In the early ’80’s, Soft Cell sang Say hello, wave goodbye. It probably isn’t as well known as the dance floor-filler that is Tainted Love, but it is a song that came to mind when I read Akenhead J’s judgment in Brims Construction v A2M Development Ltd. If you are wondering why, it is because the court held that A2M had waived goodbye to any right to raise a jurisdictional challenge.
Brims Construction Ltd v A2M Development Ltd
I thought the waiver points were the most interesting part of this case (which we will come to in a minute), but first a few details:
- A2M employed Brims to build a care home in Newcastle-Upon-Tyne.
- The contract period was June 2012 to April 2013 (although practical completion was certified on 12 July 2013).
- The contract provided for monthly interim payments, starting one month from the date of possession (that is, from 25 June 2012).
- On 28 June 2013, Brims issued its application for payment for just under £400,000 (including VAT).
- On 15 July 2013, the architect issued an interim certificate for £120,000 odd (plus VAT).
- On 18 July 2013, a pay less notice was issued on behalf of A2M, which alleged defects and delay. A sum of £63,000 (plus VAT) was said to be due to Brims.
The “smash and grab” dispute
Brims referred the dispute over its June 2013 payment to adjudication, arguing that as there was no valid pay less notice, it was entitled to the full amount of its June application for payment (its default payment notice). In response, A2M argued that the interim certificate and pay less notice were both properly issued. Importantly, A2M did not raise a jurisdictional challenges at this stage, this only came later, after the adjudicator had sought clarification from the parties on a point.
Unsurprisingly, the adjudicator found in Brims favour and, even more unsurprisingly, A2M refused to pay up. In the inevitable enforcement proceedings that followed, A2M raised a number of jurisdictional and natural justice challenges.
Let’s deal with natural justice first
A2M argued there was a breach of the rules of natural justice because the parties were not given an opportunity to submit further evidence regarding the work done by Brims to the end of June 2013. This arose when the adjudicator asked for submissions on clause 4.11 of the contract (which dealt with payment notices).
Unlike some of the other cases I have blogged about this year where the adjudicator allegedly breached the rules of natural justice (ABB v BAM, CG Group v Breyer), here the adjudicator wasn’t accused of going off on a frolic of his own by deciding the case on a point he had not put to the parties. Rather, the adjudicator acted very sensibly by asking the parties for further submissions before making his decision.
As Akenhead J put it in ABB v BAM:
“It is perfectly legitimate for the tribunal to raise this with the parties and invite comment, argument or even evidence; having done that, it will generally be perfectly fair and proper for the tribunal to rely upon that point, fact or argument in reaching the requisite judgment, award or decision.”
So what, I hear you ask, were the grounds of challenge?
To put it kindly, they were somewhat weak. A2M argued that the adjudicator had only asked for submissions on clause 4.11, “…and by necessary implication he did not ask for evidence”. A2M said that, given the opportunity, it would have put in evidence that would have fully undermined Brims’ argument.
Akenhead J said that the challenge was argued “without much justifiable conviction”, and gave it short shrift.
Jurisdiction and waiver
As I said at the outset, the really interesting part of this case concerns jurisdiction and waiver. On this issue:
- A2M argued that the adjudicator’s decision exceeded the scope of the notice of adjudication, which made no reference to the clause 4.11 point.
- Brims argued that, even if some of the argument relied on by the adjudicator was not part of the dispute referred, A2M had waived any right to raise a jurisdictional challenge in relation to the adjudicator dealing with the clause 4.11 point.
Firstly, Akenhead J considered the law concerning the ambit of a dispute, most of which stresses that common sense needs to be applied when determining the dispute referred:
“Esoteric arguments on jurisdictional grounds should be discouraged. In determining what is being referred to adjudication, one should not have to engage in contorted mental gymnastics.”
Again unsurprisingly, Akenhead J found that the adjudicator’s decision was within the scope of the dispute referred.
He then turned his attention to the law on waiver of a party’s right to challenge an adjudicator’s jurisdiction. I would urge anyone who is unsure of this area to read the judgment, I certainly found it useful. What happened was summarised as follows:
- A2M had the opportunity to raise a jurisdictional objection in its response, but it made no effort to do so. Instead, it described the point as “wholly unmeritorious”.
- Relying on A2M’s unqualified participation in the adjudication, Brims had gone on to produce its “not insubstantial” reply.
- A2M did not raise its jurisdictional objection until a further week had passed.
Applying the ordinary principles of waiver, Akenhead J said that the key elements of waiver existed:
“…words or conduct by the waiving party which are intended to be relied upon and are actually relied upon by the other party (with time, money and resource expended by it).”
So the moral of this particular story is simple: make certain that you make your jurisdictional challenge at the earliest opportunity because your failure to do so could be costly. You will most certainly be found to have waived it goodbye.