SIXTH COMPANY SEMINAR ON ADJUDICATION (ONLINE)
On Wednesday 3rd July 2024, 6.00 pm – 7.30 pm, experienced and aspiring adjudicator Liverymen and Freemen of The Worhipful Company of Arbitrators attended this lively zoom discussion of some difficult issues which can arise in Adjudication under the Housing Grants, Construction and Regeneration Act 1996 (As Amended).
Presenters: Past Master Matt Bastone, Junior Warden Matt Molloy & Liveryman Philip Fidler
MATTHEW BASTONE DipArb FRICS FCIArb
Past Master of our Worshipful Company (2016-2017), is a Chartered Quantity Surveyor with extensive experience in commercial management and dispute resolution. Having worked at the highest level in the construction industry, both in the UK and overseas, he moved to set up in private practice. He was awarded the Robert Jardine Brown prize upon completion of the CEM Post Graduate Diploma in Arbitration in 1998, and now has long experience and many appointments as a practising Arbitrator and Adjudicator, serving on various panels including those of RICS, CIArb, RIBA and CEDR.
PHILIP FIDLER FRICS FCIArb C.Arb.
who is a Quantity Surveyor, Arbitrator and Adjudicator, has been involved in construction activities since 1966, as an Arbitrator since 1988 and Adjudicator since 1999, having had roughly 300 appointments. He is a keen proponent of the Worshipful Company of Arbitrators’ Mentorship Scheme, and an occasional lecturer and author of articles on construction and ADR matters. A quantum expert assisting the Court on about 30 occasions between 1985 and 2016, he has been a contributor since 2009 to the Chartered Institute of Arbitrators’ and Adjudication Society’s various Guidelines on Adjudication. He is an Arbitrator Member of the Society of Construction Arbitrators and has served two terms as a Court Assistant of the Worshipful Company of Arbitrators.
MATT MOLLOY FRICS FCIArb C.Arb.
Matthew is an experienced dispute resolver having been appointed in over 800 construction and engineering disputes as either adjudicator, arbitrator, mediator, expert determiner, Conflict or Dispute Avoidance Panel/Board member. These disputes have concerned a number of high-profile projects both within the UK and overseas, and have involved complex technical and legal issues in a variety of sectors, including education, private and public housing, offices, hotels and leisure, sports stadia, roads and infrastructure, utilities, energy and process engineering. Matthew is a Chartered Arbitrator, Chartered Quantity Surveyor, Chartered Builder, has been called to the Bar and is the current Chair of the CIC ADR Management Board. He is Junior Warden of the Worshipful Company of Arbitrators.
QUESTIONS
These were the difficult questions addressed:
- Conflict of Interest
You are appointed as Adjudicator/Arbitrator by a nominating body [ANB]. The Defenders’ representative is identified by the ANB and you have no conflict. Shortly afterwards you receive an email from different representatives for Defenders who claim that you have a conflict with them from the past. They demand that you resign forthwith.
Q: What do you as Adjudicator, or Arbitrator, do?
- Part 7 and Part 8 Proceedings
This was included in the questions for Adjudication Seminar 5 but was not discussed.
Enforcement of an Adjudicator’s Decision by one Party was resisted by the other Party in Part 8 Proceedings on the grounds of the former’s failure to comply with certain conditions precedent. Part 8 is intended to permit the court to finally resolve matters when no relevant facts are required in order for the court to do so.
Q: What approach would the court adopt?
- Set off/withholding in relation to an Adjudicator’s Decision to account for other adjudications between the same Parties
This was Included in the questions for Adjudication Seminar 5 but was not discussed.
Q: Is it possible to set off competing Adjudicators’ Decisions between the same Parties in order to arrive at a net payable sum?
- Insolvency
This was Included in the questions for Adjudication Seminar 5 but not discussed. You are an adjudicator between an Employer and Contractor following a previous adjudication where the adjudicator decided that the Employer’s termination was invalid and constituted a repudiation. The Contractor is now claiming damages in your adjudication. The Employer’s Director writes to you to say that following the previous Decision the funder has decided to no longer support the Company and there are a number of pending winding up petitions from the Employer’s professionals and legal team. The Contractor has also obtained an injunction preventing the Employer from disposing of the property. The Director asks you to stay the adjudication pending the outcome of the winding up petition and an application to lift the injunction and has advised that they now have no legal representation.
Q: What do you do?
- The Referral claimed a sum on the alleged basis of a failure to pay by a final date for payment absent a valid payer payment or payless notice, alternatively on the basis of a true value assessment.
Q: Was this a single dispute?
- Errors in the Adjudicator’s Decision
Q: How substantial in money terms does an adjudicator’s error have to be to warrant a revision by the court on enforcement.
- Loss and expense under the JCT 2016 suite of contracts
Q1 Is the contractual notification process here a condition precedent to the constructor recovering such loss etc.?
