REUTERS | John Kolesidis

Adjudication or arbitration as viable alternatives to court

I tend to keep quite a close eye on BAILII to see what’s coming out of the TCC (sad, I know). Up to last week, February had been somewhat quiet, a drought in fact. However, as the month draws to a close a couple of cases have appeared (but not the rain!).

One of the cases that I’m talking about is West Country Renovations v Mr and Mrs McDowell, which concerned the transfer of a case from the TCC in the High Court in London to the TCC in the Central London County Court. On the face of it this may not appear to be terribly exciting, but it is a significant decision.

West Country Renovations v McDowell

Briefly, West Country Renovations (WCR) undertook works to the McDowells’ flat in SW3. The parties fell out, with WCR claiming a further £100,000 and the McDowells raising a counterclaim for the cost of rectifying defective work.

WCR started its claim in the TCC in the High Court in London and, in February 2012, the parties turned up at the first CMC having agreed a timetable (including a trial date in December 2012). However, at the CMC, despite opposition from the parties, Akenhead J transferred the case to the TCC in the Central London County Court, confirming his view that the timetable should not be affected. In doing so, he used the judgment to set out the cases that the TCC in the High Court in London will now deal with.

TCC guidance on claims

Akenhead J said that (subject to a fairly long list of exceptions) claims for less than £250,000 should be commenced in county courts or other High Court centres outside London that have designated TCC judges. I don’t want to talk about these exceptions or the alternatives available in other courts – for that see Michael Mendelblat’s excellent piece – I want to talk about the alternatives available to the parties that are outside the court system.

Parties can adjudicate

Parties to a construction contract can adjudicate “at any time”. However, we don’t know the full facts of this case or why WCR chose not to adjudicate. It may well be that adjudication was not available, for example because the McDowells are residential occupiers or there is no construction contract evidenced in writing. However, the right to adjudicate might exist under the contract and, even if it doesn’t, there’s nothing to stop the parties entering into an agreement to adjudicate.

There are advantages to adjudication. For example, WCR could have the benefit of an adjudicator with a construction and/or legal background deciding the case and producing a detailed and reasoned decision a lot sooner than December 2012. I appreciate that an adjudicator’s decision would only be temporarily binding (unless the parties agreed it would be binding), but as with ninety-odd percent of other adjudications, it would be unlikely to go on to trial. I also appreciate that the parties would be unable recover their costs (again, unless they agreed otherwise), but the costs of an adjudication might still be less than the unrecoverable costs for the successful party in a county court trial. So, I think that adjudication could be a suitable means of resolving the dispute.

Does size of claim matter in adjudication?

Digressing for a moment, would adjudication still be suitable if WCR was claiming £10,000 rather than £100,000? I ask this because, during a panel debate at a recent Adjudication Society meeting, one of the panellists made the point that adjudication has morphed into a different dispute resolution process to that envisaged in 1996. He suggested that it had become over-complicated, involves too many lawyers and experts, and that before long we will need another dispute resolution process to deal with the lower value disputes.

While I agree that adjudication has morphed into a different dispute resolution process to that envisaged in 1996, I don’t necessarily consider this a bad thing. As another panellist pointed out, this is what customers want. Lawyers and their clients like the fact that they can obtain a swift decision on detailed matters, while not being exposed to the other side’s costs. However, that’s not to say that adjudication isn’t suitable for £10,000 disputes. It’s a question of selecting the right adjudicator and adapting the process to suit the dispute referred.

What about arbitration?

