Careful what you ask for

People keep telling me that adjudications are all going on at the main contractor-subcontractor level. Don’t you believe it. They are taking place between professionals and their clients, between big main contractors and their clients – between everyone. Last week, I spoke to a big main contractor who had just received a £1.5m cheque because of a 28-day adjudication. There’s more. Look at this one. It’s all about the new Lowry Centre in Salford – or rather, the new bridge across the Manchester Ship Canal to it, built by Christiani & Nielsen.

The two firms quarrelled because the Lowry said the bridge was 34 weeks late, so it withheld a heap of cash in liquidated and ascertained damages. Apparently, the contract documents said the completion period was 81 weeks, but the Lowry said this was a mistake and that it should have read 57 weeks. It asked the adjudicator to rectify this matter.

At the same time, the Lowry told the contractor that neither party was in a position to adjudicate because the contract had been entered into before 1 May 1998, thus escaping the clutches of the Construction Act. On this basis, the Lowry told the adjudicator Guy Cottam he had no jurisdiction to become involved in the dispute.

But Cottam wasn’t easy meat. He decided to investigate jurisdiction as it had only been raised by one party; once he had determined that he did have jurisdiction, he got on with refereeing.

I will tell you the end of the story and then give you the excellent advice in the judgment. There was a judgment because the Lowry didn’t like the referee’s decision, and so called on the court to stop enforcement. The end of the story is that the court wouldn’t stop enforcement, which meant the Lowry couldn’t withhold the whopping sum.

Nowadays, it is popular to quarrel about the right to adjudicate. One party will shout “no jurisdiction” – a magic formula like “abracadabra”. But when the Lowry shouted “abracadabra” , the adjudicator believed he had been blessed by both parties to decide his jurisdiction. If he were so blessed, then his decision was binding.

The first lesson is to make clear whether you are “submitting” a particular question for the adjudicator to decide. And, if you’re an adjudicator, jolly well ask that question if an issue of jurisdiction arises.

Apart from that, the judge gave some excellent guidance on what to do in the event of a jurisdictional challenge. “It is prudent – indeed, desirable – for an adjudicator faced with a jurisdictional challenge that is not a frivolous one, to investigate his own jurisdiction and to reach his own non-binding conclusion as to that challenge,” he said. “An adjudicator would find it hard to comply with the statutory duty of impartiality if he or she ignored such a challenge.”

The first lesson is to make clear whether you are “submitting” a question for the adjudicator to decide

The judge looked at the circumstances to see if the parties had agreed the adjudicator should decide, and concluded that they hadn’t. All the parties did was put in their respective contentions to him to enable him to come to a conclusion.

Interesting, too, was what the judge thought of backdating the contract to beat the Construction act. “The terms [of the act] are mandatory and cannot be contracted out of,” he said. “Any agreement or understanding of the parties that the act would not apply would be one that robs one of the parties of its statutory entitlement to adjudication.”

How did Cottam handle the Lowry’s argument that the contract document contained a dreadful mistake? The legal term is “estoppel”, used to stop one from breaking a promise or from asserting something different from what was agreed.

Rectifying a mistake is not something an adjudicator can do. Cottam couldn’t rectify because the act only gives jurisdiction to decide matters under the contract. The key word here is “under”. Matters merely in connection with the contract are quite different, and outside the scope of the act. You would have to bless the adjudicator with extra power.

But Cottam didn’t need any power because he saw no grounds to rectify. He thought the 81 weeks was, indeed, what was agreed.

The judge pondered an important point. If an adjudicator is empowered to decide satellite issues to do with, but not under, the contract, are these decisions made under the act and thus binding? The act applies to disputes under the contract, so what is the nature of an adjudication for disputes only connected with the contract?

He said: “Important as this question is, it does not arise in this case and I express no view about it.” I can’t help wondering if he also muttered “phew”, “what a pity” or “abracadabra”.

1 Christiani & Nielsen vs The Lowry Centre Development Co Ltd TCC. 28 June 2000 HH Judge Thornton QC.