adjudicator determines own jurisdiction: a prediction …
TRANSCRIPT
ADJUDICATOR DETERMINES OWN JURISDICTION:
A PREDICTION FOR THE PROPOSED CONSTRUCTION INDUSTRY PAYMENT
AND ADJUDICATION ACT
IMRAN BIN MOHD YUSOP
UNIVERSITI TEKNOLOGI MALAYSIA
PSZ 19:16 (Pind. 1/07)
DECLARATION OF THESIS / UNDERGRADUATE PROJECT PAPER AND COPYRIGHT
Author’s full name : IMRAN BIN MOHD YUSOP
Date of birth : 25th October 1985
Title : ADJUDICATOR DETERMINES OWN JURISDICTION: A PREDICTION FOR THE
PROPOSED CONSTRUCTION INDUSTRY PAYMENT AND ADJUDICATION ACT
Academic Session: 2009/2010
I declare that this thesis is classified as :
I acknowledged that Universiti Teknologi Malaysia reserves the right as follows:
1. The thesis is the property of Universiti Teknologi Malaysia.
2. The Library of Universiti Teknologi Malaysia has the right to make copies for the purpose
of research only.
3. The Library has the right to make copies of the thesis for academic exchange.
Certified by:
SIGNATURE SIGNATURE OF SUPERVISOR
851025-10-5251 EN. JAMALUDDIN YAAKOB
(NEW IC NO. /PASSPORT NO.) NAME OF SUPERVISOR
Date : Date :
NOTES : * If the thesis is CONFIDENTAL or RESTRICTED, please attach with the letter from
the organization with period and reasons for confidentiality or restriction.
UNIVERSITI TEKNOLOGI MALAYSIA
CONFIDENTIAL (Contains confidential information under the Official Secret
Act 1972)*
RESTRICTED (Contains restricted information as specified by the
organization where research was done)*
OPEN ACCESS I agree that my thesis to be published as online open access
(full text)
“I hereby declare that I have read this project report and in my opinion this project report
is sufficient in terms of scope and quality for the award of the degree of Master of
Science in Construction Contract Management”
Signature : …………………………………………
Name of Supervisor : ……………….………………………...
Date : …………..………….……………….....
EN. JAMALUDDIN YAAKOB
ADJUDICATOR DETERMINES OWN JURISDICTION:
A PREDICTION FOR THE PROPOSED CONSTRUCTION INDUSTRY PAYMENT
AND ADJUDICATION ACT
IMRAN BIN MOHD YUSOP
A master’s project report submitted in partial fulfillment of the
requirements for the award of the degree of
Master of Science (Construction Contract Management)
Faculty of Built Environment
Universiti Teknologi Malaysia
JULY 2010
ii
“I declare that this Master Research Project entitled “Adjudicator Determines Own
Jurisdiction: A Prediction for the Proposed Construction Industry Payment and
Adjudication Act” is the result of my own research and that all sources are acknowledged
in the references. The project report has not been accepted for any degree and is not
concurrently submitted in candidature of any other degree.”
Signature : ................................................................
Name : ................................................................
Date : ................................................................
IMRAN BIN MOHD YUSOP
iii
To my beloved parents,
Tuan Haji Mohd Yusop Hasan
Puan Hajjah Badariah Abdul Hamid
iv
ACKNOWLEDGEMENT
In the name of Allah, the Most Gracious, the Most Merciful. My praises goes to
Allah, who gave me chance and ability to finish this masters. Alhamdulillah.
In preparing this master project, I was in contact with many people. They have
contributed towards my understanding and thoughts. First and foremost, I wish to express
my sincere appreciation to my kind supervisor, En. Jamaluddin Yaakob for the
encouragement, guidance, critics and friendship. Without his continued support and
interest, this master project would not have been the same as presented here.
My sincere appreciation also extends to all my friends from IIUM and UM who
helped me to get lots of books and materials for this master project. Besides, I am grateful
to all my CCM 09/10 classmates and lecturers who helped me and always been
supportive throughout the process of preparation and production of this master project. It
has been a wonderful time for me studying with them at UTM.
Last but not least, I am deeply grateful to my lovely parents, brothers and sisters,
who always support, motivate and help me trough out this masters. I will always
remember and appreciate their kindness and may Allah bless them.
v
ABSTRACT
Adjudication always been said as a cheaper and speedier dispute resolution
mechanism which gives a party a statutory right to adjudication. Currently Malaysian
construction industry is waiting for the Construction Industry Payment and Adjudication
Act (CIPAA) to come into force. The experience from other countries relating to
adjudication mainly on complex issues like jurisdiction of adjudicator must surely mean
any new model should be an improvement over earlier statutes. Whilst the cases
regarding adjudicator jurisdiction keep growing, the proposed CIPAA should be well
prepared to face similar issues and one of it is on the adjudicator determines own
jurisdiction. Accordingly, it is the objective of this research to determine the position of
the proposed CIPAA in relation to the legal position on the issue of adjudicator
determines own jurisdiction. This research focuses on the United Kingdom cases relating
to this issue under the Housing Grants, Construction and Regeneration Act (HGCRA)
1996. From there, this research studies on the principle created on the issue of adjudicator
determines own jurisdiction. Then, the proposed CIPAA be anticipated to look on its
position on this issue. It is can be learnt that there is loophole in the provisions of the
proposed CIPAA which can continue the jurisdictional challenge as been experience by
the HGCRA 1996. Thus, it is essential for the proposed CIPAA to provide a concrete
measures to prevent the similar issue arise.
vi
ABSTRAK
Adjudikasi sering dikatakan sebagai satu penyelesaian pertelingkahan yang lebih
cepat yang memberi hak kepada parti di sisi undang-undang. Kini, industri pembinaan
Malaysia sedang menunggu Akta Bayaran dan Adjudikasi Industri Pembinaan (CIPAA)
untuk dikuatkuasakan. Pengalaman negara lain berkaitan dengan adjudikasi terutama
dalam isu-isu yang rumit seperti isu bidangkuasa adjudikator seharusnya membuatkan
sebarang akta baru, lebih baik daripada akta yang sedia ada. Dalam pada peningkatan
kes-kes yang melibatkan bidangkuasa adjudikator, terutamanya di United Kingdom,
proposal CIPAA seharusnya bersiap sedia untuk menghadapi isu-isu yang sama dan salah
satunya ialah isu berkenaan dengan adjudikator menentukan bidangkuasanya sendiri.
Kajian ini memfokuskan kepada kes-kes di United Kingdom yang berkenaan dengan isu
ini di bawah akta Housing Grants, Construction and Regeneration Act (HGCRA) 1996.
Daripada situ kajian ini membincangkan keputusan mahkamah yang telah dibuat
berkenaan dengan isu tersebut. Seterusnya kajian ini mengkaji proposal CIPAA untuk
melihat posisinya terhadap isu ini. Adalah dipelajari bahawa ada ruang di dalam proposal
CIPAA yang membolehkan berlakunya tentangan terhadap bidangkuasa adjudikator.
Oleh itu, adalah penting bagi proposal CIPAA memberi satu tindakan yang baik untuk
menghalang isu yang sama berlaku apabila ia dikuatkuasa di Negara ini.
vii
TABLE OF CONTENTS
CHAPTER TITLE PAGE
DECLARATION ii
DEDICATION iii
ACKNOWLEDGEMENT iv
ABSTRACT v
ABSTRAK vi
TABLE OF CONTENTS vii
LIST OF FIGURES xi
LIST OF ABBREVATIONS xii
LIST OF CASES xiv
1 INTRODUCTION
1.1 Background of study 1
1.2 Problem statement 4
1.3 Objective 9
1.4 Scope of research 9
1.5 Significance of research 10
1.6 Research methodology 11
viii
2 ADJUDICATION
2.1 Introduction 12
2.2 The definition of adjudication 13
2.3 Types of adjudication in construction contract 15
2.3.1 Contractual adjudication 16
2.3.2 Statutory adjudication 19
2.4 Housing Grants, Construction and Regeneration 21
Act 1996
2.4.1 General overview 23
2.5 The proposed Construction Industry Payment and 25
Adjudication Act (CIPAA)
2.5.1 Features of the proposed CIPAA 27
2.6 Adjudication process 29
2.6.1 Before the adjudication 31
2.6.2 The notice of adjudication 32
2.6.3 The selection and appointment of the 34
adjudicator
2.6.4 Referral of the dispute to the adjudicator 36
2.6.5 Conduct of the adjudication 38
2.6.6 The adjudicator’s decision 42
2.7 Summary 44
3 ADJUDICATOR’S JURISDICTION
3.1 Introduction 46
3.2 Definition of adjudicator’s jurisdiction 47
3.3 Sources of adjudicator’s jurisdiction 48
3.3.1 The statute 49
3.3.2 The definition of construction contract 52
3.3.3 The adjudication clause 58
ix
3.3.4 The notice of adjudication 62
3.4 Challenging the adjudicator’s jurisdiction 64
3.4.1 Capacity of party to challenge the 65
adjudicator’s jurisdiction
3.4.2 Grounds for challenging the adjudicator’s 67
jurisdiction
3.4.3 Options for the challenging party 69
3.5 Adjudicator determines own jurisdiction 72
3.5.1 Express provision on adjudicator 74
determines own jurisdiction
3.6 Provisions in the proposed CIPAA on 78
adjudicator’s jurisdiction
3.7 Summary 80
4 CASE ANALYSIS: ADJUDICATOR DETERMINES
OWN JURISDICTION
4.1 Introduction 82
4.2 Case analysis 83
4.2.1 Christiani & Nielsen Ltd v The Lowry 84
Centre Development Company Ltd
4.2.2 Whiteways Contractors (Sussex) Ltd v 91
Impresa Castelli Construction UK Ltd
4.2.3 Fence Gate Ltd v James R Knowles Ltd 98
4.2.4 Ballast Plc v Burrell co (Construction 104
Management) Ltd
4.2.5 Pegram Shopfitters Ltd v Tally Weijl 111
(UK) Ltd
4.2.6 Pilon Ltd v Breyer Group Plc 116
4.3 Circumstances where the adjudicator determines 122
own jurisdiction
x
4.4 The effectiveness of an adjudicator determines 125
own jurisdiction
4.5 Position of the proposed CIPAA 127
4.6 Summary 133
5 CONCLUSION
5.1 Introduction 134
5.2 Research findings 134
5.3 Research constraints 137
5.4 Recommendations 137
5.5 Area of future research 140
5.6 Conclusion 140
REFERENCES 142
xi
LIST OF FIGURES
FIGURE NO. TITLE PAGE
2.1 The Adjudication Process 30
2.2 A Typical Programme for Adjudication 39
xii
LIST OF ABBREVATIONS
AC Appeal Cases
ACA Association of Consultant Architects
All ER All England Law Reports
BLR Building Law Reports
CA Court of Appeal
CIDB Construction Industry Development Board
CILL Construction Industry Law Letter 1983
CIPAA Construction Industry Payment and Adjudication Act
Con LR Construction Law Reports
Const LJ Construction Law Journal
CVA Company Voluntary Arrangement
DOM/1 Standard Form of Sub-Contract for Domestic Sub-Contractors
EG Estate Gazette
EWCA Civ England and Wales Court of Appeal Civil Division
EWHC England & Wales High Court
HGCRA Housing Grants, Construction and Regeneration Act
HHJ His Honour Judge
HL House of Lords
ICE Institute of Civil Engineers
JCT Joint Contracts Tribunal
LIR Lloyd's Law Reports
NEC New Engineering Contract
xiii
NSC Nominated Sub Contractor
PAM Pertubuhan Arkitek Malaysia
QB Queen Bench
QC Queen Council
RIBA The Royal Institute of British Architects
TCC Technology and Construction Court
TCLR Trinity College Law Review
TeCSA The Technology and Construction Solicitors' Association
VAT Value Added Tax
WG 10 Working Group 10
WLR Weekly Law Report
xiv
LIST OF CASES
CASE PAGE
Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147; 100
[1969] 1 All ER 208, HL
Ballast Plc v Burrell co (Construction Management) Ltd [2003] SC 279, 83, 104-109,
[2001] BLR 529 122, 124, 126,
132
Bouygues UK Ltd v Dahl-Jensen UK Ltd [1999] EWHC 182 (TCC); 15, 67, 74
[2000] BLR 49; TCC; [1999] CILL 1566; (1999) 70 Con LR 41;
[2000] BLR 522; CA; [2000] CILL 1673; (2000) 73 Con LR 135
Christiani & Nielsen Ltd v The Lowry Centre Development Company Ltd 65, 83-86,
[2000] TCC. 89, 90, 99,
103, 110,
123-125,
130-133, 136
Conor Engineering Ltd v Les Constructions Industrielles de la 56-57
Mediterranee (CNIM) [2004] EWHC 899 (TCC); [2004] BLR 212
Cubitt Building and Interiors Ltd v Fleetglade Ltd [2006] EWHC 16, 68
3413 (TCC).
David McLean Housing Contractors Ltd v Swansea Housing 17
Association Ltd [2002] BLR 125.
xv
Dawnay Ltd v FG Minter [1971] 2 All ER 1389 2
Discain Project Services Ltd v Opecprime Developments Ltd [2001] 41
EWHC 435 (TCC); [2001] EWHC 450.
Farebrother Building Services Ltd v Frogmore Investments Ltd [2001] 37, 76-78, 127
CILL 1762, TCC.
Fastrack Contractors Ltd v Morrison Construction Ltd [2000] BLR 168. 50-52, 62-63,
69, 71, 97
Fence Gate Ltd v James R Knowles Ltd [2001] 84 Con LR 206; [2001] 83, 98-103,
CILL 1757,TCC 123-126, 131
Griffin & Tomlinson (t/a K&D Contractors) v Midas Homes Ltd [2001] 34, 52, 63
78 Con LR 152; (2002) 18 Const LJ 67, TCC.
Halki Shipping Corp v Sopex Oils Ltd [1997] EWCA Civ 3062; [1998] 51
1 WLR 726; [1998] 2 All ER 23, [1998] 1 WLR 726, CA
Homer Burgess Ltd v Chirex (Annan) Ltd [2000] BLR 124 Outer Court. 57, 68
IDE Contracting Ltd v R G Carter Cambridge Ltd [2004] WHC 36 35
(TCC); [2004] BLR 172.
Jamil Mohammed v Dr. Michael Bowles [2003] 394 SD 2002 60
JW Hughes Building Contractors Ltd v GB Metal Work Ltd [2003] 73
EWHC 2421 (TCC).
Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] 14
EWHC Technology 254; [1999] BLR 93; 64 Con LR 1
Monmouthshire CC v Costelloe & Kemple Ltd (1965) 5 BLR 83, CA. 51
Northern Developments (Cumbria) Ltd v J&J Nichol [2000] BLR 158. 63
Palmers Ltd v ABB Power Construction Ltd [1999] BLR 426; 69 19, 56, 72
Con LR 52, TCC.
Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd [2003] EWHC 984 (TCC), 67, 71-72, 84,
[2003] 3 All ER 98, [2003] 1 WLR 2990 111-114,
123-125, 132
Pilon Ltd v Breyer Group Plc [2010] EWHC 837 (TCC) ; [2010] All ER 84, 116-120,
(D) 197 (Apr) 122, 124, 126,
128, 132
xvi
Project Consultancy Group v The Trustees of the Gray Trust [1999] 5, 65, 67, 89
BLR 377.
Sherwood & Casson Ltd v Mackenzie [2000] CILL 1577. 67
Simons Construction Ltd v Aardvark Developments Ltd [2003] EWHC 42
2474 (TCC); [2004] BLR 117; 93 CON LR 114.
Sindall Ltd v Abner Solland & Ors [2001] 3 TCLR 712. 51
Watson Building Services Ltd v Harrison [2001] ScotCS 60 73
(Judicial Review); [2001] SLT 846.
Westminster Chemicals & Produce Ltd V Eicholz & Loeser [1954] 89
1 LlR 99
Whiteways Contractors (Sussex) Ltd v Impresa Castelli Construction 70, 83, 91-
UK Ltd [2000] EWHC Technology 67; 75 Con LR 92; [2000] 97, 123-125,
CILL 1664 129-130, 131
William Verry Ltd v North West London Communal Mikvah [2004] 16
EWHC 1300 (TCC); [2004] BLR 308; 96 Con LR 96; [2004] 26
EG 192.
CHAPTER 1
INTRODUCTION
1.1 Background of study
The adversarial nature of construction industry contributes the occurrence of
construction disputes.1 This caused construction projects require the coordinated effort of
a temporarily assembled project team comprised of professionals of different disciplines.2
Nonetheless, project team members may pursue their own goals and needs, and maximize
their own benefits.3 One of the main disputes in construction industry is on the payment.
Generally, the payment dispute is about non-payment and delay payment. This
resulted to problems of cash flow which can severely affect the implementation of
construction projects and thus the provision of the nation’s infrastructure and built
1 Sai, O. C., Tak, W. Y., Sau, F. Y. (2006) A Study of Styles and Outcomes in Construction dispute Negotiation.
Journal of Construction Engineering and Management, Vol. 132, No. 8, August 2006, p.805. 2 Ibid. 3 Ibid.
2
environment.4 Moreover, payment problem remains a chronic problem including the
Malaysian construction industry and it affecting the entire delivery chain.5
There are not much effective cures available to stop or at least to minimize the
payment problems in construction industry. Remedies such as suspension of work and
direct payment cannot be properly and lawfully exercised unless there are express
provisions in the contract and the disputes are resolved by an independent third party.6
Moreover, to be effective, the dispute resolution method has to be quick, cheap, and
binding.7
Normally, most of the construction contracts provide disputes resolution in
various methods and among the most common method use today in the construction
industry are litigation, arbitration, adjudication and mediation. Litigation always is the
last option for the disputing parties. Meanwhile arbitration also not be preferred anymore
because of its similar problems with litigation as per Lord Denning said in the case of
Dawnay Ltd v FG Minter8 stated that:
“There must be cash flow in the building trades. It is the very lifeblood of the
enterprise…one of the greatest threats to cash flow is the incidences of disputes,
resolving them by litigation are frequently lengthy and expensive. Arbitrator in
construction industry is often as bad or worse”.
4 Construction Industry Development Board Malaysia (2008) A Report on The Proposal for a Malaysian Construction
Industry Payment and Adjudication. (Edited by Sariah, A. K., Noridah, S., Nazir, M. N.) CIDB. Kuala Lumpur, p.2 5 Naseem, N. A. (2006) A “Construction Industry Payment And Adjudication Act: Reducing Payment-Default And
Increasing Dispute Resolution Efficiency In Construction. Master Builders, 3rd Quarter, p.4. 6 Lim Chong Fong (2008) Update and Summary on the Proposed Construction Industry Payment and Adjudication Act.
Master Builders, 3rd Quarter, p.66. 7 Ibid. 8 [1971] 2 All ER 1389.
3
Using these two methods, typically construction disputes now take two to five
years, if not more, to be resolved and they cost tens or hundreds of thousands.9 As a
result, without any practical solution, the unpaid party’s cash flow is commonly affected
and the physical development or construction work suffers. In contrast, adjudication is a
statutorily enabled, cheaper, speedier, time-bound, contemporaneous, binding dispute
resolution mechanism which gives a party a statutory right to adjudication.10
Following the Latham report in 1994 by Sir Michael Latham, the United
Kingdom Government was influenced that primary legislation was required to give all
parties to construction contracts a statutory right to have disputes resolved, in the first
instance, by adjudication, which was to be a rapid and relatively inexpensive process in
all cases.11 This legislation, the Housing Grants, Construction and Regeneration Act 1996
(HGCRA 1996), is now be used in the United Kingdom. Under this act, parties to
construction contracts are allowed to refer a dispute to adjudication at any time.12 Other
developed Commonwealth countries like Australia, New Zealand and Singapore also
enacted Acts of Parliament for the construction industry as a solution to complement their
general laws to regulate the adjudication such as:
1. Building and Construction Industry Security of Payment Act 1999 amended in
2002 (New South Wales, Australia)
2. Construction Contracts Act 2002 (New Zealand)
3. Building and Construction Industry Security of Payment Act 2002 (Victoria,
Australia)
4. Building and Construction Industry Payments Act 2004 (Queensland,
Australia)
9 Lim Chong Fong (2008), loc.cit., p.66. 10 Construction Industry Development Board Malaysia (2008), op.cit., p.8. 11 Marthinus J Maritz (2009) Adjudication of Disputes in the Construction Industry. Innovate No. 3, p.78. 12 Section 108(1) of the HGCRA 1996.
4
5. Construction Contracts (Security of Payment) Act 2004 (Northern Territory,
Australia)
6. Construction Contracts Act 2004 (Western Australia)
7. Building and Construction Industry Security of Payment Act 2004
(Singapore)
Currently Malaysia Government through the Construction Industry Development
Board Malaysia (CIDB) is working to develop the proposed Construction Industry
Payment and Adjudication Act (CIPAA). The proposed CIPAA provides an aggrieved
party a right to refer a dispute to adjudication and this kick off the adjudication process.13
As it is new in Malaysia, it is significant to look on what it got in providing solutions to
the disputing parties based on the experience of other countries which enacted similar
statutes like United Kingdom.
1.2 Problem statement
Whilst adjudication has been said as a statutorily enabled, cheaper, speedier and
binding dispute decision, it should provide satisfaction especially to the referring party.
However, there are many adjudicator’s decision that be brought to court which shows that
there are still grounds for the parties to challenge the decision. The possible grounds of
challenge that may arise to the adjudicator’s decision are:14
13 Construction Industry Development Board Malaysia (2008), op.cit., p.17. 14 Tan Sean Git (2007) Challenges to the Adjudicator’s Decision. Master Dissertation. Universiti Teknologi Malaysia,
p.85.
5
1. Jurisdictional Challenge.
2. Mistakes and Errors.
3. Breach of Natural Justice.
4. Concurrent Court Proceedings.
5. Inability to Repay or Insolvency.
6. Set-Off (other than in insolvency).
As far as this research is concern, the focus is on the jurisdictional challenge. The
jurisdictional challenge here means the challenge to the jurisdiction of the adjudicator.
Previously, there was concern that imaginative defendants would be able to invent
spurious arguments that would call into question the adjudicator’s jurisdiction once the
HGCRA 1996 come into force.15 It is almost the only way for a party to stop an
adjudication proceeding by alleging that the adjudicator have no the jurisdiction to deal
with the dispute.16 In the case of Project Consultancy Group v The Trustees of the Gray
Trust17, the editors of the Building Law Reports stated that the possibility of challenging
the jurisdiction of adjudicator are broad if not infinite. They stated that any arguable
challenge to the jurisdiction of the adjudicator will secure that the decision of the
adjudicator is summarily unenforceable.
Prior to this research, a preliminary analysis has been made on the cases to
challenge the adjudicator’s decision in United Kingdom courts shows that from 37 cases,
20 cases are regarding to the jurisdictional challenge. These cases basically questioned on
whether the adjudicator has the jurisdiction to make the award. All the 37 cases are
gained through United Kingdom Law Journal via Lexis Nexis website18. Therefore it is
15 HHJ Coulson, P. QC (2007) Construction Adjudication. Oxford University Press. New York, p.214. 16 Forbes, J. (2001). Adjudication – The First 1,000 Days: A General Overview. Paper presented at a joint meeting of
the Society of Construction Law and the TCC Bar Association in London on 4th December 2001, p.7. 17 [1999] BLR 377. 18 Available at http://www.lexisnexis.com/my.
6
noteworthy to focus this research on jurisdictional challenge issue. The question now is
on the issue that has led to this research.
In May 2001, the Construction Umbrella Bodies Adjudication Task Group was
formed to work on the issues relating to adjudication which arose out of the first review
of the HGCRA 1996 and the Scheme for Construction Contracts.19 This resulted to the
publishing of the Guidance for Adjudicators in July 2002 and the Users’ Guide to
Adjudication in April 2003.20 Subsequently on 29
th April 2004 the Task Group was asked
to act as the adjudication working group for the second review.21
For the second review, the Task Group published a report on the possible
amendments to Part II of the HGCRA 1996 which intended to make the adjudication
provisions work more satisfactorily.22 They had considered responses to a request for
views on the operation of the adjudication provisions of the Act and Scheme from several
bodies which includes among others, Chartered Institute of Building, Institution of Civil
Engineers, Judges of the Technology and Construction Courts, Royal Institution of
Chartered Surveyors and Technology and Construction Solicitors Association.23
In the report, one of the suggestions provided by the Task Group regarding to the
adjudication is on adjudicator determines his own jurisdiction. The Task Group suggested
that an adjudicator should have the power to make a full and final decision on his own
jurisdiction.24 The Task Group stated that the HGCRA 1996 is silent on the point and the
extent to which the adjudicator has power to rule on his own jurisdiction is therefore not
19 Latham, M. (2004) Review of part II of the housing grants construction and regeneration act 1996, p.30. Available at
http://www.berr.gov.uk/files/file30327.pdf. 20 Ibid. 21 Ibid. 22 Ibid. 23 Ibid. 24 Wrzesien, T. and Nichols, S. (2006) Construction Act review: A missed opportunity?. Taylor Wessing. London, p.3.
7
clear.25 There is evidence according to the Task Group that jurisdictional challenges by
parties are increasing, and there have been a growing number of cases where the courts
have refused to enforce decisions because of a lack of jurisdiction.26
Furthermore the report mentioned that if an adjudicator is given the power under
the contract, then their decision on the matter is final. In contrast if they have no such
express power then any decision the adjudicator makes on jurisdiction is of interim effect
only and can be opened up by the courts.27 The problem is that challenges to jurisdiction
in the courts can hinder the process and delay payment of monies which the adjudicator
has ordered should be paid.28 Therefore, a power to decide jurisdiction would thus not
add to an adjudicators’ burden but will save in the wholly unreasonable exercise of the
power and would avoid much litigation.29 With that, the Task Group suggested that the
HGCRA 1996 should be amended to include an express provision conferring the
adjudicator power on this matter.30
Meanwhile, in Malaysian construction industry, prior to the submission of the
proposed CIPAA by the CIDB to the Malaysian Cabinet, there was a delay due to the
objections from the Malaysian Bar Council.31 Their objections mainly were on the right
to statutory adjudication and the accredited adjudicators’ matters.32 Following the
objections, they suggested that, among others, that the adjudicator should not be
empowered to determine his own jurisdiction.33 They claimed that there is possibility of
25 Latham, M. (2004) loc.cit., p.37. 26 Ibid. 27 Ibid. 28 Ibid. 29 Ibid. 30 Ibid. 31 Lim Chong Fong (2008), loc.cit., p.68. 32 Ibid. 33 Ibid.
