| Date | 25 July 2001 |
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| Judgment | Ballast Plc -v-The Burrell Company (Construction Management) Limited, Outer House Court of Session 21 June 2001 |
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| The Issue | Whether a failure to decide matters put before the adjudicator may render the decision unenforceable. |
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| Implication |
Adjudicators must decide the matters referred to them otherwise their decision may be rendered unenforceable. |
printIt has often been said that faced with an impossibly difficult and complex dispute to resolve in too short a timescale, an adjudicator might declare that the dispute was "non-adjudicable". Quite what the effect of such a declaration might be is uncertain. If it were to amount to a decision on the matters put to the adjudicator, then the parties would be bound by that decision and would not be free to commence a second adjudication or series of adjudications, perhaps in a more ordered and manageable fashion. This question was examined in the recent case between Ballast -v- The Burrell Company (Construction Management) Limited. Ballast were engaged as management contractor, under a standard JCT form of management contract, for the construction of a project in Glasgow known as "Homes for the Future". The matters Ballast referred to adjudication involved the entirety of its account. "The adjudicator is asked to assess the value of work done, the common services, the management fee, loss and expenses and other appropriate amounts due and payable and to make directions as to the amounts due and payable to works package contractors". The adjudicator's decision in respect of the matters referred was an enigmatic "not-valid". As far as could be determined from the adjudicator's decision, he had been concerned to note that the works packages had been placed using a bespoke form of contract rather than the standard form envisaged by the JCT contract. Other issues which had troubled him included that work had been carried out without the issue of a formal architect's instruction but which, according to Ballast, had been informally instructed or approved. Despite these matters being a common feature of building contract disputes, raising issues with which any practitioner would be expected to be familiar, it appears that the adjudicator formed a view that these problems rendered the dispute incapable of determination by adjudication. In his reasons the adjudicator noted "where the parties have departed from a strict pre-agreed code then they have to accept that it is, as with the courts, not the adjudicator's place to make decisions …….". Ballast's concern was that following the Scheme, they might be prohibited from commencing a second adjudication in respect of the disputed accounts. Clause 9 (2) of the Scheme provides that "an adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication and a decision has been taken in that adjudication". Ballast argued that the adjudicator was under a duty to decide the matters in dispute. He had failed to do so. He was not entitled to decide that he was unable to decide. It would be absurd if an adjudicator could decide that he had too little information to make a determination, thereby preventing the bringing of a second adjudication if additional information became available. The Court was requested to grant a declaration that the adjudicator had failed to make any decision in respect of the matters referred, and to set aside the adjudicator's decision as a whole. Burrell on the other hand argued that the adjudicator had implemented his duty under the Scheme. He could validly decide that he was unable to exercise his statutory jurisdiction. If the adjudicator had taken the view, rightly or wrongly, that he was empowered only to reach a valuation in accordance with the strict terms of the JCT contract, that was an error falling within his jurisdiction and with which the courts could not interfere. Lord Reed reviewed the decisions of the courts dealing with the setting aside of adjudicator's decisions on the question of jurisdiction. The relevant cases have till now tended to the view that an adjudicator's decision given properly within his jurisdiction will be enforced whether that decision is right or wrong. Lord Reed commented however that it did not necessarily follow that adjudicator's decisions were intended to be entirely immune from challenge. He noted that he would be slow to attribute to the parties an intention that the adjudicator's decision should always be binding, notwithstanding errors of law, procedural unfairness or lack of consideration of relevant material submitted to him by the parties, no matter how fundamental such a breach of the adjudicator's obligation might be. So far as Lord Reed could make sense of what the adjudicator had written, he appeared to have decided that he could not carry out any valuation or find any payment due because the parties had departed from the terms of the pre-printed contract in a number of respects. Such an approach was wrong in law. As a result of that error the adjudicator had misconstrued his powers and in consequence failed to exercise his jurisdiction to determine the dispute. His decision was therefore a nullity, leaving the parties free to commence a further adjudication in respect of part or all of the disputed matters previously referred. Unfortunately there appears to be a lack of consistency in the decisions of the courts upon how to categorise adjudicator's errors. In S L Timbers -v- Carillion (Contract Journal 11 July 2001), the adjudicator refused to value the works as referred to him, in the mistaken belief that the absence of a S110(2) payment notice prevented him from making such a valuation. In contrast to the present case, the court treated this error as one with which it could not interfere. This lack of consistency will trouble adjudicators, who may detect a general drift towards more court intervention.
CJ-0129
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