Adjudication in Construction Law

Darryl Royce

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CHAPTER 4 Procedure leading to the decision

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4.1 Procedural requirements

4.1 The procedural requirements following the giving of notice of intention to refer a dispute to adjudication, the appointment of an adjudicator and referral of the dispute laid down by Part II of the Housing Grants, Construction and Regeneration Act 1996 are that the adjudicator is to reach a decision within 28 days of referral1 or such longer period as is agreed by the parties after the dispute has been referred; that the adjudicator is allowed to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred; that there is a duty on the adjudicator to act impartially; and that the adjudicator is enabled to take the initiative in ascertaining the facts and the law.2 In addition, the Act expressly permits the parties to agree on the manner of service of any notice or other document required or authorized to be served in pursuance of the construction contract or for any of the purposes of Part II.3 If or to the extent that there is no such agreement, mandatory provisions apply as follows.4 A notice or other document may be served on a person by any effective means. If a notice or other document is addressed, pre-paid and delivered by post to the addressee's last known principal residence or, if the addressee is or has been carrying on a trade, profession or business, the addressee's last known principal business address, or, where the addressee is a body corporate, to that body's registered or principal office, it shall be treated as effectively served. This does not apply to the service of documents for the purposes of legal proceedings, for which provision is made by rules of court.5 References in Part II to a notice or other document include any form of communication in writing and references to service should be construed accordingly.6 4.2 The Statutory Scheme contains more detailed procedural provisions, including the service of a notice referring the dispute in writing (‘the referral notice') to the adjudicator.7 Contractual procedures also provide for service of such a notice.8

4.2 Jurisdictional challenge

4.2.1 Available options

4.3 If a party challenges the entire jurisdiction of the adjudicator, it has four options. Firstly, it can agree to widen the jurisdiction of the adjudicator so as to refer the dispute as to the adjudicator's jurisdiction to the same adjudicator. If the referring party agrees to that course, and the appointed adjudicator accepts the reference to him or her of this

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second dispute, the jurisdiction of the adjudicator could then be resolved as part of the reference. The challenging party could, secondly, refer the dispute as to jurisdiction to a second adjudicator. This would not put a halt to the first adjudication, if that had already led to an appointment, since the adjudicator has a statutory duty, unless both parties agree otherwise, to decide the reference in a very short timescale. The challenging party could, thirdly, seek a declaration from the court that the proposed adjudication lacked jurisdiction. This option is of little utility unless the adjudicator has yet to be appointed or the parties agree to put the adjudication into abeyance pending the speedy determination of the jurisdiction question by the court. The Technology and Construction Court can, for example, resolve questions of that kind within days of them being referred to it. Fourthly, the challenging party could reserve its position, participate in the adjudication and then challenge any attempt to enforce the adjudicator's decision on jurisdictional grounds.9

4.2.2 Investigation and grounds of challenge

4.4 The adjudicator can, of course, investigate any partial or entire jurisdictional challenge. He or she could, if satisfied it were a good one, decline to adjudicate on the part of the reference he or she regarded as lacking jurisdiction. Alternatively, the adjudicator could decide that the challenge was a bad one and proceed with the substance of the adjudication. However, unless the parties have vested the jurisdictional dispute in the hands of the adjudicator in addition to the underlying dispute, the adjudicator cannot determine his or her own jurisdiction and the challenging party may seek to avoid enforcement proceedings by showing that the sum claimed was decided upon without jurisdiction. The court would give appropriate weight to any findings of fact relevant to the jurisdictional challenge but would not be bound by them and would either have to hear out the challenge with evidence or, if that were not necessary, determine the challenge and either enforce or decline to enforce the whole or part of the adjudicator's decision depending on the decision reached as to jurisdiction.10 4.5 The most common grounds for a jurisdictional challenge are that there is no construction contract between the parties within the meaning given in Part II of the Act; that there is no dispute between the parties; that the dispute did not arise under the construction contract between the parties; that the referring party is seeking a decision as to matters not encompassed within the adjudication notice; that the referring party is seeking to refer more than one dispute; and that the referring party has failed to comply with the time limits laid down in the Act or the Scheme. 4.6 It is unusual for a referring party to raise a jurisdictional challenge for the obvious reason that such a party will be anxious to preserve the validity of the proceedings in order to obtain the relief sought. In addition, whatever dispute is referred to the adjudicator, it includes and allows for any ground open to the responding party which would amount in law or in fact to a defence of the claim with which it is dealing.11

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4.7 Where by virtue of their conduct and common assumptions, the parties are bound by an estoppel by convention from denying that there was a contract incorporating adjudication provisions, such an estoppel binds the parties if and to the extent only that asserting the true legal or factual position would be unconscionable in view of the detriment that would be suffered by the other party as a result of resiling from the common assumption. If the responding party seeks to resile from the common assumption as to the contract and the application of the adjudication provisions by a denial of the adjudicator's jurisdiction at the earliest possible stage of the adjudication process and there is no evidence that does not appear to be directed to, and does not, establish what was the detriment suffered by the referring party that rendered it unconscionable for the responding party to withdraw from the common but incorrect assumption at that time, it may do so.12 4.8 Although the adjudicator has power to take the initiative in ascertaining the facts and the law necessary to determine the dispute, and is to decide on the procedure to be followed in the adjudication,13 deciding to resign on the basis that he or she has no jurisdiction when that is not an issue which the parties have referred to him or her is outside the ambit of that power. It is wiser for the adjudicator to inquire in terms as to whether both parties accepted that he or she has jurisdiction.14

4.3 Withdrawal of claim

4.9 A claimant can discontinue proceedings in court at any time, but there are costs consequences. The defendant can apply to set aside the discontinuance, and permission is needed to make another claim if the defence has been filed.15 There was at one time a distinction between withdrawal and dismissal, the former being achieved by claiming a nonsuit at common law or dismissing the claimant's bill at his or her own option in equity. The only mode by which a claimant can now submit to defeat is by discontinuance, unless it allows the proceedings to go on until there is judgment against it.16 In arbitration it is not only the arbitrator's right but also his or her duty to deal with all matters in dispute, and a matter does not cease to fall within that duty merely because the parties are agreed upon the outcome.17 It follows that the arbitrator is obliged to make an award dismissing a claim which has been withdrawn. 4.10 Adjudication, however, is a very different process from litigation. Every construction contract contains, either expressly or by statutory implication, a series of adjudication provisions which comply with the requirements of Part II of the Housing Grants, Construction and Regeneration Act 1996. The Act says nothing about the entitlement of a

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party to withdraw or not to withdraw a claim which has been advanced in adjudication. It is impossible to read into either the Act or the Statutory Scheme any restriction prohibiting a party from withdrawing a disputed claim which has been referred to adjudication for four reasons:18

(1) There is nothing in the Act or the Scheme which suggests that any such restriction is intended.
(2) Adjudication is an informal process which arrives at an interim resolution of disputes pending final determination by litigation or arbitration. It would be contrary to the statutory purpose to prohibit a party from withdrawing from such a process any claim which it did not wish to pursue.
(3) If there were such a restriction, it would have the bizarre consequence that parties would be forced to press on with bad claims in adjudication. This would lead to wastage of costs and resources on the part of all parties. This simple consideration outweighs all the policy arguments.
(4) In John Roberts Architects v Park Care Homes,19 the Court of Appeal stated obiter that a referring party could discontinue an adjudication.

Both adjudicators and the courts should approach procedural issues in adjudication in a manner which accords with fairness and common sense. Adjudication should not become a game of chess in which the tactical skill of the players determines the outcome.20

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