In adjudication, it comes down to asking the right questions
I have been waiting for an adjudication decision such as C & B Scene Concept Design Ltd v Isobars Ltd (21.6.01) for some time.
Lawyers have been surprised that the courts have supported the adjudication process with such enthusiasm. Early decisions such as Macob v Morrison (AJ 8.4.99), were explained away on the basis that the defendant had only limited grounds on which to challenge the adjudicator's decision. But then the Technology and Construction Court (TCC) churned out case after case dismissing challenges to adjudicators'decisions.
Cries of 'it's not fair'were met with the judicial retort: 'No one said it would be, but it's quick and, if you have a real grievance, you can raise it later in arbitration or litigation.'Those who tried to trump an adjudicator's valuation of work carried out with a counterclaim for defects were told that unless they had served a notice of intention to withhold payment, they had missed the boat.
Allegations that the contract was not a 'construction contract' nor 'a contract in writing' as defined by the Housing Grants Act, met with more success as, without these requirements, the adjudicator had no jurisdiction to give a decision. But if the dispute fell within the Act, it seemed that adjudicators could decide what they liked, even if their answer was a lemon.
Then in Bouygues UK Ltd v Dahl Jensen UK Ltd (AJ 26.10.00), the claimant argued that the adjudicator had got it wrong. By mistakenly calculating that the contract retention was payable to the wrong party, the winning party lost out and, instead of recovering money, had to pay money to a company in liquidation.
TCC Judge Dyson decided it did not matter what answers the adjudicators came up with, provided they asked the right questions. We all held our breath when the case went to the Court of Appeal but the appellate court endorsed Judge Dyson's findings, adding that only the financial instability of the receiving party justified a stay of execution from the adjudicator's decision. Provided the contract was covered by the Act, and the adjudicator asked the right questions, the court would uphold the decision.
But the lawyers still wondered what would happen if the adjudicator made an obvious error and found that the JCT standard form was not incorporated into a construction contract, but went on to award extensions of time, loss or expense. Would the courts still back the adjudicator? Was an error in law simply a mistake like any other?
In the C&B Scene case, the judge grappled with the notion that an adjudicator's error in law was an error in the adjudicator's jurisdiction. The adjudicator found that payment provisions of the JCT standard form entitled the claimant to payment of three disputed interim applications. The defendant argued that the contractual payment provisions were unworkable and that the adjudicator's decision was legally incorrect.
The contract appendix, which required the parties to opt for one of two different payment regimes, had not been completed. Instead, it argued that the interim payment machinery under the Scheme for Construction Contracts applied and the claimant was only entitled to sums due for work properly done. The judge held that the adjudicator had failed to appreciate that the payment provisions of the JCT conditions had been replaced by those of the scheme. This mistake was fundamental to the adjudicator's decision that the interim applications should be paid. The judge concluded that an adjudicator's decision should not be upheld where it was based on contractual provisions that did not form part of the agreement between the parties. How was the judge able to go against the trend of cases supporting adjudicators' decisions? Because, by applying the wrong provisions of the contract, the adjudicator had asked the wrong question.
One was an error of law, the other an error in jurisdiction. Now, if an adjudicator makes an error in law it may also amount to an error in jurisdiction. If the adjudicator's answer is 'a lemon' the dissatisfied party may not be stuck with it.