| Date | 21 February 2007 |
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| Judgment | Epping Electrical v Briggs and Forrester Ltd, TCC, 19 January 2007 and Aveat Heating Limited v Jerram Falkus Construction Ltd, TCC, 1 February 2007 |
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| The Issue | The validity of published and bespoke Adjudication provisions. |
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| Implication |
Adjudication rules that state that a late decision may be effective, for example the CIC and GC/Works procedures, will render the adjudication provisions invalid and the Scheme for Construction Contracts will apply. |
printThe use of both published and contract specific adjudication provisions has become commonplace since the introduction of statutory adjudication requirements within the Construction Industry. However, the two recent cases of Epping Electrical v Briggs and Forrester Ltd and Aveat Heating v Jerram Falkus have thrown their use and validity into disarray. Epping Electrical was a sub-contractor to Briggs and Forrester (themselves a subcontractor) on a residential development in Westminster. The contract between the parties required adjudication to be in accordance with the procedure published by the Construction Industry Council (CIC). A dispute arose between the parties in respect of a number of matters covering variations to the work, whether the contract sum was fixed or fluctuating, the length of the defects liability period, and the rate for dayworks. In consideration of the matters in dispute, the adjudicator directed that Briggs and Forrester should pay Epping Electrical the sum of £372,869. The dates for the service of documentation in this adjudication were important. The notice of intention to refer the dispute to adjudication was served on 28 September 2006, then on 2 October 2006 the CIC appointed the adjudicator. Epping Electrical then served its referral notice on 4 October 2006. Therefore, the adjudicator’s decision was due to be reached by 1 November 2006, 28 days after service of the referral. On 10 October the time for making his decision was extended to 14 November by the adjudicator, with the consent of Epping Electrical and then, on 8 November, the adjudicator asked the parties for an extension of a further 7 days. On the same day Briggs and Forrester agreed to a ‘further 7 day period in which to issue (the) decision’. Epping Electrical also confirmed their consent to an extension of time to 21 November. The adjudicator reached his decision on 21 November, but initially declined to send it to the parties until he had been paid. However, on 23 November, the adjudicator relented and sent his decision to the parties. Briggs and Forrester refused to pay the sum contained within the decision on the grounds that it was received late and was therefore invalid. The matter was referred to the Technology and Construction Court before His Honour Judge Richard Havery QC for enforcement proceedings. HHJ Richard Havery QC found that by its letter of 8 November, Briggs and Forrester had consented to an extension of time for the adjudicator to reach his decision, but that consent was conditional upon the decision being issued by 21 November. That condition had not been fulfilled and therefore the time for reaching the decision had not been validly extended. As a consequence the Judge decided that the decision was reached seven days out of time and was, therefore, not enforceable. He also considered the effect of paragraph 25 of the CIC procedure. Paragraph 25 provides that if the adjudicator fails to reach his decision within the time permitted his decision shall still be effective as long as a replacement adjudicator had not been appointed. The Judge found that Paragraph 25 could not over-ride section 108(2) of the Housing Grants, Construction and Regeneration Act 1996 which provides for a mandatory time limit in which the adjudicator must reach his decision. To the extent that paragraph 25 was to remain, the adjudication provisions do not comply with the Act. In such circumstances the ‘Scheme for Construction Contracts’ would apply. He stated that: “The Scheme applies in place of the adjudication provisions of the contract. If it were otherwise, two competing sets of adjudication provisions would simultaneously apply to the contract and many other contracts. That is a recipe for confusion and uncertainty and in my judgement cannot have been the intention of parliament in passing section 108(5) of the Act.”That judgment has essentially rendered the CIC adjudication rules (in their current form) invalid, but HHJ Richard Havery QC’s concern over adjudication procedures did not rest there. In the more recent case of Aveat Heating v Jerram Falkus Construction he considered the validity of the adjudication clauses contained within the GC/Works contracts. These contracts, too, contained bespoke provisions including a clause that states that the adjudicator’s decision shall be valid even if issued after the time allowed. As the Judge had previously ruled, this rendered the entire adjudication provisions invalid so that the procedure contained within the Scheme for Construction Contracts would apply. In this case, despite the different applicable procedures, the Judge still held that the adjudicator’s decision was valid. However, there is a notable difference between the two procedures. Clause 38A.6 of the GC/Works Subcontract allows the Adjudicator to award legal costs, a right not afforded under the Scheme. Therefore, whilst the adjudicator’s main decision was enforced, his decision in respect of the parties’ costs was not as the Scheme does not provide an adjudicator with the power to do so. The Judge also considered whether the effective date of service of the Referral Notice was the date the document was sent or when it was received. He found that: “… given my interpretation of section 108(2)(c), I conclude that the date of the referral notice means the date of its receipt by the adjudicator. There is no reason why the Scheme should provide a lesser time than is permitted by the Act.” |
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