some more minor changes to the adjudication provisions. Section 107 was also repealed.

The changes came into force in England and Wales in October 2011 (November 2011 in Scotland).

Limitation

Limitation under the Limitation Act 1980 may not appear to be an issue because of the principle of “at any time” (although it will be a defence) and Lord Mance in the Supreme Court told us about the limitation period for challenging an adjudicator’s decision (Aspect Contracts (Asbestos) Ltd v Higgins Construction plc).

Natural justice

An adjudicator’s decision will be enforced unless there is a serious breach of the rules of natural justice (Carillion Construction Ltd v Devonport Royal Dockyard).

A party must complain about a breach of natural justice as soon as the circumstances giving rise to the breach occur, otherwise the opportunity to challenge during enforcement proceedings is likely to be lost. This also applies to jurisdictional challenges.

Nomination

All I need to say about this is to refer to Eurocom Ltd v Siemens plc and Cofely Ltd v Bingham (which was a Commercial Court judgment, made in the context of an application to remove the arbitrator under section 24 of the Arbitration Act 1996).

Residential occupiers

These are excluded by section 106, unless they include an adjudication provision in their contract (which they often do).

Severability

Severability is much talked about but seldom happens in practice. A key turning point was Akenhead J’s judgment in Cantillon Ltd v Urvasco Ltd, where the court talked about severing the good parts of an adjudicator’s decision from the bad.

Smash and grab adjudication

I think we can credit James Bowling with coining the phrase in CG Group plc v Breyer Group plc, and Coulson J for trying to get rid of them in Grove Developments Ltd v S&T (UK) Ltd.

They gained in popularity following Edward-Stuart J’s judgments in ISG Construction Ltd v Seevic College and Galliford Try Building Ltd v Estura Ltd, but (on one view) they simply reflect the “pay now and argue later” ethos of cases such as Macob and Carillion Construction v Devonport.

I don’t think we’ve seen an end to them just yet.

Stay of execution

The principles to prevent the execution of a judgment to enforce an adjudicator’s decision were first set out by Coulson J in Wimbledon v Vago and they have stood the test of time, although we recently got a new limb (in Gosvenor London Ltd v Aygun Aluminium UK Ltd).

We all know that there can be challenges in succeeding with stay arguments, but manifest injustice is one angle that might allow them to do so, even if only in part (for example, see Galliford Try Building Ltd v Estura Ltd and Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd).

“To infinity and beyond”

This may be Buzz Lightyear’s classic line, but who knows what the future holds for adjudication. In the meantime, I’ll leave you with Stevie Wonder’s Happy Birthday.

MCMS Ltd Jonathan Cope

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