REUTERS | Lisi Niesner

Party to construction contract can’t be adjudicator nominating body too!

There are 32 London boroughs (plus the City of London), but a quick review of the reported cases over the last five years shows that only one has ended up in the TCC trying to resist the enforcement of an adjudicator’s decision: Camden, and not just once.

Camden’s previous trips to the TCC have not ended happily for it. William Verry Ltd (RIP) successfully enforced an adjudicator’s decision against Camden in 2006 and Makers (UK) Ltd successfully enforced adjudicators’ decisions against it in 2008 and 2009.

No doubt Camden thought that it would fare better in its most recent visit with Sprunt Ltd. Alas, it was not to be. Once again it was ordered to pay the sum awarded by the adjudicator. Let me explain why.

Sprunt Ltd v London Borough of Camden

Sprunt had entered into a framework agreement with Camden to provide professional services. A dispute arose and, in July 2011, Sprunt started an adjudication. The adjudicator ordered Camden to pay Sprunt around £151,000 plus interest. Camden refused to pay on the grounds that the adjudicator lacked jurisdiction. In particular, Camden argued that the contract was partly written and partly oral and therefore offended section 107 of the Construction Act 1996. Camden also argued that the adjudicator had been appointed by the wrong nominating body.

I don’t want to dwell on the contract in writing point, other than to say that Akenhead J found that Camden had accepted Sprunt’s written offer by conduct. The interesting part of this case concerns the nomination of the adjudicator.

Contract’s adjudicator nominating clause

The contract contained the following clause concerned with the nomination of an adjudicator:

“25.4 The Council shall be the specified nominating body for the purposes of paragraphs 2(1)(b) and 6(1)(b) of Part 1 [of the Scheme for Construction Contracts 1998]”.

For those of you who have just re-read that clause, your eyes do not deceive you. Camden really did state that it was to be the nominating body in the event of a dispute. And you thought a “Tolent clause” was creative drafting!

Sprunt argued the Scheme applied

When it started its adjudication, Sprunt ignored clause 25.4 and asked the RICS to nominate an adjudicator. The RICS duly obliged. Sprunt argued that it was entitled to ignore this clause because other parts of the contractual adjudication provisions offended section 108 (for example, clause 25.11 referred to the adjudicator’s decision being suspended in certain circumstances). Therefore, Sprunt argued that the adjudication provisions of the Scheme were implied in accordance with section 108(5):

“If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply.”

Camden acknowledged that the Scheme was implied as a result of the offending provisions, but contended that it should still be allowed to nominate and that there was nothing offensive to the Construction Act 1996 in one party nominating an adjudicator.

Party as adjudicator nominating body

Akenhead J stated that the references in paragraph 2 of Part 1 of the Scheme to a “specified nominating body” allowed the parties to name the nominating body in their contract. He questioned whether this reference back to the contract was “trumped” by section 108(5), and found that it was because:

“…that is consistent with the overall statutory purpose of incorporating the Scheme as a whole when there are key non-compliances with Section 108.”

Akenhead J then stated that, even if clause 25.4 was not trumped by section 108(5), it was nevertheless:

“…inherently unsound and contrary to the policy of the HGCRA for the contract to specify that one side should nominate the adjudicator.”

He made the point that, while it would be perfectly possible for Camden to nominate an impartial adjudicator, there was no good reason why Camden retained the right to nominate adjudicators other than to nominate someone who might be sympathetic, or not unsympathetic, to its position.

Akenhead J summed-up in paragraph 50 by saying:

“Essentially, what Camden would have is not a judge in its own cause but the right to nominate a judge in its own cause and that strikes against the policy of the Act of having actually and ostensibly impartial adjudicators.”

As there was therefore no lawful “specified nominating body” in the contract, Akenhead J found that the RICS was a valid adjudicator nominating body (ANB) and the adjudicator was validly appointed.

Clause inconsistent with Construction Act 1996

In my view, Akenhead J’s decision was clearly the correct one and I personally would have been surprised if he’d decided that Camden retained the right to nominate. The TCC has previously made it clear that it will consider the purpose of the Construction Act 1996 when construing it (for example, see Yuanda v WW Gear). Surely Camden didn’t think that clause 25.4 would be found to be consistent with the purpose of the Act?

While this matter has now been settled by the TCC, in hindsight (what a wonderful thing that is!), it’s a shame the drafters of the Scheme didn’t state that a “specified nominating body” could not be a party to the dispute.

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