8
lack of expertise or experience of Quantity Surveyors to adjudicate upon substantial
disputes.34
Now there is a different view between what the Group Task suggested to the
HGCRA 1996 and what the Malaysian Bar Council suggested on the proposed CIPAA.
Although both situations happen in different countries and different legislations, but the
issue is the same which is on the adjudicator’s power to rule on his jurisdiction. The Task
Group suggested that HGCRA 1996 should include the express provisions on this matter
but the Malaysian Bar Council suggested that the proposed CIPAA should exclude it.
As far as the issue is concern, it is regarding to the adjudicator determines own
jurisdiction. Therefore, it is noteworthy to find out the legal position on this issue. This
research intends to look at the cases in the United Kingdom courts relating to this issue.
After that, this research wants to look at the current position of the proposed
CIPAA on this issue. Whether the proposed CIPAA can provide solution for the similar
issue should it happen in Malaysian construction industry when it come into force. Are
there any provisions in the proposed CIPAA relating to this matter? Does the provisions
in the proposed act adequate to solve similar issue? All this form the basis for this
research which intends to identify the closest answers of it.
As adjudication is new in Malaysia and the proposed CIPAA still not come into
force yet, it is important and necessary for us to understand and aware on the possible
issue that might arise when the proposed CIPAA come into force. Therefore all the
34 Naseem, N., A. and Kwan, H., H. (2007) Proposed Malaysian ‘Construction Industry Payment and Adjudication Act’
(CIPAA). Pasific Association of Quantity Surveyors Newsletter. Issue 12. December 2007.The Pasific Association of
Quantity Surveyor, p.20.
9
parties range from contractors to the law maker can prepare and plan what action to be
taken to overcome the possible issue.
1.3 Objective
To determine the position of the proposed Construction Industry Payment and
Adjudication Act (CIPAA) in relation to the legal position on the issue of adjudicator
determines own jurisdiction.
1.4 Scope of research
The scope of this research is on the adjudicator’s jurisdiction. From there, this
research narrowed down to the issue of adjudicator determines own jurisdiction. This
research also focused on the proposed Construction Industry Payment and Adjudication
Act. The main legislations used in this research’s discussion are the Housing Grants,
Construction and Regeneration Act 1996 and the proposed Construction Industry
Payment and Adjudication Act.
10
1.5 Significance of research
As mentioned before, the only way for a party to stop an adjudication proceeding
is by alleging that the adjudicator have no the jurisdiction to deal with the dispute. Any
arguable challenge to the jurisdiction of the adjudicator will secure that the decision of
the adjudicator is summarily unenforceable.
One of the issues relating to this matter is on the adjudicator determines own
jurisdiction. Moreover, the wealth of experience from over 15,000 adjudications around
the world, and over 400 court cases relating to adjudication mainly on peripheral issues
like jurisdiction, must surely mean any new model should be an improvement over earlier
Acts.35
Significantly, it is noteworthy to anticipate the proposed CIPAA on this issue as
to give an early prediction should this issue happen in Malaysia in the future. The
proposed CIPAA which expected to govern the adjudication in Malaysia should provide
solutions to the similar issues that have been experienced by other country like United
Kingdom which already used adjudication as one of the dispute resolution in
construction.
35 Naseem, N., A. and Kwan, H., H. (2007) Proposed Malaysian ‘Construction Industry Payment and Adjudication Act’
(CIPAA). Pasific Association of Quantity Surveyors Newsletter. Issue 12. December 2007.The Pasific Association of
Quantity Surveyor, p.20.
11
1.6 Research methodology
The methodology of this research is by way of literature review. Much has been
written on the topic on adjudication and many books have been published on the
adjudication under various jurisdictions. This study reviewed those writings especially
the adjudication under the HGCRA 1996. This includes among others, the general
overview of the statutory adjudication, process of adjudication and the adjudicator’s
jurisdiction.
This research also conducted literature review on the proposed CIPAA. Although
not much have been written on this proposed act, this research able to get lots of
information especially on the history and also the provisions of the proposed act. From
there, this research looks into the position of the CIPAA on the adjudicator’s jurisdiction.
Subsequently, this research analysed the relevant United Kingdom case law
relating to adjudication. This is to seek the principles and decisions on adjudicator’s
jurisdiction by the courts mainly on the issue of adjudicator determine his own
jurisdiction. Case law journals are readily available through the Lexis-Nexis database via
the Internet.
After that, this research anticipated the proposed CIPAA to the similar cases that
been analysed. This is to look into its approach and what it got to settle up the similar
issue. From there, this research identified the current position of the proposed CIPAA on
the issue of adjudicator determines own jurisdiction which also the main finding of this
research. In the end of this research, some suggestions and recommendation be made on
the proposed CIPAA based on the finding.
12
CHAPTER 2
ADJUDICATION
2.1 Introduction
Adjudication always claimed as a quick and relatively much cheaper than
litigation and arbitration. It had been tried and tested of its efficiency in the United
Kingdom and other countries including New Zealand, Australia and Singapore for the
past few years. Therefore, its function as an effective method of a dispute resolution
should not be doubted.
Adjudication was firstly introduced formally to the United Kingdom construction
industry on May 1, 1998 when the Housing Grants, Construction and Regeneration Act
1996 came into force.36 This was followed by the recommendations by Sir Michael
Latham in his masterpiece ‘Constructing the Team’ published in 1994 which prompted
Parliament to introduce the Act for the purpose inter alia to provide a speedy and cost
36 Muhammad Ehsan, C. M. (2008) An Analysis Of Adjudication Process As An Efficient Means Of Solving Disputes
In Construction Contracts In Malaysia. Master Builders. 3rd Quarter 2008, p.74.
13
effective mechanism for resolving construction disputes since litigation and arbitration
have failed to deliver up to the disputed parties’ expectations and to improve the
contractors’ cash flow.37
This chapter generally examines the adjudication itself as an introductory chapter
which intends to provide an overview and a general understanding of adjudication. This
chapter discussed about the definition of adjudication, types of adjudication in
construction contract and the process of adjudication under the HGCRA 1996.
Furthermore, the general history of HGCRA 1996 also explained by this chapter. As for
the interest of this research, the proposed Construction Industry Payment and
Adjudication Act (CIPAA) were studied mainly on its history and features.
2.2 The definition of adjudication
There are many definitions be given to adjudication. In English common law, it
refers to the decision of a court, especially in regard to bankruptcy.38 Meanwhile, the
Oxford Dictionary of Law defines adjudication as the formal judgment or decision of a
court or tribunal.39 Both definitions have similar explanation where both states
adjudication is the court decision. However, practically, adjudication supposed to be a
non-judicial dispute resolution. Perhaps, both meanings are a general and not specific.
37 Ibid 38 Chappel, D., Marshall, D., Powell-Smith, V., Cavender (2001) Building Contract Dictionary: 3rd Edition. Blackwell
Science: London, p.14. 39 Martin, E. A. (2003) Oxford Dictionary of Law. 5th Edition. Oxford University Press. New York, p.11.
14
As far as the building contract is concern, adjudication should be look into this
region. The obvious place to start in a search for a definition of adjudication is the statute
that created it. However, there is no definition within the Housing Grants, Construction
and Regeneration Act 1996 (HGCRA 1996), nor is there one within the Scheme40.
Parliament sought to define adjudication in a proposed amendment to the then Housing
Grants, Construction and Regeneration Bill which stated:41
“For this purpose “adjudication” means a summary non-judicial dispute
resolution process that leads to a decision by an independent person that is,
unless otherwise agreed, binding upon the parties for the duration of the contract,
but which may subsequently be reviewed by means of arbitration, litigation or by
agreement”
There are several opinions from the courts in England on the adjudication. The
first case under the HGCRA 1996 is Macob Civil Engineering Ltd v Morrison
Construction Ltd42. In this case, Dyson J stated the meaning of adjudication through the
intention of Parliament enacted the Act. He mentioned the following:
“It was to introduce a speedy mechanism for settling disputes in Construction
Contracts on a provisional interim basis, and requiring the decision of
Adjudicators to be enforced pending the final determination of disputes by
arbitration, litigation or agreement.”
40 Redmond, J. (2001) Adjudication in Construction Contracts. Blackwell Science. London, p.7. 41 Riches, J. L. and Dancaster, C. (2004) Construction Adjudication. 2nd Edition. Blackwell Publishing. Oxford, p.8. 42 [1999] EWHC Technology 254; [1999] BLR 93; 64 Con LR 1; [1993] 3 EGLR 7.
15
In the case of Bouygues UK Ltd v Dahl-Jensen UK Ltd43, Buxton LJ stated that
the purpose of adjudication is to enable a quick and interim, but enforceable, award to be
made in advance of the final resolution of what are likely to be complex and expensive
disputes. Meanwhile in the same case, Chadwick LJ mentioned that the adjudication
provide a speedy method by which disputes under Construction Contracts can be resolved
on the provisional basis.
As been learned so far, most of the definitions given on the adjudication
emphasise that adjudication is a quick and temporarily binding dispute resolution. Unless
any further proceedings have been made, the parties are bound by the decision of the
adjudicator. Further, this topic explains on the kinds of adjudication available in the
construction contract.
2.3 Types of adjudication in construction contract
In construction contract, there are two categories of adjudication which are
contractual adjudication and statutory adjudication.44 The former is available because it
has been included in the contract.45 Meanwhile, the latter is available because the
legislation has established a statutory right to adjudication.46
43 [1999] EWHC 182 (TCC); [2000] BLR 49; TCC; [1999] CILL 1566; (1999) 70 Con LR 41; [2000] BLR 522; CA;
[2000] CILL 1673; (2000) 73 Con LR 135 44 Timpson, J. and Totterdill, B. (1999) Adjudication for Architects and Engineers. Thomas Telford. London, p.23. 45 Ibid 46 Ibid
16
2.3.1 Contractual adjudication
Basically, the HGCRA 1996 requires all construction contracts to have an
adjudication procedure which comply with section 108(1) to (4) and if nothing provided,
the parties can use the adjudication provisions of the Scheme for Construction
Contracts.47 If on the provisions complied, then those contractual provisions become
determinative of the parties’ rights and obligations in respect of adjudication.48 This is
called contractual adjudication. Therefore, it is envisaged that the construction contract
will include its own adjudication provisions.49
In the case of Cubitt Building and Interiors Ltd v Fleetglade Ltd50, the parties
agreed that the contract contained provisions which complied with the HGCRA 1996.
The court ruled that even the parties could not contract out of the HGCRA 1996, if the
contractual provisions complied with the act, then they have to be at the forefront of the
court’s consideration of the parties’ respective rights and liabilities. The judge mentioned
that, in some of the reported cases, too great an emphasis had been placed upon the
operation of section 108 of the act, and not enough on the relevant contractual provisions.
This can be look in the case of William Verry Ltd v North West London
Communal Mikvah51. In this case, the judge ruled that HGCRA 1996 requires contractual
machinery that enables the referring party to refer the dispute within seven days of the
adjudication notice. However, the act does not prohibit machinery that additionally
enables the referring party to refer the dispute outside that timescale if it elects to take
longer in making the reference.
47 Section 108(5) of the HGCRA 1996. 48 HHJ Coulson, P. QC (2007), op.cit. 148. 49 Ibid. 50 [2006] EWHC 3413 (TCC). 51 [2004] EWHC 1300 (TCC); [2004] BLR 308; 96 Con LR 96; [2004] 26 EG 192.
17
Therefore, as long as the contractual provisions comply with the requirements of
the HGCRA 1996, it does not matter if they contain additional or supplementary
provisions.52 Moreover, provisions which add to the basic requirements of the HGCRA
1996 are perfectly acceptable but provisions which alter or omit those basic requirements
are not.53 However, there are cases where the contractual provisions fail to comply with
the basic requirements of the HGCRA 1996 like in David McLean Housing Contractors
Ltd v Swansea Housing Association Ltd54. In this case, judge concluded that on the facts
that the JCT 1981 which the party used had been amended including deletions, additions
and various omissions, the contract did not meet the requirements of the section 108 of
the HGCRA 1996. Therefore, according to the court, the Scheme applied.
There are many construction contracts which have the adjudication provisions.
The first standard form which included the adjudication provision was the Joint Contracts
Tribunal Contract 1963 which previously known as the RIBA form.55 Under the JCT
1963, the ‘Green Form’ of Nominated Sub-Contract which be amended to include an
adjudication procedure in 1976.56 Similar amendment also was made to the ‘Blue Form’
of domestic sub-contract.57 The inclusion of the adjudication procedure in these forms
were related to the introduction of elaborate provisions regulating the rights of main
contractors to set-off against monies die to their sub-contractors.58
When the JCT Forms were revised in 1980 the Green and Blue Forms are
replaced by the NSC/4 and DOM/1 with the inclusion of set-off adjudication
provisions.59 In 1984, the Association of Consultant Architects Form of Contract Second
Edition (ACA2) included three alternative dispute resolution procedures which were
52 HHJ Coulson, P. QC (2007), op.cit. 148. 53 Ibid. 54 [2002] BLR 125. 55 Riches, J. L. and Dancaster, C. (2004), op.cit., p.2. 56 Ibid. 57 Ibid. 58 Ibid. 59 Ibid.
18
adjudication, arbitration and litigation.60 Furthermore in 1993, the Institute of Civil
Engineers (ICE) New Engineering Contract (NEC), First Edition included the
adjudication as the front line dispute resolution which made it became the first contract to
require the application of adjudication to all disputes that arose.61
In Joint Contracts Tribunal Standard Form of Building Contract 1998 Edition
(JCT 98), there are provisions which allow the parties to invoke adjudication mainly in
clause 41A which include eight sub-clauses. It clearly stated that the parties to the
contract can refer any dispute or difference arising under the contract to adjudication.62 It
also contains the procedure to conduct the adjudication such as the method appointment
of adjudicator63, notice of adjudication
64, referral notice
65, 28 days decision
66 and other
rules and procedures.
In Malaysia, the first standard form which includes the adjudication provisions is
the PAM Contract 2006. In the clause 34 of the contract, it confers the parties’ right to
refer dispute to adjudication relating to set-off only.67 There also provisions on the notice
of adjudication68 and decision of adjudicator
69. PAM Contract 2006 also required the
parties to the contract to use the PAM Adjudication Rules for the procedural matters.70
60 Riches, J. L. and Dancaster, C. (2004), op.cit., p.3. 61 Ibid. 62 Clause 41A of the JCT 98. 63 Clause 41A-2 of the JCT 98. 64 Clause 41A-2.2 of the JCT 98. 65 Clause 41A-4.2 of the JCT 98. 66 Clause 41A-5.3 of the JCT 98. 67 Clause 34.1 of the PAM Contract 2006. 68 Clause 34.2 of the PAM Contract 2006. 69 Clause 34.4 of the PAM Contract 2006. 70 Clause 34.3 of the PAM Contract 2006.
19
2.3.2 Statutory adjudication
Statutory comes from the word “statue” which means a document that sets out
legal rules and has (normally) been passed by both Houses of Parliament in the form of a
Bill and agreed to by the Crown.71 It is the formal expression of the will of Parliament
and sets out the law in written form.72 The example of statutory are likes acts, bills and
enactments.
As far as the statutory adjudication is concern, the statute enables either party to a
contract to require that a dispute be immediately referred to an adjudicator whose
decision is binding until the dispute is finally determined by some arbitral or legal
process or by agreement of the parties.73 Moreover, the statute lays down certain
procedural and other requirements relating to the conduct of adjudication, and all
construction contracts caught by the statute must contain at least these requirement.74 In
the case of Palmers Ltd v ABB Power Construction Ltd75, Judge Thornton mentioned the
statutory adjudication as follows:
“Section 105 is contained within Part II of the HGCRA which introduces a
statutory adjudication scheme, to be operated in conditions of speed, that is linked
to a statutory limitation on a paying party’s power to impose set-offs on a
receiving party. It also renders ineffective the operation of pay-when-paid
provisions in construction contracts which are situated below the main contract
in a contractual chain. These measures are intended to speed up cash flow and to
curb the prevalence of unnecessary and unfair set-offs being imposed on sub-
contractors and on contracting parties even lower down the contractual chain.”
71 Martin, E. A. (2003) op.cit., p.9. 72 Chappel, D., Marshall, D., Powell-Smith, V., Cavender (2001), op.cit., p.11. 73 Simmonds, D. (2003) Statutory Adjudication: A Practical Guide. Blackwell Publishing. Oxford, p.6. 74 Ibid. 75 [1999] BLR 426; 69 Con LR 52, TCC.
20
Basically, the statutory lays down certain procedural and other requirements
relating to the conduct of adjudication.76 The statutory also enables either party to
contract to require that a dispute be immediately referred to an adjudicator whose
decision adjudicator is binding until the dispute is finally determined by some arbitral or
legal process or by agreement of the parties.77
The first statute on adjudication is the Housing Grants, Construction and
Regeneration Act 1996. The HGCRA 1996 applies to all construction contracts and the
parties cannot contract out of it.78 Section 108 of the HGCRA 1996 confers the right of
the parties to the construction contract to refer dispute to the adjudication.79 It is
sufficient to note that any party to a construction contract has the right to refer a dispute
arising under the contract for adjudication.80
The construction contract here means the construction contract as been defined by
section 104 of HGCRA 1996. Among the works that been classified under the
construction contract includes architectural, design, surveying work, engineering, interior
and exterior decoration and landscape.81 Moreover, before a party would like to refer a
dispute to statutory adjudication they must first check whether the dispute complies with
the necessary provisions laid down in the HGCRA 1996.82 Other developed
Commonwealth countries like Australia, New Zealand and Singapore also has their own
statute to govern the adjudication as follows:
1. Building and Construction Industry Security of Payment Act 1999 amended in
2002 (New South Wales, Australia)
76 Simmonds, D. (2003), p.6. 77 Simmonds, D. (2003) op.cit., p.6. 78 Ibid. 79 Section 108(1) of the HGCRA 1996. 80 Timpson, J. and Totterdill, B. (1999), op.cit., p.25. 81 Section 104 of the HGCRA 1996. 82 Ibid.
21
2. Construction Contracts Act 2002 (New Zealand)
3. Building and Construction Industry Security of Payment Act 2002 (Victoria,
Australia)
4. Building and Construction Industry Payments Act 2004 (Queensland, Australia)
5. Construction Contracts (Security of Payment) Act 2004 (Northern Territory,
Australia)
6. Construction Contracts Act 2004 (Western Australia)
7. Building and Construction Industry Security of Payment Act 2004 (Singapore)
As been discussed so far, basically the statute will provide a statutory adjudication
for all construction contracts. However, if the contract provide its own adjudication
provisions and those provisions comply with the requirement of the statute, then the
parties can use the contractual adjudication.
2.4 Housing Grants, Construction and Regeneration Act 1996
Construction industry in the United Kingdom faced a terrible time in the early
1990s.83 Overbuilt markets, overheated economies, overextended developers and, indeed,
simple greed and mismanagement, led to a significant decline in construction volume.84
The consultants and contractors there hope to recover through claim and additional payment
as the project progress even though they might not get any profit.85 This leads to an
increasingly adversarial and conflict-driven business environment in the industry.86
83 King, V.W., (1999) Constructing the Team: A US Perspective. Retrieved on May 21 2010, from
http://library.findlaw.com/1999/Nov/1/130337.html 84 Ibid 85 Cahill, D. and Puybaraud, M. (2003) Constructing the Team: The Latham Report (1994). Construction Reports 1944-
88. (Edited by Murray, M. and Longford, D.) Blackwell Science. London, p.145. 86 Cahill, D. and Puybaraud, M. (2003), op.cit., p.146.
22
On 5 July 1993, the House of Commons announced that there was to be a Joint
Review of Procurement and Contractual Arrangements in the United Kingdom
Construction Industry and it was conducted by Sir Michael Latham.87 In July 1994, Sir
Michael Latham published the results of his investigation into the construction industry in
a report titled “Constructing the Team” which also called as “the Latham Report”.88
In the Latham Report, Sir Michael Latham made a number of recommendations
for fairer contract.89 The two most radical aspects of the report concerned its
recommendation of particular payment provisions to be implied into building contracts,
and its unequivocal recommendation of a new type of mandatory dispute resolution
mechanism known as adjudication.90
According to this report, the best way of resolving disputes was by adjudication
and Sir Michael Latham stated that a system of adjudication must become the key to
settling disputes in the construction industry.91 It stated that there was no inherent reason
why adjudication should not be used for any size of contract.92 The report also stated that
the adjudication should encompass any matter which can also be within the scope of
resolution under the main contract.93
In order to aid confidence, the report suggested that adjudication should be
underpinned by legislation.94 In the report, Sir Michael Latham recommended that there
87 HHJ Coulson, P. QC (2007) Construction Adjudication. Oxford University Press. New York, p.5. 88 Ibid 89 Cottam, G. (2002) A User’s Guide to Adjudication under the Scheme for Construction Contracts Including Payment
Provisions. 2nd Edition. Thomas Telford: London, p.1. 90 HHJ Coulson, P. QC (2007), Ibid. 91 HHJ Coulson, P. QC (2007), op.cit., p.7. 92 Ibid. 93 Ibid. 94 Cottam, G. (2002), op.cit., p.2.
23
should be a “Construction Contract Bill”.95 Moreover, he recommended that all
construction and engineering contracts should include an adjudication system which was
independent of contract administration.96
This prompted the Conservative Government of the day to pass the Housing
Grants, Construction and Regeneration Act 1996 (HGCRA 1996).97 The Act became
operative on 1 May 1998 in England, Wales and Scotland and 1 June 1998 for Northern
Ireland.98
2.4.1 General overview
The HGCRA 1996 is divided into five parts which are Grants for Renewal of
Private Sector Housing, Construction Contracts, Architects, Grants for Regeneration,
Development and Relocation, and Miscellaneous and General Provisions. The
adjudication provisions fall under Part II which is the Construction Contracts covering
sections 104 to 107.
The HGCRA 1996 applies to contracts for the carrying out construction
operations in England, Wales, Northern Ireland or Scotland.99 It also applies to
agreements to provide architectural, design or surveying work or to provide advice on
95 HHJ Coulson, P. QC (2007), op.cit., p.6. 96 Ibid. 97 Cottam, G. (2002), ibid. 98 Riches, J. L. and Dancaster, C. (2004), op.cit., p.3. 99 Mills, R. (2005) Construction Adjudication. RICS Books. Coventry, p.1.
24
building, engineering, interior or exterior decoration or on the laying out of landscape, in
relation to construction operations.100
The HGCRA 1996 addresses three important issued in construction contracts
which are:101
1. Interim settlement of disputes by adjudication.
2. Payment by instalments for contracts lasting longer than 45 days.
3. The ability to suspend performance if not paid within specific period.
4. Outlawing the ‘pay when paid’ clauses.
Before the HGCRA 1996 come into existed, adjudication only available in certain
standard forms like in 1976 when the ‘Green Form’ of Nominated Sub-Contract was
amended to include an adjudication procedure.102
After its enforcement, any construction
contract formed had to have the new right to adjudication incorporated in the contract in a
form which satisfied the requirements of section 108 of the HGCRA 1996 or it would be
incorporated by default with the provisions of the Scheme for Construction Contracts.103
The Scheme for Construction Contracts is the supplementary provisions under the
HGCRA 1996. This Scheme is use when a construction contract does not comply with
the requirements provided by the HGCRA 1996.104
When the Scheme applies its
requirements have the effect of implied terms under the contract.105
100 Ibid 101 Cottam, G. (2002), ibid. 102 Riches, J. L. and Dancaster, C. (2004), op.cit., p.2. 103 Ibid 104 Sections 108(5), 109(3), 110(3), 111(3), 113(6), 114(4) of HGCRA 1996. 105 Section 114(4) of HGCRA 1996.
25
Since the enforcement of the HGCRA 1996, adjudication has become a common
in United Kingdom. The process has represented a breath of fresh air for the construction
industry and blown the cobwebs off the traditional methods by which the industry
resolved its disputes.106
In the United Kingdom today, there can be no doubt that statutory
adjudication is the predominant procedure currently in use for domestic disputes, whether
measured in terms of numbers of referrals or reported cases.107
Other countries like Australia, New Zealand, and Singapore also has come out
with their own legislation to enforce the statutory adjudication. Therefore, the initiative
by Malaysian government to enact the Construction Industry Payment and Adjudication
Act (CIPAA) is warmly welcome.
2.5 The proposed Construction Industry Payment and Adjudication Act
(CIPAA)
In 2003, the Construction Industry Development Board Malaysia (CIDB) and the
construction industry collaboration started to develop the proposed Construction Industry
Payment and Adjudication Act (CIPAA) following the recommendations of a
construction industry working group on payment and related matters, WG10.108
One of
the recommendations of WG10 is for the enactment of a Malaysian Construction Industry
Payment and Adjudication Act (CIPAA).109
106 HHJ Coulson, P. QC (2007), op.cit., p.v. 107 Uff, J. (2005) 100-Day Arbitration: Is the Construction Industry Ready for It? Construction Law Journal p.3-10, p.3. 108 Construction Industry Development Board Malaysia (2008), op.cit., p.1. 109 Ibid
26
It started in June 2003 at a roundtable discussion; payment was identified as one
of ten priority areas in the Malaysian construction industry.110
There, ten construction
industry working groups were formed and The Working Group on Payment known as
WG10 was led by the Institution of Surveyors Malaysia.111
The recommendation by
WG10 to create CIPAA was agreed in principle at the roundtable discussion which
reconvened in June 2004.112
In September 2005, the International Forum be organized which brought together
prominent speakers from the UK, Australia, New Zealand, and Singapore to share their
experiences on the implementation of statutory provisions on payment in their respective
construction industries.113
During this forum the Minister of Works gave his stamp of
approval for the establishment of CIPAA.114
This was followed by the formation of a
Steering Committee comprising representatives from professional bodies and consultants
from legal, engineering and quantity surveying practices.115
This committee was tasked to
identify key principles, concepts and framework for the proposed CIPAA.116
In May 2007, the first formal meeting was held with the Secretary General of
Ministry of Works.117
This meeting was chaired by the Secretary General of the Ministry
of Works, which aimed at gathering further views and comments from the government
and private sector on the proposed enactment.118
110 Construction Industry Development Board Malaysia (2008), op.cit., p.4. 111 Ibid 112 Ibid 113 Ibid 114 Ibid 115 Ibid 116 Ibid 117 Construction Industry Development Board Malaysia (2008), op.cit., p.5. 118 Construction Industry Development Board Malaysia (2008), op.cit., p.5.
