A tense situation

Back in 2003 a cladding specialist called William Verry (Glazing Systems) agreed to do some work for Furlong Homes. It was a big job, worth in excess of £1m. A dispute arose over an extension of time, and this led to Furlong to claim that it had overpaid Verry, and in the fullness of time it led to an adjudication and then a legal battle in the High Court.

The point I’d like you to consider first is the adjudicator’s comment that: “The case now put forward by Verry in its response is markedly different from that previously put forward and was not been seen by the referring party before the issue of the notice of adjudication.” He went on to conclude that he was therefore “debarred from considering Verry’s response”.

The snag here is that this sounds like shutting out of a defence. And if anything goes against the grain in litigation or arbitration it is to bar a defendant from defending themselves by any legitimate means possible … even if it is halfway through the trial. You might make them pay the cost of an adjournment, but to shut them out is too tricky: the Court of Appeal would wriggle.

Wait a moment. We’re not talking about long haul flights in endless litigation or arbitration here, we’re talking about short-hop adjudication. The idea of the process is to bring an existing set of arguments to an umpire. To allow in new arguments is to stray from the plot. When that happens, 28 days can become 28 weeks.

The adjudicator then, upon reflection, changed his mind. He decided that a defendant “was entitled to refute a claim by any proper means, and if that meant making points that had not been made before, that was entirely legitimate”.

You can imagine the effect of all that. Furlong said the whole process had gone off the rails and was of no effect. If Verry wanted the adjudication to stick it would have to get the High Court to have a look at what went on. It was a useful look.

Judge Coulson began not by asking whether a respondent could put in any defence it liked in an adjudication. He began by looking at what the referring party had asked the adjudicator to do and asking if the respondent’s defence came within “what he was authorised to let in and what quarrels he was authorised to decide”. That is what is meant by “internal jurisdiction”. Step outside the scope of all that, and the process can easily become a waste of time and money.

So, if the word ‘was’ instead of ‘is’ was used, is ‘was’ quite different to ‘is’ or is ‘is’ instead of ‘was’ the question? Is you keeping up?

Scope starts within what is written in the notice of adjudication. One of the quarrels asked the adjudicator to “decide that the extension of time granted by Furlong to 2 February 2004 is correct”. Consider the word “is”. The judge landed on it. He said: “The dispute was whether the existing extension is – present tense – correct.” There was no attempt, he said, to limit the dispute to earlier claims made or information previously provided by Verry and considered by Furlong. It was, said the judge, an unlimited and unqualified dispute. So, if the word “was” instead of “is” was used, is “was” quite different to “is” or is “is” instead of “was” the question? Is you keeping up?

A tense situation

Draw breath with me. According to the adjudicator, Verry’s defence was a new extension of time claim. Furlong immediately told the adjudicator and Verry that if it wanted an extension, it should simply make a claim using the contractual machinery. But the judge said that the scope of the notice was wide enough to let the contractor put in any defence … including a new extension claim.

This is an important remark and with great respect correct. If the scope of words used in the notice is wide enough (forgive me, was wide enough) to invite any defence then the referring party has abandoned the right to have only the pre-adjudication quarrels included in the tribunal. There is no rule that allows a respondent to put in any new defence willy-nilly. There is no rule that says a respondent cannot take a referring party by surprise. Instead, the respondent is confined, even fettered, by the words in the notice. The fetter may be nearly none at all if the notice is a sort of “kitchen-sink” adjudication. But if the question is tightly drawn, the respondent can’t complain that it has only “half a shield”. If the question put is tightly circumscribed, the adjudicator, as first happened here, would be right to debar new arguments. This isn’t or wasn’t litigation.

The model we had in mind for adjudication in 1998 was to bring single matters: questions of law, finding of facts. If you are awarded a wrong extension of time by the contract administrator, bring that issue to an impartial adjudicator and if next week you are unhappy with a second extension of time by the contract administrator bring that to an adjudicator. Bring one-off questions and watch out for the “ises” and “wases” on the way. Nothing should shut-out a good defence, simply bring it to a separate adjudication.