Recent Developments domestic and international

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Recent Developments domestic and international

    Recent Developments: domestic and


by Nicholas Gould

    Paper given at the 10th Adjudication Update Seminar

     8 November 2004


    Adjudication under the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) has now been with us for 6? years. The Adjudication Society’s website identifies over 200 cases predominantly dealing with the adjudication, although some focus on payment issues arising from the HGCRA.

     Adjudication can no longer be said to be a UK phenomenon. Adjudication has

    been introduced in Australia (New South Wales, Victoria, Queensland and Western Australia) and New Zealand . Adjudication, or related measures in respect of security for payment in respect of construction work, has been

    considered in Singapore, Hong Kong, Texas and the State of New York (excluding the World Trade Centre Developments area). In addition, the Dispute Review

    Board has, in the eyes of the World Bank, matured into an adjudicative binding process captured by the World Bank’s own procurement of works procedure, and

    also the Dispute Adjudication Board procedure set out in the FIDIC forms of


    Adjudication has spread as a result of the right to call in an adjudicator

    because of an implied term in the contract (arising from statute) and the right

     to adjudication quite simply because the parties have expressly included it within their contract (even though there may be no legislative requirement

     on the parties to adjudicate because of the jurisdiction they are operating within).

    The focus of this paper, therefore, is recent developments not just in the

    1. Gould, N. (2002) domestic arena but also in the international arena. Bearing in mind the

    Caution from the introductory points made above, this paper seeks to briefly consider the

     6 th Courts”development of adjudication as a contractual mechanism before then considering

    Adjudication how it has spread into the international arena and how it might continue to

    Update, Fenwick spread internationally as further legislation develops. In addition, the

    Elliott, Savoy, issues that have arisen from some of the recent case law will also be

considered. 4 November.

     Domestic Developments

    2. TCC, HHJ Havery

    There have been several interesting cases since the last Fenwick Elliott QC, 25 June 2004.

    Adjudication Update some 6 months ago. These fall under the category of “in

     writing”, scope of dispute referred, and payment provisions. For a more complete analysis of a range of jurisdictional challenges see N. Gould 1 “Caution from the Courts”.

     “In Writing”

     In the case of Connex South Eastern Limited v MJ Building Services Group Plc,

    MJ Building Services Group Plc carried out work in connection with the 2 installation of close-circuit television systems for the claimant. MJ had been

    invited to tender for work to 50 stations. They were given a verbal instruction to carry out the work, but no written order, nor was any written contract issued. On 20 September 2000 work was suspended. On 18 October 2000 it was agreed that work would proceed, but that MJ would not claim compensation for the suspension. In February 2002 the scope of the work was considerably reduced. On 24 February 2004 MJ served a Notice of Adjudication in respect

    of Connex’s failure to make payment. The adjudication was stayed by consent

    pending the outcome of this hearing.

Connex sought the following declarations:

    ; That there was no agreement as required by Section 107 of the Act;

    ; MJ no longer had a right to adjudicate as the contract had been

    repudiated; and

    ; MJ’s Notice of Adjudication was an abuse of process as the issues

    between the parties had been settled.

HHJ Havery QC held:

    o That Connex’s instruction to proceed with the work in the minutes

     of the meeting of 15 September 2000 constituted an acceptance of

    MJ’s tender. The minutes were in writing and were therefore

     sufficient evidence within section 107 (4) of the Act.

    o It was well established that adjudication can occur after

     completion of the works. The right to adjudicate at any time

    survived repudiation as would an arbitration clause.

    3. TCC, HHJ Thornton o The 11 February 2002 letter was not particularly clear and did

    QC, 11 June 2004. not relate to an existing claim. It could not, therefore, amount

    to a settlement. As a result MJ’s Notice of Adjudication was not

    an abusive process.

    He therefore declined to make the declarations sought.

    Scope of dispute referred

    In the case of William Verry Limited v North West London Communal Mikvah,

    William Verry Limited agreed to construct for the North West London Communal

     Mikvah a Jewish ritual Bath in Golders Green, London for approximately ?2.4 3million. Several disputes arose and there were three consecutive

     adjudications in respect of interim valuations. This application related to the third adjudication by which the adjudicator decided that Verry should be

     paid ?67,055.97 plus interest in respect of retention.

     The second adjudicator’s decision dealt with an interim valuation. A further interim valuation (No. 34) was then issued. No further work had been carried out, but half of the retention was due for release. However, the Interim Certificate showed that no amount was to be paid because of an allegation of defects. Verry referred to the adjudicator the issue of whether retention should be paid. The adjudicator decided that Verry should be paid the half release of retention.

     Mikvah refused to pay on three jurisdictional grounds. First, that the referral was one day late, out of time and therefore the adjudicator did not have the

    jurisdiction to consider it. Second, that there was no dispute because Verry had not challenged Mikvah’s non-payment of the retention, such that a claim

    had not been made which had then been rejected in order to crystallise the dispute. Finally, that the adjudicator had failed to decide all of the critical

    issues referred to.

    Proceedings started pursuant to CPR Part 8, but were transformed into a Part 7 proceedings in order that the judge could consider the factual issues rather

    than strictly legal ones.

    HHJ Thornton QC considered the three jurisdictional changes. He decided that

     the 7-day period for service of the referral notice ran from the date that the Adjudication Notice was issued and not from the date that it was served.

     The referral was therefore as a matter of fact served one day late. However,

    the language of section 108(1)(b) was not rigid, and there was nothing in that

     subsection to preclude a contract from allowing an adjudicator to extend the timescale for issue of the referring document. Clause 41 A.5.6 of the JCT Contract provided that a failure by any party to comply with the contract would not invalidate the decision of an adjudicator. The adjudicator once appointed asked that the referral be faxed to him by 11 December 2003 . Verry complied with this direction and therefore HHJ Thornton QC decided that the Referral

Notice was served within time. 4. [2003] TCLR 5.

    In respect of the no dispute point, HHJ Thornton QC made it clear that William

    Verry Limited’s Adjudication Notice referring to the release and payment of

     the first half of retention was to be considered against the background that was known to the parties at the time or shortly before the issue of the notice.

     It was clear that the subject matter of the dispute required an adjudicator to consider the interim valuation machinery of the contract, to open up review

     and revise the last certificate therefore carrying out a full revaluation in order to determine whether retention should or should not be released. While Verry had not specifically challenged the release of retention with Mikvah,

    they had taken issue with allegation of defects, which impacted upon the financial calculation of the Interim Certificate which in turn determined whether retention would be released. Consideration of the defects was therefore an integral part of the adjudication even though it was not specifically mentioned in the Adjudication Notice.

    The adjudicator had decided that he could not revalue the work nor consider

    any defects. This was based on his incorrect understanding of Ferson 4v Levolux A.T. Limited. The adjudicator felt that he was Contractors Limited

    bound by his previous gross valuation of the work in the second adjudication. However, this rationale failed to consider the contractual interim valuation

    machinery of the contract, which provided him with the ability to revalue the

    5. [2004] EWHC 1285 works on a gross basis. The adjudicator’s error in failing to value the works

    (TCC). afresh and failure to consider the defects was an error of law, and was also unfair to Mikvah.