27
The first preliminary draft of the proposed CIPAA was endorsed by the Steering
Committee in March 2007.119
The draft will be further refined once the cabinet gives
approval in principle to enact the proposed CIPAA.120
Currently, the proposed CIPAA is
awaiting submission to the Cabinet for approval and directive so that a formal Bill can be
presented to Parliament.121
2.5.1 Features of the proposed CIPAA
The proposed CIPAA consists of five parts which are Preliminary, Payment,
Adjudication of Disputes, Security of Payment and Remedies, and Miscellaneous. The
adjudication provisions fall under Part III: Adjudication of Disputes covering sections 12
to 34. It applies to every construction contracts that concerns construction work at an
identified site within the territory of Malaysia.122
There are four main key features of the proposed CIPAA. The first feature is to
outlawing the practice of ‘pay-when-paid’ and conditional payment from construction
contracts.123
With these kinds of provisions, contractors will only get their money only
after the upper chain of the contract parties got money or after a number of products be
sold.124
As result, the contracting party at the receiving end (the party doing the work and
who is to be paid) and who has no privity of contract with or choice of the party up the
chain of contract could be abused.125
119 Construction Industry Development Board Malaysia (2008), op.cit., p.13. 120 Ibid 121 Lim Chong Fong (2008), loc.cit., p.67. 122 Section 3 of the proposed CIPAA 123 Construction Industry Development Board Malaysia (2008), op.cit., p.7. 124 Ibid 125 Ibid
28
The second feature is streamlining payment procedures for construction works.126
This will be done by providing statutorily implied terms of progress payment, default
mechanism for payment process and procedures on responses following payment
claims.127
The third feature is establishing a cheaper, speedier, contemporaneous, binding,
statutorily-enabled adjudication mechanism.128
This is where the statutory adjudication
will be applied in the Malaysian construction industry. Under the proposed CIPAA the
decision will be made by an independent adjudicator through a fast and cheap dispute
resolution mechanism within 30 days.129
The last key feature of the proposed CIPAA is providing security and remedies
for the recovery of payment following a decision by the adjudicator.130
The proposed
CIPAA introduced the security provisions on payment bond mechanism at the apex level
within the hierarchy of the construction project undertaken.131
This means that
clients/developers/employers will be required to issue payment bond to main contractors
to guarantee payment.132
Under the remedial provisions, 5 types of provisions are
proposed:133
1. Interest on late payment
2. Suspension of works
3. Direct payment from principal
4. Judgment debt recovery
126 Construction Industry Development Board Malaysia (2008), op.cit., p.7. 127 Ibid 128 Construction Industry Development Board Malaysia (2008), op.cit., p.8. 129 Ibid 130 Construction Industry Development Board Malaysia (2008), op.cit., p.9. 131 Ibid 132 Ibid 133 Ibid
29
5. Deregistration of business licenses
As been learned so far, the proposed CIPAA is a new hope for the Malaysian
construction industry especially for the contractors. This is because normally they are the
receiving parties and open to the payment problems. Perhaps, the proposed CIPAA will
provide betterment and improvement for the Malaysian construction industry as what
have been experienced by other countries especially the United Kingdom.
2.6 Adjudication process
This topic explained on the adjudication process under the HGCRA 1996 and the
Scheme for Construction Contract (England and Wales). Generally, adjudication process
can be as shown in Figure 2.1. The process basically includes six stages as follows:134
1. Before the adjudication.
2. The notice of adjudication.
3. The selection and appointment of the adjudicator.
4. Referral of the dispute to the adjudicator.
5. Conduct of the adjudication.
6. The adjudicator’s decision.
134 Timpson, J. and Totterdill, B. (1999) op.cit., p.19.
30
Start
Notice of adjudication
Selection, nomination or appointment of adjudicator
Referral of dispute to adjudicator
Evidence of fact
and/or opinion
from both sides
Legal/contractual
arguments from
both sides
Adjudicator ascertains
facts and law
Claim
upheld
Supports claim on
balance of
probability
Satisfies burden of
proof
Claim fails Claim fails Quantum investigated
and decided
Decision
yes
or
Decision
no
Yes Yes
No No
Figure 2.1: The Adjudication Process
(Source: Timpson, J. and Totterdill, B. (1999), op.cit., p.20)
31
2.6.1 Before the adjudication
In order for parties to execute adjudication, there must be a dispute. The HGCRA
1996 clearly stated that a party to a construction contract has the right to refer a dispute
arising under the contract for adjudication.135
If there is no dispute there can be no
adjudication.136
Dispute generally means a disagreement or argument between two people, groups
or countries.137
As for the construction contracts context, it will take the form of a
proposition by one party which the other has rejected, although sometimes long silence or
delay in responding on the part of the other party may also be considered a rejection.138
Among the nature of construction dispute are about payment, delay, termination,
variations and damages.139
After the dispute has been considered properly, the party may then consider
adjudication as the dispute resolution mean. There are some questions to help the party in
deciding to refer dispute to adjudicator as follows:140
1. What is the issue which we are trying to resolve?
2. Have I made my views clear to the other side? Do they realize that the initial
problem has become a dispute and I intend to involve an independent dispute
resolver?
135 Section 108(1) of the HGCRA 1996. 136 Riches, J. L. and Dancaster, C. (2004), op.cit., p.45. 137 Turnbull, J., Bull, V., Phillips, P. (2008) Oxford Wordpower Dictionary: 3rd Edition. Oxford University Press.
Oxford, p.213. 138 Chappel, D., Marshall, D., Powell-Smith, V., Cavender (2001), op.cit., p.134. 139 Asniah (2007) Profile of Construction Disputes. Master Dissertation. Universiti Teknologi Malaysia, Skudai, p.80. 140 Timpson, J. and Totterdill, B. (1999), op.cit., p.21
32
3. Would further investigation or tests help to clarify the cause of the problem
and resolve dispute? If so, should the investigation or tests be carried out
before I refer the matter to adjudication?
4. Will an impartial decision, within a limited time period, be helpful to the
project as a whole?
5. Is adjudication appropriate for this particular problem, or is there a better way
forward? Should I try further negotiation, mediation or conciliation?
6. Would it be better to refer the problem direct to arbitration? Is immediate
arbitration permitted by the contract?
7. Is there any procedure which must be followed before the problem can be
referred to adjudication?
These are basic questions to provide the party a clear and firm intention to refer
the dispute to adjudication. It is also important for the party to consider whether the
reference is being made to a contractual procedure or to adjudication under the statutory
scheme.141
As been discussed in previous topic, if a party wants to use the contractual
adjudication, he must make sure the provisions complied with the requirements of the
HGCRA 1996. This is to avoid the similar problems happen as in the cases that have
been discussed previously. After the party has readied, then he can proceed with the
notice of adjudication.
2.6.2 The notice of adjudication
After the party has decided to bring the dispute to adjudication, then the referring
party shall proceed by serving the notice of adjudication to the responding party. This
141 Timpson, J. and Totterdill, B. (1999), op.cit., p.24.
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notice is to inform the intention to refer the dispute to adjudication from the referring
party to the responding party who is also known as receiving party.142
The purposes of
this notice are:143
1. To inform the recipient party that the particular dispute is to be referred to
adjudication.
2. To give any nominating body and potential adjudicator basic information
about the dispute.
3. To initiate the procedure and move on to the next stage.
The notice of adjudication only needs to contain sufficient information for
identification and to define the dispute.144
However, it should not include a lengthy
justification of the referring party’s point of view, or copies of previous
correspondence.145
This information can be submitted at a later stage.146
Paragraph 1 of the Scheme provides the procedure for the notice of adjudication.
The notice should contain, among other things, the nature and brief of the dispute.147
This
should be fairly general so as not to restrict the issues unduly.148
The notice also must
include the redress sought.149
This is where the referring party state the remedy they ask
to the adjudicator. It should be phrased in term of contractual obligations not as orders
concerning what work should be done.150
Moreover, the notice also must include and the
name of the parties involved.151
This is required so that the appointing body can inform
142 Timpson, J. and Totterdill, B. (1999), op.cit., p.26. 143 Ibid. 144 Ibid. 145 Ibid. 146 Ibid. 147 Paragraph 1(3)(a) of the Scheme for Construction Contracts. 148 Cottam, G. (2002), op.cit., p.31. 149 Paragraph 1(3)(c) of the Scheme for Construction Contracts. 150 Cottam, G. (2002), op.cit., p.32. 151 Paragraph 1(3)(d) of the Scheme for Construction Contracts.
34
all parties to the dispute of the appointment of the adjudicator.152
Therefore, the
adjudicator can write to all parties on his appointment to give instructions on the conduct
of the adjudication.153
The notice of adjudication must be carefully drafted to identify properly the
dispute to be decided and also to comply with the minimum criteria.154
In the case of
Griffin & Tomlinson (t/a K&D Contractors) v Midas Homes Ltd155
, the judge stated that,
it is essential to inform the other party and the adjudicator of the statement of the nature
of the redress as required by the Scheme. If the notice is inadequate, it is possible that
there is no dispute identified and therefore the adjudicator cannot decide anything.156
As been learned so far, the adequacy of information in the notice of adjudication
is very important. It can be said that the lack of information may result to the failure for
the adjudicator to act. After the responding party had served the notice of adjudication to
the responding party, then the referring party can proceed to the appointment of
adjudicator.
2.6.3 The selection and appointment of the adjudicator
In order for the adjudication to starts, the suitable adjudicator must be selected
either appointed at the start of the project or when the dispute has arisen.157
An
152 Cottam, G. (2002), op.cit., p.32. 153 Ibid. 154 Riches, J. L. and Dancaster, C. (2004), op.cit., 79. 155 [2001] 78 Con LR 152; (2002) 18 Const LJ 67, TCC. 156 Riches, J. L. and Dancaster, C. (2004), op.cit., 79. 157 Timpson, J. and Totterdill, B. (1999), op.cit., p.27.
35
adjudicator must have knowledge and experience of the type of project and be able to
understand the issue which is subject of the dispute.158
However, there are no particular
qualification is required in order to be appointed validly as an adjudicator.159
Basically the Scheme provided that the party must agree on who shall be the
adjudicator.160
This either from the name already stated under the contract or from the
nominating body.161
Then the person requested must decide whether he want to accept it
within two days of the request.162
The problem with trying to agree on the adjudicator is that adjudication
procedures allow only a very short time period for the selection and appointment, and
some parties tend to reject any name which has been suggested by the other side.163
Usually this happens when the appointment is after the notice of adjudication and not be
chosen and appointed at the start of the project.164
If the adjudicator is not appointed in accordance with the terms under the Scheme,
then his appointment is invalid and any decision from his will be unenforceable.165
In the
case of IDE Contracting Ltd v R G Carter Cambridge Ltd166
, no request at all was made
pursuant to the Scheme. The court held that non-compliance with the Scheme deprives
the adjudicator of jurisdiction unless the responding party has submitted to the
adjudicator’s jurisdiction.
158 Ibid 159 Redmond, J. (2001), op.cit., p.67. 160 Paragraph 2(1) of the Scheme for Construction Contracts. 161 Ibid. 162 Paragraph 2(2) of the Scheme for Construction Contracts. 163 Timpson, J. and Totterdill, B. (1999), op.cit., p.29. 164 Ibid. 165 Mills, R. (2005), op.cit., p.88. 166 [2004] WHC 36 (TCC); [2004] BLR 172.
36
As been learned so far, the most important thing in the appointment of the
adjudicator is the agreement between the parties on the requested person. Without any
consensus, the adjudicator cannot be appointed. The parties also must follow the rules
and procedure stipulated under the statute. If the parties failed to obliged, any decision by
the adjudicator is invalid and cannot be enforce. When the adjudicator had agreed to
become the adjudicator, then the responding party can proceed with the referral notice.
2.6.4 Referral of the dispute to the adjudicator
After the adjudicator has been appointed, it is time for the referring party to serve
the details of the dispute. The referral of dispute to the adjudicator indicates the start of
the time period for the adjudication.167
Therefore, it is important that the actual calendar
date of referral is clear and the adjudicator should confirm the referral date immediately
he receives the referral documents.168
Under the Scheme, the referring party must serve the adjudicator the referral
notice within seven days from the notice of adjudication.169
The referral notice may be
accompanied with the relevant documents the referring party wants to rely.170
The
referring party also must send the referral notice to the responding party.171
The referral notice should include all information needed by the adjudicator. If the
adjudicator has been appointed, but has not received the necessary information about the
167 Timpson, J. and Totterdill, B. (1999), op.cit., p.32. 168 Ibid 169 Paragraph 7(1) of the Scheme for Construction Contracts. 170 Paragraph 7(2) of the Scheme for Construction Contracts. 171 Paragraph 7(3) of the Scheme for Construction Contracts.
37
dispute, then he cannot start his work and the time period should not commence.172
This
may because the adjudicator was appointed at the start of the project which is before the
notice of adjudication.173
Basically, the procedure for the referral and response are as follows:174
1. The adjudicator has been appointed and has a copy of notice of adjudication.
2. The referring party sends the adjudicator his statement of case, with a copy to
other party.
3. The responding party sends the adjudicator his response, with a copy to the
referring party.
In this stage, the statement of case is important to be clear and concise because of
the limited time available.175
It may include a brief summary of the dispute and the
problem which lead to a dispute.176
Moreover, evidence, legal and contractual arguments
also may be included in the statement of case.177
The responding party must be given a reasonable opportunity of presenting his
case.178
However, the Scheme does not give the responding party the right to submit a
reply to the statement of case.179
In the case of Farebrother Building Services Ltd v
Frogmore Investments Ltd180
, the adjudicator did not take into account the responding
counter claim in his decision. The court held that the adjudicator’s decision is incorrect
172 Ibid 173 Ibid 174 Timpson, J. and Totterdill, B. (1999), op.cit., p.33. 175 Timpson, J. and Totterdill, B. (1999), op.cit., p.34. 176 Timpson, J. and Totterdill, B. (1999), op.cit., p.35. 177 Ibid 178 Cottam, G. (2002), op.cit., p.44. 179 Timpson, J. and Totterdill, B. (1999), op.cit., p.34. 180 [2001] CILL 1762, TCC.
38
but it has been made within his jurisdiction. Therefore the court the decision ought to be
enforced.
As been discussed so far, the referral notice should provided adequate
information. Then, the responding party should respond to the referral notice before the
adjudicator proceeds with the adjudication. This is a chance for the responding party to
be well prepared before the adjudicator proceeds.
2.6.5 Conduct of the adjudication
After the adjudicator has studied the statement of case, he will prepare the
provisional timetable for the adjudication181
as sample shown in Figure 2.2. The timetable
will show how he proposes to complete his work within the time period which is
permitted by the contract procedure.182
The adjudicator will revise the initial timetable as
the adjudication proceeds.183
Usually the other party will want to respond to the statement of case by the
referring party.184
The responding party may be determined to give its point of view and
will send a response to suit its own convenience.185
The response should be given within
the allowed time period either stipulated in the contract procedure or given by the
adjudicator.186
181 Paragraph 13(8) of the Scheme for Construction Contracts. 182 Timpson, J. and Totterdill, B. (1999), op.cit., p.36. 183 Ibid 184 Timpson, J. and Totterdill, B. (1999), op.cit., p.38. 185 Ibid 186 Ibid
39
Claimant refers and sends
statement of claim
Adjudicator’s action Parties’ action
Receives claim: confirms and
considers statement – is advice
needed? Draft programme
Issues directions and sets
programme all by fax Further info/docs from
claimant
Respondent’s statement or
documents
Any tests
Inspection/meeting
Hearing
Days 12-21 reserved for further inquiries if necessary and any advice from
specialist consultants
Days 22-28 reserved for drafting and delivering decision
(With reasons if required under procedure)
Day 1
Day 2
Day 4
Day 8
Day 9
Further info
Days
9-11
Days
12- 21
Days
22-28
Figure 2.2: A Typical Programme for Adjudication
(Source: Timpson, J. and Totterdill, B. (1999), op.cit., p.37)
40
The time period which is available will depend on the details of the procedure, but
it is always restricted and cannot be unilaterally extended by the adjudicator.187
For
example, the Housing Grant, Construction and Regeneration Act 1996 require the
adjudicator to reach a decision within 28 days and another 14 days allowed for extension
with the consent of both parties.188
The adjudication provisions in the contract or in the
act, by fixing the time period, are telling the adjudicator to do the best he can, within that
time period.189
It is up to the adjudicator to determine and decide what actions he is going to take
in order to reach his decision based on the powers conferred by the particular
procedure.190
The powers are derived from the contract and have been accepted by the
parties, but he has no power to force a reluctant party to comply or to give directions to
third parties.191
In the event of insufficient information, the adjudicator can request to
either party to provide additional information.192
The adjudicator also have right to meet with the parties to resolve any queries and
to clarify any points regarding to the dispute.193
The meeting can be done separately with
just one party if it is difficult to fix a mutually acceptable date.194
However, if the
adjudicator feels that the documents are complete and appear to give him all the
information he requires then the adjudicator may decide that a meeting is not
necessary.195
187 Timpson, J. and Totterdill, B. (1999), op.cit., p.40. 188 Section 108 (2) of HGCRA 1996. 189 Timpson, J. and Totterdill, B. (1999), op.cit., p.40. 190 Paragraph 13 of the Scheme for Construction Contract. 191 Ibid 192 Paragraph 13(a) of the Scheme for Construction Contracts. 193 Paragraph 13(c) of the Scheme for Construction Contracts. 194 Timpson, J. and Totterdill, B. (1999), op.cit., p.45. 195 Ibid
41
In the case of Discain Project Services Ltd v Opecprime Developments Ltd196
,
Discain sought to enforce the adjudicator’s decision which Operprime resisted on the
basis that the adjudicator had had number of telephone conversations with Discain, which
was in breach of natural justice. The court held that the adjudicator did not act in
accordance with the rules of natural justice, nor did the adjudicator acted in fairly as the
limitations imposed by parliament permit. The court rejected to enforce the adjudication.
Another ways for the adjudicator to get further information are by site visits and
the use of specialist advice.197
Site visits are an important feature of most adjudication
and may include inspection of disputed work or a direction by the adjudicator to open up
work or conduct tests.198
Meanwhile specialists’ advice helps adjudicator on areas that he
lacks of knowledge either technical or legal.199
Most of all, the adjudicator must work within the constraints of the rules and
procedures under which he has been appointed.200
He also must treat both parties fairly
and with an equal opportunity to present their case and answer the allegations which have
been made against them.201
As been learned so far, there are procedures that must be followed by all parties
including the adjudicator. Meanwhile, the adjudicator is given power in certain aspects
which also limits him to conduct the adjudication within the Scheme.
196 [2001] EWHC 435 (TCC); [2001] EWHC 450. 197 Paragraph 13(d)&(f) of the Scheme for Construction Contracts. 198 Paragraph 13(e) of the Scheme for Construction Contracts. 199 Paragraph 13(f) of the Scheme for Construction Contracts. 200 Timpson, J. and Totterdill, B. (1999), op.cit., p.51. 201 Ibid.
42
2.6.6 The adjudicator’s decision
The aim of adjudication is for the parties to receive an impartial decision on their
dispute, within a fixed time period.202
The decision is the product of the adjudicator’s
work and it is what the parties receive in exchange for paying his fees.203
The Scheme provided that the adjudicator must reach his decision within 28
days.204
However, the adjudicator may decide within more than 28 days but he must get
the agreement by both parties first.205
In the case of Simons Construction Ltd v Aardvark
Developments Ltd206
, the adjudicator published a draft decision at the end of the 28 day
period and produced his final decision in substantially the same format seven days later.
The judge concluded that the draft decision was not a decision for the purpose of
adjudication as it was not signed or dated and it was marked “for the parties’ comment”.
Therefore, the court held that the final decision signed by the adjudicator was a decision
on the dispute referred to him and was binding upon parties.
Accordingly, the adjudicator should provide reasons for his decision if requested
by one of the party.207
It is argued that parties find it more acceptable and more likely to
comply with a decision if they know why they have won or lost.208
The parties can
request the reasons after the decision has been made.209
However, there is nothing to
prevent the adjudicator providing the decision on time and then providing the reasons
202 Timpson, J. and Totterdill, B. (1999), op.cit., p.56. 203 Ibid 204 Paragraph 19(1)(a) of the Scheme for Construction Contracts. 205 Paragraph 19(1)(c) of the Scheme for Construction Contracts. 206 [2003] EWHC 2474 (TCC); [2004] BLR 117; 93 CON LR 114. 207 Paragraph 22 of the Scheme Construction Contracs. 208 Riches, J. L. and Dancaster, C. (2004), op.cit., p.100. 209 Ibid.
43
after the decision date if the request is delayed.210
Nonetheless, reasons given together
with the decision is the favoured approach.211
Furthermore, the adjudicator must deliver a copy of the decision to each party
after he has reached the decision.212
The decision must be drafted to serve it purpose
either for immediate use on the project or use for legal reasons as follows:213
1. For immediate use on project:
a) Implementation by the parties.
b) To assist in resolving future claims and disputes.
c) To assist with future payment certificates and the final account.
2. Use for legal reasons:
a) Enforcement if either party fails to implement.
b) An application to the courts for the decision to be set aside.
c) Any future arbitration or litigation.
The adjudicator’s decision should ease the parties and not complicate the dispute.
It must be well written, in clear and concise English to express the intention of the
adjudicator and enables the parties to understand them.214
It cannot anticipate every
possible future problem, but the written decision should include the basic information
which would be required if certain situations should develop.215
210 Ibid. 211 Ibid. 212 Paragraph 19(3) of the Scheme for Construction Contract. 213 Timpson, J. and Totterdill, B. (1999), op.cit., p.57. 214 Ibid 215 Ibid
44
In his decision, the adjudicator can order any of the parties to comply
peremptorily with his decision or any part of it.216
Paragraph 24 of the Scheme includes
the Section 42 of the Arbitration Act 1996 for the enforcement of the peremptory orders
of the adjudicator.217
Peremptory orders can be defined as a final order or direction of the
tribunal, which specifies a time for compliance.218
This can be done by application to the
court either by the adjudicator himself of by the party to the adjudication.219
As been learned so far, these are the stages of the adjudication processes under the
HGCRA 1996. Basically these process also followed by other jurisdictions as the
HGCRA 1996 is the first statute on the adjudication.
2.7 Summary
From the discussion in this chapter, it can be learned that basically adjudication is
a quick and temporary binding dispute resolution unless further proceedings been invoke.
In construction contract, there are two kinds of adjudications which are the contractual
adjudication and statutory adjudication. The main different between this two is the former
is available because it has been included in the contract while the latter is available
because the legislation has established a statutory right to adjudication.
It is also learned that the first statue on adjudication is the Housing Grants,
Construction and Regeneration Act 1996 which come into force in 1 May 1998. This
216 Paragraph 23(1) of the Scheme for Construction Contracts. 217 Paragraph 24 of the Scheme for Construction Contracts. 218 Peremptory Order. Retrieved June 19, 2010 from
http://ld.practicallaw.com/ldProfile/jsp/article.jsp?item=:26211939. 219 Section 42(2) of Arbitration Act 1996.
45
followed by other countries like New Zealand, Australia and Singapore. Currently
Malaysia is waiting for the similar kind of statute which is the Construction Industry
Payment and Adjudication Act (CIPAA).
Under the HGCRA 1996, the adjudication process can be categorised into six
stages which are before the adjudication, the notice of adjudication, the selection and
appointment of adjudicator, referral of the dispute to the adjudicator, conduct of the
adjudicator and the adjudicator’s decision. As far this research is concerned, all the
discussion in this chapter is fundamental to give the understanding for the discussion in
the next chapter.
The following chapters discussed on the adjudicator’s jurisdiction which is the
scope of this research. Furthermore, the provisions relating to the adjudicator’s
jurisdiction under the Housing Grants, Construction and Regeneration Act 1996 and
under the proposed Construction Industry Payment and Adjudication Act will be studied.
This is to provide further understanding and information to assists the discussion on the
analysis in the Chapter 4 which is the crux of this research.
46
CHAPTER 3
ADJUDICATOR’S JURISDICTION
3.1 Introduction
Previously, this research had discussed on the fundamental of the adjudication.
This includes the statute and the processes of the adjudication. From there, it can be
learned that the adjudication processes are subjected to the rules and procedures either
from the statute and or the adjudication provisions in the contract. At this point, it is
significance to know the jurisdiction of the adjudicator in conducting the adjudication.
Basically the adjudicator’s jurisdiction is governs either by the statute or the
adjudication provisions in the contract. In many cases, the jurisdiction of adjudicator
became the interest by parties in dispute as it can be challenge. There is evidence that
jurisdictional challenges by parties are increasing, and there have been a growing number
of cases where the courts have refused to enforce decisions because of a lack of
jurisdiction.220
220 Latham, M. (2004) loc.cit., p.37.
47
As with all forms of dispute resolution it is often in one party’s perceived interest
that the adjudication should not be proceed.221
In addition, the most successful challenges
have been mounted against enforcement were on the grounds of lack jurisdiction222
.
Therefore, it is noteworthy for this research to focus on the jurisdictional challenges.
