March 2005

ADJUDICATORS' DECISIONS: DELAY CAN BE FATAL

Scotland's Appeal Court, the Inner House, has decided in the case of Ritchie Brothers (PWC) Limited -v- David Philp (Commercials) Limited that a "late" adjudicator's decision is invalid. This decision overturned that of the judge who first heard the debate on this case. Unusually, the decision was not unanimous, and was reached by a majority of 2:1.

The decision provides authoritative guidance on this point in Scotland, but is possibly at odds with the law in England.

Factual Background

Ritchie, the contractor, sought to enforce an adjudication decision in its favour against Philp, the employer. The adjudication had proceeded under the Scottish Scheme for Construction Contracts. The adjudicator's decision had been issued 11 days beyond the expiry of the prescribed 28 day period (and, in fact, 4 days beyond a purported retrospective extension granted by Ritchie).

The adjudicator's decision was upheld by the judge at first instance on the basis that his jurisdiction continued until a fresh adjudication notice was served by one of the parties. The end of the 28 day period did not bring an end to the adjudicator's jurisdiction.

Appeal Arguments

Philp maintained that the 28 day period had to be complied with. If an adjudicator realised he was going to be late in issuing his decision, he could seek an extension of the decision period.

Ritchie, on the other hand, argued that the Scheme does not expressly require an extension to be granted in advance; that jurisdiction continues until a fresh adjudication notice is served; and that the decision remained binding despite a procedural error. Ritchie's fallback position was that the delay was immaterial (following the earlier case of St Andrews Bay v HGB)

The Majority Decision

The Lord-Justice Clerk (with Lord Nimmo Smith concurring) held that the adjudicator's jurisdiction automatically expired after 28 days. Any extension to that 28 day period required to be granted before it expired. The court considered that the time limits in the Scheme and the 1996 Act are mandatory and not merely directory.

The majority view refers to the onus on adjudicators, lawyers and other parties involved in an adjudication to act in accordance with the prescribed timetable. According to the court, adjudicators ought to be able to assess their prospects of meeting the 28 day deadline as soon as papers are received. If there is any doubt, an extension ought to be requested.

The Dissenting Voice

Lord Abernethy agreed with the first instance decision, pointing to the wasted time and expense which would flow from the unenforceability of the adjudicator's decision.

The English Position

In the case of Barnes & Elliot -v- Taylor Woodrow it was held that the adjudicator required to reach his decision and communicate it in writing to the parties within the time limit. A very short delay in communicating the decision to the parties would be excusable, but a longer delay would not be.

In the more recent case of Simons Construction -v- Aardvark, the decision of the adjudicator was issued 8 days late. The court held that the decision of an adjudicator was binding whenever it was given, provided that the adjudication agreement had not been terminated for failure to produce a decision, and that a fresh adjudication notice had not been issued by one of the parties.

The law in England on this point is therefore - at the present time at least - unsettled. Would the English Court of Appeal follow the same approach as its Scottish counterpart? Our view is that this is likely.

Practice Points

• Adjudicators should ensure that their decision is reached and communicated to the parties within the relevant time limit.

• The need for an extension ought to be considered from the very outset, by the adjudicator and the parties, and addressed before the initial 28 day period expires. Referring parties and those acting for them should err on the side of caution when deciding whether to allow an extension within the 14 day "referring party" period and how much longer to give the adjudicator to reach a decision.

• Other time limits in the 1996 Act (or their contractual equivalents) are likely to be strictly construed by the courts if the Ritchie v Philp approach is adopted

Vivien Welsh
Assistant, Construction & Engineering Team