Wriggle room

Park Lane Estates was determined not to pay its design-and-build contractor’s interim application for payment. Snag was, the JCT’s With Contract Design form says an employer has to follow a certain rigmarole before it declines payment. So when no cheque turned up, the contractor, Palmac, got an adjudicator in.

He did his stuff and declared that £170k should be paid. Park Lane refused. So Palmac went to the Technology and Construction Court for enforcement. It got it, but more rigmarole was mulled over. It was interesting stuff.

The first argument was digital. The contractor had sent payment application number 20 by email. Park Lane said service by email was not valid. If that is right, then no application was made: the email is a nothing, and you can’t have a dispute over nothing – and if you haven’t got a dispute, you can’t have an adjudication, and the £170k isn’t enforceable. And if you recite all that at a gallop, you might get away with it.

The adjudicator rejected that argument, and was within his rights to do so. If he was wrong, it did not mean he had no authority to decide that item. He did, and it is binding. In any case, the JCT document allows “any effective means” for communication, and if you publish your email address that invites emails.

The second argument was about non-compliance with the adjudication procedure that was set out in the contract. The notice of adjudication was served through Park Lane’s letterbox and then Palmac says it applied to the appointing body for the adjudicator. Park Lane said it didn’t receive the notice until the next day. Now then, a clash of evidence leads to cross-examination. If that is necessary, enforcement proceedings are likely to be stopped and a trial of fact ordered. But in this case a smidgen of law was applied instead. It was decided that the JCT WCD rigmarole does not stipulate that the nomination of the adjudicator must only be made after service of the notice of adjudication. Nor, by the way, is the Construction Act prescriptive as to the timing of any nomination. The only obligation is to “aim to secure appointment of the adjudicator within seven days of the notice of adjudication.”

Not long ago I told you about IDE Contracting vs RG Carter Cambridge (13 February 2004, page 48). There the court refused to enforce because the adjudicator was appointed before the notice of adjudication was served. So the adjudication was void. The rules in that IDE case were not JCT; they were the Scheme for Construction Contracts. The previous case was therefore of no help. But it is food for thought that if the Construction Act is not prescriptive as to the timing of any nomination, its offspring, the Scheme, being a statutory instrument, is prescriptive. Odd that so much money can be wasted as the result of such a skinny technical faux pas. Perhaps the DTI will look at that in its review.

There is a useful comment in the judgment about some foggy words in the JCT rigmarole. It says: “Any failure by either party to comply with any provision in, or requirement under, the adjudication rules shall not invalidate the decision of the adjudicator.” These words, said the judge, are not enough to validate the appointment of an adjudicator invalidly appointed: its scope is limited to procedural steps within a validly constituted adjudication.

The final point is a tricky area. The adjudicator was accused of being unfair. It is all to do with “taking the initiative in ascertaining the facts and the law”. The adjudicator wrote to the parties asking for evidence about previous interim payment applications. Both complied. When the formal decision was made, the adjudicator expressed a view about Park Lane’s contentions.

Its lawyers were upset that they were not able to comment on the adjudicator’s formed view of the evidence before he made his binding decision. It is an exasperating experience to find that a decision was made on grounds that you were not aware of, and so could not influence. On this occasion, however, the adjudicator was expressing his view on the evidence adduced. The court said that was okay. He had not committed the sin of obtaining information from other sources and keeping it to himself. He had not brought in new material of his own. He had made no investigation of his own. None of this could point up unfairness.

The truth is that once or twice, a tribunal does not seem to have decided the case on the evidence put; even judges have felt that draught. Taking the initiative to ascertain the facts and the law can easily be misunderstood as constructing one party’s case for him, even unwittingly.

Tony Bingham is a barrister and arbitrator