Do I have a dispute under my construction contract?
A dispute is the bedrock of adjudication. Without a dispute, a party has no right to start an adjudication. As section 108 of the Construction Act 1996 tells us:
“A party to a construction contract has the right to refer a dispute [or difference] arising under the contract for adjudication.”
Has my dispute crystallised?
If the parties have a “dispute”, and that dispute arises “under the contract“, there is one further hurdle for a party wishing to start an adjudication: whether the dispute has crystallised. In simple terms, this means a claim must have been made. However, it can mean much more than that. Section 108 does not refer to “crystallisation”, which is a test that has developed through the case law on adjudication. It is how we define what a dispute is and whether there is one between the parties.
Over the years, the courts have adopted different approaches to whether a dispute has crystallised. The leading authority is Jackson J’s judgment in AMEC Civil Engineering Ltd v Secretary of State for Transport (approved by the Court of Appeal), which established seven propositions to assist in determining whether a dispute had arisen. These include:
- The word “dispute” should be given its normal meaning.
- The mere fact that one party notifies another of a claim does not automatically and immediately give rise to a dispute.
- Silence may not necessarily mean there is a dispute, it depends on the length of the silence and whether the gist of the issues are familiar to the responding party.
- If the claim presented is so nebulous and ill-defined that the responding party cannot sensibly respond, neither silence nor an express non-admission is likely to give rise to a dispute.
Whether a dispute has crystallised remains a question of fact, looking at all the surrounding circumstances.
Does the adjudicator have jurisdiction?
Just because there is a dispute that has crystallised, it doesn’t mean that there can be a valid adjudication and an enforceable adjudicator’s decision. The adjudicator still needs jurisdiction to deal with the dispute. Typically, he will have that jurisdiction. However, there are many potential reasons why he may not. One reason is because the dispute has previously been referred to adjudication. This is another area where the legal principles have developed through case law.
Whether the dispute has been referred before will (as is so often the case) be a question of fact. It will require the parties (or a court) to consider the submissions and the adjudicator’s decision in the earlier adjudication.
It is well established that:
- The notice of intention to refer defines the scope of the adjudication and sets the parameters of the dispute. The referring party cannot seek to widen that scope by including, in its referral, something that ought to have been included in the notice.
- In its response, the responding party can raise any matters that it considers appropriate.
- An adjudicator is required to consider matters raised by the responding party in its defence of the claim.
The grey area comes when the parties or the courts need to establish exactly what the dispute was and what the adjudicator based his decision on. Is the adjudicator’s decision limited to the issues in the notice, or has it been widened by matters included by the responding party in its response (which the adjudicator must take account of). It is arguable that it doesn’t matter. If the adjudicator has made his decision, that decision will bind the parties and any subsequent adjudicator (insofar as the decision is temporarily binding).
But it isn’t always that straightforward
Whether a previous adjudicator’s decision now governs an issue between the parties may also depend on whether the scope of the dispute before the subsequent adjudicator has widened. For example, in Quietfield v Vascroft, in the first adjudication the contractor made a claim for an extension of time based on two letters. In the third adjudication, the contractor sought to rely on that material, along with significant other material (running to 400 pages), to defend the employer’s claim for liquidated damages. The adjudicator refused to accept the material but Jackson J in the TCC and the Court of Appeal both disagreed. Jackson J said that the subsequent material was a “far cry from the two application letters”. As such, the adjudicator was wrong to reject it.
Sometimes the court will go the other way, and find that the subsequent adjudicator was not asked to decide the same dispute as the contractor had previously referred to adjudication.
What lessons can we learn?
Key lessons include:
- Before starting an adjudication, consider whether the dispute is the same or substantially the same as one referred to adjudication previously. This involves looking at the underlying dispute, not the legal arguments or documents that surround it.
- Avoid serial adjudication. Put forward the best case at the outset, rather than raising one legal argument at a time. If the referring party could have raised its later arguments in an earlier adjudication, by not doing so, it may have failed to put its case properly and may not be allowed a second attempt.
- Consider the facts that will be relied on in an adjudication. A court will consider the dispute to be the same or substantially the same if there are no material differences in the facts, or the same documents will be relied on.
