BLP and Crown Office Chambers recently hosted a workshop on behalf of the Adjudication Society. The informal and interactive format proved to be a hit with the Society and its members.
The event was attended by the full range of professionals from the construction industry, giving rise to some lively and topical discussions on the issues experienced at the coal face of adjudication practice. Two of the topics that sparked most interest and which I wanted to share were:
- The role of adjudicator nominating bodies (ANBs).
- Limitation periods for payment challenges.
Most readers will spot some old favourites that are still causing a few headaches, and also some newer issues that have been building to a crescendo more recently.
Adjudicator nominating bodies – should they do more?
After a case study focusing on jurisdiction and the decision in Twintec v Volkerfitzpatrick Ltd, we considered whether nominating bodies should do more to ensure that an adjudicator is properly appointed in accordance with the parties’ contract.
For those unfamiliar with Twintec, this was a TCC decision from January of this year. Twintec successfully obtained an injunction to restrain the adjudication proceedings because the adjudicator had been “appointed” under a clause the court decided did not form part of the contract. The contract consisted of a letter of intent, to which the DOM/2 standard terms were appended. Questions of contractual interpretation and construction had to be answered to establish if the relevant adjudicator appointment provisions within the DOM/2 form were included within the contract, or not.
Should adjudicator nominating bodies police the appointment?
This raised the question, could the costly and disruptive proceedings to restrain the adjudication have been avoided if the adjudicator nominating body had policed the basis of the appointment more closely at the outset? The adjudicators in the room certainly thought that the nominating bodies should take some care in fulfilling this role, for which a more than nominal fee is required in most instances.
It is difficult to argue against nominating bodies taking more care in reviewing the contractual validity of an adjudicator’s appointment. Doing so could reduce jurisdictional challenges and applications to restrain adjudication proceedings, which often fetter resolution of the substantive issues in dispute.
However, questions of law, such as the correct interpretation of the contract, often underlie challenges to the validity of adjudicator’s appointment. Is it realistic or indeed appropriate, particularly given the tight adjudication timetable, for the nominating body to undertake the necessary level of judicial inquiry and due diligence? In my view this is more appropriately dealt with by the adjudicator in the first instance and, ultimately, the courts.
Should adjudicator nominating bodies audit the decision?
Nominating bodies were in for further scrutiny when discussions moved on to whether they should audit the quality of adjudicators’ decisions.
This is an interesting prospect. The vast majority of adjudicators’ decisions are not subjected to the scrutiny of challenge in the courts or by an arbitral tribunal. Parties live with the result. However, those that do make it to the court often throw up some questionable decisions. Review or audit of decisions would, one would hope, go some way to deter rogue decisions and also identify areas where further training might be needed, not just for individual adjudicators, but across the industry generally. Nominating bodies already recognise that this is the case. For example, TeCSA, introduced its adjudicator assessment procedure in 2011. However such “quality control” is an onerous task and under the current TeCSA scheme generally all adjudicators on the adjudicator list will only be assessed once every five years by rotation. It also begs the question of who will pay for the associated costs of assessment and maybe we should not be tempted to stray too far from the original “quick and dirty” nature of adjudication as a temporary fix.
Limitation periods – brace for impact
Limitation periods and how they relate to adjudication decisions was also a talking point. The basis for discussions was the apparent conflict between two Court of Appeal decisions:
The scenario which faced the courts in both cases was as follows:
- The unsuccessful party to an adjudication makes payment in accordance with the adjudicator’s decision.
- The unsuccessful party then seeks to challenge the validity of the payment made in the courts.
- In such circumstances, when does the limitation clock start ticking on the unsuccessful party’s right to challenge the (allegedly unnecessary) payment?
In Aspect, the Court of Appeal (consisting of Lord Justices Longmore, Rimer, and Tomlinson) decided that the paying party accrues a new cause of action at the date of payment. This overturned Akenhead J’s first instance decision, which preferred that the cause of action accrued “whenever it otherwise did before the decision was issued”. The result being that under the Court of Appeal’s view, the paying party has a far longer limitation period to challenge the payment.
The Court of Appeal arrived at this conclusion on the basis that adjudication is only intended to be binding until final determination of the matter, with Longmore LJ stating:
“If the final determination decides that a particular party has paid too much, repayment must be made.”
The decision in Aspect can be contrasted with that of Walker.
In Walker, the Court of Appeal (consisting of Lord Justices Laws, McFarlane and Gloster) preferred Akenhead J’s first instance reasoning in Aspect. Gloster LJ gave the leading judgment. The Court of Appeal therefore reverted (although arguably in obiter only) to the position that the cause of action arises from:
“the underlying construction contract itself and was thus subject to the six year limitation period applicable to that contract.”
Given the polarity between these two decisions, coupled with their close proximity in terms of timing (the hearing for Walker was held on 28 October 2013, judgment in Aspect was handed down on 29 November 2013), it is perhaps possible that the Court of Appeal’s decision in Aspect did not come to the attention of the differently constituted members in Walker. Nevertheless, considerable uncertainty surrounds the issue, and our workshop attendees recognised the possibility that particularly savvy parties may issue placeholder proceedings to protect their limitation periods, until the issue is finally determined.
The good news is, Aspect is due before the Supreme Court in April 2015 so the conflict should be resolved very soon, although it is impossible to predict which approach the court will prefer. In the meantime, the construction industry will have to sit tight and brace for impact.