This chapter discussed on the matters related to the adjudicator’s jurisdiction.
Starting from the definition of the adjudicator’s jurisdiction, this chapter provides
discussion on the sources of adjudicator’s jurisdiction and the adjudicator’s jurisdictional
challenges. Moreover, this chapter narrowed down the focus to issue of adjudicator
determines own jurisdiction also. This is to provide important basis for the discussion in
the next chapter which is the main core of this research.
3.2 Definition of adjudicator’s jurisdiction
First and foremost, it is important to know what is meant by jurisdiction.
Basically, jurisdiction is the power of a court to hear and decide a case or make a certain
order.223
The court here means the judges. Most dictionaries only limited the definition to
the courts or a tribunal and no specific meaning be given regarding to the adjudicator’s
jurisdiction. There is also no proper definition on the adjudicator’s jurisdiction or in the
HGCRA 1996.
221 Cottam, G. (2002), op.cit., p.127. 222 Ibid. 223 Martin, E. A. (2003), op.cit., p.272.
48
As far as the adjudication is concern, jurisdiction is the authority of the
adjudicator to decide the dispute put before him.224
Jurisdiction also used to describe the
nature and extent of the adjudicator’s task.225
It is the authority granted to an adjudicator
so that he can exercise justice in respect of matters brought before him.226
In addition, the jurisdiction basically arises from the agreement between the
parties to refer disputes to the adjudication.227
It also limited by the character of the
questions to be answered as are properly referred to him based on the notice of
adjudication.228
Furthermore, the adjudicator’s jurisdiction also limited to its sources
mainly the statute and the adjudication rules which be discussed in next topic.
3.3 Sources of adjudicator’s jurisdiction
It is significance for this research to look into the sources of adjudicator’s
jurisdiction to provide fundamental knowledge for further discussion. The sources in this
chapter means the starting place which give the adjudicator the jurisdiction to conduct the
adjudication. For the purpose of this research, the sources of adjudicator’s jurisdiction
were classified into four which are the statue, the definition of construction contract, the
adjudication clause and the adjudication notice.
224 Simmonds, D. (2003), op.cit., p.11. 225 Riches, J. L. and Dancaster, C. (2004), op.cit., p.187. 226 Ibid. 227 Ibid. 228 Ibid.
49
3.3.1 The statute
The main source of the adjudicator’s jurisdiction is the statute itself. The HGCRA
1996 is the first statute that governs the adjudication which came into force on 1 May
1998 in United Kingdom.229
Other developed Commonwealth countries like Australia,
New Zealand and Singapore also have their own statute to govern the adjudication. For
the purpose of this study, discussion only focuses on the Housing Grant Construction and
Regeneration Act 1996.
Since there are no specific provisions in HGCRA 1996, the act itself does not
actually grant any jurisdiction at all.230
The HGCRA 1996 only provides the basic
parameters and the things that have to be in the construction contract as a minimum for
compliance with the act.231
Section 108(1) stated that a party to a construction contract
has the right to refer a dispute arising under the contract for adjudication under a
procedure complying with this section.232
This sets the boundaries for jurisdiction where
the act only deals with disputes arising under the contract.233
It is only parties to a
construction contract who have this right given to them by statute.234
The definition of
construction contract will be discussed in next sub topic.
Basically the HGCRA 1996 confers the jurisdiction with the basic principle where
there must be a dispute and it must arise under a construction contract as defined in the
Act.235
It is a prerequisite of both adjudication that a dispute must exist before such
229 Redmond, J. (2001), op.cit., p.1. 230 Riches, J. L. and Dancaster, C. (2004), op.cit., p.193. 231 Ibid. 232 Section 108(1) of the HGCRA 1996. 233 Riches, J. L. and Dancaster, C. (2004), op.cit., p.193. 234 Riches, J. L. and Dancaster, C. (2004), op.cit., p.194 235 Riches, J. L. and Dancaster, C. (2004), op.cit., p.187.
50
proceedings commence.236
If there were no dispute, then an appointed adjudicator would
have no jurisdiction to decide the matters referred.237
As far as the adjudicator is concerned, he is only there to reach a decision on a
dispute that has been referred to him under the contract.238
The adjudicator would not
have jurisdiction to deal with disputes that do not arise under the contract or do not fall
within the various definitions of a construction contract or a contract in writing in the
act.239
The adjudicator also cannot operate under a procedure outside of the requirements
of the HGCRA 1996.240
This in plain terms gives some boundaries that help to define
jurisdiction.241
The question arise now is on the definition of the “dispute”. As far as the HGRCA
is concern, there is no definition given on the term “dispute”. In the case of Fastrack
Contractors Ltd v Morrison Construction Ltd242, Judge Thornton stated that the HGCRA
1996 required there to be a dispute that had already arisen between the parties to a
construction contract to start the process of adjudication. According to him, any selection,
acceptance of appointment or subsequent adjudication and decision which are not
confined to that pre-existing dispute would be undertaken without jurisdiction. Judge
Thornton also mentioned the following:
“A 'dispute' can only arise once the subject-matter of the claim, issue or other
matter has been brought to the attention of the opposing party and that party has
236 Reid, A. and Ellis, R. C. T. (2007) Common Sense Applied to the Definition of a Dispute. Structural Survey. Vol.
25 No. 3. Emerald Group Publishing Limited, p.239. 237 Ibid 238 Riches, J. L. and Dancaster, C. (2004), op.cit., p.194 239 Ibid 240 Ibid 241 Ibid 242[2000] BLR 168; 75 Con LR 33
51
had an opportunity of considering and admitting, modifying or rejecting the claim
or assertion.”
In this case, Judge Thornton relied on two non-adjudication cases which are Halki
Shipping Corp v Sopex Oils Ltd243
and Monmouthshire CC v Costelloe & Kemple Ltd244.
In Halki case, the court confirmed that a 'dispute', the existence of which is the statutory
pre-condition of a party being entitled to enforce an arbitration clause and to have legal
proceedings stayed for arbitration under the Arbitration Act 1996, has a wide meaning.
The term includes any claim which the opposing party has been notified of which that
party has refused to admit or has not paid, whether or not there is any answer to that
claim in fact or in law. In Monmouthshire case, the court only allowed for arbitration
where there was a dispute or difference that had already been referred to and decided by
the engineer, required there to have been a claim by one party and its rejection by the
other before a dispute or difference could be referred to the engineer.
Referring to both cases, Judge Thornton stated that these cases help in showing
that a claim and its submission do not necessarily constitute a dispute. He mentioned that
a dispute only arises when a claim has been notified and rejected, that a rejection can
occur when an opposing party refuses to answer the claim. Moreover, he stated that a
dispute can arise when there has been a bare rejection of a claim to which there is no
discernable answer in fact or in law.
Fastrack case was seen as an important case since it provided a basis for the
definition of “dispute” for the purposes of adjudication under the HGCRA 1996.245
This
can be seen in case of Sindall Ltd v Abner Solland & Ors246
. In this case, HHJ Lloyd QC
243 [1997] EWCA Civ 3062; [1998] 1 WLR 726; [1998] 2 All ER 23, [1998] 1 WLR 726, CA 244 (1965) 5 BLR 83, CA. 245 Reid, A. and Ellis, R. C. T. (2007), loc.cit., p.241. 246 [2001] 3 TCLR 712.
52
referred to the Fastrack case and stated that for there to be a dispute for the purposes of
exercising the statutory right to adjudication it must be clear that a point has emerged
from the process of discussion or negotiation has ended and there is something which
needs to be decided.
In another case, Lloyd J considered Fastrack case in deciding Griffin &
Tomlinson (t/a K&D Contractors) v Midas Homes Ltd247. He held that the adjudicator did
not have jurisdiction for that part of a referral for which the respondent had had less than
ten days to consider material correspondence preceding the Notice of Adjudication. This
period was held to be insufficient to allow the respondent time to consider the claim to
discuss and to resolve it by agreement. As discussed so far, it can be said that without the
existence of dispute, the adjudicator has no jurisdiction to conduct the adjudication under
the HGCRA 1996.
As been discussed so far, it can be say the statute particularly the Housing Grants,
Construction and Regeneration Act 1996 provides the limits and boundaries to the
adjudicator’s jurisdiction. It can be said that the HGCRA 1996 confers jurisdiction to
adjudicator to only deal with the dispute arise under the construction contract.
3.3.2 The definition of construction contract
The HGCRA 1996 put limit to the jurisdiction of adjudicator only to deal with the
dispute under the construction contract.248
If it is not a construction contract there is no
247 [2001] 78 Con LR 152; (2002) 18 Const LJ 67, TCC. 248 Section 108(1) of the HGCRA 1996.
53
statutory right, but there may be a contractual one and will be if the parties have included
an adjudication provisions in their contract.249
Section 104 to 107 of the HGCRA 1996
provides the meaning of construction contract. A construction contract is an agreement
with another party for any of the following:250
a) The carrying out of construction operations;
b) Arranging for the carrying out of construction operations by others, whether
under sub-contract to him or otherwise;
c) Providing his own labour, or the labour of others, for the carrying out of
construction operations.
These definitions clearly covers contracts for construction work but the HGCRA
1996 also includes consultancy contracts in connection with the construction work which
includes:251
a) To do architectural, design, or surveying work, or
b) To provide advice on building, engineering, interior or exterior decoration or
on the laying-out of landscape,
The HGRCA 1996 also provides a wide definition for construction operations.252
This includes the following operation:253
249 Riches, J. L. and Dancaster, C. (2004), op.cit., p.194 250 Section 104(1) of the HGCRA 1996. 251 Section 104(2) of the HGCRA 1996. 252 Section 105 of the HGCRA 1996. 253 Section 105(1) of the HGCRA 1996.
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a) Construction, alteration, repair, maintenance, extension, demolition or
dismantling of buildings, or structures forming, or to form, part of the land
(whether permanent or not);
b) Construction, alteration, repair, maintenance, extension, demolition or
dismantling of any works forming, or to form, part of the land, including
(without prejudice to the foregoing) walls, roadworks, power-lines,
telecommunication apparatus, aircraft runways, docks and harbours, railways,
inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial
plant and installations for purposes of land drainage, coast protection or
defence;
c) Installation in any building or structure of fittings forming part of the land,
including (without prejudice to the foregoing) systems of heating, lighting,
air-conditioning, ventilation, power supply, drainage, sanitation, water supply
or fire protection, or security or communications systems;
d) External or internal cleaning of buildings and structures, so far as carried out
in the course of their construction, alteration, repair, extension or restoration;
e) Operations which form an integral part of, or are preparatory to, or are for
rendering complete, such operations as are previously described in this
subsection, including site clearance, earth-moving, excavation, tunnelling and
boring, laying of foundations, erection, maintenance or dismantling of
scaffolding, site restoration, landscaping and the provision of roadways and
other access works;
f) Painting or decorating the internal or external surfaces of any building or
structure.
Having defined the term construction operation, the next subsection goes to on to
list exceptions. The exceptions include the operations of:254
254 Section 105(2) of the HGCRA 1996.
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a) Drilling for, or extraction of, oil or natural gas;
b) Extraction (whether by underground or surface working) of minerals;
tunnelling or boring, or construction of underground works, for this purpose;
c) Assembly, installation or demolition of plant or machinery, or erection or
demolition of steelwork for the purposes of supporting or providing access to
plant or machinery, on a site where the primary activity is—
i. Nuclear processing, power generation, or water or effluent treatment, or
ii. The production, transmission, processing or bulk storage (other than
warehousing) of chemicals, pharmaceuticals, oil, gas, steel or food and
drink;
d) Manufacture or delivery to site of—
i. Building or engineering components or equipment,
ii. Materials, plant or machinery, or
iii. Components for systems of heating, lighting, air-conditioning, ventilation,
power supply, drainage, sanitation, water supply or fire protection, or for
security or communications systems,
Except under a contract which also provides for their installation;
e) The making, installation and repair of artistic works, being sculptures, murals
and other works which are wholly artistic in nature.
The definition of construction contract contained in the provisions of section 104
to 107 inclusive prescribes the boundaries of what constitutes a construction contract.255
Accordingly, in a dispute about the adjudicator’s jurisdiction to decide a dispute under
the HGCRA 1996, it may be necessary to consider whether there was a construction
contract in existence.256
There might involve an analysis of the subject matter of the
contract in question, to see whether the operations being carried out on site meant that the
contract was expressly excluded from the section 105 of HGCRA 1996.257
255 Riches, J. L. and Dancaster, C. (2004), op.cit., p.194 256 HHJ Coulson, P. QC (2007), op.cit., p.224. 257 Ibid
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In the case of Palmers Ltd v ABB Power Construction Ltd258
, Palmers were a
scaffolding subcontractor to ABB who in turn were appointed to provide heat recovery
steam generating boilers and associated pipework at the Esso Fawley Cogeneration
Project at Fawley. Disputes arose between Palmers and ABB, which Palmers sought to
refer to adjudication. Concurrently with the referral to adjudication, Palmers issued a
notice of intention to suspend performance of their works allegedly pursuant to the
provisions of the HGCRA 1996. ABB contended that Palmers’ contract did not come
within the scope of the HGCRA 1996 and therefore Palmers had no statutory right to
adjudication.
Palmers sought to resolve this issue and referred the matter to court for
determination on the point of law. It was accepted by both parties that ABB’s own works
were outside the scope of the HGCRA 1996 pursuant to the exceptions in section 105(2)
(c). ABB therefore argued that Palmers’ works also outside the scope of the HGCRA
1996 as being operations preparatory to excluded works. The judge disagree with ABB
and held that the reference to scaffolding in section 105(1) (e) of the HGCRA 1996
referred to the operations in section 105(1) irrespective of whether the exclusion in
section 105(2) applied.
In another case, Conor Engineering Ltd v Les Constructions Industrielles de la
Mediterranee (CNIM)259
, CNIM were appointed to construct a waste incineration and
power generation plant. Conor were appointed as their subcontractors for installation of
boilers and pipework. Disputes arose between the parties, which Conor referred to
adjudication. CNIM refused to pay according to the adjudicator’s decision and Conor
therefore sought to enforce the decision of the adjudicator pursuant to Part 8 of the Civil
Procedure Rules 1998.
258 [1999] BLR 426; 69 Con LR 52, TCC 259 [2004] EWHC 899 (TCC); [2004] BLR 212
57
CNIM claimed that there was no right to adjudicate as the Scheme was excluded
from the provisions of the HGCRA 1996 by reason of section 105(2) because the primary
activity on the site being power generation. The court rejected CNIM argument and
conclude that power generation was a secondary activity, the primary activity being
waste incineration. The court reached this conclusion notwithstanding that Conor works
were primarily related to the power generation element of the works as a whole.
Both two cases showed that the adjudicators had jurisdiction as the disputes arose
under the construction contract. There are cases where the works be classified by the
court not under the definition of the construction contract. In the case of Homer Burgess
Ltd v Chirex (Annan) Ltd260
, the defendant contended that the primary activity on their
site fell within the exception created by section 105(2)(c)(ii), and accordingly the contract
was not a construction contract within the meaning of section 104. The court held that
pipework connecting various items of machinery and equipment on a site where the
primary activity was the processing and production of pharmaceutical was ‘plant’ and
therefore excluded. The court held that an adjudicator would have jurisdiction for those
parts of the contract that the scope of the Act applies to only. Therefore a contract is
severable where it relates to ‘construction operations’ and other activities, and the Act
only apply to those parts, which are construction operations.
As be discussed so far, the HGCRA 1996 puts the limits of the adjudicator’s
jurisdiction to deal only with the disputes under the construction contract as defined by
the act. However, there is nothing to prevent the parties to the contract making provisions
for adjudication that apply to work that goes beyond the definition of a construction
contracts in the HGCRA 1996.261
If the contract that the parties enter into provides that
all disputes that arise under the contract are subject to the right to adjudication, the
260 [2000] BLR 124 Outer Court. 261 Riches, J. L. and Dancaster, C. (2004), op.cit., p.194.
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adjudicator’s jurisdiction would not be fettered by such definition and it would be
extended by the agreement of the parties.262
3.3.3 The adjudication clause
The next source of adjudicator’s jurisdiction is the adjudication clause. Beside the
statute, some of the forms of contract also give parties right to adjudication. These
standard forms of contract include adjudication provisions that comply with the statute.263
This is called contractual adjudication as been discussed in previous chapter.
As far as the HGCRA 1996 is concerned, section 108(5) clearly provides that if
the contract does not comply with the requirements of subsections (1) to (4), the
adjudication provisions of the Scheme for Construction Contracts apply.264
This means
that if the contract does not wholly comply with the requirements of section 108(1) to (4),
the Scheme will apply.265
Therefore, if the contract refers to adjudication rules and these
do not comply with the act, the Scheme still apply.266
In some standard forms of contract, parties are obliged to use its own adjudication
procedures. Therefore the jurisdiction of the adjudicator will be governed by the
adjudication procedures and not the Scheme. The Joint Contracts Tribunal Standard
Building Contract 2005 Edition (JCT 05) provides a clause on adjudication in clause 9.2
262 Ibid. 263 Riches, J. L. and Dancaster, C. (2004), op.cit., p.113 264 Section 108(5) of the HGCRA 1996. 265 Riches, J. L. and Dancaster, C. (2004), op.cit., p.56 266 Riches, J. L. and Dancaster, C. (2004), op.cit., p.57
59
where either party may refer the dispute to adjudication.267
However, the JCT has decided
not to prepare its own adjudication procedures and prefers to rely on the procedures set
out in the Scheme for Construction Contracts (England and Wales) Regulations 1998.268
Therefore, the jurisdiction of adjudicator is governed by the Scheme and not by the JCT
05.
Previously, the Joint Contracts Tribunal Standard Form of Building Contract 1998
Edition (JCT 98) used its own adjudication procedures. The clause 41A of JCT 98
comprises of eight sub-clauses confers the parties to refer a dispute to adjudication,
including the rules and procedures. All these procedures provide limitation and
boundaries to the adjudicator’s jurisdiction. For example, clause 41A.2.1 provides that no
adjudicator shall be agreed or nominated who will not execute the JCT Adjudication
Agreement.269
This put a limit for the jurisdiction of the adjudicator where the adjudicator
may not have jurisdiction to deal with the dispute referred to him if the adjudicator
refused to execute the JCT Adjudication Agreement.
In the Institute of Civil Engineer (ICE) Conditions of Contract 6th Edition, there
are no provisions in the ICE 6th Edition provides the right to for the parties to refer
dispute to adjudication initially. In the clause 66, the ICE 6th Edition only provides
conciliation and arbitration as method for dispute resolution.270
Subsequently, in March
1998, an amendment was made by the ICE Conditions of Contract Joint Standing
Committee to incorporate the payment and adjudication requirements of the HGCRA
1996.271
The amendments came with a separate ICE Adjudication Procedure 1997.272
This gives the party right to refer dispute to adjudication at any time.273
267 Clause 9.2 of the JCT 05 268 Ibid 269 Clause 41A.2.1 of the JCT 98. 270 Clause 66 of the ICE 6th Edition. 271 Timpson, J. and Totterdill, B. (1999), op.cit., p.99. 272 Ibid. 273 Timpson, J. and Totterdill, B. (1999), op.cit., p.101.
60
The ICE Adjudication Procedure 1997 was made to avoid the possible imposition
of the Scheme for Construction Contracts.274
It has been prepared principally for use with
the ICE family of Conditions of Contract. It consist of nine sections range from General
Principles, The Notice of Adjudication, The Appointment of the Adjudicator, Referral,
Conduct of the Adjudication, The Decision, Miscellaneous Provisions, Definitions, and
Application to Particular Contracts. All these sections provide adjudicator the limitation
to his jurisdiction. For example, in section 5.1 the adjudicator is obliged to reach his
decision within 28 days of referral including 14 days extension with the consent of the
referring party.275
This means that a party may challenge the jurisdiction of adjudicator if
the adjudicator took more than 28 days without consent from the parties to reach his
decision.
There was a case where the fact that the parties bound by a contract that contains
adjudication clause in Jamil Mohammed v Dr. Michael Bowles276
. The contract between
Michael, who is the residential occupier and Jamil the builder contained adjudication
clause complied with the HGCRA 1996. Michael took adjudication proceedings against
Jamil where the adjudicator decided in favour of Michael. Michael then sought to enforce
the decision by use of statutory demand. Jamil argued that since the contract is a
residential occupier, it falls within the exclusion provided under section 106(1) (a) which
resulted to the adjudicator had no jurisdiction. The judge rejected Jamil argument on the
basis of the evidence that the parties entered into contract for residential construction
works that included a form of dispute resolution which adopted the procedure under the
HGCRA 1996. Therefore, the court held that the adjudicator had jurisdiction following
the adjudication clause.
As far as the Malaysian construction industry is concern, the PAM Contract 2006
provides provisions on adjudication. In the clause 34 of the contract, it confers the
274 Timpson, J. and Totterdill, B. (1999), op.cit., p.99. 275 Section 5.1 of the ICE Adjudication Procedure 1997. 276 [2003] 394 SD 2002
61
parties’ right to refer dispute to adjudication relating to set-off only.277
Subsequently, in
clause 34.3, the contract provided that the adjudicator is obliged to use the PAM
Adjudication Rules or any modification or revision to such rules.278
Since the proposed
CIPAA not be force yet, therefore the adjudication will follow the rules and procedures
under the current PAM Adjudication Rules 2009. As a result, the jurisdiction of the
adjudicator will also be governed by this rule.
In the general provisions of the PAM Adjudication Rules 2009, the jurisdiction of
adjudicator can be expanded not only for the set-off matter.279
This must be done through
a separate agreement to refer the specific disputes to adjudication.280
Moreover, the
written agreement must be submitted and acceptable to the Adjudicator, or the
Appointment Body.281
According to the article 10.1 of the PAM Adjudication Rules 2009, the
adjudicator is obliged to reach his decision within 21 days from the date of acceptance by
him of his appointment as adjudicator plus 7 days extension with consent from both
parties.282
The rules expressly stated that if the adjudicator fails to deliver his decision
within the time limit, or within the extended time agreed by the parties, the adjudicator’s
will have no jurisdiction to deliver the decision beyond the date or agreed date and not be
entitled to any fees.283
As been discussed so far, the adjudicator’s jurisdiction also came from the
adjudication clause in the form of contract. Thus, the adjudicator cannot act outside of
what have been stipulated in the adjudication clause as it is beyond of his jurisdiction.
277 Clause 34.1 of the PAM Contract 2006. 278 Clause 34.3 of the PAM Contract 2006. 279 Article 1.2 of the PAM Adjudication Rules 2009. 280 Ibid. 281 Ibid. 282 Article 10.1 of the PAM Adjudication Rules 2009. 283 Ibid.
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3.3.4 The notice of adjudication
The most important document in the adjudication process is the notice of intention
to refer a dispute to adjudication which commonly known as the notice of adjudication.284
As been discussed in previous chapter, this notice is to inform the intention from the
referring party to the responding party.285
One of the purposes of this notice is to inform
the recipient party that the particular dispute is to be referred to adjudication.286
Unless
the adjudication procedure under which the adjudication to be carried out provides
expressly for additional disputes to be added the adjudicator cannot consider issues which
are not included in the notice of adjudication.287
The notice of adjudication is the cornerstone of both adjudicator’s jurisdiction and
the scope and limit of referring party’s claim in the adjudication.288
It is important that the
notice must identify carefully the dispute and the nature of the redress sought.289
Numerous problems in adjudication and adjudication enforcement arose from the
referring party’s failure to provide adequate notice of adjudication.290
In the case of Fastrack Contractors Ltd v Morrison Construction Ltd291, Fastrack
was a brickwork subcontractor to Morrison as the main contractor. Morrison argued that
the notice of adjudication had been unsatisfactory in that it raised matters that were not a
pre-existing dispute. Prior to delivery of the notice, Fastrack had made an application for
payment. The application had included claims in respect of disruption and breach of
contract and the like, but there were significant differences between those claims and the
284 HHJ Coulson, P. QC (2007), op.cit., p.233. 285 Timpson, J. and Totterdill, B. (1999), op.cit., p.26. 286 Ibid 287 Cottam, G. (2002), op.cit., p.30. 288 HHJ Coulson, P. QC (2007), op.cit., p.98. 289 Ibid. 290 Ibid. 291 [2000] BLR 168.
63
claims made in the notice of adjudication. Morrison challenged the adjudicator’s
jurisdiction on the basis that the notice of adjudication referred to more than one dispute.
Judge Thornton in his judgment stated the following:
“Thus, the notice of adjudication; the selection of a person to act as an
adjudicator by an adjudicator nominating body; the indication from the selected
adjudicator of his willingness to act; and the referral notice must all relate to that
same pre-existing dispute. Any selection, acceptance of appointment or
subsequent adjudication and decision which are not confined to that pre-existing
dispute would be undertaken without jurisdiction.”
The court held that Fastrack’s referral notice was wide enough to embrace the
whole of the dispute between the parties outstanding after the first adjudication had been
completed and accordingly the adjudicator has jurisdiction.
In the case of Griffin & Tomlinson (t/a K&D Contractors) v Midas Homes Ltd292
,
Midas argued that there were number of disputes between the parties at the time of the
notice, and the failure in the notice to specify which dispute was being referred was fatal.
However, the judge was clear that at least one dispute between the parties related to the
validity of a notice of determination. Therefore, on that issue at least, the judge concluded
that the adjudicator had jurisdiction to decide the matter referred.
In another case, Northern Developments (Cumbria) Ltd v J&J Nichol293
, Northern
wrote a letter purporting to be notice of intention to withhold payment. Nichol then,
withdrew from site and Northern treated this action as a repudiatory breach of contract.
292 [2001] 78 Con LR 152; (2002) 18 Const LJ 67, TCC. 293 [2000] BLR 158.
64
The dispute which was referred to adjudication by Nichol in their notice of adjudication
was in respect of the outstanding monies. In response, Northern sought to set-off the
damages which they claimed arose out of Nichol repudiation of the contract. Nichol
argued that the adjudicator had no jurisdiction to deal with that claim. The court accepted
Nichol’s submission and concluded that the adjudicator had no jurisdiction to consider
any matter not rose in the notice of adjudication, which was concerned with the validity
of the notice of intention to withhold payment.
