A contractor used a procedural trap to try to torpedo an adjudicator’s decision against it. Unfortunately for the contractor, it blew up in its face
The contractor GD City Holdings Limited has struggled to torpedo the adjudicator’s decisions on this job. The employer, KNN Colburn LLO, is the developer converting a retail space in Brady Street, London E1, into five flats. The modest size of the job hasn’t stopped enthusiastic falling out, and a handful of adjudications. The most recent round in adjudication saw GD City Holdings come to the High Court arguing four reasons why the judge should see off the adjudicator’s order for a modest £33,000-odd to be paid by the contractor to the employer. I bet the High Court costs came close to that same figure. Nor would it be a surprise that by lumping the High Court enforcement costs onto the adjudicator’s order, the total lump is £60k instead of £33k. On top of that the contractor copped it for the £7k adjudicator’s fees.
Go back to the very start of the adjudication. The notice of adjudication arrived, then a few days later the referral was served by the employer (KNN Colburn) on the adjudicator and contractor. That service of the referral, under the JCT rules, is the starting pistol shot for the 28-day race. You calculate day 28 from that service date. It so often happens that the referral comes in two parts: first an email turns up with the story, argument and more. Next day, as happened here, the supporting documents turn up. If the email story is served on (as here) 31 January but the supporting appendices on 1 February, when does the 28 days run from? The adjudicator here is very experienced. He said it ran from 1 February. I suspect he was being fair to the responding party. He then put in writing that day 28 would be 1 March, being 28 days from 1 February.
GD City Holdings played adjudications all that time without shouting about the error. It was an attempt to spring a procedural trap
Come 1 March, the adjudicator Matt Bastone kept to his word and served up the decision. That’s when he decided GD City Holdings owed the employer the £33k. Up popped the lawyers for GD City Holdings. They pointed to a gotcha. Since the referral was served on 31 January, the decision was due on 28 February, so being one day late it had no effect. That was both right and wrong. The judge decided that the Scheme’s rules for adjudication say the referral story itself shall be accompanied by the construction contract and those other documents the referring party intends to rely on. But the Scheme also says that the adjudicator shall reach his decision not later than 28 days after the date of referral. The supporting files are not usually part of the referral notice, said the judge. So the 28 days runs from 31 January. Hurrah, said the contractor; hang on, said the judge. Did you notice that the adjudicator wrote to the parties telling them that the 28th day was 1 March? He wasn’t pulled up on that until the losing contractor got the award. In other words, GD City Holdings played adjudications all that time without shouting about the error. It was an attempt to spring a procedural trap, said
Mr Justice Stuart-Smith. Go back to the finding that the referral does not usually include the supporting appendices. It’s not always right to say that. The judge reminded us that there may be documents needed with the referral story, otherwise it can be so deficient that it affects the validity of the adjudication process. Hmm. I don’t think we can proceed in this way. Too vague. The 28 days should start when all the confounded files land.
We haven’t finished with the effort to torpedo the decision. The contractor makes another three points. Two of them said that the previous adjudicator, Philip Eyre, had already determined the amount of damages for delay to be paid by the contractor and other matters too. This time the objection was taken during the adjudication. It was a question of objective interpretation of the previous adjudicator’s decision. This judge agreed with the later adjudicator about what his predecessor decided. It was a clearly written earlier award; so that disposed of points two and three.
The fourth point also failed but is important. GD City Holdings’ lawyers could not find in the award any sign that an argument about a particular clause in the contract had been dealt with. It’s all too easy in this 28-day system to miss an argument in the documents. The “ordinary” position in those circumstances is that the decision remains enforceable. Exceptionally, it is fair to say that an independent oversight that has a significant effect on the overall result could render the decision void. It didn’t in this case. The judicial view is that mistakes are to be expected, even big ones. The safety net is “pay now and argue later”.
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple