I was the adjudicator at a mock adjudication hosted by Collyer Bristow recently. The dispute was between a contractor, Q (the referring party) and the employer, L (the responding party). Q claimed L owed it £400,000, which L denied. L argued:
- There was no contract “in writing“, so the dispute could not be referred to adjudication and the adjudicator did not have jurisdiction.
- There was a risk of bias because of an alleged relationship between the adjudicator and Mr Jones, an employee of the referring party.
Sound familiar? This post looks at the “no contract” point.
To refer a dispute to adjudication, you must be a party to a construction contract. It is not uncommon for one party to argue that all or part of the contract is not “in writing” to try and avoid liability. The courts have considered this on a number of occasions and consistently hold no contract exists where the agreement is too uncertain to amount to a contract.
The question “is there a contract in writing?” goes to the heart of the adjudication, but it is also a question that the adjudicator may not have power to decide. If there is no contract, the adjudicator does not have jurisdiction and, generally, adjudicators do not have the power to decide on their own jurisdiction. However, I often have to deal with this sort of challenge and make a decision: do I resign, or do I continue to act? My decision on this point is likely to be non-binding, as it is rare for the parties to agree to extend my powers to give me jurisdiction over my own jurisdiction. I make the decision on the evidence before me, on an objective basis, looking at factors such as price, contract start and finish dates and scope of works. If I conclude there isn’t a contract, I will resign.
In the mock adjudication I decided there was a contract in writing and that I had jurisdiction to continue with the adjudicator (if I hadn’t, that would have been the end of the session!). Often in real life, the decision is not so “black and white”.
One other factor that I will take into account is the timing of the challenge and the balance of convenience to the parties. Often, the responding party will raise this issue early, sometimes before it serves its response. In my view, the parties need clarity and it is better to resign at the outset, when the costs are limited, rather than pressing ahead with the adjudication and coming unstuck during enforcement proceedings, when the responding party brings the matter before the courts.
This point may fall away if the proposed amendments to the Construction Act 1996 make it on to the statute books, but until then (2011), adjudicators will be battling with this point and responding parties will continue to raise it to challenge enforcement of an adjudicator’s decision.