As discussed so far, it can be said that the adjudicator’s jurisdiction is also
governs by the notice of adjudication. The adjudicator can only deal with the matter
stipulated in the notice and it is beyond his jurisdiction to deal with other matters which
not mentioned in the notice.
3.4 Challenging the adjudicator’s jurisdiction
Most common attack on the adjudicator’s decision is the submission that the
adjudicator had no jurisdiction to reach that decision.294
Once the Housing Grants,
Construction and Regeneration Act 1996 came into force, there was concern that
imaginative defendants would be able to invent spurious arguments that would call into
question the adjudicator’s jurisdiction.295
The arguments may arise at the start of the adjudication process, part way through
when for example the responding party seeks legal advice, or at the end when the
294 HHJ Coulson, P. QC (2007), op.cit., p.214. 295 Ibid.
65
successful claimant tries to enforce the decision.296
The argument may based on several
grounds likes the contract was not a construction contract, the adjudicator was not
appointed in accordance with the contractual requirements or the contract was one those
exempted from the operation of the HGCRA 1996.297
In the case of Christiani & Nielsen Ltd v The Lowry Centre Development
Company Ltd298
, Judge Thornton stated that it is clearly prudent and desirable, for an
adjudicator faced with a jurisdictional challenge which is not a frivolous one to
investigate his own jurisdiction and to reach his own non- binding conclusion as to that
challenge. Moreover, he stated that an adjudicator would find it hard to comply with the
statutory duty of impartiality if he or she ignored such a challenge.
This topic looks on the right of a party to challenge the adjudicator’s jurisdiction.
This to provide basic information on the eligibility of a party to raised question on the
jurisdiction of the adjudicator. Furthermore, this topic also discussed the options
available for a party to challenge the adjudicator’s jurisdiction.
3.4.1 Capacity of party to challenge the adjudicator’s jurisdiction
In the case of Project Consultancy Group v The Trustees of the Gray Trust299
, the
issue arose was whether a party may challenge the decision on the grounds that the
296 Redmond, J. (2001), op.cit., p.93. 297 Ibid. 298 [2000] TCC. 299 [1999] BLR 377.
66
adjudicator had no jurisdiction to determine the dispute. This is the first case in United
Kingdom regarding to the challenging the adjudicator’s jurisdiction.300
In this case, Project made a claim for professional fees in connection with the
conversion of a property into a nursing home. The claim had been referred to the
adjudicator and the adjudicator made an award on Project’s favour. Project then brought
court proceedings to enforce the adjudicator’s decision. Gray contended that the
adjudicator had no jurisdiction because the contract had been made on April 1997 which
was before 1 May 1998 and therefore the HGCRA 1998 did not apply. Therefore, Gray
claimed that there was no right to refer disputes to adjudication. Project disputed that
such a challenge could potentially be valid.
Dyson J held that it is open to a defendant in enforcement proceedings to
challenge the decision of an adjudicator on the grounds that he was not empowered by
the Act to make the decision. Judge decided that the adjudicator had no jurisdiction under
the Housing Grants, Construction and Regeneration Act 1996 since the contract was not a
construction contract or had been made before 1 May 1998. The court also held that Gray
had at all times made it clear that their position was that the adjudicator had no
jurisdiction. Moreover according to the judge, Gray participation in proceedings before
the adjudicator had not amounted to a waiver of this position.
This was the case where the court ruled that a party can challenge the
adjudicator’s jurisdiction. It can be learnt so far that it is clearly prudent and desirable, for
an adjudicator faced with a jurisdictional challenge. Subsequently, any party to
adjudication can raise question on the jurisdiction of the adjudicator.
300 Redmond, J. (2001), op.cit., p.94.
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3.4.2 Grounds for challenging the adjudicator’s jurisdiction
Basically there are two reasons that cause the jurisdictional challenge which are
the adjudicator either lack of statutory jurisdiction or lack of jurisdiction as a result of the
contract. These reasons were first recognized by Judge Thornton in Sherwood & Casson
Ltd v Mackenzie301
. Sir John Dyson expressed the following:
“A decision may be challenged on the ground that the adjudicator was not
empowered by the Act to make the decision, because there was no underlying
construction contract between the parties (Project Consultancy) or because he
had gone outside his terms of reference (Bouygues).”
Consequently, the adjudicator’s decision may be challenged under the statutory
jurisdictional by the following grounds:302
1. Absence of a construction contract.
2. Absence of a contract in writing.
3. “No dispute” under the contract.
4. Contract predates the effective date of the Act.
5. Same dispute as previously referred.
6. Decision beyond the stipulated time limits.
Many of adjudication cases in the United Kingdom courts involved challenges
based on these reasons. In Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd303 the issue was
301 [2000] CILL 1577. 302 Tan Sean Git (2007) Challenges to the Adjudicator’s Decision. Master Dissertation. Universiti Teknologi Malaysia,
p.85.
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on the absence of a contract in writing. Weijl raised jurisdictional challenges with the
adjudicator and they argued firstly that there was no construction contract between the
parties and hence no construction contract giving rise to a statutory entitlement to
adjudication. The adjudication was therefore conducted without jurisdiction. Lord Justice
May in this case was clear that, if there was no contract, there was no construction
contract in writing complying with Part II of the Housing Grants, Construction and
Regeneration Act 1996. Section 107 of the Act clearly stated that the provisions of the
Act apply only where the construction contract is in writing, and any other agreement
between the parties as to any matter is effective for the purposes of the Act only if in
writing.
In Homer Burgess Ltd v Chirex (Annan) Ltd304
, there is an issue of whether the
contract falls within the definition stated under the Housing Grants, Construction and
Regeneration Act 1996. The defenders' contention was that, the primary activity on their
site fell within the exception created by section 105(2) (c) (ii), and accordingly the
contract was not a construction contract within the meaning of section 104. The court
held that pipework connecting various items of machinery and equipment on a site where
the primary activity was the processing and production of pharmaceutical was ‘plant’ and
therefore excluded. The court held that an adjudicator would have jurisdiction for those
parts of the contract that the scope of the Act applies to only. Therefore a contract is
severable where it relates to ‘construction operations’ and other activities, and the Act
only apply to those parts, which are construction operations.
In another case, Cubitt Building and Interiors Ltd v Fleetglade Ltd305
the party
raised issue on the decision beyond the stipulated time limit. Fleetglade claimed that the
adjudicator had failed to make decision by the agreed extended date of 24th
November
and therefore the decision made was void. He argued that the decision was reached to
303 [2003] EWHC 984 (TCC), [2003] 3 All ER 98, [2003] 1 WLR 2990 304 [2000] BLR 124 Outer Court. 305 [2006] EWHC 3413 (TCC); 110 ConLR 36
69
them on 25 November not 24 November. The contract provides a clear time-limit that the
adjudicator shall reach his decision not later than twenty eight days after the date of the
referral notice. The court held that, the adjudicator had completed the entire decision on
24 November that was within the agreed period actually. Thus the judge decided to grant
the application of claimant and enforce the adjudicator’s decision.
As been discussed so far, there are several grounds for a party to challenge the
adjudicator’s jurisdiction. This shows that, despite the appointment and the decision of
the adjudicator, his jurisdiction still open for challenges.
3.4.3 Options for the challenging party
There are no specific provisions on the options available if a party want to
challenge the adjudicator’s jurisdiction in the HGCRA 1996. When the responding party
challenges the jurisdiction of the adjudicator, it has four option based on the judgment of
HHJ Thornton QC in Fastrack Contractors Ltd v Morrison Construction Ltd.306
Firstly, the challenging party can agree to widen the jurisdiction of the adjudicator
so as to refer the dispute as to the adjudicator's jurisdiction to the same adjudicator. If the
referring party agrees to that course, and the appointed adjudicator accepts the reference
to him of this second dispute, the jurisdiction of the adjudicator could then be resolved as
part of the reference. The important thing about this option is that the challenging party is
306 [2000] BLR 168.
70
bound by the adjudicator’s decision and cannot subsequently challenge it, or seek to resist
enforcement on the grounds that the adjudicator lacked of jurisdiction.307
However, there are many cases which the claimant argued that the defendant
agreed to be bound by the adjudicator’s decision on jurisdiction but the defendant denied
it.308
In the case of Whiteways Contractors (Sussex) Ltd v Impresa Castelli Construction
UK Ltd309, Whiteways gave notice of intention to refer a further dispute to adjudication
which the adjudicator had decided in favour of Whiteways. The decision was not
followed by Impresa as they argued that the referral submission made by Whiteways,
referred to disputes not referred to in the notice of adjudication and was therefore outside
the jurisdiction of the adjudicator. The court held that, on the fact that the adjudicator
invited both parties to decide on whether they want to give the adjudicator power to
determine his jurisdiction which the parties positively replied, it resulted to an ad hoc
agreement to widen the jurisdiction of the adjudicator so as to refer the dispute as to the
adjudicator's jurisdiction to the same adjudicator. Therefore, the adjudicator had
jurisdiction to deal with the dispute.
Secondly, the challenging party can refer the dispute as to jurisdiction to a second
adjudicator. This would not put a halt to the first adjudication, if that had already led to
an appointment, since the adjudicator has a statutory duty, unless both parties agree
otherwise, to decide the reference in a very short timescale. This is not an option that is
commonly pursued since the time is very limited and the adjudicator must decide the first
adjudication within 28 days.310
307 HHJ Coulson, P. QC (2007), op.cit., p.216. 308 Ibid. 309 [2000] EWHC Technology 67; 75 Con LR 92; [2000] CILL 1664 310 HHJ Coulson, P. QC (2007), op.cit., p.217.
71
Thirdly, the challenging party can seek a declaration from the court that the
proposed adjudicator was lack of jurisdiction. This option is of little utility unless the
adjudicator has yet to be appointed or the parties agree to put the adjudication into hold
pending the relatively speedy determination of the jurisdiction question by the court. The
Technology and Construction Court in United Kingdom can, for example, resolve
questions of that kind within days of them being referred to it. This option needs a certain
amount of co-operation between the parties and the adjudicator.311
The final option is the challenging party could reserve his position, participate in
the adjudication and then challenge any attempt to enforce the adjudicator's decision on
jurisdictional grounds. This is one of the most commonly option adopted.312
In the case of
Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd313, Tally invited Pegram to undertake
refurbishment works for their retail clothing store in Oxford Street, London. A dispute
arose as to the final account and Pegram served a notice of adjudication on Tally. The
adjudicator accepted jurisdiction under the statutory scheme and made an award in the
Pegram's favour. Tally refused to pay on the grounds that it was decided without
jurisdiction and Pegram brought proceedings to enforce the award. The court held that the
adjudicator had had jurisdiction and enforceable.
As been discussed so far, the challenging party have options to challenge the
adjudicator’s jurisdiction. This either the challenging party agree to widen the jurisdiction
of the adjudicator, refer the jurisdiction issue to a second adjudicator, seek a court
declaration that the proposed adjudicator was lack of jurisdiction or reserve his position
and challenge any attempt to enforce the adjudicator's decision.
311 Ibid. 312 Ibid. 313 [2003] EWHC 984 (TCC), [2003] 3 All ER 98, [2003] 1 WLR 2990
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3.5 Adjudicator determines own jurisdiction
Generally, the adjudicator has no jurisdiction to decide his own jurisdiction.314
Judge Thornton in Palmers Ltd v ABB Power Construction Ltd315 clearly stated that there
is no provision which allows the adjudicator, when appointed, to examine his own
jurisdiction or to make a decision as to whether he has jurisdiction to act in dispute. The
only provisions under the Scheme are regarding to the jurisdiction of adjudicator to deal
with one or more disputes under the same contract and regarding to related disputes under
the different contracts.316
However, there is no doubt that an adjudicator can investigate any partial or full
challenge to his jurisdiction as Judge Thornton mentioned in Fastrack Contractors Ltd v
Morrison Construction Ltd317. He stated that the adjudicator could, if he was satisfied the
challenge was a good one, decline to adjudicate on the part of the reference he regarded
as lacking jurisdiction. Judge Thornton also stated that the adjudicator also could decide
that the challenge was a bad one and proceed with the substance of the adjudication.
Subsequently, unless the parties had agreed to be bound by the result of the
adjudicator’s investigation into his own jurisdiction, the adjudicator’s ruling to the
jurisdiction issue will not be determinative and the challenger can defeat the enforcement
proceedings by showing a respectable case that the adjudicator did not have the necessary
jurisdiction. This is what May LJ stated in Pegram Shopfitters Ltd v Tally Weijl (UK)
Ltd318. The parties can agree to be bound by express agreement; implied agreement or
unilateral waiver of any jurisdictional objections.319
314 Riches, J. L. and Dancaster, C. (2004), op.cit., p.188. 315 [1999] BLR 426; 69 Con LR 52, TCC. 316 Paragraph 8 of The Scheme for Construction Contracts (England and Wales) Regulations 1998 317[2000] BLR 168; 75 Con LR 33. 318 [2003] EWHC 984 (TCC), [2003] 3 All ER 98, [2003] 1 WLR 2990. 319 HHJ Coulson, P. QC (2007), op.cit., p.218.
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Sometimes, although not expressly made clear, that the parties had reached an ad
hoc agreement to be bound by the adjudicator’s conclusion as to jurisdiction.320
In the
case of Watson Building Services Ltd v Harrison321
, Lady Paton construed the formal
documents exchanged in the adjudication as confirming that, although at the outset the
employer had challenged the adjudicator’s jurisdiction, he had also agreed that if the
adjudicator concluded that he did have the necessary jurisdiction, he could and should
proceed to determine the merits of the parties’ disputes. Lady Paton concluded that,
considering the employer’s actions and terms of his formal response in the adjudication,
it was open to the employer later to seek to challenge the adjudicator’s decision on his
jurisdiction. In other words, she stated that any earlier reservation of the employer’s
position on the jurisdiction point had been lost, and a subsequent agreement to be bound
by the decision had been reached.
In another case, the court also decided that the parties had reached an ad hoc
agreement to be bound by the adjudicator’s decision on his own jurisdiction. Forbes J in
JW Hughes Building Contractors Ltd v GB Metal Work Ltd 322
decided that both parties
agreed, by their conduct, to the adjudicator having the necessary jurisdiction to deal with
all issues relating to his jurisdiction in accordance with the terms and conditions that he
had proposed. The judge accepted the submission that, by reason of the way in which the
matter was dealt with before the adjudicator, there was an ad hoc agreement by the
parties to the effect that the adjudicator had jurisdiction to make a binding decision on the
issue.
As been discussed so far, it can be learnt that the adjudicator cannot determine his
own jurisdiction but the adjudicator can investigate any jurisdictional challenge.
Moreover, unless both referring and responding had agreed to be bound by the result of
the adjudicator’s investigation into his own jurisdiction, the adjudicator’s ruling to the
320 HHJ Coulson, P. QC (2007), op.cit., p.219. 321 [2001] ScotCS 60(Judicial Review); [2001] SLT 846. 322 [2003] EWHC 2421 (TCC).
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jurisdiction issue will not be determinative and the challenger can defeat the enforcement
proceedings by showing a respectable case that the adjudicator did not have the necessary
jurisdiction.
3.5.1 Express provision on adjudicator determines own jurisdiction
As far as been discussed, there are no provisions under the HGCRA 1996 confers
the adjudication power to determine his own jurisdiction. Unless expressly permitted by
the rules applicable to his appointment, the adjudicator must stay within his terms of
reference by the notice of adjudication.323
If the adjudicator strays outside the permitted
bounds his decision on such wider matter will be no effect.324
In the case of Bouygues UK
Ltd v Dahl-Jensen UK Ltd325
, Sir John Dyson stated the following:
“Where the adjudicator has gone outside his terms of reference, the court will not
enforce his purported decision. This is not because it is unjust to enforce such
decision. It is because such a decision is of no effect in law.”
Accordingly, there are one adjudication rules which include this provision which
is The Technology and Construction Solicitors' Association (TeCSA) Adjudication
Rules. The TeCSA rules are an example of a regime that does enable the adjudicator to
rule on his own substantive jurisdiction.326
323 Redmond, J. (2001), op.cit., p.100. 324 Ibid. 325 [1999] EWHC 182 (TCC); [2000] BLR 49; TCC; [1999] CILL 1566; (1999) 70 Con LR 41; [2000] BLR 522; CA;
[2000] CILL 1673; (2000) 73 Con LR 135 326 Redmond, J. (2001), op.cit., p.100.
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The Technology and Construction Solicitors’ Association (TeCSA) is a body
representing solicitors involved in litigation in the Technology and Construction Court
(TCC) in United Kingdom which involves construction, engineering technology and IT
disputes.327
TeCSA has been actively involved in lobbying Ministers, Members of
Parliament, Government departments, the TCC judges and other relevant organisations
on a variety of important matters, including most recently, the possible amendments to
the Housing Grants Act, and the use of the TCC pre-action protocol.328
TeCSA provides a service to their members and their clients for adjudication
through its own Adjudication Rules that can be used in place of the adjudication rules in
the Government Scheme for Construction Contracts under the HGCRA 1996.329
TeCSA
also can act as adjudicator nominating body to appoint an adjudicator which sets out their
own procedure.330
TeCSA also maintains a list of adjudicators trained and experienced in
resolving disputes referred to adjudication under the HGCRA 1996.331
Moreover, TeCSA
has a standard suggested form for giving notice of intention to refer a dispute to
adjudication.332
In TeCSA Adjudication Rules 2002, the scope of the adjudication which
subsequently limits the adjudicator’s jurisdiction only on the matters identified in the
notice of adjudication, together with the following:333
i. Any further matters which all parties agree should be within the scope of the
adjudication, and
327 The Technology and Construction Solicitors Association (TeCSA) Brochure. Retrieved June 16, 2010 from
http://www.tecsa.org.uk/welcome-1.htm. 328 Ibid. 329 Adjudication. Retrieved June 16, 2010 from http://www.tecsa.org.uk/adjudication-1324.htm. 330 Ibid. 331 Ibid. 332 Ibid. 333 Paragraph 13 of the TeCSA Adjudication Rules 2002 Version 2.0.
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ii. Any further matters which the adjudicator determines must be included in
order that the adjudication may be effective and/or meaningful.
From this, it can be said that TeCSA Adjudication Rules 2002 Version 2.0 give
power to adjudicator to include any matters which he think important to settle the dispute
effectively. This is a very wide power confers upon the adjudicator.
Further in Paragraph 14 of this rules, the adjudicator is allow to decide upon his
own substantive jurisdiction, and as to the scope of the adjudication.334
This is the main
interest of this research where this is an express provision given by TeCSA to the
adjudicator to determine his own jurisdiction. As been discussed before, the HGCRA
1996 is silent on this matter and no provisions included in other adjudication rules. As far
as this research been conducted, this is the only one adjudication rules which confers
such power to the adjudicator.
Previously, there was a case where the parties adopted TeCSA Adjudication Rules
in their contract. In Farebrother Building Services Ltd v Frogmore Investments Ltd335
,
Frogmore and Farebrother entered into a contract which contained contractual provisions
and incorporated the TeCSA Adjudication Rules 1999 Version 1.3 in relation to which
they fell into dispute. Farebrother sought an extension of time and in consequence an
additional payment for loss and expense which they referred to adjudication. In their
response, Frogmore sought to apply a counterclaim for set-off. The adjudicator made the
decision in favour of Farebrother but held that he had no jurisdiction to deal with the
counterclaim by Frogmore.
334 Paragraph 14 of the TeCSA Adjudication Rules 2002 Version 2.0. 335 [2001] CILL 1762, TCC.
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Frogmore sought to resist summary enforcement of the award, essentially on the
basis that the adjudicator failed to deal with Frogmore’s claim to set off. Frogmore
claimed that the adjudicator has simply not dealt with an essential and important part of
their case, and that accordingly this court should not enforce the judgment summarily.
Farebrother argued that even if it be the case that the adjudicator did not consider
Frogmore’s claim, nevertheless, that was a matter which was within the scope of the
adjudicator's jurisdiction.
Judge Gilliland in his judgement stated that if it be the case that the adjudicator
ignored or failed to take account of an issue of substance put forward by Frogmore in the
present case that is not a matter which goes to jurisdiction but a matter which goes to the
conduct of the proceedings. The court held that the adjudicator may have been wrong or
he may have erred in what he did, but it is an error which is, in principle, within his
jurisdiction. The court relied on the paragraph 11 and 12 of the TeCSA Adjudication
Rules 1999 Version 1.3. Paragraph 11 it is provided that the scope of the adjudication
shall be the matters identified in the notice requiring adjudication, together with:
i. Any further matters which all parties agree should be within the scope of the
adjudication;
ii. Any further matters which the adjudicator determines must be included in
order that the adjudication may be effective and/or meaningful.
The judge decided that if it be the case that the adjudicator did not deal with the
matter of the set-off, it is clear that 11 (ii) does not assist Frogmore, because the
adjudicator must have determined that this was not something which had to be included
within the scope of the adjudication in order that the adjudication could be effective
and/or meaningful.
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Meanwhile, under paragraph 12 it is expressly provided the adjudicator may rule
upon his own substantive jurisdiction and as to the scope of the adjudication. According
to the court, on the face of paragraph 11 and 12 that it is a matter entirely for the
adjudicator to decide which of the matters he will decide in the course of the
adjudication. The judge mentioned that the adjudicator has a complete discretion over the
scope of the adjudication and can make a decision as to what is within the scope of the
adjudication. He has obviously to have regard to the notice, but his decision as to what is
comprised within the notice is a matter which is by contract given to him to decide. With
that, the court granted Farebrother summary judgment and rejected Frogmore
counterclaim.
From this case, it can be learnt that the TeCSA rules give the jurisdiction to the
adjudicator to make such decision even though the adjudicator may wrong in his
procedure to reach his decision. This shows that the Paragraph 12 of the TeCSA
Adjudication Rules 1999 Version 1.3 confers the absolute power to the adjudicator to
determine his own jurisdiction. As been discussed so far, it can be learnt that unless there
is express provisions in the rules in respect of the adjudication, the adjudicator don’t have
power to determine his own jurisdiction.
3.6 Provisions in the proposed CIPAA on adjudicator’s jurisdiction
As far as the proposed Construction Industry Payment and Adjudication Act is
concern, there are no specific provisions conferring the adjudicator to determine his own
jurisdiction. The only provisions in this proposed act are regarding to the general
limitation of the adjudicator’s jurisdiction.
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Section 20(1) clearly stated that the adjudicator’s jurisdiction in relation to any
dispute is limited to any matter permitted by this proposed act that is referred to
adjudication by the parties.336
From this provision it can be said that the proposed CIPAA
limits the adjudicator’s jurisdiction firstly to any matter permitted by the act which
permitted by this proposed act. Accordingly, the adjudication under the proposed CIPAA
covers any matters relating construction contract.337
Therefore, it can be said that any dispute either related to payment or others can
be referred to adjudication under this proposed act. This is parallel to the intention of the
proposed CIPAA to cover all kind of disputes and not restricted to disputes on issues of
payment only as legislated in the Australian states and Singapore.338
Secondly, the
proposed CIPAA limits the adjudicator’s jurisdiction to only the matter referred by the
referring party. This means that the adjudicator cannot deal with matters not stipulated in
the notice of adjudication.
Next, the proposed CIPAA provided in section 20(2) that the parties to
adjudication may at any time by agreement in writing extend the jurisdiction of the
adjudicator to decide any other matter not already referred to the adjudicator.339
From this
provision, it can be said that the proposed CIPAA give adjudicator’s power to extend his
jurisdiction as long as the parties agree. As a result, parties may not be able to challenge
the adjudicator’s decision on the ground that the dispute is not within the adjudicator’s
jurisdiction, if both parties have agreed to widen his jurisdiction.
From these two provisions, it is learned that there are limitation expressly provide
by the proposed CIPAA to the adjudicator’s jurisdiction. However, as far as this research
336 Section 20(1) of the proposed CIPAA 337 Section 12 of the proposed CIPAA 338 Construction Industry Development Board Malaysia (2008) op.cit., p.17. 339 Section 20(2) of the proposed CIPAA
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is concern, there are no express provisions conferring the adjudicator to determine own
jurisdiction. In previous discussion, the TeCSA Adjudication Rules 2009 Version 2.0
provides express provision on this matter.
3.7 Summary
As been discussed so far, the adjudicator’s jurisdiction basically has limits put by
the statute, adjudication clause and the notice of adjudication itself. Subsequently, the
adjudicator’s jurisdiction can be challenge based on several grounds as a party in the
adjudication may do so. This has been proved by several cases that have been discussed
in this chapter. Furthermore, there are also options for the party to take in order to
challenge the adjudicator’s jurisdiction.
When the adjudicator has been questioned on his jurisdiction, he then can
determine whether to investigate his own jurisdiction and to reach his own non- binding
conclusion as to that challenge. Subsequently, he may determine his own jurisdiction on
the matter referred to him. So far, we have discussed on the capacity and the express
provision which allowed the adjudicator to determine his own jurisdiction.
However, there are circumstances where the adjudicator rules his own
jurisdiction. There are cases where the court accepted the adjudicator decision to
determine his jurisdiction and there also cases where the court rejected such decision. It
also been discussed so far, the proposed CIPAA doesn’t have the express provisions
conferring the adjudicator to determine his own jurisdiction. At this point, question arise
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as whether the proposed CIPAA can provide guidance when the adjudicator’s jurisdiction
been challenge.
These are the focus of the next chapter’s discussion which is as well as the main
focus of this research. In the next chapter, discussion be done on several cases relating to
the adjudicator determines own jurisdiction. The discussion focussed on the legal position
on the decision of the adjudicator determining his own jurisdiction. Moreover, a
prediction for the proposed CIPAA was made on the on this matter.
