IDE Contracting Ltd. v RG Carter Cambridge Ltd

This is an application on the part of the claimant to enforce the award of an adjudicator appointed under the provisions of the Housing Grants, Construction and Regeneration Act 1996. The application was made under part 8 of the Civil Procedure Rules on the basis that there was unlikely to be a dispute of fact. There is, indeed, no dispute of primary fact, though as will appear there is a dispute as to an inference. By the application, the claimant sought permission to enter judgment in respect of the award and permission to enforce the judgment. The application has proceeded on the basis that it is an application for summary judgment under part 24.

By his award dated 18^th November 2003 the adjudicator, Mr. John Smalley, directed the defendant to pay to the claimant forthwith the sum of £120,147.69 plus interest in the sum of £9,357.66, together with further interest at the rate of £29.62 a day for each day that IDE (sic) failed to make payment in accordance with the decision. He also ordered the defendant to pay his fee of £7,668.15 within seven days of the date of the decision. VAT was to be added to all those sums as appropriate. The total amount claimed before me was £161,229.61, including VAT. There is no dispute as to the correctness of the calculation of that figure on the basis of the award.

The defence is that the adjudicator had no jurisdiction to make the award. By its written response, dated 15^th October 2003, to the claimant’s claim before the adjudicator, the defendant submitted on a number of grounds that the adjudicator had no jurisdiction to act in this matter. It stated in the first paragraph of its response that it specifically reserved its right to raise the issue of jurisdiction during both the adjudication and in any subsequent court or arbitral proceedings. It went on:

Mr. Dennys relied on two grounds in support of his contention that the adjudicator lacked jurisdiction to make his award. The first was that Mr. Smalley had not been duly appointed.

The contract between the parties provided for adjudication as follows:

The facts as they emerged before me are that Mr. Stephen Pratt was telephoned on 12^th September 2003 by Christine Holland, who worked for the practice of Stuart C. Holland, Chartered Quantity Surveyor, acting for the claimant, to enquire as to his availability to act in an adjudication involving R G Carter Ltd. He replied that he would not be able to accept the appointment as he had work commitments that would take him overseas. In an e-mail dated 15^th January 2004 to Sarah Elliott, a solicitor acting for the claimant, Mr. Pratt explained that he had had a full diary to the end of September 2003 and had planned business and holiday commitments that took him overseas in October 2003. He went on to state that he had been unable to take the appointment for those reasons. It appears from an e-mail dated 23^rd October 2003 that Mr. Pratt would have been back at work on 2^nd November and would have been able to act as adjudicator after that date.

The notice of adjudication was dated, and received by the defendant on, 29^th September 2003. The accompanying letter from Stuart C. Holland stated “The Chartered Institute of Arbitrators will now be requested to nominate an adjudicator”. It was common ground that that was the institute mentioned in the adjudication clause of the contract, but there misnamed. It was only in the notice of adjudication, at paragraph 10, that it was stated that Mr. Stephen Pratt had declined to act as adjudicator. Mr. Jason Hinch, a senior quantity surveyor employed by the defendant, did not want an adjudicator selected at random, and wrote to Mr. Holland on 2^nd October 2003 suggesting Mr. G. Brewer and Mr. C. Dancaster as adjudicators. He offered further discussion on the point. That offer was not taken up. On 3^rd October Mr. Holland wrote back saying “As stated in our letter of 29^th September, an application has already been made to the Chartered Institute of Arbitrators”. On the same day the Chartered Institute of Arbitrators nominated Mr. Smalley. Mr. Smalley wrote to the parties on 6^th October 2003 in confirmation of his appointment.

The statutory provisions as to the appointment of adjudicators are contained in the schedule to the Scheme for Construction Contracts (England and Wales) Regulations 1998 (S.I.1998 No. 649). The relevant provisions are as follows:

Mr. Lee submitted that those provisions had been complied with. Mr. Pratt indicated on 12^th September that he was unwilling or unable to act. Thus the condition contained in paragraph 2(b) was fulfilled. On a literal reading of the provisions, that submission cannot be gainsaid. But it seems to me not to be in accordance with the general intendment of the provisions. What is intended, in my judgment, is that the notice of adjudication comes first. Then the referring party is to request the person specified in the contract to act as adjudicator, unless he has already indicated to the parties that he is unwilling or unable to act. The request must doubtless be in writing since it must be accompanied by a copy of the notice of adjudication. The person specified must indicate within two days whether or not he is willing to act. If he indicates that he is not, then provided that that indication is made to all parties the referring party may proceed under paragraph 6(1)(b) to request the nominating body to select a person to act as adjudicator. What happened here is that no request at all was made under paragraph 2(a). The procedure was bypassed. And it is in my judgment implicit in paragraph 2(b), as it is explicit in paragraph 6, that the unwillingness or inability of the specified person to act should be indicated to all parties.

