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Construction adjudication update: discretion of an adjudicator

View profile for Richard Bailey
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Goodman Derrick’s construction group has successfully acted for a party in an enforcement action in the Technology and Construction Court. This was the first time the Court has had to grapple with the jurisdiction of an adjudicator to decide upon another adjudicator’s jurisdiction, as set out in the Notice of Adjudication.

Penten Group Ltd v Spartafield Ltd involved the application, very unusually, of a Responding Party in an adjudication seeking to confirm that an adjudicator’s decision was enforceable, as the Referring Party was trying to cherry pick the elements of an adjudicator’s decision it accepted and not comply with those that it did not.  In particular, in this case Spartafield did not like the adjudicator’s decision on the terms of the contract and therefore sought a declaration from another adjudicator, that the first adjudicator did not have jurisdiction to make the decision he did.  By the time of the hearing Spartafield, despite having issued three Notices of Adjudication all seeking the same redress, had stopped trying to proceed with the adjudication.

Before the Court therefore was a request from Penten for a declaration that the contract was the contract determined by the adjudicator and that the parties were bound by that decision.

The relevant wording of the original redress sought in the first adjudication, which was the subject matter of the proceedings, (itself having taken four Notices of Adjudication from Spartafield’s claims consultant to start) was “That a valid Construction Contract exists between the parties, and the terms of that Contract include the provisions of ICD2011”.  The Adjudicator, Mr Gupta, in his decision declared that “I decide that a valid construction contract does exist between the parties but that the terms of that contract were not the JCT Contract but the Letter of Intent.

Spartafield argued that the final element of the adjudicator’s declaration was unenforceable as the question was in two parts, whether there was a valid construction contract (which Spartafield accepted was correct as it was the declaration they were seeking) and if so, that the contract included the provisions of the ICD (a point the adjudicator did not accept, which is why Spartafield was not content with the decision). Spartafield also argued that the use of the word “include” precluded a wider answer to the issue, and finally that it was unfair for the adjudicator to make such a determination as the letter of intent was never fully addressed in the first adjudication. The Judge rejected these arguments.

The Judge decided that the adjudicator’s decision on the form of contract was enforceable.  Before doing so the Judge reminded the Court of Judge Wilcox’s judgment in Absolute Rentals Ltd v Glencor Enterprises Ltd in which Judge Wilcox, referring to the adjudication process, described it as “a robust and summary procedure” and that “there may be casualties” along the way.  The Judge went on to make clear his sympathies for adjudicators who are now required not just to determine disputes in 28 days, but also to determine the terms of the contract which govern the relationship between the parties in 28 days as well, making the adjudicator’s job all the tougher.

The Judge decided that it is impossible for an adjudicator to determine whether there is a valid construction contract without determining the terms of the contract between the parties.  The Judge also determined that while the Notice of Adjudication is the document that gives the adjudicator jurisdiction, it is not open to a referring party to artificially restrict the responding party’s defence by saying that, as the referring party made no reference to a particular point in the notice, it cannot arise in the decision; see also Pilon Ltd v Breyer Group PLC.  The reliance on the word “include” to exclude such a conclusion was an overly restrictive view.

The Judge therefore continued the line of cases upholding adjudicators’ decisions, and for the first time since the revisions to the Construction Act, grappled with the issue of contractual interpretation in adjudication.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.  If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.