We all know that the key selling point of adjudication is its 28-day time limit. But that’s no good if the rules don’t agree on when the clock starts ticking
There is an elephant trap sitting smack bang in the middle of the Scheme for Construction Contracts – and the adjudicator in the Scottish decision Ritchie Bros (PWC) Ltd vs David Philp (Commercials) Ltd crashed right into it. Mind you, it has been sitting there quietly undisturbed for seven years. Did you spot it?
The ground rule for adjudications is the oh-so-tight 28-day deadline. But from when? According to the JCT documents, the clock ticks from the day the adjudicator receives the referral. The Construction Act 1996 says “within 28 days of referral”. But, oh dear, the Scheme says the adjudicator has 28 days from the date of the referral notice.
Can you see what is coming? Ritchie Bros posted the referral to the adjudicator on 16 September. It got delayed; arrived on the 23rd. The adjudicator thought his 28 days ran from the day it arrived. Wrong. His deadline according to the Scheme was 28 days from 16 September. He was still beavering away with the adjudication after that. In fact, he asked for an extension on 21 October and the referring party said okay. But that okay was, of course, given after the true deadline. His decision was all done by the 23rd and sent on the 27th. Then the responding party kicked up a fuss: the process had run over its deadline so the respondent said it was void.
The first instance judge rejected that. He accepted that the 28 days runs from the date of the referral but accepted argument that there were grounds for regarding the rules of the Scheme as “directory” rather than “mandatory”. So while the decision was late and therefore in breach, it was not so prejudicial as to be struck down. But the decision of two judges in the three-judge tribunal in the Scottish Court of Appeal revised this. The majority decision was that the adjudicator’s misreading of the rules in the Scheme, coupled with the referral getting lost in the post, meant that he missed the decision deadline so it was void. Money wasted.
The Ritchie decision said the words in the Scheme were plain: “The adjudicator shall reach his decision not later than 28 days after the date of the referral notice.” He didn’t. True, the rules say that the referring party alone can consent to extend time by another 14 days. True, the rules say that if the adjudicator fails to reach his decision in 28 days, or 28 plus 14, then either party can serve a fresh notice of adjudication. But the majority decision accepted the argument that permission to extend time had to happen before the expiry of the 28 days. In other words, the adjudicator referee is off the pitch at the end of the 28 days – unless he is asked to stay while he is still on the pitch. He can’t make decisions about the game once he has left the pitch nor be brought back unless both parties agree.
This elephant trap has been sitting smack bang in the middle of the Scheme, quietly undisturbed for seven years. Did you spot it?
The third judge in the Ritchie appeal expressed regret that there were differences in the wording between the Scheme and the act, and more differences in the JCT rules. He also picked up on the fact that the first judge accepted that nothing in the Scheme dictated that consent to extend time had to be obtained before the 28 days ran out. But that point was not argued in the Court of Appeal, so this judge would say no more on that. The key point for him appears to be the unattractive prospect that parliament intended that a decision made one day late was a decision out of time. That is not what parliament intended, he thought. It would undermine the aim of adjudication and involve extra expense.
Can you see what is happening here? The judges are attempting to interpret an act of parliament to fathom the true intentions of parliament from the words in the statutory instrument once put in context. Two judges have read the intention differently from another two. That is unsatisfactory. But the timing is good.
The reason is that the DTI is consulting about changes to the Scheme right now. The Scheme needs amending. Moreover, a decision has to be made: is the Scheme a set of “mandatory” rules or is it “directory”? View the answer not as a court, but from the point of view of the construction industry. And watch out for the elephant trap.
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on firstname.lastname@example.org.