REUTERS | Neil Hall

To resign or not to resign: that is the question

The title may be adapted from Shakespeare’s Hamlet, but it is a question often posed in adjudication. Should the adjudicator resign when he is invited to do so?

Most practitioners are familiar with the responding party inviting the adjudicator to resign, often citing jurisdictional reasons for the invitation, but what happens if it is the referring party that invites the adjudicator to resign? Should the outcome be any different to an invitation from the responding party?

I recently came across a situation where the referring party wanted to withdraw from an adjudication after the responding party had served its response. (The response alleged that the referring party owed it money and requested a declaration to that effect.) The adjudicator was invited to resign. The responding party was against the adjudicator resigning, no doubt because it wanted its declaration that the referring party owed it money. The adjudicator wanted to continue, since he believed he had been given jurisdiction to decide the parties’ dispute, which included the issues raised by the responding party.

Can the referring party simply withdraw from the process?

Case law suggests that a referring party may chose to withdraw or discontinue with a referral to adjudication. In Midland Expressway, Jackson J said:

“In litigation, the right of a party to discontinue its claim or certain heads of claim is enshrined in and regulated by the Civil Procedure Rules. Adjudication, however, is a very different process from litigation. Every construction contract contains, either expressly or by statutory implication, a series of adjudication provisions which comply with the requirements of Part 2 of the [Construction Act 1996]. The 1996 Act says nothing about the entitlement of a party to withdraw or not to withdraw a claim which has been advanced in adjudication…

… I have come to the conclusion that it is impossible to read into either the 1996 Act or the [Scheme for Construction Contracts 1998] any restriction prohibiting a party from withdrawing a disputed claim which has been referred to adjudication.”

Jackson J went on to say that it would be contrary to the statutory purpose to prohibit a referring party from withdrawing from an adjudication that it did not want to pursue, with bizarre consequences (not to mention, a waste of time and money).

If the referring party withdraws, what then?

If the referring party may withdraw from the process at any time, where does that leave the adjudicator and the responding party?

On the one hand, it is arguable that the adjudicator should press-on, reaching a decision about the dispute (including the responding party’s declaration). After all, he has received the referral and the response and, at least under the Scheme, the referring party has no entitlement to serve a reply. If the adjudicator did continue, given that the referring party is hardly likely to comply with it, would that decision be enforceable?

On the other hand, the adjudicator should resign. (Under the Scheme he may resign at any time simply by giving the parties written notice (paragraph 9(1).) If he does resign, the referring party may be able to avoid any cost consequences (unlike in court litigation, where it would be penalised for discontinuing a claim).

But does the adjudicator have to do anything? Probably not. If the referring party has withdrawn from the process, surely that means the adjudication is at an end (this is what Midland Expressway tells us).

Who pays, if the referring party withdraws?

What happens to the costs of the discontinued adjudication will depend on the terms of the contract, the adjudicator’s appointment and whether the adjudicator has the power to award legal costs. The adjudicator may be able to rely on Linnett v Halliwells LLP, but the responding party may have to pay its costs and that’s it.

As ever with legal matters, there is no black and white, only various shades of grey, and the answer probably depends on the facts.

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