Could you lose your right to adjudicate?
Introduction
Section 108 (2)(a) of the Housing Grants Construction and Regeneration Act 1996 states that a party to a construction contract has the right to refer a dispute arising under the contract for adjudication "at any time".
A recent Scottish case has suggested, however, that a party can lose this “right” by waiting too long to commence adjudication and acting in a way that suggests it will not be doing so at all.
The case
In Phoenix Contracts (Leicester) Limited v Central Building Contractors (Glasgow) Limited t/a CBC Stone (Glasgow Sheriff Court, 24 June 2009, unreported), Sheriff Deutsch had to grapple with some "novel and difficult" issues in deciding whether the right to adjudicate can ever be lost, or whether it is an absolute and inalienable statutory right.
CBC had raised an action for payment under a building contract in Glasgow Sheriff Court in October 2008. This action proceeded to the point where proof (trial) dates were fixed and the parties had started to prepare for the proof. With the proof due to start on 8 August 2009, CBC issued a Referral Notice on 10 June 2009, with a view to referring the same dispute to adjudication.
Phoenix asked the court to grant an interim interdict barring CBC from proceeding with the adjudication, arguing that CBC had waited too long to raise adjudication proceedings. Phoenix claimed that, by raising the court action and proceeding with it to a fairly advanced stage, CBC had waived its right to adjudicate in respect of the same subject matter, and was personally barred from doing so.
The decision
In his judgment, Sheriff Deutsch pointed out that there must be exceptions to a party's right to refer a dispute to adjudication "at any time", including cases where the referring party has waived its right to adjudicate and/or is personally barred from doing so.
In assessing whether CBC had waived its right, the Sheriff looked at the whole of CBC's actions, and drew particular attention to:-
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The stage the court action had reached on the date CBC threatened to refer the matter to adjudication;
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The relatively low value of the claim (£40,303.90), and the fact that Phoenix might infer from this that CBC had decided that the cost of adjudication was not warranted; and
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The fact that CBC would be unlikely to be able to enforce any adjudicator's award before judgment was issued in the court action.
Taking all of this into account, the Sheriff granted interim interdict barring CBC from referring the dispute to adjudication. (As a side issue, the adjudicator's assertion that he would not be bound by the interdict was rejected, with the court confirming that an adjudicator acts on behalf of the parties, not on behalf of himself or of the appointing authority).
What this means for you
CBC is now appealing this decision, and we will therefore have to wait and see whether Sheriff Deutsch's decision will stand.
In the meantime, however, any party to a court action who wishes to retain its right to refer the same dispute to adjudication should consider taking steps throughout the course of the court action to make it clear to its opponent that it has not waived its right to adjudicate.
This becomes increasingly important as a court action progresses, particularly when the stage of fixing proof dates and taking steps to prepare for proof is reached.
David Scott
Partner
Tel +44 (0)131 777 7023
Email david.scott@mcgrigors.com
Kenneth Hill
Solicitor
Tel +44 (0)131 777 7454
Email kenneth.hill@mcgrigors.com
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