If finality of the decision and recoverability of costs is a real issue for the parties then they could always agree to arbitrate. In my opinion, this has two main advantages over a trial in the county court:

  • Speed. If the parties adopt an appropriate procedure (such as the CIMAR rules) and allow the arbitrator to effectively manage the process, I have no doubt that the parties could obtain an award before December 2012. Gone are the days when the arbitrator produced an award when it suited him and the parties could wait months, even on a relatively low-value dispute. Adjudication has taught dispute resolvers a better appreciation of time management and the importance of producing arbitration awards immediately once the parties have made their final submissions. The parties could even go one step further, and adopt the SCA’s 100 day arbitration procedure. They’d be certain of an award before December then.
  • Flexibility. Arbitration is likely to be able to offer greater flexibility than the county court. For example, during an arbitration last year the parties’ solicitors asked me to conduct the hearing like an adjudication meeting, that is with me asking the factual and expert witnesses questions, rather than the normal hearing procedures we’re used to. The county court system is unable to adapt to the parties’ needs in the same manner.

Other alternatives?

There are other alternatives, such as expert determination and mediation, but space doesn’t allow me to expand on them here.

What should you take away from this?

While I have no doubt that WCR and the Dowells will have their case effectively dealt with by the TCC judges at the Central London County Court, I would urge parties to consider other means of resolving their disputes outside of the court system. If nothing else, that way their dispute is likely to be resolved before the Christmas decorations go up outside the Central London County Court at the top of Regent Street.

2 thoughts on “Adjudication or arbitration as viable alternatives to court

  1. Dear Sir

    A very interesting article. May I ask if you could please answer the following for me:

    I entered into an agreement with a Property Project Manager – and yes I did read it and I did sign it. I was (and still am) suffering anxiety and depression as a builder I had contracted with was supposed to have completed works in January this year but failed to do so. I had to refinance via abridging lender as it was still a building site. Consequently I hired the Project Manager from the 5th of February 2016 to ensure that the works work completed properly, on time and on budget. By the 24th of February the project manager had upset the builder that he stopped turning up on site. The project manager terminated the builder’s contract. The builder sued me for illegal termination of contract citing that the contract was between me and him, and that the project manager had no right to terminate. The adjudicator sided with the builder and awarded him a further £50,000.

    Whilst I had paid, in advance, all of the project manager’s invoices, he then created a fictitious invoice for a further £1,500 which I refused to pay.

    The Project Manager used a RICS Short Form of Consultant’s Appointment, which had the following:

    17 Disputes
    17.1 Notwithstanding any other provision of this Appointment, either party may at any time refer any dispute under it to ADJUDICATION under the Scheme for Construction Contracts (England and Wales) Regulations 1998, Part 1 (as amended) 20 Governing Law and Jurisdiction. This Appointment is governed by and construed in accordance with English law and the parties submit to the exclusive jurisdiction of the Courts of England and Wales.

    Also in the RICS form was:

    Limitation of Liability:
    The maximum aggregate liability of the Consultant Is Ten Thousand pounds (£10,000).

    Professional Indemnity Insurance:
    The Consultant maintains professional indemnity insurance in the sum of Five hundred thousand pounds (£500,000) for each claim or series of claims arising out of any circumstance/in the aggregate.

    Instead of going via the adjudication/arbitration route stipulated in the RICS, he filed a county court claim, which I put in a defence and counterclaim to. There is a hearing on the 25th of November for 10 minutes in the county court to determine whether they will allow the small claims to become a multi-track hearing claim as I am counterclaiming for £100,000.

    What I want to know is, does the Limitation of liability figure of £10,000 still stand given he breached the contract by filing a county court claim instead of arbitration/adjudication as the contract stipulated?

    Respectfully

    AKA

  2. We cannot answer questions posted on this blog but I would make one observation.

    As Jonathan discusses above, parties are free to adjudicate “at any time” if the Construction Act 1996 applies to their contract. If one party is a residential occupier (as you appear to be), then the statutory provisions of the Act do not apply and there is no statutory right to adjudicate. In those circumstances, parties can include express provision in their contract (which is what clause 17 in your contract is). However, that clause is not expressed to be a requirement, it simply says the parties may refer a dispute to adjudication. That means the option of court proceedings is open to either party at any time. In essence, the facts appear similar to the case Jonathan is discussing. Thus, it appears unlikely that clause 17 has been breached.

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