| Date | 14 July 2004 |
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| Judgment | IDE Contracting Limited v R G Carter Cambridge Limited, TCC 16 January 2004 |
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| The Issue | The procedures for the appointment of an adjudicator. |
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| Implication |
The procedures for an appointment of an adjudicator set down within the Scheme for Construction Contracts, if applicable, must be meticulously followed otherwise the adjudicator's decision may be rendered invalid. |
printThe statutory Scheme for Construction Contracts provides a detailed procedure for the appointment of an adjudicator. The recent case of IDE Contracting v R G Carter Cambridge indicates that unless those procedures are followed strictly to the letter, the appointment of an adjudicator may be deemed to be improper and any subsequent adjudicator's decision rendered invalid. Reflecting the requirements of the Housing Grants, Construction and Regeneration Act, the Scheme permits that the construction contract may specify the name of the person whom the parties have agreed will act as adjudicator in the event of a dispute. Occasionally the contract will specify a list of two or three adjudicators agreed by the parties. That being the case, both parties to the contract are bound to refer any dispute which may arise to the adjudication of one of those named parties. Neither party may seek to appoint an alternative adjudicator without the agreement of the other party, unless the named adjudicator has indicated that he or she is unwilling or unable to act. If that should happen, the Scheme dictates that the nominating body named in the contract must then be requested to select a person to act as adjudicator. Before that point is reached however, careful steps must be taken to follow the requirements of the Scheme, otherwise the adjudicator nominated by the nominating body will lack the necessary jurisdiction. A representative acting for IDE Contracting had telephoned the adjudicator named in the contract to determine whether he would be able to act. The response obtained was that the adjudicator was too busy with other work commitments and would not be available to act for a further six weeks. IDE were unwilling to wait six weeks and accordingly, two weeks later, it issued its Notice of Adjudication in which it stated that the named adjudicator had declined to act and that it would that same day be making an application to the Chartered Institute of Arbitrators for the appointment of an adjudicator. Later that day, the Chartered Institute nominated an individual who in turn wrote to the parties confirming his appointment. R G Carter immediately complained that all of this had come as a bolt out of the blue. It had not seen details of IDE's application to the Chartered Institute and complained that it therefore did not have details of the basis of the appointment of the adjudicator. Carter indicated that it had no evidence that the correct steps had been taken to seek the appointment of the named adjudicator and concluded that it would only participate in the adjudication whilst reserving its position that the adjudicator did not have proper jurisdiction to deal with the matter. Despite all of these concerns, the adjudicator nominated by the Chartered Institute continued with the adjudication and made an award in favour of IDE, ordering that R G Carter should pay approximately £160,000. Carter refused to comply and the matter came before His Honour Judge Havery QC on enforcement proceedings in the Technology and Construction Court. Judge Havery carefully examined the provisions of the Scheme and concluded that the adjudicator's decision should not stand. IDE had not strictly complied with the requirements of the Scheme. What was intended by the Scheme, according to Judge Havery, was that the notice of adjudication should come first. The referring party would then be in a position to request the person named in the contract to act as adjudicator. That request required to be in writing since it had to be accompanied by a copy of the notice of adjudication. Those steps would then allow the adjudicator named in the contract to indicate to both parties within two days whether or not he was willing to act. If he indicated that he could not act, the referring party may then, and only then, proceed to request the nominating body to select a person to act as adjudicator. Those steps had not been followed correctly and in effect the procedure had been bypassed. Judge Havery explained that this was not simply a pedantic view of the provisions of the Scheme. If IDE's view of these provisions were correct, it would be open to an intending claimant who did not want the specified person to act as the adjudicator to ascertain, without the knowledge of the other party, when the specified person would not be available and to serve notice of adjudication at that time. The other party would suffer prejudice in that he would be deprived of having the adjudication carried out by the person of his first choice. Judge Havery was reasonably satisfied that the named adjudicator would indeed not have been able to act and thus it would have made no difference if IDE had properly followed the steps outlined in the Scheme. On any reasonable view therefore, R G Carter had suffered no prejudice as a consequence of IDE's failure to follow those steps. Importantly however, Judge Havery noted that it was clearly unnecessary for the defendant to show actual prejudice. The correct procedures had not been followed and R G Carter had not submitted to the jurisdiction of the adjudicator nominated by the Chartered Institute. The application to the court by IDE for enforcement of the award of the adjudicator was therefore refused.
CJ-0428
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