After the summer slowdown, the TCC is back in full swing and judgments are starting to appear on BAILII. Of last week’s new additions, the one that really caught my eye was KNN Colburn LLP v GD City Holdings Ltd, mainly because GD City contended that there were multiple reasons why the adjudicator’s decision shouldn’t be enforced.
KNN Colburn v GD City Holdings
The first area of challenge concerned everyone’s favourite topic, jurisdiction. GD City said that the decision had been issued late (we haven’t had one of those for a while) and that the adjudicator had decided the same dispute as a previous adjudicator. The second area concerned natural justice. GD City said that the adjudicator hadn’t considered a material line of defence.
All of GD City’s challenges failed and the adjudicator’s decision was enforced. I don’t want to dwell on the natural justice challenge or the same dispute contention. I think that the interesting part of the judgment for those of us involved at the sharp end of adjudication is the allegation that the decision was issued out of time.
Was the decision issued late?
KNN sent the referral to the adjudicator and GD City by email on 31 January 2013, but none of the supporting documents were attached. Rather, hard copies were delivered the following day. The adjudicator set the 28-day timetable on the basis that there had been service when he receive the complete referral (that is, the narrative and the supporting documents), on 1 February 2013.
While there were some early jurisdictional skirmishes, the parties proceeded in accordance with the adjudicator’s timetable. The adjudicator duly issued his decision on 1 March 2013.
At this point, GD City responded by saying that the 28-day timetable had started on 31 January 2013 when the adjudicator had been served with the referral. Therefore his decision should have been issued on 28 February 2013, not 1 March 2013. The Scheme for Construction Contracts 1998 applied to the adjudication and GD City argued that, under paragraph 19(1) the adjudicator was required to issue his decision within 28 days of receiving “…the referral notice mentioned in paragraph 7(1)…”. GD City said that paragraph 19(1) makes no mention of the supporting documents referred to in paragraph 7(2) of the Scheme.
KNN said that issuing the referral without the supporting documents was ineffective to start time running. In the alternative, KNN said that by consenting to the adjudicator’s timetable, it had in effect extended the time in which he had to reach his decision.
Stuart-Smith J considered PT Building Services v ROK Build where the contract had not been served with the referral. In that case, Ramsay J drew a distinction between the fundamental requirement of paragraph 7(1) and the associated procedural requirement of paragraph 7(2), and found that the adjudicator had jurisdiction despite the late service of the contract. Stuart-Smith J said that it was implicit in Ramsay J’s decision that service of the referral without the supporting documents not only vested the adjudicator with jurisdiction, but was also effective to start time running. He therefore concluded that the adjudication had started on 31 January 2013 and not 1 February 2013 as the adjudicator had concluded.
However, Stuart-Smith J accepted KNN’s alternative case that it had, in effect, extended the time in which the adjudicator had to reach his decision. Not only this, he also held that GD City had acquiesced to the decision being due on 1 March 2013 by fully participating in the adjudication.
Surprised at the outcome?
In their update, Practical Law expressed surprise that the adjudicator proceeded on the basis that he had not received the referral until the supporting documents had arrived. However, I’m not surprised. Indeed, I confess that I’ve done exactly the same thing as the adjudicator did in KNN Colburn v GD City Holdings.
I acknowledge that paragraph 19(1) makes express reference to paragraph 7(1) and makes no mention of paragraph 7(2). However, paragraph 7(2) makes it clear that the referral should be “accompanied by” copies of the supporting documents. Furthermore, Ramsay J made the point in PT Building Services v ROK Build that:
“There may, of course, be cases where documents included with the referral notice are so deficient that it effects that validity of the adjudication process…”
Surely the complete absence of the supporting documents is one of those cases?
Possible consequences of KNN Colburn v GD City Holdings
I also think that there could be some consequences arising from this judgment for those involved in adjudication, not all of which will be welcome.
The downside of KNN Colburn v GD City Holdings is that we may well now see referring parties regularly issuing supporting documents the day after service of the referral in order to try and gain a tactical advantage over responding parties. Any adjudicator worth their salt is likely to take this into account when setting the timetable, but that could reduce time for further submissions and the adjudicator’s time to reach his decision.
The upside (particularly for referring parties) is that responding parties have now lost a weapon from their jurisdictional challenge war chest. It is common for responding parties to allege that an adjudicator lacks jurisdiction because the referral is served seven days after service of the notice but none of the supporting documents are served until day eight. However, this challenge has now been lost, and they can no longer shout “out of time”. Ironically, I strongly suspect that if 1 February 2013 had been eight days after KNN had served its notice then GD City would have been jumping up and down shouting that the referral had been served late and that the adjudicator therefore did not have jurisdiction.
I will leave you with this question to ponder: how late do the supporting documents have to be in order to effect the validity of the adjudication process?