Adjudication: Muddling through

Dear me, said the responding party (main contractor) to the adjudicator, none of this will do - the referring party has gone wrong in describing what the contract is. The subcontractor is attempting to argue the rights and wrongs under the wrong contract. And since you, Mr Adjudicator, are to decide the dispute under the contract, it is all a waste of time if you proceed under the wrong contract. This is more or less what happened in a very recent case called RMP Construction Services Ltd vs Chalcroft Ltd. The adjudicator said “tish-tosh”, I am pressing on. He eventually awarded £259,000 to the ground worker subby (RMP). Chalcroft said “tish-tosh” to RMP, and said they could whistle for the cash. They did whistle, and came to the High Court to enforce the adjudicator’s order to pay up.

As for forming the subcontract there was, as so frequently happens, oodles of toing and froing during the courting stage. It was a mix of letters of intent (sort of), a JCT perhaps, this or that for whatever amount of work. That’s the ordinary way of things. These folk are constructors, not lawyers. Given all that, it’s ever so attractive for a lawyer in a later adjudication to try to persuade an adjudicator with the idea that it’s impossible to fathom what the contract is, so clear off. He said no.

Regardless of what makes up the particular contract, the fact is that these groundworks, of somewhere between half and one million pounds, are, come what may, a “construction contract”. And there’s no denying these two parties had a humdinger of a dispute. So, there you now have the key ingredients needed to call for an adjudicator. Moreover, the adjudicator has a complete right to get on with the dispute - nearly always; I will come back to that “nearly” point shortly.

You can easily see that the adjudicator will be faced with an opening round of arguments. RMP will say this, or that. Chalcroft will say, dear me, no; the deal is full of ifs and ands and pots and pans. It may even be that the adjudicator chips in; he might say, dear me no, to both parties’ ideas. And lo and behold, he then decides the dispute. In this case the result was that Chalcroft had to stump up £259,000. He has made a decision about law and fact, on what he said the contract is. He decided the substantive dispute about money due under the interim account using the contractual rules he decided could be divined from the negotiations that somehow made some sort of construction contract.

Chalcroft was saying that the doubt over what the contract was is enough for the High Court to refuse enforcement in a summary judgment process. The idea of Chalcroft, attractive as it was, is wrong

The judge explained that since the earliest days of the Construction Act, the courts have, when considering whether to enforce an adjudicator’s decisions, drawn a clear distinction between questions going to the jurisdiction of the adjudicator and questions about whether the adjudicator (having jurisdiction) has reached the correct substantive answer. The legal policy, derived from the Construction Act, has been that reasonably arguable challenges to the adjudicator’s jurisdiction may be a reason for not enforcing the decision, but a mere assertion that he has misunderstood the factual or legal basis for his or her substantive decision is nothing to the point. That analysis by the judge defeats Chalcroft’s argument that it is essential that the contractual basis of the dispute, or what the contract says, has to be identified by the party seeking the adjudication. Chalcroft was saying that the doubt over what the contract was is enough for the High Court to refuse enforcement in a summary judgment process. The idea of Chalcroft, respectable and attractive as it was, is wrong.

Earlier I said it is “nearly” always right for the adjudicator to decide what the contract is from a muddle of toing and froing when conceiving the deal. That “nearly” is tricky. Say the referring party has referred the dispute under what it says is a contract containing adjudication rules invented by Joe Soap Enterprise and nomination of adjudicators by Joe Soap Institute. But the respondent says, dear me no, the rules are by the Royal Institution of Putter-Upperers and so too the institute is the appointing body.

It’s true that the adjudicator can decide if he has been correctly appointed, but his decision is instantly extinguished, if a later judge decides the wrong body appointed the adjudicator. Tactically dealing with that argument at referral and appointment stage is fairly easy. Just stop the adjudication and get the appointing body, said to apply by the respondent, to appoint. In that way that fox is shot. The adjudication presses on and the decisions on the actual dispute are binding.

There is a final thought: is there anyone out there clever enough to stop all this money being wasted on these fancy footwork arguments? The whole idea originally was to decide who would have the money pro-tem. That’s all.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple