Solving disputes without dispute

If challenging an adjudicator's jurisdiction, it is important to act quickly. In Palmers Ltd versus ABB Power Construction Ltd (August 1999) His Honour Judge Thornton QC made it clear that if questions about jurisdiction are raised for the first time at enforcement stage, the court is likely to hold that there has been an acceptance of the adjudicator's jurisdiction and that the challenge is too late.

Two recent cases highlight the dangers of delay. In Pegram Shopfitters Ltd versus Tally Wiejl (UK) Ltd (February 2003), Pegram started work on site in June 2000. No formal contract documents were signed and it was not clear as to what amounted to the contract between the parties.

Pegram submitted a final account to Tally Wiejl in March 2002. Since Pegram did not receive what it considered to be a proper response to the final account, it served a notice of adjudication on Tally Wiejl on 3 July 2002. The notice was given in accordance with the statutory Scheme for Construction Contracts and sought the nomination of an adjudicator from the Association of Independent Construction Adjudicators. An adjudicator was nominated who gave a decision on 16 August 2002 stating that Pegram should be paid £95,483.78 plus interest.

Pegram had chosen to commence adjudication under the Scheme because it alleged that the relevant contractual conditions were its own standard conditions which did not comply with Section 108 of the Housing Grants, Construction and Regeneration Act 1996 (the Act). Tally Wiejl objected to the nomination of the adjudicator on the grounds that the relevant conditions of contract were the JCT Standard Form of Prime Cost Contract 1998 and therefore the JCT adjudication provisions applied.

Pegram sought to enforce the award. Tally Wiejl alleged that the adjudicator did not have jurisdiction because: there was no construction contract in existence; or if there was a construction contract in existence, the contract was different in content to that found to exist by the adjudicator and the adjudication had been conducted by reference to the wrong rules.

His Honour Judge Thornton QC held that since Tally Wiejl's jurisdictional challenge before the adjudicator had been made on the basis that there was a construction contract in existence (but incorporating different terms to those alleged by Pegram), Tally Wiejl was now prevented from arguing that there was not a contract in existence at all.

The moral of these tales is that if challenging an adjudicator’s jurisdiction, you must do so at the outset and state your objections clearly.

In relation to the second ground, he held that in circumstances such as these, where the terms of a construction contract regarding notices of referral of disputes to adjudication are not readily ascertainable, the contract does not comply with Section 108 of the Act so the Scheme applies. Therefore the adjudicator in this case had taken the correct approach. Judgement was given for Pegram.

In the second case, Cowlin Construction Ltd versus CFW Architects (November 2002), Cowlin was employed as design and build contractor in a project for the rebuilding of servicemen's housing for the MoD. CFW were architects for the project. Numerous correspondence took place between the parties in relation to the contract documents but no standard form appointment was signed by Cowlin.

Invoices were submitted by CFW and some were paid. CFW's solicitors wrote to Cowlin's solicitors in relation to unpaid invoices and stated that Cowlin had repudiated the contract. Cowlin gave notice of adjudication, alleging that CFW had wrongly repudiated the contract. CFW's solicitors replied by a document described as a 'counter notice' alleging that Cowlin had repudiated the contract. The parties disagreed as to which standard form applied to their agreement in their respective notices.

RIBA nominated an adjudicator. Cowlin served its referral notice. In response, CFW contended that no contract had been concluded and that the adjudicator did not have jurisdiction. CFW made the same objections in relation to a second adjudication commenced by Cowlin.

Her Honour Judge Kirkham found that by its counter notice CFW had accepted the adjudicator's jurisdiction to determine the terms of the contract. Although CFW subsequently changed its mind, by initially electing to affirm the adjudicator's jurisdiction and expressly seeking decisions by the adjudicator in the counter notice, it had waived its right to object to the jurisdiction of the adjudicator and could not go back on that election.