Dispute, what dispute?

Does the GC/Works/1 contract contain a licence to ambush? In the early years of adjudication there was some concern over the possibility of the referring party setting an ambush for the other party. This would be done by preparing a detailed case and launching the adjudication unexpectedly. The situation was considered in the case of Nuttall v Carter in 2002.

Adjudication was introduced as a statutory right in construction contracts by the passing of the Housing Grants, Construction and Regeneration Act in 1996. The Act provided that parties to a construction contract could refer a dispute, at any time, to an adjudicator for an ‘interim’ decision. This Act has revolutionised dispute resolution in the construction industry.

In the Nuttall v Carter case, the contractor Nuttall submitted, together with its application for interim payment, a claim for loss and expense of approximately £2m. This included a claim for an extension of time, which comprised a list of events said to have given rise to delay. Carter rejected the claim.

It is common ground that a ‘dispute’ requires at least two people (or one with a split personality) but what about a ‘question’?

The parties continued to debate Nuttall’s entitlement and four months later, Nuttall commenced adjudication. Nuttall’s referral notice was accompanied by a document entitled Norfolk and Norwich Millennium Project: Substructure and Superstructure Works Report on Programming and Excusable Delay Entitlement. This document claimed an extension of time but there the similarity ended. Carter claimed an ambush on the grounds that the ‘new’ claim was not in dispute. The adjudicator rejected Carter’s objections, continued with the adjudication and awarded Nuttall approximately £1m. Carter refused to pay and the matter was referred to the Technology and Construction Court for enforcement proceedings.

His Honour Judge Richard Seymour concluded that a ‘dispute’ is something different to a ‘claim’. He decided that in order for there to be an adjudication there must be a ‘dispute’, but that dispute must consist of the arguments between the parties at the time of the referral and not further arguments which had not been rehearsed between them.

This, of course, is all very good stuff when the contract requires a ‘dispute’, but what if the parties have contractually agreed to extend the adjudication beyond ‘disputes and differences’? What if a party to the contract could refer a ‘question’?

A ‘dispute’ is something different to a ‘claim’. It must consist of arguments between the parties at
the time of the referral

Judge Richard Seymour

Now consider the wording of the adjudication provisions contained within the popular GC/Works1 form of contract. Condition 59 states that: “The Employer or Contractor may at any time notify the other of intention to refer a dispute, difference or question arising under, out of, or relating to, the Contract to adjudication.”

It is common ground that a ‘dispute’ requires at least two people (or one with a split personality) but what about a ‘question’? Surely a ‘question’ could be asked of the adjudicator without the prior approval of the other party? Could a ‘question’, therefore, be the vehicle for an ambush? Consider this hypothetical situation.

The Contractor and Employer stumble through a difficult project, each using their resources to achieve practical completion as quickly as possible. The project is in considerable delay with a sizeable increase in cost. The contractor secretly instructs an army of quantity surveyors and delay experts to prepare its final account and claim. For months this hidden army prepares reams of paper and on completion the contractor refers a ‘question’ to the adjudicator: “What is the value of my Final Account?” The contractor encloses its 50 lever arch files of variations, claims and expert reports to assist the adjudicator. None of these documents have previously been seen by the Employer. Could the Employer claim foulplay? Could the adjudicator decline to answer the ‘question’ or could a decision on the value of the Final Account be given?

If you are currently working under the GC/Works/1 form of contract you might consider asking your adjudicator this question: “Does the GC/Works/1 contain a licence to ambush or would it be considered a breach of the rules of natural justice on enforcement?” Let me know if you get an answer.