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Unseemly wrangles in the world of adjudication schemes

legal matters

The statutory adjudication scheme introduced by the Housing Grants, Construction and Regeneration Act l996 (HGCRA) was intended to provide parties to construction contracts with a rapid, binding but interim dispute resolution process. To the chagrin of its detractors, it has proved a great success. The main stumbling block to its smooth operation has proved to be the first step, the jurisdictional threshold, across which the enthusiastic referring party seeks to drag a usually reluctant respondent.

The most common ground for seeking to resist enforcement of an adjudicator's decision is that the adjudicator has no jurisdiction to decide the dispute in the first place. So, the reluctant respondent would argue, the adjudication scheme applies to most construction contracts - but not this one.

Given the runaway success of the process, enthusiastic referring parties might be forgiven for believing that the HGCRA was behind them all the way.

Surely Parliament would want to extend an open invitation to the industry to the adjudication jamboree.

Support for this approach came from the judge in RJT Consulting Engineers Ltd v DM Engineering (NI) Ltd (Judgment: 8.3.02). DM Engineering had engaged RJT as consulting engineer in connection with mechanical and electrical work to be carried out as part of the refurbishment of the Holiday Inn Hotel in Liverpool.

A dispute arose as to the services provided by RJT, which DM Engineering sought to refer to adjudication. RJT objected on the basis that its agreement did not fall within the scope of the HGCRA because it was agreed orally and was not a contract in writing as required by section 107.

RJT took the point to court and argued that the HGCRA should be construed as giving purpose to its provisions.

The judge was invited to look at all the written evidence and decide whether it was capable of supporting the existence of an agreement between them. It was pointed out that there was a good deal of written material, including fee notes and invoices, and more than enough to amount to written evidence of the contract. The judge agreed and was not prepared to deny the benefits of adjudication. Looking at the purpose of the HGCRA, he said, it was not necessary to see that all the terms of the agreement were set out in documentary form.

Interestingly, when this case went to the Court of Appeal, only the third adjudication case to do so, the appellate judges did not agree. They recognised that disputes as to the terms of oral contracts arise with surprising frequency in construction cases and are not readily capable of resolution by a prompt procedure such as adjudication. On one view, therefore, parliament may have intended that such disputes should be excluded from the process altogether.

Furthermore, the demanding timetable for adjudication was such that the adjudicator would need to start from a position of certainty.

The bare minimum an adjudicator should be sure of was the terms of the agreement from which the dispute had sprung.

In order to divine the purpose of the HGCRA, the court demonstrated the emphasis placed by the wording of section 107 on the need for a complete written record of the whole agreement relied upon.

Reaching the opposite conclusion, the appeal court concluded that it was not sufficient for a referring party to produce evidence in writing capable of supporting merely the existence of the agreement. Instead, they needed written evidence of all of its terms.

Lord Justice Auld did not go quite this far but found that written evidence, at least of the terms relied upon in the adjudication, was required. In any event, they all agreed that if evidence only of the agreement were all that was required, the documents relied upon by the referring party did not pass muster.

While expressing a passing regret that this may lead to unseemly wrangles at the doorstep of adjudication, they had no hesitation in finding that the fee notes and invoices relied upon by DM Engineering did not amount to an invitation to the adjudication party.

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