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CHAPTER 4
CASE ANALYSIS: ADJUDICATOR DETERMINES OWN JURISDICTION
4.1 Introduction
At this point, it can be learned that most of the adjudication cases involved
jurisdictional challenges. It also can be learned that when the adjudicator has been
questioned on his jurisdiction, he then can determine whether to investigate his own
jurisdiction and to reach his own non- binding conclusion as to that challenge. This
resulted to adjudicator determines own jurisdiction. It has to be noted that this is the main
focus of this research.
Previously in Chapter 1, this research had discussed on the issue that has led to
this research. The main point is that there is a different view between what the Group
Task suggested to the HGCRA 1996 and what the Malaysian Bar Council suggested on
the proposed CIPAA. The Task Group suggested that HGCRA 1996 should include the
express provisions on this matter but the Malaysian Bar Council suggested that the
proposed CIPAA should exclude it.
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Therefore, in this chapter, this research look at the legal position on the issue of
adjudicator determines own jurisdiction. There are cases where the court accepted the
adjudicator’s decision to determine his own jurisdiction and there also cases where the
court rejected such decision. Those cases been discussed in this chapter to find what are
those circumstances. Then, this research anticipated the proposed CIPAA into the cases.
This is to achieve the objective of this research to find the current position of the
proposed CIPAA on the issue of adjudicator determines own jurisdiction.
4.2 Case analysis
All of the cases are from the United Kingdom combined courts ranging from
England, Wales and Scotland. The building contracts in these cases regulated by the
Housing Grants, Construction and Regeneration Act 1996. Only cases regarding to the
adjudicator determines own jurisdiction were selected for this analysis. Moreover, all of
the cases were collected from the Lexis Nexis website.
There are total of six cases in this analysis which are as follows:
1. Christiani & Nielsen Ltd v The Lowry Centre Development Company Ltd340
2. Whiteways Contractors (Sussex) Ltd v Impresa Castelli Construction UK
Ltd341
3. Fence Gate Ltd v James R Knowles Ltd342
4. Ballast Plc v Burrell co (Construction Management) Ltd343
340 [2000] TCC 341 [2000] EWHC Technology 67; 75 Con LR 92; [2000] CILL 1664 342 [2001] 84 Con LR 206; [2001] CILL 1757,TCC
84
5. Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd344
6. Pilon Ltd v Breyer Group Plc345
The analysis on each case includes four headings which are facts of case,
jurisdictional issue, judgement and principle created. It has to be noted that this is the part
where this research looked at the legal position which mainly on the court decision and
principle created by the judges on the issue of adjudicator determines own jurisdiction.
4.2.1 Christiani & Nielsen Ltd v The Lowry Centre Development Company Ltd346
(a) Facts of case
Lowry engaged Christiani as the contractor for the construction of a footbridge
over the Manchester Ship Canal to provide access to the new Arts Centre in Manchester.
A letter of intent was then sent to Christiani in April 1997 which indicated that Christiani
would be appointed as the contractor subject to a Guaranteed Maximum Price. Further
design revisions followed and on 11 August 1997 a second letter of intent was signed by
both parties. Following this, Christiani started work and the formal contract was entered
into as a deed by the parties on 1 December 1998. The formal contract incorporated the
Fifth Edition of the Institute of Civil Engineers (ICE) Conditions of Contract.
343 [2003] SC 279, [2001] BLR 529, 344 [2003] EWHC 984 (TCC), [2003] 3 All ER 98, [2003] 1 WLR 2990 345 [2010] EWHC 837 (TCC) ; [2010] All ER (D) 197 (Apr) 346 [2000] TCC
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A dispute arose to whether the work had been completed in time. Both parties
were unable to agree on this matter and therefore Christiani sought adjudication. The
adjudicator made an award in favour of Christiani but Lowry refused to pay and
Christiani therefore applied to the court to enforce the adjudicator’s decision.
(b) Jurisdictional issue
The issue started from the deed itself where the deed provided a provision which
be signed on 1st December 1998. The deed stated that notwithstanding the date of
execution of the agreement (1st December 1998), the agreement shall take effect from 11
August 1997. This provision was according to Lowry, intended to have the effect that the
deed would not be subject to the adjudication provisions of the HGCRA. Before that, in a
detailed letter that Lowry's solicitor sent to Christiani on 28 May 1998, Lowry explained
to Christiani the amendments that had been made by Lowry to the then prevailing draft of
the proposed formal contract. The letter contained this statement:
"A clause has been added in the agreement confirming the effective date of the
contract being the date of the letter of intent from the Trust. The reason for
inserting this clause is simply to make it clear that the contract applied before 1
May 1998 when the Housing Grants Construction and Regeneration Act came
into force."
Consequently, on 19 June 1998, Christiani wrote to Lowry that they agreed with
the letter, subjected to two immaterial points concerning other provisions.
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After the work completed on 22 June 1999, the parties disputed on the period of
the contract. The contract period provided in the deed was 81 weeks but the second letter
of intent provided 57 weeks. Consequently, if the contract period was 81 weeks, the
works should have been completed on 11 April 1999 which was 10 weeks late. However,
if the contract period was 57 weeks, the work should have been completed nearly 34
weeks late. Lowry contended that the deed should have stated that the contract period
was 57 weeks but Christiani claimed 81 weeks.
This resulted to disagreement between both parties and Christiani, on 22 February
2000, served a notice of its intention to refer the dispute to an adjudicator. On the same
day, Christiani applied to the Institute of Civil Engineers, the appointing body provided
for in the ICE Conditions of Contract, to appoint an adjudicator and that body appointed
an Engineer as adjudicator. Then, Christiani submitted a notice of referral on 29 February
2000.
Subsequently, on 1 March 2000, Lowry sent a fax to the adjudicator which invited
him to agree that he had no jurisdiction. Lowry raised the question on the adjudicator’s
jurisdiction on the basis of the work was being carried out under a contract entered into
before 1 May 1998. Therefore, Lowry claimed that the adjudicator had no jurisdiction
because the HGCRA 1996 applied on 1 May 1998.
After several sessions of discussion between the adjudicator and both parties’
solicitors, the adjudicator decided that he had jurisdiction. The adjudicator decided that
the contract for the construction of the footbridge was entered into by the agreement
dated 1 December 1998, and consequently the HGCRA 1996 applies to the contract. The
adjudicator then went on to decide the underlying dispute and issued a second decision
dated 23 March 2000 which Christiani sought to enforce.
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The first jurisdictional issue arose as to whether the adjudicator needs an ad hoc
jurisdiction to determine his own jurisdiction. The second jurisdictional issue is whether
the adjudicator’s decision can be enforced in the absence of ad hoc jurisdiction to
determine his jurisdiction.
(c) Judgment
Judge Thornton Q.C in his judgment stated that it is trite law that the adjudicator
had no jurisdiction to decide whether he had jurisdiction to act as an adjudicator under
the scheme provided for by the HGCRA 1996. However, the court held that the parties to
adjudication can always agree to vest in the adjudicator ad hoc jurisdiction to determine
his own jurisdiction.
According to Judge Thornton, it is clearly prudent and desirable, for an
adjudicator faced with a jurisdictional challenge which is not a frivolous one to
investigate his own jurisdiction and to reach his own non- binding conclusion as to that
challenge. Moreover, he stated that an adjudicator would find it hard to comply with the
statutory duty of impartiality if he or she ignored such a challenge. Judge Thornton ruled
a principle when the adjudicator faced with a challenge to his own jurisdiction. The
principle is, whether the parties did reach an agreement to vest in the adjudicator ad hoc
jurisdiction to determine his own jurisdiction, he has a choice as to how to proceed based
on three options as follow:
1. He can ignore the challenge and proceed as if he had jurisdiction, leaving it to
the court to determine that question if and when his decision is the subject of
enforcement proceedings.
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2. Alternatively, the adjudicator can investigate the question of his own
jurisdiction and can reach his own conclusion as to it. If he was to conclude
that he had jurisdiction, he could then proceed to decide the dispute that had
been referred to him. That decision on the merits could then be challengeable
by the aggrieved party on the grounds that it was made without jurisdiction if
the adjudicator's decision on the merits was the subject of enforcement
proceedings.
3. Having investigated the question, the adjudicator might conclude that he had
no jurisdiction. The adjudicator would then decline to act further and the
disappointed party could test that conclusion by seeking from the court a
speedy trial to determine his right to adjudication and the validity of the
appointment of the adjudicator.
In this case, the adjudicator adopted the second option. However, the court held
that the adjudicator did not have ad hoc jurisdiction to decide his own jurisdiction since
Lowry was not agreeing to confer on the adjudicator the necessary jurisdiction to enable
him to decide his own jurisdiction.
The court held that although Lowry did accept the invitation and involved in the
discussion, the challenging party did not agree to give power to the adjudicator to
determine his own jurisdiction based on the fact that the challenging party constantly
protested the adjudicator’s jurisdiction. the court stated that Lowry were, when their
conduct is closely analysed, doing no more than agreeing a procedure which would
enable the parties to put before the adjudicator their respective contentions as to
jurisdiction so as to enable him to reach his own conclusion as to whether he should
proceed and decide the dispute that had been referred to him. Thus, according to the
judge, Lowry' actions were made against the background of their continuing protest as to
jurisdiction. The court decided that Lowry was not agreeing to confer on the adjudicator
the necessary jurisdiction to enable him to decide his own jurisdiction.
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The court referred to the decision of Devlin J. in Westminster Chemicals &
Produce Ltd V Eicholz & Loeser347. Devlin J. ruled that a party who had protested that
the arbitrator had no jurisdiction to determine the dispute in question before participating
in the arbitration hearing could not subsequently be held to have agreed to have conferred
ad hoc jurisdiction on the arbitrator to determine that dispute. This decision has been
adopted and applied to HGCRA 1996 adjudications by Dyson J in Project Consultancy
Group V The Trustees of the Gray Trust.348
Nonetheless, the court held that the adjudicator’s decision that he had jurisdiction
to decide the particular dispute referred to him was correct. The court decided that the
deed had superseded the letter of intent. This was because, according to the court, the
letter of intent stated that it would be effective pending Lowry entering into a contract
with Christiani. The letter of intent also instructed Christiani to proceed with the works
and stated that "in the unlikely event" of there being no contract, Christiani would be
reimbursed for the costs incurred in carrying out work pursuant to it.
The court also stated that the letter of intent envisaged that a contract would be
entered into subsequently and that the work carried out prior to that contract being
entered into would not be subject to the ICE Conditions. The judge stated that the deed
would govern the work and the letter of intent ceased to have any effect or independent
existence once the deed was executed. Moreover, the judge mentioned that all work
carried out after earlier date of 11 August 1997 was to be referable and subject to the
provisions of the deed.
With that, Judge Thornton held that the whole of the works was subject to a
construction contract, being the deed, which was entered into after 1 May 1998 since that
347 [1954] 1 LlR 99 348 [1999] BLR 377.
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was the only surviving contract between the parties at the date that the dispute was
referred to adjudication. It was, moreover, the only contract under which that dispute
could have arisen according to the court. Hence, the court held that the adjudicator's
decision was made within jurisdiction and that Christiani were entitled to summary
judgment.
(d) Principle created
This was the case where the responding party challenged the adjudicator’s
jurisdiction based on the ground that the HGCRA 1996 cannot be applied as the contract
made before its enforcement. In this case, the adjudicator had invited the parties to
discussed and then determine his jurisdiction. However, because a responding party had
not agreed to confer him the necessary jurisdiction to enable him to decide his own
jurisdiction, the adjudicator did not have ad hoc jurisdiction to decide his own
jurisdiction.
It can be learnt that without an ad hoc jurisdiction, the adjudicator cannot
determine his own jurisdiction as the HGCRA 1996 confers no provisions to the
adjudicator to do so. However, the absence of ad hoc jurisdiction cannot form a basis to
argue that the adjudicator’s decision in determining his jurisdiction is wrong. The
aggrieved party still have a chance to challenge the adjudicator’s decision upon the
enforcement of the adjudicator’s decision.
It also can be learnt that when any party challenges his jurisdiction, the
adjudicator may:
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1. Ignore the challenge and leave it to the court to determine it.
2. Investigate the matter and conclude that he has jurisdiction and proceed with
the adjudication.
3. Investigate the matter and conclude that he has no jurisdiction and decline to
deal with the dispute.
It has to be noted that this case was not reported until 2004. This research unable
to find the cases that was referred by Judge Thornton to rule these three options.
4.2.2 Whiteways Contractors (Sussex) Ltd v Impresa Castelli Construction UK Ltd349
(a) Facts of case
Impresa engaged Whiteways as plastering sub-contractors in connection with the
construction of Kingsway Hall Hotel in London. On 23 November 1999, disputes arose
and were referred to adjudication. The adjudicator decided that Impresa should pay
Whiteways £101,524.39 plus value added tax, which was paid.
On 13 January 2000 Whiteways gave notice of intention to refer a further dispute
to adjudication. The same adjudicator was appointed and on 25 April 2000 he ordered
that Impresa should pay Whiteways £81,177.4 plus value added tax. This sum was not
paid by Impresa as they argued that the referral submission made by Whiteways, referred
to disputes not referred to in the notice of adjudication and was therefore outside the
349 [2000] EWHC Technology 67; 75 Con LR 92; [2000] CILL 1664
92
jurisdiction of the adjudicator. Whiteways then applied for summary judgment against
Impresa to enforce the adjudicator’s decision.
(b) Jurisdictional issue
The jurisdictional issue arose from the referral document submitted after the
notice of adjudication. On 13 January 2000, Whiteways referred to outstanding payments
on valuations 22 and 23 and their final account, including prolongation costs, interest and
financing charges, and retention release referred to in the final account. The letter
concluded:
“In pursuit of the above and under clause 38A of the Domestic Sub-Contract
DOM/1 we hereby give you formal notice of our intention to refer the dispute to
adjudication as set out below:
1. Failure to make payment against our Final Account dated 25 October
1999.
2. Failure to make payment against our interim applications nos 22 and 23.”
As required by clause 38A.4.1 of DOM/1, Whiteways served a referral document
on 25 February 2000. Attached to that referral document, and to be read as part of it, was
an amended application by Whiteways for an extension of time. That amended
application was dated February 2000, that was after the date of the notice of adjudication.
Impresa disputed the adjudicator's jurisdiction to deal with some, but not all, of the
matters referred to in the referral document. The disputed heads of claim were claims for
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extension of time, contractual interest, prolongation costs and financing charges which
they claimed not included in the notice of adjudication.
Impresa through their solicitor, made their objection by a letter to the adjudicator
dated 3 March 2000. With that letter they enclosed a formally drafted “Submission by
Impresa Castelli Construction UK Limited on the matter of Jurisdiction”. The last
paragraph of that letter stated:
“We invite you to decide on this issue as a matter of urgency as our response to
Whiteways Notice of Referral will depend on your decision. Our client does not
wish to incur costs on matters which, in our view, fall outside the jurisdiction of
the Adjudication.”
On the same day, the adjudicator directed Whiteways to respond to the Impresa’s
submissions in writing, which they did. Further to the submissions received, on 7 March
2000, the adjudicator wrote to the parties and attached his determination on the matter of
his jurisdiction. With that letter, the adjudicator sent a detailed reasoned decision and
concluded that he did have jurisdiction to consider the matter.
In giving his reasons on jurisdiction, the adjudicator relied on the clause 38A.4.1
of DOM/1 1980 (reprinted 1998) which stated the following:
“When pursuant to Article 3 a Party requires a dispute or difference to be
referred to adjudication then that Party shall give notice to the other Party of his
intention to refer the dispute or difference, briefly identified in the notice, to
adjudication. Within 7 days from the date of such notice or the execution of the
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JCT Adjudication Agreement by the Adjudicator if later the Party giving the
notice of intention shall refer the dispute or difference to the Adjudicator for his
decision ("the referral"); and shall include with that referral particulars of the
dispute or difference together with a summary of the contentions on which he
relies, a statement of the relief or remedy which is sought and any material he
wishes the Adjudicator to consider. The referral and its accompanying
documentation shall be copied simultaneously to the other Party”
According to the adjudicator this clause requires that the notice of intention to
refer contains a brief description of the dispute or difference to be referred sufficient to
facilitate unambiguous identification of the same by the non-referring party and, if
subsequently applicable, by the nominated Adjudicator. The adjudicator stated that in the
absence of any ad hoc agreement between the parties to subsequently extend the same,
the adjudicator's jurisdiction is limited to the dispute or difference described in the notice
of intention to refer.
He further stated that the inclusion of the words "the dispute or difference" in the
second sentence of Clause 38A.4.1 in connection with the Referral was intended to mean
the same dispute or difference referred to in the first sentence of that clause in connection
with the notice of intention to refer. Nevertheless, the adjudicator found that Whiteways'
notice of intention to refer dated 13 January 2000 contains reference to other matters
including matters in the referral.
On 16 March 2000, Impresa served their response to Whiteways’s referral
document. In that response, Impresa repeated their objections to the jurisdiction and
stated that the response was made without prejudice to that objection and reserved the
right to raise the matter of jurisdiction in any future proceedings concerning this
adjudication.
95
In his final decision given on 26 April 2000, the adjudicator again referred to the
matter of jurisdiction. In the decision, he stated that although an adjudicator has no
power under Clause 38A of DOM/1 to determine his or her jurisdiction, he concluded
from the parties' submissions that both parties had extended his jurisdiction to determine
the matter.
He mentioned that all such matters included in Whiteways' Referral, were
included in Whiteways' notice of intention to refer with the sole exception of Whiteways'
application for the extension of the Sub-contract period in which Whiteways was to carry
out and complete the Sub-contract Works which was not expressly included. He further
stated the following:
“Notwithstanding that the notice of intention to refer restricted matters to
disputes as to payments I nevertheless concluded that if I was to decide on the
merits of Whiteways' claims for payment, which included loss and expense arising
from prolongation of the Sub-contract period, and also Castelli's claims for loss
and expense arising in part from Whiteways' failure to complete the Sub-contract
Works by the due date, some consideration was necessary of Whiteways'
entitlement to the extension of its Sub-contract Period vis-a-vis the period
actually taken to complete its work.”
In court, Impresa claimed that they were constrained to accept that the adjudicator
correctly construed the effect of clause 38A, but they claimed that the adjudicator applied
it wrongly. They claimed that, the jurisdiction of the adjudicator extended only to
disputes notified in the notice of intention to refer. The adjudicator also was of the same
view but Impresa contended that the adjudicator was wrong in the manner in which he
applied that view of the law in this case.
96
Impresa also claimed that the referral submission made by Whiteways after the
notice of adjudication referred to disputes not indicated by the notice of adjudication and
the adjudicator acted in excess of jurisdiction in dealing with those additional disputes.
Moreover, Impresa claimed that the letter of 3 March 2000 from them to Whiteways was
only an invitation to decide whether the adjudicator should proceed with the adjudication
and not an invitation to decide on his jurisdiction.
As for Whiteways, they claimed that the letter from Impresa dated 3 March 2000
was not an invitation to the adjudicator to enquire into his jurisdiction but was an
invitation to decide it. They also added that after the decision on jurisdiction had been
made against Impresa, it was too late to protest that the adjudicator had no jurisdiction to
decide his jurisdiction. Whiteways claimed that both parties had the power to give the
adjudicator power to decide his own jurisdiction and this was agreed by Impresa.
The jurisdiction issue in this case is whether the adjudicator’s decision which
involved an ad hoc agreement on his jurisdiction can be enforce.
(c) Judgment
Judge Peter Bowsher QC in his judgment agreed with the view of the adjudicator
on determine his jurisdiction to deal with the matters in the Whiteways’ Referral. The
court rejected Impresa’s claim of the additional matters in the Whiteways’s Referral not
covered by Whiteways’ notice of adjudication.
The court also held that the formal written submissions made by solicitors on
behalf of both parties were the clearest request to the adjudicator to decide the issue of
97
jurisdiction. Therefore, they were bound by the adjudicator’s decision. The letter of 3
March 2000 from Impressa was referred the court as an invitation to decide it. The court
rejected Impresa’s claim of the letter was only an invitation to decide whether the
adjudicator should proceed.
The court took the view of Honour Judge Thornton QC in Fastrack Contractors
Ltd v Morrison Construction Ltd350
who mentioned the following:
“If a party challenges the entire jurisdiction of the adjudicator, as Morrison does,
he has four options. Firstly, it can agree to widen the jurisdiction of the
adjudicator so as to refer the dispute as to the adjudicator's jurisdiction to the
same adjudicator. If the referring party agrees to that course, and the appointed
adjudicator accepts the reference to him of this second dispute, the jurisdiction of
the adjudicator could then be resolved as part of the reference.”
In the present case, the court held that the parties adopted this option. The court stated
that there were no reasons to differ from the finding of the adjudicator on jurisdiction.
Therefore the court decided not to rehearse the adjudicator’s reasons for making his
decision on jurisdiction. With that, the court granted Whiteways for the summary
judgment.
(d) Principle created
This is the case where the responding party challenged the adjudicator’s
jurisdiction based on the ground that the dispute in the referral was different from the
350[2000] BLR 168; 75 Con LR 33
98
dispute in the notice of adjudication. In this case, the adjudicator invited both parties to
decide on whether they want to give the adjudicator power to determine his jurisdiction
which the parties positively replied. This resulted to an ad hoc agreement to widen the
jurisdiction of the adjudicator so as to refer the dispute as to the adjudicator's jurisdiction
to the same adjudicator.
It can be learnt that such agreement is binding on both parties. Having given the
adjudicator an ad hoc jurisdiction to determine his own jurisdiction and the adjudicator
having acted on that, neither of the parties could unilaterally take that jurisdiction away.
It can also be learnt that in the absence of any ad hoc agreement between the parties to
subsequently extend the same, the adjudicator's jurisdiction is limited to the dispute or
difference described in the notice of intention to refer.
4.2.3 Fence Gate Ltd v James R Knowles Ltd351
(a) Facts of case
Fence is the employer of a construction works carried out in 1997 by a building
contractor at the Fence's premises. Fence was dissatisfied with some aspects of the work.
Thus, in a contract dated 21 May 1998, Fence employed Knowles to provide architectural
and surveying services to them. The services which Knowles agreed to provide were
described as “Preliminary Report on defective kitchen floor”. The document then set out
the basis of charge for that work. It was also clear that litigation support services might
351 [2001] 84 Con LR 206; [2001] CILL 1757,TCC
99
be required from Knowles because the contract went stated that the standard expert
witness rates will apply for any work in connection with litigation.
In relation to their service, Knowles issued four invoices which were not paid by
Fence and Knowles therefore sought for adjudication. The adjudicator decided on 4 April
2001, instructing Fence to pay Knowles for three of the four invoices in the total sum of
£31,024.94 within seven days. By Particulars of Claim served on 17 April 2001, Fence
sought a declaration that the adjudicator had no jurisdiction to make any award in relation
to those invoices under that contract. Later, on 15 May 2001, there was a cross
application by Knowles to enforce the award.
(b) Jurisdictional issue
The issue arose from the invoices which claimed by Knowles. These invoices
were regarding to payment which Knowles sought for their service carried out in relation
to the arbitration between Fence and the contractor. The works involved under those
invoices are regarding to providing evidence as a witness of fact Architect or Engineer
and assisting in arbitration as Architect or Engineer. The question arose was whether
those services are matters which fall under the definition of a “Construction Contract”
within the HGCRA 1996352
which can affect the adjudicator’s jurisdiction if the answer is
negative.
Fence raised challenge to the adjudicator’s jurisdiction as they claimed the
services by Knowles did not fall within the definition. By a letter dated 26 February
2001, Fence asked the adjudicator to decide on his jurisdiction. The adjudicator used the
option available on him based on HHJ Thornton QC’s rule in the case of Christiani &
352 Section 104(2) of the HGCRA 1996.
100
Nielsen Ltd v The Lowry Centre Development Company Ltd353. One of three options
available according to HHJ Thornton is:
“…the adjudicator can investigate the question of his own jurisdiction and can
reach his own conclusion as to it. If he was to conclude that he had jurisdiction,
he could then proceed to decide the dispute what has been referred to him. That
decision on the merits could then be challengeable by the aggrieved party on the
grounds that it was made without jurisdiction if the adjudicator's decision on the
merits was the subject of enforcement proceedings.”
The adjudicator took this option and concluded that he has jurisdiction to deal
with the dispute in a letter dated 5 March 2001. He stated that the giving of factual
evidence as an architect or surveyor was the 'doing' of architectural design or surveying
work and that assisting at the arbitration was the 'provision' of advice in relation to
construction operations because the arbitration itself concerned construction operations.
Reliance was also placed by the adjudicator on the circumstance that Knowles’s work in
relation to the arbitration followed on from their original engagement to provide a report
on the defective floor.
In response, both Fence and Knowles agree that the adjudicator to make a non
binding decision and both took the view that any decision of the adjudicator would be
open to challenge on any enforcement proceedings. The adjudicator decided in favour of
Knowles and later, Fence applied to the court to challenge the adjudicator’s decision.
In court, Fence claimed that to give evidence of fact and to assist at the arbitration
was not itself to “do architectural, design or surveying” work nor was it to provide
353 [2000] TCC
101
“advice on building” or engineering.354
Fence also claimed that such work or advice was
not done or provided “in relation to construction operations”355
but in relation to
arbitration. Moreover, Fence submitted that Part II of the HGCRA 1996 was intended to
deal with disputes and to assist cash flow in the construction industry and was not
intended to affect arbitration or legal industry. Therefore, Fence claimed the adjudicator
has no jurisdiction to decide on those invoices.
As for Knowles, they relied on the case of Ashville Investments v Elmer
Contractors356
as an authority to indicate that a broad meaning should be given to the
words “in relation to” in the HGCRA 1996.357
Knowles claimed that those services fell
within the extended definition of a “Construction Contract” under the HGCRA 1996
because the arbitration itself concerned construction operations. Knowles also claimed
that their works in relation to the arbitration followed on from their original engagement
to provide a report on the defective floor. Therefore, Knowles contended that the
adjudicator did have jurisdiction in relation to the invoices.
The jurisdiction issue in this case is whether the adjudicator’s decision which
derives from the non-binding decision made by the adjudicator on his jurisdictional
question can be enforce.
