REUTERS | Ognen Teofilovski

No contract “in writing”? That’s OK says the adjudicator, I’ll carry on

The keenness of responding parties (and sometimes referring parties) to raise jurisdictional challenges about every little (and big) thing is, perhaps, an understandable part of adjudication. It often seems as though parties raise these challenges regardless of whether they believe the challenge has any merit, and irrespective of the stage that the adjudication has reached. Some challenges are simply wide ranging general reservations, others are concerned with more specific grounds.

This need to repeatedly challenge jurisdiction may be fed by a party not wanting to lose its chance to challenge the adjudicator’s decision at the enforcement stage. After all, we have seen a number of cases where, because a party did not raise a challenge at the time, it has been unable to do so later.

Therefore, it came as a bit of a surprise to read the judgment in SG South v Swan Yard. Not only had the adjudicator reached what Coulson J described as an “erroneous” conclusion (he decided that despite the parties not having a written contract, he still had the necessary jurisdiction to act as the adjudicator), but the parties did not challenge this. Unusually, the responding party was happy for the adjudicator to continue and made no challenge during the adjudication or at the enforcement hearing. In fact, had the court not looked at this point, it is arguable that the point would not have arisen at all.

Everyone knows that a construction contract has to be “in writing” (section 107(2), Construction Act 1996) but how often do parties look to section 107(5) (which provides that an agreement will be “in writing” if, during the course of adjudication, arbitral or legal proceedings, one party alleges the existence of an oral agreement and the other party does not deny it)?

In my view, because of the proliferation of jurisdictional challenges, nowadays it is rare for a situation like this to arise. Usually the adjudicator would just resign. The case certainly wouldn’t reach the courts.

However, one could argue that the parties in SG South adopted a pragmatic approach to a situation that suited them. Much cheaper and quicker to deal with a dispute valued at £100,000 through adjudication than through the courts or in arbitration. After all, had they executed the JCT management contract, adjudication is where the dispute ought to have been dealt with in the first place. Arguably, even if the adjudicator hadn’t made a mistake and had resigned, they could still have given him jurisdiction, and called it an “ad hoc” adjudication.

The “in writing” requirements of the Construction Act 1996 have been heavily criticised, especially in circumstances such as this one. If the amendments ever come into force, this type of case will become a thing of the past, not just the rarity it is today.

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