SBC clause 9.2 states that if a ‘dispute or difference’ arises under the contract and either party wishes to refer it to adjudication, the Scheme will apply. Reference to the definitions in clause 1.1 indicates that the Scheme means Part 1 of the Schedule to the Scheme for Construction Contracts (England and Wales) Regulations 1998. Other JCT contracts have similar clauses, as do other standard form construction contracts. The Scheme, in paragraph 1(1), states that any party to a construction contract may give written notice of intention to refer a ‘dispute’ to adjudication. Therefore, it is of the greatest importance that an identifiable dispute has arisen before it can be referred to adjudication; otherwise the adjudicator will not have the jurisdiction to deal with it. It might be thought that the existence or otherwise of a dispute would be fairly obvious, but questions have often arisen based on the argument that the reference to adjudication has been premature, done before the dispute has crystallised. For example, a contractor may lodge a claim with an architect stating that it expects a reply within two weeks, and having received no response within the allotted time, it issues a notice of adjudication citing the architect’s failure to decide the subject matter of the claim. The first question to be considered is whether there was a dispute when the notice was issued. Was it reasonable for the architect to respond in two weeks? If it was not reasonable, there was no dispute and the adjudicator has no jurisdiction to decide the matter. Needless to say, this kind of question has been the subject of very many actions through the courts. Fortunately, after reviewing the legal authorities, the courts have formulated a series of propositions to assist in deciding whether or not there is a dispute:
1 The word ‘dispute’ which occurs in many arbitration clauses and also in s. 108 of the Housing Grants Act should be given its normal meaning. It does not have some special or unusual meaning conferred upon it by lawyers.
2 Despite the simple meaning of the word ‘dispute’, there has been much litigation over the years as to whether or not disputes existed in particular situations. This litigation has not generated any hard-edged legal rules as to what is or is not a dispute. However, the accumulating judicial decisions have produced helpful guidance.
3 The mere fact that one party (whom I shall call ‘the claimant’) notifies the other party (whom I shall call ‘the respondent’) of a claim does not automatically and immediately give rise to a dispute. It is clear, both as a matter of language and from judicial decisions, that a dispute does not arise unless and until it emerges that the claim is not admitted.
4 The circumstances from which it may emerge that a claim is not admitted are Protean. For example, there may be an express rejection of the claim. There may be discussions between the parties from which objectively it is to be inferred that the claim is not admitted. The respondent may prevaricate, thus giving rise to the inference that he does not admit the claim. The respondent may simply remain silent for a period of time, thus giving rise to the same inference.
5 The period of time for which a respondent may remain silent before a dispute is to be inferred depends heavily upon the facts of the case and the contractual structure. Where the gist of the claim is well known and it is obviously controversial, a very short period of silence may suffice to give rise to this inference. Where the claim is notified to some agent of the respondent who has a legal duty to consider the claim independently and then give a considered response, a longer period of time may be required before it can be inferred that mere silence gives rise to a dispute.
6 If the claimant imposes upon the respondent a deadline for responding to the claim, that deadline does not have the automatic effect of curtailing what would otherwise be a reasonable time for responding. On the other hand, a stated deadline and the reasons for its imposition may be relevant factors when the court comes to consider what is a reasonable time for responding.
7 If the claim as presented by the claimant is so nebulous and ill-defined that the respondent cannot sensibly respond to it, neither silence by the respondent nor even an express non-admission is likely to give rise to a dispute for the purposes of arbitration or adjudication.1
These propositions were approved by the Court of Appeal in Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd.2 Many courts have observed that it will be obvious in most cases when there is a dispute, and the requirement that there must be a dispute will not be interpreted with legalistic rigidity. It has also been said that when the phrase ‘dispute or difference’ is used, it is less hard-edged than using the word ‘dispute’ alone.3
In theory anyone can give expert evidence in arbitration or in court proceedings. All that is necessary is that the ‘expert’ is knowledgeable and experienced about the topic. Therefore, an experienced bricklayer could give expert evidence about the standard of brickwork on a project, a plasterer about plasterwork and an architect about the way an architect should deal with a project – or what is commonly known as ‘good practice’. There are certain architects and others for whom acting as an expert witness is a substantial part of their practices. One must of course be wary of doing nothing but act as an expert witness, because an architect who was no longer in active practice may lack the credibility required. One has only to read the scathing comments by the judge about one of the experts in Royal Brompton Hospital NHS Trust v Hammond & Others (No.7)4 to see the danger.
Nevertheless, it sometimes falls to an architect who is not particularly experienced in court to give expert evidence, and a recent case before the Supreme Court (formerly the House of Lords) should be noted. In Jones v Kaney5 the court had to consider whether an expert witness was immune from actions for negligence. In other words, if an expert witness is negligent in preparing a report or giving evidence, can the party affected by the negligence take legal action against the expert to recover any losses?