(c) Judgment
Judge Gilliland QC in his judgment held that, the giving of factual evidence by an
Architect, Designer, or Surveyor in arbitration is not within the words in the HGCRA
354 Section 104(1)&(2) of the HGCRA 1996. 355 Section 104(2)(b) of the HGCRA 1996. 356 [1989] QB 488. 357 Section 104(2) of the HGCRA 1996.
102
1996.358
He also held that assisting at an arbitration is not the same thing as providing
advice on building or engineering. Therefore, he stated that the adjudicator did not upon
the true construction of s104(2) of the HGCRA 1996 have jurisdiction to rule upon the
entitlement of Knowles to payment for the services rendered by it as a witness of fact or
by way of assistance at the arbitration.
He stated that although the preparation of a preliminary report on the defective
kitchen floor is not itself a construction operation, it is sufficiently connected with
construction operations so that it can properly be said to relate to construction operations.
However, if the giving of factual evidence or the provision of advice at an arbitration is
not sufficiently connected with the construction operations, therefore it does not relate to
construction operations. Nevertheless, the contract can be severed and adjudication will
be available in relation to any disputes in connection with the preliminary report.
Furthermore, the court held that the letter dated 26 February 2001 from Fence to
the adjudicator and the adjudicator's response dated 5 March 2001, Fence had conferred
jurisdiction on the adjudicator to determine his own jurisdiction and that Fence was
accordingly bound by or estopped from disputing the adjudicator's decision that
Knowles’ claim was within the 1996 Act. The court also decided that there were no terms
expressly in the scheme for construction contracts which govern the contract between
Fence and Knowles, conferring on the adjudicator the power to determine his own
jurisdiction in a manner which would bind the parties.
However, according to the judge it could only be on the basis that the parties had
agreed either expressly or by implication to confer that power upon him. Nonetheless, the
court held that it was not open to one party unilaterally to confer jurisdiction on the
adjudicator to determine his own jurisdiction. If the adjudicator is to have ad hoc
358 Section 104(2)(a)
103
jurisdiction to decide the issue of his jurisdiction so as to bind the parties, the request
must be assented to by the other party in circumstances where it is appropriate to
conclude that both parties have agreed to confer that power upon the adjudicator. In this
case, the adjudicator never invited Knowles and Knowles never respond on the invitation
by Fence.
Moreover, the court found that the solicitors for the parties were ad idem that the
adjudicator was being asked to make a non binding decision on his jurisdiction and
indeed that appears also to have been the view which was taken by the adjudicator
himself who after referring to the Christiani case stated that he had reached 'the non-
binding conclusion' that he had jurisdiction under the contract. The court therefore, held
that Fence entitled to the declaration sought in their Particulars of Claim and refused the
cross application by Knowles to enforce the award.
(d) Principle created
This is the case where the responding party challenge the adjudicator’s
jurisdiction on the ground that the services by the claimant fall outside the definition of a
“Construction Contract” within the HGCRA 1996. It can be learnt that the adjudicator
can investigate the question of his own jurisdiction and can reach his own conclusion as
to it. Then, it is not wrong for the adjudicator to decide that he has the jurisdiction and
continue to decide on the dispute even the party have ground to challenge it.
The aggrieved party has right to challenge the adjudicator’s decision in court on
the ground that it is made without jurisdiction. This is because the adjudicator’s decision
is non-binding and subject to enforcement proceedings. The court then, will decide
whether the adjudicator has jurisdiction to deal with the dispute and whether the
adjudicator’s decision can be enforced. It also can be learnt that if the court find that the
104
adjudicator has no jurisdiction to deal with the dispute referred to him; his decision on
such dispute cannot be enforced.
4.2.4 Ballast Plc v Burrell co (Construction Management) Ltd359
(a) Facts of case
1n 1998 Burrell engaged Ballast to act as management contractor relating to a
construction project in Glasgow known as 'Homes for the Future' under the standard JCT
form of management contract. There was a dispute as to the amount of the payment due
which Ballast referred it to an adjudicator.
The dispute related to the non-payment of valuations claimed to be worth
£1,600,000. In this dispute the adjudicator refused to grant the redress sought and his
decision in relation to the main request by the Ballast which was to assess the value of
work done, was 'not valid' on the reason that the parties had failed to abide by the terms
of the JCT contract. Ballast applied to the court to grant a declarator that the adjudicator
had failed to make a decision and to reduce the decision as a whole. The court held that in
those circumstances, his decision was a nullity, and reduced it. Subsequently, Burrell
appealed.
359 [2003] SC 279, [2001] BLR 529,
105
(b) Jurisdictional issue
The issue started from the adjudicator’s decision. On 16th November 2000, Ballast
gave a notice of adjudication to Burrell on about the dispute related to the amount of the
non-payment by Burrell. In the notice, Ballast set out the nature of the redress which was
sought by him asking the adjudicator:
1. To assess the value of work done, the common services, the management fee,
loss and expenses and other appropriate amounts due and payable and to make
directions as to the amounts due and payable to works package contractors.
2. To find that where his directions regarding any works package contract would
involve reduction to amounts previously paid in relation to that package, no
reduction in the value due and payable to the referring party may be made
until such time as the referring party recovers any sums found in those
directions to have been overpaid.
3. To order payment by the respondents to the referring party of any sums due
and payable arising from the remedies sought under (1) and (2) above.
4. To order payment of the adjudicator's fees and expenses by the respondents
Subsequently on 28th December 2000, the adjudicator issued his decision for all
the redress sought by Ballast. On the first redress, the adjudicator decided that it was not
valid on the grounds that the issues and methods utilised in formation of the works
package contracts lack certainty and reliability as to value and related considerations.
On the second redress, the adjudicator decided that it was not valid on the grounds
that not in accordance with the HGCRA 1996 or Regulations and in particular Part II
Regulation 11 on conditional payment provisions. In addition this presupposed that the
106
costs could have been passed on to Burrell without proof that they could contractually be
recovered due to lack of true transparency between works package and main contracts.
The adjudicator therefore held that the third redress was not applicable on the grounds of
decisions on the first and second redress.
The adjudicator also decide that the forth redress was not granted on the grounds
that both parties, on the basis of joint several liability for the costs, will share them
equally. This was based on the joint failure to ensure that the contract and its conditions
were adhered to in their entirety. With that the adjudicator decided that Burrell was to
immediately remit £2.771.50 inclusive of VAT to Ballast as the share of fees and
expenses of the adjudicator.
In response to a request for clarification of his reasons, the adjudicator provided a
letter dated 29th December 2000. The adjudicator accepted that the allegations that
variations had been instructed by or on behalf of Burrell otherwise than in the form
stipulated in the JCT conditions, and that Burrell had in bad faith prevented the issue of
certificates, were being made. The adjudicator put the parties' failure to abide strictly by
the terms of the JCT contract which they had entered into, in their dealings with each
other and with third parties as the main reason for him to give such decision.
He stated that he could not carry out an evaluation, or find any payments due,
because the parties had departed from the terms of the pre-printed contract in a number of
aspects. Therefore, he concluded that he has no jurisdiction to deal with matter referred
by Ballast. Ballast sought a declaration that the adjudicator had failed to make any
decision in respect of the matters claimed.
107
In the Session Court, Ballast claimed that in term of paragraph 20(1) of the
Scheme the adjudicator was under a duty to decide the matters in dispute360
; the
adjudicator had failed to do so. Ballast claimed that the adjudicator was not entitled to
decide that he was unable to decide. Meanwhile, Burrell claimed that the adjudicator had
implemented his duty under paragraph 20(1) of the Scheme. Burrell contended that the
adjudicator could validly decide that he was unable to exercise his statutory jurisdiction.
The Session Court granted Ballast the declarator sought. Then, Burrell reclaimed to the
Extra Division.
In the Extra Division, Burrell argued that the adjudicator had had power to
determine the claim. It was a claim for valuation of works carried out within the terms of
the contract, and was not restricted to the original terms. Burrell contended that the
failure of the adjudicator to consider the matter was a failure in duty inconsistent with the
jurisdictional powers conferred on him. Burrell submitted that the adjudicator had not
erred in law, and had determined the dispute.
The jurisdiction issue in this case was whether the adjudicator had taken an
erroneously restrictive view of his jurisdiction and if so, whether the decision can be
enforce.
(c) Judgment
In Session Court, Lord Reed in his judgment stated that the Scheme should be
interpreted as requiring the parties to comply with an adjudicator's decision,
notwithstanding his failure to comply with the express or implied requirements of the
Scheme, unless the decision was a nullity; and it would have been a nullity if the
360 Paragraph 20(1) of the The Scheme for Construction Contracts (Scotland) Regulations 1998
108
adjudicator acted ultra vires. The court gave example where an adjudicator had acted
ultra vires such as because he had no jurisdiction to determine the dispute referred to
him, or because he had acted unfairly in the procedure or because he had erred in law in a
manner which resulted in his failing to exercise his jurisdiction or acting beyond his
jurisdiction.
This general approach used by the court and the court held that the adjudicator
was bound to determine the dispute referred to him, provided the dispute fell within his
jurisdiction. Lord Reed also referred to Paragraph 20(1) of the Scheme which expressly
provides that the adjudicator shall decide the matters in dispute361
. This, according to
Lord Reed is subject to the adjudicator’s power to issue separate decisions on different
aspects of the dispute.
Lord Reed also ruled that the adjudicator could not determine with binding effect
the extent of his own jurisdiction. He stated that the limits of adjudicator’s jurisdiction
are determined by the notice of adjudication and the provisions of the Scheme, and
cannot be narrowed or extended by the adjudicator's misconstruing those limits. The
court referred to the Lord Reid's example where the tribunal which might in perfect good
faith have misconstrued the provisions giving it power to act so that it failed to deal with
the question remitted to it in the case of Anisminic Ltd v Foreign Compensation
Commission362. The court also referred to the principle created from the Anisminic case
where the tribunal cannot be for the commission to determine the limits of its own
powers.
The court disagree with the approach by the adjudicator who decided that he
could not carry out any valuation, or find any payment due, because the parties had
361 Paragraph 20(1) of the The Scheme for Construction Contracts (Scotland) Regulations 1998 362 [1969] 2 AC 147; [1969] 1 All ER 208, HL
109
departed from the terms of the pre-printed contract in a number of respects. The judge
stated it was apparent that there were allegations that variations had been instructed by
Burrell otherwise than in the form stipulated in the JCT conditions, and Burrell had in
bad faith prevented the issue of certificates. However, given that allegations of that nature
were being made, the court held that the adjudicator's error was material.
As a result of that error, the Session Court decided that the adjudicator had
misconstrued his powers, and in consequence failed to exercise his jurisdiction to
determine the dispute. His decision is therefore a nullity. With that, the Session Court
granted Ballast the declaration sought.
The Extra Division upheld the Session Court decision and stated that the
adjudicator has the power and the duty to determine whether a claim in respect of
valuation of work is validly made under the contract, and must do so. The judge stated
that the adjudicator must answer that question either in the affirmative or the negative and
cannot decline to address it, which is what the adjudicator in fact did in this case.
The judge viewed that the adjudicator’s power is based on the notice of dispute
which identified the question which the adjudicator had to address. However, the court
held that the adjudicator in this case had declined to do so fell into an error of law which
is material. Therefore the adjudicator misconstrued his powers and failed to exercise his
jurisdiction to determine the dispute. With that, the Extra Division held that the
adjudicator’s decision was a nullity and reclaiming motion refused.
110
(d) Principle created
This was the case where the adjudicator had determine his own jurisdiction based
on the wrong reason. In this case the adjudicator had decided first that he had no
jurisdiction to deal with the dispute referred. Then, the adjudicator never invited the
parties to agree on whether he can determine his own jurisdiction.
If we look to the third option given by Judge Thornton in Christiani & Nielsen
Ltd v The Lowry Centre Development Company Ltd363, an adjudicator can investigate the
matter regarding to his jurisdiction and conclude that he has no jurisdiction and decline to
deal with the dispute. However, in this case the adjudicator concluded that he had no
jurisdiction but still continue to deal with the dispute. Moreover, the adjudicator
conclusion was based on the erroneous reason.
It can be learnt that an adjudicator has the power and duty to determine whether
the matter referred is validly made under the contract. The adjudicator must answer it
either in the affirmative or the negative and cannot decline to address it. If the adjudicator
decline, the adjudicator will fall into an error of law which is material. As a result, any
decision by the adjudicator on the matter is a nullity and cannot be enforced.
363 [2000] TCC
111
4.2.5 Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd364
(a) Facts of case
Tally invited Pegram to undertake refurbishment works for their retail clothing
store in Oxford Street, London which were carried out between June and September
2000. Pegram undertook the strip out work without any clear-cut letter of intent having
been provided. By a letter dated 7 July 2000, Tally wrote to Pegram instructing them to
carry out the works subject to a term that the form of the contract would be the JCT
Standard Form of Prime Cost Contract (1998 edition) (JCT PC 98). However, Pegram
immediately in a letter dated 10 July 2002 declining to enter into a contract which
incorporated these conditions and instead offering their own conditions which had
already been sent to Tally.
On 28 July 2000 Pegram sent to Tally four marked up plans which was signed by
an authorised representative of Tally. On 2 August 2000, Tally sent to Pegram a finalised
letter of appointment seeking to incorporate the JCT PC 98 terms and, if already
applicable, seeking to exclude the Pegram's standard terms. The letter contained a
requirement that Pegram should confirm its agreement to the terms of the letter by
returning the enclosed copy signed which never did. No further communication of note
occurred concerning the terms of the contract under which the work was being carried
out.
A dispute arose as to the final account and Pegram served a notice of adjudication
on Tally on 3 July 2002. The adjudication be referred by adopted the statutory scheme
rules (Scheme for Construction Contracts (England and Wales) Regulations 1998. The
364 [2003] EWHC 984 (TCC), [2003] 3 All ER 98, [2003] 1 WLR 2990
112
adjudicator accepted jurisdiction under the statutory scheme and made an award in the
Pegram's favour. Tally refused to pay on the grounds that it was decided without
jurisdiction and Pegram brought proceedings to enforce the award.
(b) Jurisdictional issue
The jurisdictional issue starts from the appointment of the adjudicator. Following
the practical completion, disputes as to the value of that work arose and Pegram brought
the matter to adjudication. Pegram referred the matter to an adjudicator under the
statutory scheme contained in the Scheme for Construction Contracts (England and
Wales) Regulations 1998, pursuant to section 108(1) of the Housing Grants, Construction
and Regeneration Act 1996 (HGCRA 1996). The adjudicator accepted jurisdiction under
the statutory scheme and made an award in the Pegram's favour on 16 August 2002.
Tally disputed the adjudicator's jurisdiction on the basis, inter alia, that the
contract was on JCT standard terms which met the requirements of section 108(2) of the
HGCRA 1996 so as to displace the statutory scheme with its own. That subsection
provided that:365
(2) The contract shall:
(a) Enable a party to give notice at any time of his intention to refer a dispute
to adjudication;
(b) Provide a timetable with the object of securing the appointment of the
adjudicator and referral of the dispute to him within 7 days of such notice.
365 Section 108(2) of the HGCRA 1996
113
By section 108(5) of the HGCRA 1996, if the contract did not comply with those
requirements, the adjudication provision of the statutory scheme applied.366
Tally argued
that the adjudicator was appointed under the provisions of the Scheme for Construction
Contracts when the Scheme did not apply based on two reasons.
First, Tally contended that there was no construction contract in existence
between the parties and, hence, no construction contract underlay or gave rise to Pegram's
statutory entitlement to adjudication as to the disputes concerning the true value of the
work. Secondly, Tally alleged that if there was a construction contract in existence, that
contract was different in content to the construction contract found to exist by the
adjudicator.
In consequence, that contract incorporated different adjudication rules into any
adjudication arising out of that contract to those adopted by the adjudicator and, thus, the
adjudicator was appointed and the adjudication was conducted by reference to the wrong
rules and in contravention of the parties' agreement as to the procedural rules that would
apply. On this additional ground, therefore, Tally contended that the adjudication was
conducted without jurisdiction.
As for Pegram, they contended that the contract was formed by their offer
contained in their quotation of 28 July 2000 read with the earlier communication
enclosing their standard conditions and Tally's acceptance of both constituted by Tally’s
signature on that quotation. They claimed that the joint signatures on the document of 28
July 2000 could only have related to, and given rise to, a construction contract concerning
the partitions they have been asked to install.
366 Section 108(5) of the HGCRA 1996
114
Pegram also contended that since a contact was already in being, their failure to
sign and return the offer contained in the letter dated 2 August 2000 was the clearest
possible indication that they was not agreeing to be bound by that proposed contract and
remained bound by the earlier contract.
The adjudicator confirmed that the applicable terms incorporated into the
construction contract both parties accepted was in existence. Thus, the adjudicator
proceeded on the basis that there was a construction contract underlying both the disputes
referred to him and his appointment. The jurisdictional issue arose as to whether the
adjudicator's award was unenforceable if the adjudicator applied the wrong rules.
(c) Judgment
Judge Anthony Thornton QC in his judgment held that the adjudicator correctly
proceeded on the basis that there was a construction contract underlying both the disputes
referred to him. The court stated that, since the quotation by Pegram to Tally on 28 July
2000 made no reference to earlier communications or to Pegram's conditions, these
conditions could not be regarded as applying to any of the Pegram’s work.
In consequence, the other work could only have been subject to the letter dated 2
August 2000 and that Pegram's failure to sign and return a copy did not preclude a
contract coming into being. Judge concluded that it was not clear-cut or obvious which
set of conditions, namely the Pegram's conditions or JCT PC 98, had been incorporated
into the construction contract but that there was in existence a construction contract of
some kind. Thus, judge held that the adjudicator’s appointment by scheme rules was
correct.
115
It followed that, in the instant case, the court held that the adjudicator had had
jurisdiction and enforceable. In addition, the court mentioned that in any case where the
adjudicator applied the wrong rules, did not amount to an error which undermined his
jurisdiction and the resulting decision was still valid. The court concluded that any error
as to the terms of the contract or as to the applicable procedural adjudication rules was an
error of law within the adjudicator's jurisdiction and did not render the decision
unenforceable.
(d) Principle created
This is the case where the responding party challenged the adjudicator’s
jurisdiction on the ground that the adjudicator’s appointment was under the wrong rules.
The adjudicator in this case did not invite parties to decide on his power to determine his
jurisdiction. Nevertheless, the adjudicator decided that he had the jurisdiction without any
agreement from the parties.
It can be learnt that the adjudicator can straight away decide on his jurisdictional
question without having to ask response from the parties. Then, any party can challenge
the adjudicator’s decision based on lack of jurisdiction. The court will then decided on
whether the adjudicator’s decision made within his jurisdiction and whether such
decision can be enforced.
It also can be learnt that even if the adjudicator applied the wrong rules, it did not
amount to an error which undermined his jurisdiction and the resulting decision was still
valid. Moreover, any error as to the terms of the contract or as to the applicable
procedural adjudication rules was an error of law within the adjudicator's jurisdiction and
did not render the decision unenforceable.
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4.2.6 Pilon Ltd v Breyer Group Plc367
(a) Facts of case
Breyer engaged Pilon as the specialist refurbishment contractor to carry out work
for a construction project. The work was separated into two batches: batches 1-25, and
batches 26-62. In the summer of 2008, disputes arose between the parties and Pilon left
the site in October 2008.
Since January 2009, Pilon has been the subject of a Company Voluntary
Arrangement ("CVA"). In September 2009, which was nine month after the CVA, Pilon
issued an interim application for payment in respect of batches 26-62 which was not paid
by Breyer and the dispute went to adjudication. Breyer contended that they were not
obliged to serve any such notices. Their defence was primarily one of set off, in the sum
of 147,774 which, it claimed, constituted an earlier over-payment to Pilon in relation to
batches 1-25.
The adjudicator did not consider the over-payment defence at all, proceeded to
find for Pilon and awarded to them 206,617.74. Breyer informed Pilon that in refusing to
consider their defence, the adjudicator had committed a breach of natural justice, that his
decision was therefore not regarded as binding, and that they would not be paying the
sum directed by him in his decision. Pilon issued the instant application, seeking
enforcement of the adjudicator's judgment.
367 [2010] EWHC 837 (TCC) ; [2010] All ER (D) 197 (Apr)
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(b) Jurisdictional issue
The jurisdictional issue arose from the Pilon’s interim application for payment in
respect of batches 26-62. Pilon claimed that they were entitled to that payment without
any deduction because the defendant had not served either a payment or a withholding
notice on batches 26-62. Breyer claimed that they were not obliged to serve any such
notices primarily because one of set off, in the sum of 147,774 which, it claimed,
constituted an earlier over-payment Pilon in relation to batches 1 - 25.
In their response to the adjudication referral notice, Breyer termed Pilon's attempt
to limit the issues to batches 26-62 only as a 'crude device' and set out in terms that the
over-payment defence was open to them and within the adjudicator's jurisdiction.
The adjudicator, in his written decision held that, inter alia: (i) the absence of
payment and/or withholding notices did not mean that the detailed valuation exercise
could be bypassed; and (ii) he did not have jurisdiction to consider Breyer’s argument in
relation to the alleged over-payment on batches 1-25 because the notice of adjudication
made it plain that the dispute was limited to batches 26-62. The adjudicator in giving the
decision to conclude he did not have jurisdiction on the overpayment on batches 1-25,
mentioned several reasons.
First, his jurisdiction in this matter is governed by the terms of the parties'
contract and the details of the Notice of Intention and the Referral. Thus, he stated that to
stray outside those matters would constitute dereliction of his jurisdiction.
Second, the redress sought in the Referral is for payment of the sum of
337,000.67, which sum is derived from a gross payment entitlement said to be
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1,712,665.83. Therefore, the extent of his jurisdiction was limited by the matters referred
by Pilon. Those matters were, as it seems to him, the matters that led to the gross
valuation of 1,712,665.83 which deal with the batches 26-62.
Based on these reasons, the adjudicator concluded that his jurisdiction does not
extend to any matter that arises outside of the determination of that particular gross figure
and the sums that make it up, since Pilon who, as the referring party, has deliberately
formulated their Notice and Referral to limit his jurisdiction. The adjudicator rejected
Breyer's case that he was obliged to consider their defence based upon over-payment on
batches 1-25.
In court, Pilon contended that the adjudicator's decision, to the effect that he did
not have the jurisdiction to consider the alleged overpayment on batches 1-25, was
temporarily binding on the parties. Pilon claimed that the parties had debated the question
of jurisdiction before the adjudicator, and he had reached a decision on it, so that,
whether he was right or wrong, that decision was at least temporarily binding on the
parties and therefore the court. Thus, Pilon argued, the jurisdiction point now taken by
Breyer was simply not open to them on this application for summary judgment.
As for Breyer, they made clear that this jurisdictional issue was in dispute at the
time of the adjudication. In the response to the notice of adjudication, Breyer claimed that
they were perfectly entitled to refer to the over-payments made to Pilon in relation to
batches 1-25, as a defence to the claim, and if this defence is not considered by the
adjudicator, this would amount to a breach of the rules of natural justice. Subsequently in
court, Breyer claimed that the adjudicator’s decision had been reached on a fundamental
misunderstanding of his jurisdiction and that they were not bound by it.
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The jurisdiction issue in this case is whether the restriction on his own jurisdiction
deliberately put by the adjudicator is valid and the decision can be enforced.
(c) Judgment
Coulson J in his judgment held that the adjudicator had no power to make a
binding decision on his own jurisdiction. He stated that Breyer were not agreeing that the
adjudicator's decision on this point would be temporarily binding, even as the parties
sensibly requested that the adjudicator investigate and rule upon his jurisdiction. Thus, in
the absence of any express or implied agreement, such decision cannot be bound to the
parties.
Coulson J also stated that the adjudicator erred in failing to take into account
Breyer's defence by reference to the over-payment on batches 1-25. This was because the
adjudicator failed to appreciate that what Pilon were seeking by that notice was not only
an interim valuation of batches 26-62, but also an interim payment of any sum considered
owing to them, even the adjudicator was correct to regard the notice of adjudication
established the boundaries of his jurisdiction. In other words, the notice of adjudication
gave the adjudicator the jurisdiction to consider any further sum should be paid by way of
interim payment from Breyer to Pilon and that issue involved a consideration of Breyer's
defence based on the alleged over-payment on batches 1-25.
Furthermore, the court held that the adjudicator deliberately placed an erroneous
restriction on his own jurisdiction, which amounted to a breach of natural justice. This
was because the overpayment defence was worth 147,774 or 71% of the sum eventually
awarded. Therefore, it was fundamental importance to the dispute as a whole. However,
the adjudicator failed to have any regard to it at all. Moreover, Coulson J stated that the
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statement by Pilon who deliberately limited the scope of the adjudication notice to
batches 26-62 was an erroneous statement of the adjudicator's jurisdiction.
The judge understand that that it may be tempting for a claiming party in an
adjudication to seek to limit the adjudicator's jurisdiction in a way in which that party
believes to be to its advantage. The judge had no doubt that was what happened in this
case where Pilon did not wish the adjudicator to have any regard to batches 1-25, and
therefore deliberately limited the scope of the adjudication notice to batches 26-62.
The court stated that the adjudicator had to attempt to answer the question
referred to him. The question might consist of a number of separate sub-issues.
According to the judge, if the adjudicator had endeavoured generally to address those
issues in order to answer the question then, whether right or wrong, his decision was
enforceable. The judge also stated that, if the adjudicator failed to address the question
referred to him because he had taken an erroneously restrictive view of his jurisdiction
(and had, for example, failed even to consider the defence to the claim or some
fundamental element of it), then that might make his decision unenforceable, either on
grounds of jurisdiction or natural justice.
Accordingly, the court held that the adjudicator made a material jurisdictional
error in deliberately declining to consider the over-payment defence. The court concluded
that as a consequence of this jurisdictional error and resulting breach of natural justice,
his decision should not be enforced.
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(d) Principle created
This is the case where the responding party challenged the adjudicator’s
jurisdiction based on the ground that the adjudicator had made erroneous statement of his
jurisdictional and constituted breach of natural justice. The adjudicator decided that he
had no jurisdiction to deal with matters outside the limits in the notice and referral of
adjudication.
