When is a dispute not a dispute? We look at the intricacies of adjudication
The Housing Grants, Construction and Regeneration Act 1996 allows a party to a construction contract the statutory right to refer a dispute arising under that contract to adjudication. Since the Act was implemented, the precise meaning of the word ‘dispute’ has been the subject of extensive judicial interpretation.
What is a dispute?
It is to be noted that the Act refers to a ‘dispute’ and not to ‘disputes’. Thus, at any one time, a referring party must refer a single dispute. During a project, many claims, issues, contentions and causes of action will arise. Many of these will be, collectively or individually, disputed.
When a dispute arises, it may cover one, several or many of these matters. At any time, it will be a question of fact as to what is in dispute. Thus the dispute is whatever claims, issues, contentions or causes of action then being disputed which the referring party has chosen to crystallise into an adjudication reference.
Accordingly, a contractor with a complex final account claim containing loss and expense, extensions of time, valuation of variations and the valuation of measured work is entitled to argue that its claim is, in essence, one single claim for an unpaid sum. It does not matter how large the claim might be and how voluminous the supporting documentation.
There is no definition of ‘dispute’ in the Act but if a contractor is to implement the law successfully it depends on a clear grasp of when a dispute crystallises.
Scope and extent of the dispute
Without doubt, the most important document in the adjudication process is the notice of intention to refer a dispute to adjudication. Judicial authority makes it clear that any jurisdictional issues will be considered by reference to the nature, scope and extent of the dispute identified in the notice of adjudication.
This notice defines the limits of the adjudicator’s jurisdiction, and it is extremely important that a contractor understands that the later documents, and in particular the more detailed referral notice, do not extend the scope of the dispute beyond that which is set out in the notice of adjudication.
Unless there is an express agreement by the parties and the adjudicator to widen or narrow the extent of the dispute described in the notice of adjudication, it is that dispute alone that the adjudicator has jurisdiction to decide. Such agreement is not to be implied from the parties’ conduct (submission of later documents or arguments).
There is no definition of ‘dispute’ in the Act but if a contractor
is to implement
the legislation successfully it depends on a clear understanding of when a dispute crystallises
Dispute prior to the notice
The notice of adjudication should not purport to identify a dispute of which the other party was either unaware or had very little or no time to consider. If this occurs, the other party may well have justifiable grounds to complain that the purported dispute in the notice of adjudication was not a dispute because the dispute had not crystallised.
A claim and its submission to the other party do not necessarily constitute a dispute. The claim has to be rejected or contested, which can occur when the opposing party refuses to answer the claim, and a dispute can arise when there has been a bare rejection of the claim.
Also, there must have been an opportunity for each of the protagonists to consider the position adopted by the other and to formulate arguments of a reasoned kind.
An important point to consider is that, for the purposes of referring a dispute to adjudication, a party can refine its arguments and even abandon previous points, although not to be meritorious.
But what a party cannot do is alter fundamentally the nature of the dispute between them by abandoning wholesale facts previously relied on or arguments previously advanced, and contend that, because the claim remains the same, the dispute is the same.
Although the Act is silent on the meaning of the word ‘dispute’, there is an abundance of adjudication case law to assist in defining when a dispute crystallises. For example, a dispute does not automatically crystallise simply because a claim has been made, but the claim must first not have been admitted.
It must be shown that the parties have had an opportunity to consider, admit, modify or reject a claim, with the open exchange of views, in an attempt to resolve it, and there is a requirement that the rejection is in clear language or is an obvious refusal. If a claim is made against a party, that party needs to be fully aware of the case against it.
Originally published in EMC September 2009 as "Has your dispute crytallised?"
Electrical and Mechanical Contractor
Andrew Milner is with Integritam Construction Consultancy