Q2 Therefore no recovery by the constructor?
- Adjudicator’s directions
The directions include: It is confusing to the Adjudicator and bad practice for subsequent pleadings to the Referral to fail to address each paragraph in the preceding pleading. Subsequent pleadings must make clear which parts of the pleaded predecessor are admitted, not admitted, or denied, whilst dealing with all the matters in contention.
Q What happens when these directions are not followed?
- Confidentiality clause
A main contractor’s [“the MC”] subcontract terms included a confidentiality clause intended to prevent discourse etc. between individual subcontractors about their individual experiences as regards delays, loss & expense, termination, and common law remedies, arising from the same project and the responsibility of the MC. During an adjudication raised by subcontractor A against the MC, A sent a detailed letter of claim which was supported by the facts. A later admitted that the letter was a copy of that of subcontractor B.
The adjudicator was satisfied that A’s letter was valid and awarded A a substantial sum.
Q1. Was he correct?
MC asserted that the Decision was invalid and A failed to pay the adjudicator’s fee in the first instance but the Decision provided that ultimately MC should reimburse A in full. Sometime later MC paid the fee in full.
Q2. What do you think happened between A and MC in the intervening period between the Decision and payment of the fee?
- A little domestic difficulty
The contract was for the construction of a new-build residential barn on the
Employer’s land, for the Contract Sum of £900,000, under a JCT Prime Cost Form of Contract. The Contract Administrator was noted in the Contract as ‘TBA’. Subsequently, after commencement, the Contractor was informed by the Employer that he would be assuming the role of Contract Administrator himself.
The contract period was 12 months with a completion date of 14th January. Three weeks prior to the completion date (shortly before Christmas) the Employer, with the Contractor’s agreement, moved into the barn. At that point, the works to the barn were largely complete, apart from a few minor items, but much of the external works (topsoil, patios and paving, driveway, external drainage etc.) had still to be completed.
The Contractor continued in the New Year with the external works and, in mid-April, the Employer issued a list of defects and outstanding items to be completed – both to the barn and to the external works. These were essentially of a minor nature.
On 30th June the Employer issued a certificate of non-completion, stating that the Works should have been completed by the completion date of 14th January. The Employer informed the Contractor that he considered the Works were still not complete and, specifically, that the timber cladding to the barn was of poor quality, badly installed, and needed to be replaced. The Employer provided an expert report which identified a number of defects in the materials and workmanship, and stated that the cladding was not Grade A quality and, for that reason, should be totally replaced.
Note: there was no specification for the cladding, beyond the description that it be Siberian larch, but the Employer was provided with a sample of the timber before it was obtained.
Following the issue of the certificate of non-completion, the Employer then proceeded to claim a deduction of liquidated damages at the contract rate of £1,000 per week for a total of 24 weeks and, in addition, deducted the sum of £60,000 for replacing the cladding.
| Q1. | Do you consider that the Employer is entitled to:
(a) deduct liquidated damages? (b) deduct the cost of replacing the cladding? |
| Q2. | Does the fact that the Employer took occupation of the barn before the completion date affect your decision? |
| Q3. | Does the fact that the Employer acted as Contract Administrator affect your decision? |
- True Value?
This problem concerns two adjudications between a Sub-Contractor and a Main Contractor, both concerning the same interim application for payment.
The first adjudication was a ‘smash and grab’ commenced by the Sub-Contractor. The Contractor did not issue a Payment Notice but did issue a Pay Less Notice specifying a notified sum of –£72,911.96 (minus i.e. due to the Contractor) and the basis on which that negative sum had been calculated.
The Sub-Contract Conditions state:
If any payer’s notice or any written notice to pay less issued by the Contractor results in a balance due to the Contractor then the Sub-Contractor shall repay to the Contractor the amount of any overpayment within 20 Business Days following the Contractor having given written notice of the overpayment.
The Sub-Contractor argued in the first adjudication that revised payment terms had been agreed and that the Contractor’s Pay Less Notice had, as a result, been issued late, two days after the final date for payment. The Contractor acknowledged that there had been discussions regarding revised payment terms but denied that there had been any concluded agreement to vary the payment terms.
The adjudicator found no evidence of an agreement to vary the payment terms, decided that the Contractor’s Pay Less Notice was valid and in time, and, consequently, that no sum was due to the Sub-Contractor.
The Sub-Contractor then commenced a second ‘true value’ adjudication.
The Contractor raised a jurisdictional challenge, arguing that in accordance with the judgement in Henry Construction Projects Ltd v Alu-Fix (UK) Ltd, and the principles previously established in Bexheat, Davenport, AM Construction and Grove, the Sub-Contractor was not entitled to commence a true value adjudication until it had paid the Contractor the outstanding notified sum of £72,911.96.
Q Is this a valid jurisdictional challenge?
Suggested answers
The lively discussion produced suggested answers which can be downloaded here.