CJP Builders vs William Verry: Some verry fine distinctions

There were over 1,000 adjudications last year. Out of these, 10 decisions – less than 1% – were not enforced by the court. You could count on two fingers how many of these were not enforced because a party did not have a reasonable opportunity to be heard. Last month saw the first such reported case of this year.

These statistics reflect well on the general success of adjudication, its users, party representatives, adjudicators and the courts. Although adjudicators, like all people, make mistakes, the courts enforce their decisions even if they contain errors of fact, law or procedure. This recognises the rough and ready nature of adjudication and the theoretical prospect for the losing party to have the dispute reheard in arbitration or litigation.

However, the Construction Act requires adjudicators to act impartially, which means that they have to give each party a fair hearing. There is a critical, but blurred, line between when an adjudicator considers and rejects a party’s case (which is valid) and when he decides one point against a party that renders the rest of its case inadmissible or irrelevant. As CJP Builders vs William Verry showed, the latter may be fatal to the resulting decision.

The facts were these. CJP claimed by adjudication a £100k interim payment it said Verry owed it. The subcontract (like the still much used JCT 98 forms) required Verry, as the responding party, to make any written submissions within seven days of the referral. However, Verry sought further time and, after some haggling, CJP agreed to give Verry until noon on 14 May. Unfortunately, Verry served its responsive submissions (alleging defective works) at about 5.30pm on 14 May.

The adjudicator disregarded Verry’s submissions because they were served late. He found that, in the absence of any admissible material from Verry, CJP was entitled to its £100k.

Mr Justice Akenhead declined to enforce the adjudicator’s decision. He said the subcontract did give the adjudicator the power to consider Verry’s submissions and that he was wrong not to do so. In this, the judge was bolstered by the adjudicator’s honest admission that if he had any discretion under the subcontract, he would have taken Verry’s submissions into account.

Any failure to give an opportunity to be heard is only critical if there was a real possibility that the adjudicator would have reached a different decision

It is not hard to see the difference between this case and other cases where adjudicators have declined to consider part of a party’s case, but their decisions have been enforced. In Carillion vs Devonport (which is not cited in the CJP judgment) the unsuccessful party to an adjudication failed in its attempt to pick over parts of a decision from a large and complicated adjudication. The failure must be a serious one.

What is harder to discern is the distinction between the CJP situation and the run-of-the-mill adjudication in which an adjudicator decides that the responding party failed to give a valid withholding notice with respect to an interim payment certificate or application and that any evidence of, say, defects is therefore inadmissible. Should we brace ourselves for such adjudicators’ decisions being defended at court on the basis that the adjudicator’s finding on the invalid withholding notice or its effect, caused that party’s grounds for withholding payment to be wrongfully ignored?

In such cases it is likely that the courts would draw a divide between procedural decisions that go directly to the opportunity to be heard (such as in CJP) and substantive decisions that go directly to the outcome. However, a decision of Judge Thornton QC last year militates against such a distinction.

The difficulties do not end there. Adjudicators often have to handle late submissions. It is here one should emphasise that parties have a reasonable opportunity to be heard. Also, any failure to give that opportunity is only critical if there was a real possibility that the adjudicator would have reached a different decision. Late submissions rarely contain vital material.

There will be some who hear about CJP and recall other cases in which deadlines, such as the one Verry breached, have been fatal to the decision. The answer to this, again, calls for distinctions. Yes, a referral must be served within seven days of the adjudication notice, but this is not always fatal under other adjudication rules. Yes, an adjudicator’s decision must be reached by the deadline, but it is sometimes open to question whether a draft or interim decision qualifies as reaching a decision.

On these legal distinctions adjudicators’ decisions turn sometimes – but fortunately only rarely – with disastrous consequences. Since the judgment, CJP has petitioned to be wound-up.