RG Carter Cambridge told the adjudicator to clear off. This happened when its brickwork subcontractor, IDE Contracting, began an adjudication for unpaid sums. Since the subcontract published the name of a pre-chosen adjudicator, it made sense for IDE to phone up and see if the fellow was available. That was on 12 September last. No, he wouldn't be free for about six weeks. So the IDE representative issued a standard notice of adjudication, then applied to the Chartered Institute of Arbitrators for a nomination. And the CIA picked a good chap, too. But RG Carter told him that the rules in The Scheme for Construction Contracts laid down a rigmarole for finding a substitute adjudicator. Guess what? It had not been followed, said RG Carter.
Carter explained how. First, the notice of adjudication has to be served on the other party and the pre-named candidate for adjudicator. Then that candidate is to say within two days whether they are willing and able to do the business, and say so to both parties. You will remember that IDE's representative had simply phoned up to see if the named person was available. The new adjudicator saw the reality of the situation. The named fellow had confirmed that, no matter how he had been approached, he would have declined. It didn't matter, said the appointed adjudicator, that RG Carter hadn't received a written refusal; it suffered no prejudice. In any case, resignation now would result in a disproportionate loss to the referring party. So he pressed on with the adjudication and eventually awarded £120,147 to IDE Contracting.
RG Carter said it wouldn't pay. So IDE sought the usual enforcement in the High Court … and lost. The procedure in the Scheme had not been followed. It was not acceptable, said the judge, that one party should ascertain the availability of the adjudicator named in the contract without the knowledge of the other party and then serve a notice of adjudication. In other words, a canny referring party could play a little game by quietly inquiring about availability and then choosing whether to adjudicate or not. I don't think that suspicion arose here. Anyway, the judge insisted that the second adjudicator wasn't properly appointed and set the adjudication aside. The lesson, then, is to follow the Scheme's rules precisely. What a pity that the adjudicator used his common sense instead.
Perhaps the right approach to jurisdiction challenges is to weigh the risk of carrying on. In this case, the adjudication costs were wasted
Perhaps the right approach to jurisdiction challenges is to weigh the risk of carrying on. In the IDE case, the adjudication costs were wasted. It is easy to spend £15,000 a side; it is easy for the adjudicator to rack up (as happened here) a £7000 fee. Then, if the enforcement challenge succeeds, there will easily be another £20,000 in legal costs. Jurisdiction points are crucial. The adjudicator might be inclined to stay put but he should fight self-interest.
In this case the challenge was carefully explained by RG Carter: the procedure hadn't been followed. (But Carter probably just seemed like one of the awkward squad.) It would have been so easy to do as Carter said and go through the appointing procedure again. The loss in time would have been nothing compared with what a touch of obstinacy eventually lost them. IDE has gone all the way back down the snakes and ladders board.
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.