If a client presented with a payment certificate hasn’t paid up 14 days later, the dispute begins on day 15, right? Wrong. As this Scottish case demonstrates, you need to apply a little common sense
I do like this Scottish judgment. It’s written in plain English and it addresses an old favourite: had a dispute crystallised before adjudication proceedings were begun? It also explores what happens if the contract file is chock-a-block with correspondence from a company with a similar name to one of the contracting parties.
Let me explain the second point first. Westminster Properties Scotland entered into a refurbishment contract with John Stirling, trading as M&S Contracts. A JCT Minor Works form was agreed. Ordinary stuff.
It so happens that another of John Stirling’s enterprises was M&S Contracts Limited. And, you guessed it, letters were sent in that company name as well. Cheques received from the employer for this job went into both the limited company and the other firm.
This sort of mishmash isn’t unusual, particularly with smaller firms. Mind you, it’s a bit of a gift for the other side’s lawyers. But the Scottish judge was able to explain the position. He said the correspondence by the “wrong” company made no odds when it was on administration of the contract works.
The line is drawn, however, when the “wrong” company goes “formal”. So if M&S Limited began an adjudication in its name, that was a no-no. The true party was the original contracting firm: John Stirling trading as M&S Contracts. Only the true party could give a notice of adjudication, be the name on the referral, and so on.
Now let’s switch back to the first point: the attempt by Westminster to chase the adjudicator away by saying, “there is no dispute”. Let me tell you the facts.
In the ordinary way, the JCT contract administrator issued payment certificates. Bear in mind that, although the administrator is paid its fee by the employer, it is supposed to don a hat with a label on it saying, “I’m independent and impartial when issuing certificates”. Anyway, the amount said to be payable according to the certificate becomes “the amount due”.
If nothing more is said, the employer pays 14 days later. And if it doesn’t, said counsel for John Stirling trading as M&S Contracts, that’s when a dispute is formed. If that is right, an adjudication can begin on day 15.
In the nine or so years that adjudication has been around, this argument about whether a dispute has arisen has occupied the waking and sleeping hours of many a lawyer and builder. The Scottish judge has kept to all the principles from previous cases, but he has identified the exact point at which a dispute arises because of non-payment.
It isn’t correct to say a dispute arises immediately the employer fails to pay up. The so-called rules for identifying birth of a dispute are not quite so hard-edged.
There is even a suspicion that these rules require a smidgen of common sense. Consider that unpaid certificate. I would have thought the dispute was born the day it became late. Not necessarily so. Say the employer had been silent since the certificate was issued. Then say it is silent when its accounts department is chivvied. By now, it is day 21 or 25. Or say the accounts department prevaricates. By now, it is day 30 or 35.
There ought to be a period, according to the legal tests, when the matter of a claim has been brought to the attention of the opposing party and that party has had an opportunity to consider and admit, modify or reject the claim. So if no cash turns up on day 14, there is an inkling of a dispute. After all, the payer has had 14 days to kick up a fuss.
In real life, though, there are administrative hiccups. The certificate or the cheque may have slipped behind a radiator. As time, excuses or silence ebb by, the inkling gives way to an inference, then to near certainty. So it’s the conduct of the payer that has to be weighed. That’s why the test on the point at which the dispute kicks off is not set in stone.
One other point does strike home: the employer is entitled to challenge any administrator’s certificate, which can be opened up and reviewed using adjudication.
Some folk are not so focused on the niceties of legal obligations. So the hint here is to prod the other fellow gently for the cash.
And if he doesn’t pay up, give him a thick ear with the adjudicator and the court.
Tony Bingham is a barrister and arbitrator