If Mr. Lee’s construction of the scheme 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 the notice of adjudication at that time. By the time the notice of adjudication was served, the adjudicator might have become free to act. Yet he would not be appointed. The other party would suffer prejudice in that he would be deprived of having the adjudication carried out by the person of his (and the other party’s) first choice. The same could apply in the absence of any ulterior motive on the part of the claimant.

I conclude that the provisions of the scheme relating to the appointment of the adjudicator were not complied with. Mr. Dennys submitted, and I accept, that non-compliance with those provisions deprives the adjudicator of jurisdiction unless the defendant has submitted to the adjudicator’s jurisdiction in the full sense of having agreed not only that the adjudicator should rule on the issue of jurisdiction but also that it would be bound by that ruling (see the words of Simon Brown L.J., as he then was, in Thomas-Fredric (Construction) Limited v. Keith Wilson [2003] EWCA Civ 1494, 21^st October 2003). However, Mr. Lee submitted that non-compliance with the provisions of the scheme did not affect the validity of the appointment because, on the evidence, Mr. Pratt would in any event have declined to act as adjudicator and a nomination through the Chartered Institute of Arbitrators would have been made. Thus the defendant had suffered no prejudice. I summarize below the further evidence relevant to the questions of submission to the jurisdiction of Mr. Smalley and of prejudice to the defendant.

On 7^th October 2003 the defendant wrote to Mr. Smalley in response to his letter of 6^th October mentioned in paragraph 7 above. The letter stated that the defendant had not seen details of the claimant’s application to the Chartered Institute of Arbitrators or the basis under which the claimant claimed that Mr. Smalley should have jurisdiction. It stated that Mr. Holland’s letter of 29^th September came as a bolt out of the blue as they had no knowledge who he was or what authority he had. The last paragraph of the letter read as follows:

In paragraph 9 of its response, the defendant stated:

On 30^th October the defendant wrote to Mr. Smalley in the following terms:

Mr. Smalley wrote to the parties the same day with reference to the defendant’s letter. With regard to the last paragraph of the letter, he said this:

The defendant replied on 31^st October. The letter was expressed to be without prejudice to the defendant’s view that Mr. Smalley had not been appointed and did not have jurisdiction. The letter contained the following passage:

On the same date, 31^st October, Mr. Holland wrote to Mr. Smalley a letter describing the efforts that his firm had made to find Mr. Pratt, since he was no longer at the address mentioned in the contract. The letter contained the following paragraph:

For the purpose of these proceedings, Christine Holland made a witness statement dated 16^th December 2003 in which she erroneously said that it was “around the 26 September 2003” that she was asked to make contact with Mr. Pratt. It was not until 15^th January 2004 that, following research into Stuart Holland’s telephone records and confirmation from Mr. Pratt, it was realized that the telephone call to Mr. Pratt had taken place not on 26^th September but on 12^th September. Christine Holland made a second witness statement on 15^th January correcting her former statement.

I accept Mr. Smalley’s point that the defendant could itself have contacted Mr. Pratt after service of the notice of adjudication. Nevertheless, the foregoing account of misapprehension and confusion surely confirms the importance of complying with what I have held to be the correct procedure for the appointment of an adjudicator. The defendant’s understandable belief that Mr. Pratt had not been approached led to its taking no further part in the proceedings after 31^st October, when it might otherwise not have taken that course.

Mr. Dennys submitted that the defendant had suffered prejudice by the claimant’s failure to comply with the procedure laid down by the scheme. He submitted that what Mr. Pratt would have done if properly approached is unclear, and might have depended on whether the parties would have been prepared to accommodate his commitments. The state of the evidence was not such as to show convincingly that he would have refused or been unable to act. I accept that notwithstanding what he said in his e-mails of 23^rd October 2003 and 15^th January 2004, it is possible that Mr. Pratt might have changed his mind and made himself available, but in my judgment it is unlikely.

Mr. Dennys submitted that the defendant had also suffered prejudice in having Mr. Smalley as adjudicator when the defendant thought he might be biased against it. In view of Mr. Dennys’s disclaimer of any actual or apparent bias on the part of Mr. Smalley, I cannot accept that submission. Thus I am not satisfied that the defendant has suffered prejudice. But it is in my judgment clearly unnecessary for the defendant to show actual prejudice.

It is abundantly clear that the defendant did not submit to the jurisdiction of Mr. Smalley in the sense of agreeing to be bound by his ruling on the issue of his jurisdiction. I conclude that the adjudicator’s award cannot stand.

The second ground upon which Mr. Dennys relied was that two disputes were put before the adjudicator, whereas the effect of paragraph 8(1) of the scheme was that an adjudicator might not, without the consent of all parties, adjudicate at the same time on more than one dispute. It is unnecessary for me to decide that point.

There being no reason why the case should be disposed of at a trial, I dismiss the claim.