The facts of the case are unimportant and concerned a road traffic accident in which Mr Jones was injured. The crucial points were that the clinical psychologist expert witness for Mr Jones, Dr Kaney, prepared reports. The other party admitted liability, and all that remained was the amount of damages. It was alleged that Kaney had been negligent in agreeing to the terms of a joint report, which resulted in Jones having to settle for less damages. Jones brought an action for negligence against Kaney, but she said that, as an expert witness, she enjoyed immunity from actions for negligence. The High Court agreed, but in view of the importance of the question it granted permission for an appeal directly to the Supreme Court.
The Supreme Court confirmed that it is in the public interest that judge, jury, and witnesses, including expert witnesses, are all granted civil immunity. The immunity of expert witnesses has lasted for over 400 years. After a long and thorough consideration of the position, the Court decided by a 5 to 2 majority that expert witnesses would no longer have immunity from action for breach of duty, although they would still enjoy absolute privilege in respect of claims for defamation.
No doubt a person appointed to act as a mediator believes that he or she cannot be called as a witness to give evidence about what transpired at the mediation. That is partly because the parties to a mediation almost invariably agree that the mediation is without prejudice to their rights and remedies if the mediation were to fail and the parties resorted to the courts. In addition, the mediator is party to confidential discussions with each party.
The mediation process can take various forms. In general, the mediator will receive documents concerning the dispute from both parties, and they will probably also make oral submissions at the commencement. The mediator then meets with each party separately to discuss the strengths and weaknesses of their cases. When the mediator believes that both parties are receptive to settlement, generally because the mediator has made both aware of their weaknesses, a meeting of both parties chaired by the mediator is arranged. In many instances, a settlement is reached and put into writing at that meeting. Mediations commonly take up to a day to run their course.
In Farm Assist Ltd (in liquidation) v Secretary of State for the Environment, Food and Rural Affairs,6 the parties had engaged in a mediation in 2003 which was followed by a settlement agreement. Some time later, Farm Assist alleged that the agreement had been entered into under economic duress (economic duress has been discussed in question 27). The Secretary of State wished to call the mediator to give evidence about what had transpired at the mediation, including the private discussions with the mediator, and Farm Assist had no objection. However, the mediator, a solicitor, did object and applied to the court to have the witness summons set aside on the grounds that a mediation agreement had been entered into between the two parties and the mediator which precluded her attendance to give evidence in litigation. In any event, the evidence was confidential and legally privileged.
The judge held that mediation is confidential among all parties. Therefore, even if the parties waive the confidentiality, the mediator can insist upon it. The court will usually uphold this except where evidence of confidential matters is necessary in the interests of justice. The without prejudice privilege is between the two parties, who can waive the privilege; it is not a privilege of the mediator. Any other privilege attaching to documents shown to the mediator is not waived by the waiver of the without prejudice privilege. In this instance, because the dispute was about economic duress in regard to the settlement and not about the subject matter of the mediation, the mediator could be called as a witness.
However, the mediator informed the court that she did fifty mediations a year and she could not remember what transpired at the mediation in question. Moreover, she had not retained any personal notes. The court brushed that aside, saying that memories are often jogged when documents are produced to witnesses. It is clear that the mediator usually cannot be called about the subject matter of the mediation unless the situation is exceptional. In this instance, it was not the subject matter which was in dispute but the settlement itself.
When a party decides to seek adjudication of a dispute under a construction contract, the first stage is to send a notice of adjudication to the other party, and the next, or sometimes concurrent, stage is to appoint an adjudicator. The adjudicator may be named in the contract, or the contract may state the name of the body which is to nominate the adjudicator. Under the Scheme for Construction Contracts (England and Wales) Regulations 1998, if no nominating body is chosen, the referring party may chose any nominating body. Most nominating bodies have their own form which must be filled in and submitted together with a fee, after which the body chooses an adjudicator from the ones on their list and nominates that person. Often, a referring party will notify the nominating body of persons they do not wish to see nominated, and it is rare that a nominating body will ignore such objections – it is easier to nominate someone to whom neither party has raised early objections. A referring party will sometimes ask the nominating body to nominate an adjudicator with particular qualities, such as legal expertise or experience in costing or design, or one who has been engaged on an earlier adjudication on the same project. What is unusual is for a party to suggest the name of an adjudicator to the nominating body.
In Makers UK Ltd v London Borough of Camden,7 solicitors for the referring party decided that the adjudicator should be legally qualified. They discovered that someone they considered to be suitable was on the panel of adjudicators of the RIBA, and having ascertained that he was available, they suggested to the RIBA that he should be nominated. The RIBA did so, and in due course the adjudicator accepted the appointment and proceeded to make a decision. Camden argued that the decision was void because the adjudicator had not been properly appointed. Camden contended that there was an implied term to the effect that neither party should try to unilaterally influence the nominating body when choosing the adjudicator. This contention was rejected by the court, which held that the RIBA was well able to decide whether to take notice of representations, and there may well be times when representations were helpful.
Therefore, it seems that although there is nothing to stop a referring party from suggesting the name of an adjudicator, it will be relatively rare to do so.
213 If the contractor does not like the adjudicator who has been nominated, can it abort the process and seek the nomination of a different adjudicator?
