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Arbitration picnic doesn't mean litigation cake is off the menu

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The Housing Grants Act says that a party to a construction contract has the right to refer a dispute to adjudication 'at any time'.What does this mean? The new statutory concoction of adjudication was, of course, first cooked up by Sir Michael Latham in his report into trouble-free construction procurement.

One of his ideas was to have swift resolution of those kinds of disputes that arise in the course of a building contract. He proposed adjudication to give disputing parties an immediate taste of what was to come and to enable them to assess whether they had the stomach for a full-blown litigation or arbitration banquet.

Had he been asked for how long a claimant was to hold an invitation to the adjudication picnic, I suggest he would have said that he wanted claimants to be able to begin an adjudication 'at any time' during the project, or 'at any time' up to the final certificate or even 'at any time' up to the issue of court or arbitration proceedings. It seems unlikely that he would have said: 'Oh, for all time, of course.'

Sir Michael's original recipe has since been rehashed by a parliamentary draughtsman, chewed over by Parliament, considered, if not digested, by the House of Lords, and finally, after a period of pre-digestive anticipation, presented for the delectation of the industry.When the Act was finally passed it simply gave a claimant a right to adjudication at any time. This wording of the Act was recently considered by Mr Justice Dyson in the case of Herschel Engineering v Breen Property. He was asked to decide whether claimants lose their right to adjudication once they have started court proceedings - does a party to a construction contract have to give up its adjudication picnic voucher once it sits down to the main litigation bean feast?

In this case, the electrical subcontract provided for adjudication, but when the main contractors refused to pay them, the electricians nevertheless started court proceedings. The proceedings followed a fairly familiar route for claims on invoices, and a judgment was entered in default of a defence from the main contractors. The latter then woke up to the fact that they might be required to pay some money so applied, successfully, to set the judgment aside. The electricians then appealed against that decision and the hearing of the appeal was pending. (Incidentally, if ever you need to demonstrate the advantages of adjudication to those with debt claims, you need only compare this rather convoluted machinery of the courts with the 28-day adjudication process. ) At some stage someone reminded the parties of their adjudication option and an adjudicator was subsequently appointed. The adjudicator decided that the contractors should pay the electricians their £l7,000.

The contractors still refused and, when the electricians went to court to enforce the adjudicator's decision, the contractors said that, in fact, the electricians had lost their right to go to adjudication because they had already started court proceedings.

The judge accepted that a claimant should not be allowed to pursue proceedings for the same claim before two different tribunals.The reasons are obvious - it is not fair on the defendant to have to run hither and thither defending the same claim on two fronts, and there is also the risk that no two tribunals will come to the same conclusion on the same facts. As a result, if you start an arbitration procedure you should not be allowed to litigate on the same claim.

But, the judge said, arbitration and adjudication are not the same thing. The decision of an adjudicator is only temporary and subject to review by a court or an arbitrator. Parliament obviously had litigation and arbitration proceedings in mind when drafting the Act, and yet said nothing to prevent a party from starting an adjudication once litigation had been commenced.And anyway, it is inherent in the process that the defendant may have to face two tribunals, first the adjudicator and then the arbitrator or judge.

So, the judge said, a claimant can opt for the adjudication picnic 'at any time', even when their feet are well and truly under the litigation table.

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