What it takes to crystallise a dispute

Crystallisation. It sounds like something from Harry Potter, doesn’t it? Along comes the first round of an adjudication, and the respondent begins crystal-ball gazing, having received an overpowering urge to consult the Orb. Wizardry is afoot. There, in the swirling mist, is the message: “No dispute … go away, dear adjudicator.” It’s not quite the Battle of Hogwarts, but it does appear that LJH Paving Ltd has been in a tussle with Meeres Civil Engineering. The pair have been in court arguing about enforcing four adjudication awards, with Meeres resisting one such by waving the wand of crystallisation.

At 9am on day one of QS college the baby QS begins rehearsing a standard letter to the supply chain, saying politely, ‘Please substantiate your account’

Meeres claimed the so-called dispute, referred to adjudication by LJH, had not yet crystallised into a dispute when the notice of adjudication was served. And if that is the case, the adjudicator must resign: because in short there is no dispute, no bat and ball to play with. Meeres said (oh, it’s a well-worn argument) that the subcontractor claiming payment must provide sufficient information for its claim to be assessed by the paying party before a dispute can crystallise. 

“Go away, Mr Subcontractor, because you have failed to provide such information prior to serving the notice of adjudication,” was the gist of Meeres’ argument. In other words, the adjudicator lacked jurisdiction. I have lost count of the number of times I have seen this jurisdiction point run. It hardly ever works. Don’t be surprised when the adjudicator replies by return saying: “Rejected: press on.” And if not by return, the reply will come after the adjudicator has burned three hours in fees reading the bumf. Oh, don’t forget that the representatives will have spent a dozen hours as well. I can see £5,000 in the swirling mist; can you?

In this affair, LJH Paving sent in its account. Meeres sent a pleasant letter back explaining how the efforts “to engage in a constructive way in relation to evaluation […] have had no response”. Mind you, LJH had sent 140 pages of back-up, including spreadsheets and more besides. So these soft-soap “let’s engage” letters tend to get a short-shrift remark from the subcontractor. Meeres went on: “In the absence of a response, input or positive contribution from LJH, we have, in short, done our own [evaluation].” And you might guess that it was somewhat different as to the sums due. LJH pushed out its notice of adjudication. And Mears said: “No dispute.”

The definition of “a dispute” is excellently explained in the recent judgment on this case. The judge in LJH Paving Ltd vs Meeres Civil Engineering Ltd traced the history of adjudication back 20 years to the start. As he explained, a dispute can only arise once the subject matter of the claim, issue or other matter has been brought to the attention of the opposing party and that party has had the opportunity of considering and admitting, modifying or rejecting the claim or assertion. There are no hard-edged legal rules as to what is or is not a dispute – just guidance. 

So, the paying party receives an account or claim, say for extension of time, or loss and expense, or accusation of improper behaviour. Now what must be asked is whether the claim is “not admitted” by one means or another. For example, discussion can indicate the claim is not admitted; the payer may shilly-shally; the payer may simply remain silent for a period of time. Bingo – a dispute. In short, sitting on an account unpaid and otherwise due constitutes a dispute. On the other side of the coin is a badly presented claim. “Badly” here means so nebulous, vague or ill-defined that the other party cannot sensibly respond to it. An account whether interim or final that is a one-liner can still crystallise the dispute, if the circumstances allow it. For example, a milestone payment date having been reached requires nothing more than that simple statement: if the payment is not paid on the due date it is likely to be a dispute. But the final account that pushes the contract price up through the roof may be too unclear. 

Beware, though, of running the argument as payer that “this invoice/ application/account is all too vague”. In another recent case, AMD Environmental vs Cumberland Construction, the judge cast doubt on the idea in construction that every last element of the account must be provided. He said: “When a contractor or subcontractor makes a claim, it is for the paying party to evaluate that claim promptly, and form a view as to its likely valuation, whatever points may arise as to particularisation.” Efforts to acquire further particularisation should proceed in tandem with that valuation process. And can you see how Meeres’ nicely worded letter to LJH gave the game away that there was in fact a dispute? Meeres complained about lack of information, so in all fairness got on with the valuation. Once Meeres arrived at a figure different from the subcontractor’s figure, that constituted a dispute.

It seems to me that at 9am on day one of QS college the baby QS begins rehearsing a standard letter to the supply chain, saying politely, “Please substantiate your account.” Then hands are sat upon and money flow stalls. The snag these days is that there is an adjudicator around every corner, waiting to earn a fee. In the Battle of Hogwarts, Professor Trelawney threw a crystal ball as a projectile at the Death Eaters. But crystallisation in adjudication does not work so well.

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