A party wishing to refer a dispute to adjudication obviously wants to have the best adjudicator it can get, but it is reliant on the nominating body to nominate one. The previous question dealt with whether one might suggest the name of an adjudicator; the answer is ‘Yes’, but the nominating body is entitled to nominate any person on its panel of adjudicators.
In Lanes Group plc v Galliford Try Infrastructure Ltd,8 the court considered whether a party, having sought the nomination of an adjudicator, can abort the process by failing to serve a referral and start again with a new application for nomination of a different adjudicator. The court decided that if it was a statutory adjudication (i.e. under the Housing Grants, Construction and Regeneration Act 1996 [as amended]), the referring party could abort the reference and start again. The submission of the notice of adjudication and the nomination of an adjudicator did not start time running; the adjudicator had no jurisdiction until the referral was served. That will be the position under any of the standard forms of contract unless used in connection with residential occupiers, because the existence of an adjudication clause is a result of the 1996 Act.
However, it seems that if it was merely a contractual adjudication (i.e. in accordance with an adjudication clause agreed by the parties and not imposed by legislation), a failure to serve a referral would amount to a repudiation of the adjudication agreement, and the right to adjudicate would be lost.
214 An adjudicator has been appointed whom the employer has not agreed. What can the employer do about it?
The adjudicator can be appointed in various ways. SBC has provision in clause 9.2.1 and in the contract particulars for the adjudicator to be named; that is, the parties have decided on the name before entering into the contract. There is also provision for the parties to simply apply to one of several bodies that maintain panels of adjudicators and which will undertake (for a modest fee) to nominate an adjudicator who has passed the criteria set by that particular body. The RIBA, RICS and CIArb are typical nominating bodies. Of course, there is nothing to stop the parties simply agreeing the name of an adjudicator when the dispute arises. If the parties can agree a name, that is by far the best way because the adjudicator is then a person whom both parties trust to make the right decision.
Putting the name in the contract in advance appears to have the same effect, but it does have some serious disadvantages. An adjudicator chosen in advance, perhaps several months or even years before required, may not be available when required due to holidays, illness, retirement or even death. The adjudicator may be admirable in very many respects but not suited to the particular problem that arises. For example, the parties may choose Mr X, who is an architect, but the eventual dispute may concern structural steel or electrical services. When applying to a nominating body, the danger is that the parties are stuck with whoever is nominated, unless they both object and agree to ask the adjudicator to step down in favour of another of their choosing.
Therefore, the answer to this question depends on what the contract says or, if there is no standard contract, what the Scheme for Construction Contracts (England and Wales) Regulations 1998 says.
It is essential that the adjudicator is appointed in strict conformity with any procedure that is laid down. If the relevant procedure has been complied with, there is nothing the employer can do about it. The adjudicator must be accepted. Obviously, if there is a good reason to object, for example if the adjudicator has a link with the other party, the appointment can be challenged. If the adjudicator does not step down, the employer can agree to proceed with the adjudicator without prejudice to the contention that the adjudicator lacks jurisdiction on the grounds of actual or apparent bias or an apparent breach of the rules of natural justice. That position can be tested in the courts if the adjudicator’s decision is adverse to the employer.
If the proper procedure for the appointment of the adjudicator has not been observed, the employer is on firm ground to challenge, and the adjudicator should resign as soon as it is established that the appointment is flawed.
This is a fairly common question. In general the answer is ‘No’, but what constitutes a single dispute may be open to interpretation. In Witney Town Council v Beam Construction (Cheltenham) Ltd,9 the council entered into a JCT Design and Build Contract 2005 (Revision 2 2009) with Beam for the design and construction of a new community hall. Disputes arose and were referred to adjudication, which was conducted under the Scheme. The dispute was set out in the Notice of Adjudication as follows:
• What value is due to Beam from the council?
• What value is due to Beam from the council under and in connection with the draft January 2011 account?
• What value is due to Beam under and in connection with the final statement of March 2011?
• What is the time or times for payment?
• What sum is due to Beam as interest?
• Is Beam entitled to recover its costs?
• Is Beam entitled to such further or other sums from the council as the adjudicator decides?
It was agreed by both parties that the Scheme allows only one dispute to be referred to adjudication at the same time (some other contracts allow several disputes). The adjudicator’s decision was substantially in favour of Beam. The council refused to pay, and when Beam applied to enforce the decision through the court, the council argued that the adjudicator had attempted to decide several disputes and so had no jurisdiction.
In a significant judgment for anyone seeking adjudication and for adjudicators, the court held that there was actually only one dispute: What was due and owing to Beam? Therefore, the adjudicator had the jurisdiction to make the decision. After reviewing all the relevant authorities, the court summed up the position like this:
i A dispute arises generally when and in circumstances in which a claim or assertion is made by one party and expressly or implicitly challenged or not accepted.
ii A dispute in existence at one time can in time metamorphose in to something different to that which it was originally.
iii A dispute can comprise a single issue or any number of issues within it. However, a dispute between parties does not necessarily comprise everything which is in issue between them at the time that one party initiates adjudication; put another way, everything in issue at that time does not necessarily comprise one dispute, although it may do so.