| Date | 26 August 1999 |
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| Judgment | Project Consultancy Group -v-The Trustees of The Gray Trust, TCC 16 July 1999 |
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| The Issue | Enforcement of Adjudicator's Decision. |
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| Implication |
Failure to establish on clear evidence the existence of a contract within the meaning of the Construction Act will deny a party the means of conferring the necessary jurisdiction upon an adjudicator. |
printA body of case law is slowly but steadily being established to clarify the adjudication process. The trend has been for the court to robustly enforce the decision of adjudicators on the basis that this was what Parliament intended. Even when an adjudicator failed to provide a good answer, it will be treated, nevertheless, as one capable of enforcement since it is not necessarily the final answer. All has not been plain sailing, however. In the Project Consultancy Group -v- The Trustees of The Gray Trust the head of the Technology and Construction Court, The Hon Mr Justice Dyson QC, refused to enforce the decision of an adjudicator on the basis that it was at least arguable that the parties had not entered into a construction contract within the meaning of the Housing Grants, Construction and Regeneration Act 1996. Previously, in Macob Civil Engineering Ltd -v- Morrison Construction Ltd Justice Dyson examined Section 108(3) of the Act where it states "the contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration ……. or by agreement". He held the word "decision" in this section of the Act should be given its plain and ordinary meaning and that a decision whose validity was challenged was nevertheless a decision within the meaning of the Act and the Scheme. In Macob the adjudication decision was challenged on the basis that there had been a procedural error by the adjudicator which amounted to a breach of natural justice. On this Mr Dyson said "If his decision on the issue referred to him is wrong, whether because he erred on the facts or the law, or because in reaching his decision he made a procedural error which invalidates the decision, it is still a decision on the issue. Different considerations may well apply if he purports to decide a dispute which was not referred to him at all". It was this last sentence which became relevant in the present case. Different considerations must indeed apply where the adjudicator purports to make a decision which he is not empowered by the Act to make. An example would be where an adjudicator decides a dispute arising under a contract which is not a construction contract within the meaning of the Act. Another example would be where the contract does not come within reach of Section 108 of the Act because, although it is a construction contract, it was entered into before the commencement of the Act, being the 1st of May 1998. The Project Consultancy Group carried out professional design services in connection with the conversion of a property into a nursing home for the Trust. It alleged the non-payment of fees, and sought the appointment of an adjudicator to decide the matter. The Trust's solicitors responded saying that the contract had been entered into in March 1997 and argued that the Act could therefore not apply and that the Notice of Reference to Adjudication was invalid. Nevertheless, the Project Consultancy Group proceeded to obtain the appointment of an adjudicator. In its response document the Trust stated that it disputed the contractual position and that this would impact upon the adjudicator's jurisdiction to determine the matter. It argued that the contract was a pre-May 1998 contract and that the adjudicator had no jurisdiction to decide the dispute. It is not surprising to find the parties arguing over the date of the contract. The procurement process for construction projects is at best an untidy mess. It is commonplace for formal contract documents never to be executed. Parties will progress projects on the basis of loosely worded Orders or Letters of Intent, such that it will often be difficult if not impossible to establish the true nature of the transaction. A very large proportion of construction disputes which are heard in front of the courts or arbitrators commence with argument as to whether there was a contract, and if so, when it came into force and what were its terms. Despite these difficulties the adjudicator decided that there was a contract entered into after May 1998 capable of being regarded as a construction contract within the meaning of the Act, and accordingly he proceeded to make his decision that fees in the sum of approximately £65,000 were due to the Project Consultancy Group. As expected, the Trust refused to observe the adjudicator's decision and the Project Consultancy Group applied for enforcement of the decision upon summary judgment pursuant to Part 24 of the new Civil Procedure Rules. Justice Dyson was in no doubt that it would be open to a defendant in enforcement proceedings to challenge the decision of an adjudicator on the grounds that he was not empowered by the Act to make the decision. The only real question to decide, however, was whether by participating in the adjudication process the Trust had waived this jurisdiction point and agreed to abide by the decision of the adjudicator on that issue. Previous custom and practice in connection with arbitrators was unhelpful in the view of the judge. He was satisfied that in their initial communications and in their response to the adjudicator, the Trust had never departed from the position that the contract was not one caught by the provisions of the Act. They did not submit to the jurisdiction of the adjudicator on this point. The adjudicator could not, simply by issuing his decision, create jurisdiction where none existed in the absence of clear agreement between the parties. In defending the application for enforcement the Trust needed only to show in the summary proceedings that there was a reasonable prospect that they could demonstrate in full trial that there was no contract capable of giving jurisdiction to the adjudicator. The judge was satisfied that there was reasonable evidence to doubt whether a contract had been formed at all. Accordingly, the application for enforcement of the adjudicator's decision was dismissed.
CJ-9932
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