In this case, the adjudicator decided first that he did not have jurisdiction to deal
with the matter. Only after that, the responding party ask the adjudicator to investigate the
issue and state conclusion. It can be learnt that adjudicator when being referred a dispute
can reject to deal with the matter before any party challenge his jurisdiction.
It can be learnt that when one of the party not agreeing that the adjudicator's
decision on this point, it would be temporarily binding even though the parties sensibly
requested that the adjudicator investigate and rule upon his jurisdiction. Thus, in the
absence of any express or implied agreement, such decision cannot be bound to the
parties.
It also can be learnt that a referring party cannot deliberately put a limitation in
the notice of adjudication to restrict the adjudicator to only deal with the dispute in the
notice. It is an erroneous statement of the adjudicator's jurisdiction. The adjudicator also,
should think and consider deeply on whether such limitation can be imposed as it would
amount him to a breach of the rules of natural justice. Subsequently, any decision of
adjudicator which involved breach of natural justice is unenforceable.
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4.3 Circumstances where the adjudicator determines own jurisdiction
As been learn so far this research had discussed on the courts’ decision on all of
the six cases on the issue of adjudicator determines own jurisdiction. Following this
discussion, this research summarised on the circumstances where the adjudicator
determines own jurisdiction. Based on the case analysis, there are two circumstances
where the adjudicator makes rule on his jurisdiction.
The first circumstance is where the adjudicator decides he has no jurisdiction on
the first place. This is where the adjudicator, after being referred to him by any party the
matter, he rejected to deal with it based on the ground he has no jurisdiction. Only after
that, the aggrieved party raise the question on the adjudicator’s jurisdiction.
This first circumstance can be confirmed in Pilon case. The adjudicator ruled that
he had no jurisdiction to deal with the over payment defence by the responding party
because it deal with another batches of work scope. On top of that, the adjudicator stated
that there was a limitation put by the referring party in the notice of adjudication, not to
deal with the other batches of work scope. The adjudicator therefore ruled that the over
payment defence was beyond his jurisdiction as conferred by the notice of adjudication.
Subsequently, the court held that the adjudicator made a material jurisdictional error in
deliberately declining to consider the over payment defence.
This circumstance also can be look in the case of Ballast. However, because the
adjudicator took the erroneous reasons to decide that he had no jurisdiction to deal with
the dispute, the adjudicator has done an error in law. Both of this cases showed that the
adjudicator determined his own jurisdiction based on the erroneous reasons which lead to
nullity decision and cannot be enforced.
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The second circumstance is where a party raises question to challenge the
adjudicator’s jurisdiction. This is where the responding party claims that the adjudicator
has no jurisdiction to deal with the dispute and challenges the adjudicator to determine
his stand. This circumstance can be proved in the case of Christiani. This was the case
where the responding party challenged the adjudicator’s jurisdiction based on the ground
that the HGCRA 1996 could not be applied as the contract was made before its
enforcement. The similar circumstance also happen in the case of Whiteways where the
responding party challenged the adjudicator’s jurisdiction based on the ground that the
dispute in the referral was different from the dispute in the notice of adjudication.
It can also be look at the case of Fence where the responding party had challenged
the adjudicator’s jurisdiction on the ground that the services by the claimant fall outside
the definition of a “Construction Contract” within the HGCRA 1996. The similar
circumstance also happen where the responding party challenged the adjudicator’s
jurisdiction on the ground that the adjudicator’s appointment was under the wrong rules
in Pegram. All these cases proved that the responding party, can challenge the
adjudicator’s decision on several grounds and ask the adjudicator the deal with the
question whether he has jurisdiction or not.
The difference between both circumstances is in the first circumstance, the
adjudicator decide first that he has no jurisdiction to deal with the matter referred to him.
Only after that, the responding party challenged such decision. In contrast, in the second
circumstance, the responding party challenged the adjudicator’s jurisdiction at the first
place.
In both circumstances, the adjudicator is given three options when it comes to the
question of his jurisdiction based on the decision by Judge Thornton in Christiani case.
According to Judge Thornton, when the adjudicator faced with a challenge to his own
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jurisdiction, whether the parties did reach an agreement to vest in the adjudicator ad hoc
jurisdiction to determine his own jurisdiction, he has a choice as to how to proceed based
on three options as follow:
1. He can ignore the challenge and proceed as if he had jurisdiction, leaving it to
the court to determine that question if and when his decision is the subject of
enforcement proceedings.
2. Alternatively, the adjudicator can investigate the question of his own
jurisdiction and can reach his own conclusion as to it. If he was to conclude
that he had jurisdiction, he could then proceed to decide the dispute that had
been referred to him. That decision on the merits could then be challengeable
by the aggrieved party on the grounds that it was made without jurisdiction if
the adjudicator's decision on the merits was the subject of enforcement
proceedings.
3. Having investigated the question, the adjudicator might conclude that he had
no jurisdiction. The adjudicator would then decline to act further and the
disappointed party could test that conclusion by seeking from the court a
speedy trial to determine its right to adjudication and the validity of the
appointment of the adjudicator.
From the discussion, most of the adjudicators took the second option. This can be
look in the cases of Christiani, Whiteways, Fence and also Pegram. All the adjudicators
in these four cases investigate the jurisdictional challenge and decided that they had
jurisdiction. Meanwhile in the other two cases; Ballast and Pilon, the adjudicators took
the third option where they investigate and decided that they did not have the jurisdiction.
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There are no cases on the first option. Perhaps, this is because an adjudicator
would find it hard to comply with the statutory duty of impartiality if he or she ignored
such a challenge as mentioned by Judge Thornton in case of Christiani.
4.4 The effectiveness of an adjudicator determines own jurisdiction
In this part, this research intends to look on the effectiveness of an adjudicator in
determining his own jurisdiction. The effectiveness here means that in what extend the
adjudicator determines his own jurisdiction can help the parties to resolve the dispute
effectively without further challenges on the ground that the adjudicator has no
jurisdiction. This can be look on whether the adjudicator’ reasons in determining his
jurisdiction to deal with the dispute be upheld by the court.
From all the cases that have been discussed previously, there are cases where the
court upheld the decision of adjudicator. This can be look in the cases of Christiani,
Whiteways and Pegram. In all of the three cases, the courts held that the adjudicators
were correct in determined their own jurisdiction.
In Whiteways case, there was an ad-hoc jurisdiction be given to the adjudicator to
determine his jurisdiction where it resulted to the parties bound by his decision. The court
upheld the adjudicator’ decision as the adjudicator correct in his reasons in determines
the dispute. Meanwhile in both Christiani and Pegram cases, although there was no ad-
hoc jurisdiction to give the power to the adjudicator to determine his jurisdiction, the
court upheld the decision of the adjudicator. This shows that, even the adjudicator did not
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have the jurisdiction to determine his own jurisdiction; it will not affect his decision on
the dispute.
There are also cases where the courts refused to accept that the adjudicators were
correct in his decision. This can be look at the case of Fence where the court held that the
adjudicator was wrong in determine his jurisdiction because the works did not fall within
the definition under the HGCRA 1996. Meanwhile in Ballast case the court rejected that
the adjudicator had no jurisdiction to deal with the matter as the adjudicator had erred and
act fairly with rejected to deal the matter referred to him. And in case of Pilon, the court
rejected the decision of the adjudicator that he had no jurisdiction based on his error in
law which resulted to breach of natural justice. In all three cases, there was no ad-hoc
jurisdiction be given to the adjudicator to determine his own jurisdiction but still, the
adjudicator were incorrect in their decision of his jurisdiction to deal with matters
referred to them.
From this discussion, one lesson that can be learn is even the adjudicator had
determine his own jurisdiction either with or without the agreement from the parties,
nevertheless the parties still can challenge the adjudicator jurisdiction to deal with the
dispute. This is because there are no provisions conferred the parties to be bound by the
adjudicator’s decision on the jurisdictional issue.
Previously in Chapter 3.5.1, a studied had been done to the TeCSA Adjudication
Rules 2002. Paragraph 14 of this rules, clearly stated that the adjudicator is allowed to
decide upon his own substantive jurisdiction, and as to the scope of the adjudication.368
This is an example of express provision which confers the adjudicator the power to
determine his own jurisdiction and subsequently, the parties to the contract are bound to
this provision.
368 Paragraph 14 of the TeCSA Adjudication Rules 2002 Version 2.0.
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This can be look in the case of Farebrother Building Services Ltd v Frogmore
Investments Ltd369 that has been discussed. In this case, the court ruled that on the face of
the provisions that stipulated in the TeCSA Adjudication Rules, it is a matter entirely for
the adjudicator to decide which of the matters he will decide in the course of the
adjudication. The judge mentioned that the adjudicator has a complete discretion over the
scope of the adjudication and can make a decision as to what is within the scope of the
adjudication.
At this point, it can be said that an express provision which confers the
adjudicator the power to determine his own jurisdiction is more effective than an ad-hoc
jurisdiction. The reason is the former is solely up to the adjudicator to decide while the
later need an agreement from all parties.
4.5 Position of the proposed CIPAA
In this part, this research anticipates the proposed CIPAA into the legal position
on the issue of adjudicator determines own jurisdiction. This is the main analysis where
this research determines the position of the proposed CIPAA on this issue based on the
legal position that has been discussed so far.
As been learnt so far, there are no provisions in the HGCRA 1996 conferring the
adjudicator the power to determine his own jurisdiction like in TeCSA Adjudication
Rules. It can only be done by agreement by both parties.
369 [2001] CILL 1762, TCC.
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First of all, as been discussed in Chapter 3.6, the proposed CIPAA basically limits
the jurisdiction of adjudicator. Section 20(1) clearly stated that the adjudicator’s
jurisdiction in relation to any dispute is limited to any matter permitted by this proposed
act that is referred to adjudication by the parties.370
From this provision it can be say that the proposed CIPAA limits the adjudicator’s
jurisdiction firstly to any matter permitted by the act which permitted by this proposed
act. The adjudication under the proposed CIPAA covers any matters relating construction
contract.371
Therefore, it can be say that any dispute either related to payment or others
can be referred to adjudication under this proposed act.
Secondly, the proposed CIPAA limits the adjudicator’s jurisdiction to only the
matter referred by the referring party. This means that the adjudicator cannot deal with
matters not stipulated in the notice of adjudication. However, this provision needs more
explanation to avoid erroneous on the jurisdiction.
This can be look at the case of Pilon, where the referring party put a limitation in
the notice of adjudication and also in the referral for the adjudicator to only deal with the
dispute under the batches 26-62. The adjudicator rejected to deal with the responding
party’s claim regarding other batches of work. This resulted to adjudicator deliberately
placed an erroneous restriction on his own jurisdiction, which amounted to a breach of
natural justice. The court held that the over payment defence by the responding party in
relation to other batches of work stipulated under the notice of adjudication must also be
considered by the adjudicator. The court held that the adjudicator’s decision cannot be
enforced.
370 Section 20(1) of the proposed CIPAA 371 Section 12 of the proposed CIPAA
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Should the similar case happen in Malaysia, there is possibility for the adjudicator
make an error to limit their jurisdiction like what happen in this case. The adjudicator
might use the section 20(1) to decide that he is bound by the notice of adjudication and
the referral. This might resulted to an erroneous restriction on his own jurisdiction, which
amounted to a breach of natural justice. The referring party also might use this provision
to limit the adjudicator power at the first place. This might resulted to the adjudicator
reject other related claims which he supposed to deal.
Next, the proposed CIPAA provided in section 20(2) that the parties to
adjudication may at any time by agreement in writing extend the jurisdiction of the
adjudicator to decide any other matter not already referred to the adjudicator.372
From this
provision, it can be said that the proposed CIPAA give adjudicator the power to extend
his jurisdiction as long as the parties agreed. As a result, parties may not be able to
challenge the adjudicator’s decision on the ground that the dispute is not within the
adjudicator’s jurisdiction, if both parties had agreed to widen the jurisdiction.
This provision is seems similar to the ad-hoc jurisdiction as previously discussed.
In Whiteways’ case the court held that when the parties had agreed to allow the
adjudicator decide on his jurisdiction, it resulted to an ad-hoc jurisdiction for the
adjudicator to determine his own jurisdiction and the party cannot challenge it anymore.
The approach is similar as the section 20(2) where it also needs an agreement from both
party for the adjudicator to extend his jurisdiction on any other matters.
Thus, because the similar approach between this section and the ad-hoc
jurisdiction, there is an issue that can be raise. From the analysis on the cases, there was
an issue on the agreement on whether the party had agreed to give the adjudicator power
to determine his own jurisdiction.
372 Section 20(2) of the proposed CIPAA
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In Whiteways case, it shows that although rejected by the court, the challenging
party still have arguments to deny that they had agreed to the ad-hoc jurisdiction. In this
case, the challenging party send a letter to invite the adjudicator to determine his
jurisdiction. Then the adjudicator invited the referring party to respond on that invitation
which they did in this case. After adjudicator had decided he had jurisdiction, the
challenging party in their respond to the referral by the referring party, stated their stand
that they did not agree with the adjudicator’s jurisdiction. Nonetheless, the court held that
on the fact that the letter given by the challenging party to invite the adjudicator to
determine the adjudicator’s jurisdiction was the clearest request to the adjudicator to
decide on his jurisdiction and not to decide whether to proceed as contended by the
challenging party.
Meanwhile, in the case of Christiani, subsequently after the challenging party
invited the adjudicator to determine his jurisdiction, the adjudicator invited both parties to
discuss on his jurisdiction. The court held that although the challenging party did accept
the invitation and involved in the discussion, the challenging party did not agree to give
power to the adjudicator to determine his own jurisdiction based on the fact that the
challenging party constantly protested the adjudicator’s jurisdiction. Moreover, the court
held that the challenging party’s acceptance on the invitation was only on the procedure
to whether the adjudicator should proceed and decide the dispute. Therefore, according to
the court there was no ad-hoc jurisdiction.
At this point, there was a difference between the decision in Whiteways’s case and
Christiani’s case. Perhaps, this proved on what HHJ Peter Coulson QC mentioned on the
following:373
373 HHJ Coulson, P. QC (2007), op.cit., p.218.
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“This fine line, between an agreement to allow the adjudicator to reach a
conclusion on the jurisdiction point, and an agreement to be bound by that
conclusion, explains why there are so many cases in which the successful party
has sought to argue that the loser agreed to be bound by the adjudicator’s
decision on jurisdiction.”
This also shows that in the early days of the HGCRA 1996 come into force, there
was a failure properly to differentiate between the adjudicator’s power to investigate and
rule on his own jurisdiction, and his ability to produce a binding determination on the
jurisdiction argument.374
As far as the proposed CIPAA is concern, this situation might also happen to the
proposed CIPAA when it comes into force. Section 20(2) clearly stated that without an
agreement between both parties, the adjudicator will not have jurisdiction to determine
any other matters. Both Whiteways and Christiani cases showed a complicated situation
where the judge had to determine whether the act of the parties can be can be considered
as an agreement. Based on this section, challenging party might deny such agreement if
he can prove their cases like in Christiani which resulted to unenforceable decision by the
adjudicator.
Meanwhile in Fence case, the challenging party invited the adjudicator to
determine his jurisdiction on the dispute. Then, without inviting the referring party to
respond to the invitation by the challenging party, the adjudicator decided he had
jurisdiction to determine the dispute. The court held that for an ad-hoc jurisdiction to
exist there must be agreement from both parties to confer it.
374 Ibid.
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On the fact that the challenging party unilaterally agree without assented to by the
referring party, the decision by the adjudicator would be open to challenge on any
enforcement proceedings. This case clearly shows that the invitation did not be responded
by the referring party and thus, there was no ad-hoc jurisdiction confers to the
adjudicator.
As far as the section 20(2) is concerned, the adjudicator will not have power in
this situation where it clearly showed only one party who agreed. Therefore, based on this
section, the challenging party can challenge the jurisdiction of adjudicator as the power
given is made unilaterally without agreement by both parties.
Furthermore, in Pegram case, the challenging party claimed the adjudicator had
no jurisdiction. Then the adjudicator after investigated on the challenge, he decided that
he has jurisdiction. There was no invitation made by the challenging party to the
adjudicator to determine his jurisdiction. Therefore no issue on the ad-hoc jurisdiction
had aroused. This issue also not arose in case of Ballast and Pilon where both
adjudicators in these cases decided first that they did not have the jurisdiction.
From this discussion, one main finding is that the approach of the proposed
CIPAA which lies in section 20(2) is similar with the ad-hoc jurisdiction. Further
discussion on findings is done in Chapter 5.2.
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4.6 Summary
From the analysis that have been done, it can be learnt that under the HGCRA
1996 and the Scheme, there are no provisions conferring the adjudicator the power to
determine his own jurisdiction. It can only be done by agreement by all both referring and
responding parties to confer such power. This is called ad-hoc jurisdiction as been
discussed before.
It also can be learnt that, a party challenge the adjudicator’s jurisdiction, the
adjudicator has three options. The adjudicator either can ignore the challenge and proceed
as he had jurisdiction; or investigate the challenge and conclude he has jurisdiction and
proceed; or he can investigate the challenge and conclude he has no jurisdiction and
decline. Except for the first option, both the second and third option can be proved in the
cases that have been discussed in this chapter. This perhaps because an adjudicator would
find it hard to comply with the statutory duty of impartiality if he or she ignored such a
challenge as mentioned by Judge Thornton in case of Christiani.
As far as the proposed CIPAA is concerned, it can be learnt that the section 20(2)
is similar to the ad-hoc jurisdiction which the party might challenge to the agreement if
he can prove that he never agree to give the adjudicator the jurisdiction to determine his
on jurisdiction. This is the main finding of this research which be discussed further in
Chapter 5.2.
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CHAPTER 5
CONCLUSION AND RECOMMENDATION
5.1 Introduction
This is the final chapter of this research. This chapter summarizes and concludes
the position of the proposed CIPAA on the issue of adjudicator determines own
jurisdiction based on the analysis and findings. This chapter also provides
recommendation based on the findings of from the analysis. At the end of this chapter,
this research determines whether the objective of this research was achieved.
5.2 Research findings
As far as the objective of this research is concerned, this research intended to
determine the position of the proposed Construction Industry Payment and Adjudication
135
Act (CIPAA) in relation to the legal position on the issue of adjudicator determines own
jurisdiction. Through the analysis, this research had anticipated the proposed CIPAA on
the issue of adjudicator determines own jurisdiction.
From the analysis that had been done, the main finding of this research is the
approach of the proposed CIPAA in dealing with the issue on adjudicator determines own
jurisdiction is similar to the approach of an ad-hoc jurisdiction. The main similarity is
where both need an agreement to confer the adjudicator to determine his own jurisdiction.
The provision in the proposed CIPAA regarding to this matter is the section 20(2)
which allow the parties to adjudication to extend the jurisdiction of the adjudicator to
decide any other matter not already referred to the adjudicator at any time by agreement
in writing. As been discussed in Chapter 4.5, this section needs an agreement for the
parties to allow adjudicator to determine his jurisdiction on any matters which is similar
to the approach of ad-hoc jurisdiction.
Therefore, based on the legal positions that have been discussed, it can be
predicted that the similar situation might happen should the proposed CIPAA come into
force. This legal position includes the judges’ decision and principle created on the issue
of adjudicator determines own jurisdiction from the six cases that involved in the
analysis.
It is also the finding of this research that, although section 20(2) provided that an
agreement must exist for a party to confer the jurisdiction to the adjudicator, the
challenging party might refute the agreement if he can prove that he never agree to give
the adjudicator the jurisdiction to determine his on jurisdiction. This can be proved from
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the case of Christiani & Nielsen Ltd v The Lowry Centre Development Company Ltd375
where the referring party claimed that the challenging party had agreed but the court held
that there was no agreement happens in the case which resulted to adjudicator had no
jurisdiction to determine his own jurisdiction.
Previously in Chapter 3.5.1, a studied had been done to the TeCSA Adjudication
Rules 2002. Paragraph 14 of this rules, clearly stated that the adjudicator is allowed to
decide upon his own substantive jurisdiction, and as to the scope of the adjudication.376
This is an example of express provision which confers the adjudicator the power to
determine his own jurisdiction and subsequently, the parties to the contract are bound to
this provision.
The difference between Section 20(2) of the proposed CIPAA and Paragraph 14
of the TeCSA Adjudication Rules is the former needs an agreement by all parties while
the later put solely power to the adjudicator to determine on his own jurisdiction.
Accordingly under the proposed CIPAA the adjudicator’s jurisdiction can be challenge if
the party can proved he had never agree to confer such jurisdiction. Meanwhile under
TeCSA Adjudication Rules, the party cannot challenge it based on the same reason as the
rules did not need an agreement by both parties for the adjudicator to determine his own
jurisdiction. It had been conferred by the rules and the parties are bound by the rules.
From these findings, it can be conclude that the position of the proposed CIPAA
is inadequate to provide a conclusive decision when it comes to the issue on adjudicator
determines own jurisdiction. The reason is that the section 20(2) of the proposed CIPAA
needs an agreement from both parties to be invoked. Thus, a party still can challenge the
jurisdiction of adjudicator to determine his own jurisdiction as long as the challenging
375 [2000] TCC 376 Paragraph 14 of the TeCSA Adjudication Rules 2002 Version 2.0.
137
party can prove he never agreed on such jurisdiction. With that, this research is of the
opinion that an express provision which confers the solely power to adjudicator to
determine his own jurisdiction is better than provision which need an agreement.
5.3 Research constraints
Since the time period given for this research was only 8 weeks, there was
absolutely time constraint for this research to gain more materials. There are many cases
on the issue of adjudicator determines own jurisdiction but this research only manage to
analyse six cases. Furthermore this research only able to look at the adjudication under
the HGCRA 1996 and the proposed CIPAA. As the proposed CIPAA is concern, there
were very few materials available on this proposed act which limits the discussion in this
research.
5.4 Recommendations
Whilst the Malaysian construction industry still waiting for the proposed
Construction Industry Payment and Adjudication Act to come into force, there are still
room for improvement to provide a good statutory adjudication. It is recommended based
on this research that the following suggestions need to be considered:
138
(a) No express limitation in the notice of adjudication and in the referral notice.
As been discussed before, section 20(1) clearly stated that the adjudicator’s
jurisdiction in relation to any dispute is limited to any matter permitted by this proposed
act that is referred to adjudication by the parties.377
This means that the adjudicator
cannot deal with matters not stipulated in the notice of adjudication which might lead to
erroneous restriction on adjudicator’s jurisdiction. Therefore it is suggested that the
proposed CIPAA to include a provision on preventing any express limitation in the notice
of adjudication as well as in the referral notice.
(b) Express power to adjudicator to determine his own jurisdiction
Based on the findings, it is suggested that the proposed CIPAA to include an
express provision to give power to the adjudicator to determine his own jurisdiction.
Section 20(2) of the proposed CIPAA is not conclusive enough to provide solution on the
issue of adjudicator determines own jurisdiction. One example that can be adopted is like
the Paragraph 14 of TeCSA Adjudication Rules 2002 Version 2.0 which allows the
adjudicator to decide upon his own substantive jurisdiction, and as to the scope of the
adjudication.378
In addition, the proposed CIPAA is expected to give a speedy solution by
statutory adjudication. Therefore the proposed CIPAA should limit the chances of further
proceedings. One loophole that had been identified by this research is the section 20(2)
which might give chances for the unfavoured party to challenge the adjudicator’s
jurisdiction.
377 Section 20(1) of the proposed CIPAA 378 Paragraph 14 of the TeCSA Adjudication Rules 2002 Version 2.0.
139
Previously in Chapter 1, this research had discussed on the suggestion by the
Construction Umbrella Bodies Adjudication Task Group in a report on the possible
amendments to Part II of the HGCRA 1996. The report mentioned that if an adjudicator
is given the power to determine his own jurisdiction under the contract, then their
decision on the matter is final.379
In contrast if they have no such express power then any
decision the adjudicator makes on jurisdiction is of interim effect only and can be opened
up by the courts.380
The problem is that challenges to jurisdiction in the courts can hinder the process
and delay payment of monies which the adjudicator has ordered should be paid.381
Therefore, a power to decide jurisdiction would thus not add to an adjudicators’ burden
but will save in the wholly unreasonable exercise of the power and would avoid much
litigation.382
This research is of similar opinion as the suggestion made by the Task
Group and this suggestion should also be applied on the proposed CIPAA.
It has to be noted that, the analysis, finding and suggestions only based on the
proposed CIPAA. Nonetheless, the proposed CIPAA still not been tested yet and
therefore it is suggested to the CIDB to keep in view on these suggestions.
379 Latham, M. (2004) loc.cit., p.37. 380 Ibid. 381 Ibid. 382 Ibid.
140
5.5 Area of future research
Since this research is only based on the proposed CIPAA, similar research may be
undertake after the act come into force and compare with other legislation such as New
Zealand, Australia and Singapore.
5.6 Conclusion
It can be concluded that the objective of this research is achieved. The position of
the proposed CIPAA on the issue of adjudicator determines own jurisdiction is doubtful
as under the proposed act, the parties still can argue that the jurisdiction of the adjudicator
to determine his own jurisdiction is conferred without agreement by both parties. The
provisions regarding to this issue is inadequate since from the findings it shows that the
proposed CIPAA use similar approach as the ad-hoc jurisdiction.
It has to be noted that the third key feature of the proposed CIPAA is to
establishing a cheaper, speedier, contemporaneous, binding, statutorily-enabled
adjudication mechanism.383
Thus, if the provisions especially in section 20(2) can give
room for the party to challenge the adjudicator’s jurisdiction, this feature would not be
achieve.
It is hope that the proposed CIPAA can bring betterment to the Malaysian
construction industry. The wealth of experience from over 15,000 adjudications around
383 Construction Industry Development Board Malaysia (2008), op.cit., p.8.
141
the world, and over 400 court cases relating to adjudication mainly on important issues
like jurisdiction, must surely mean any new model should be an improvement over earlier
Acts.384
Therefore, the proposed act should be well prepared to face any similar issues
that have been experienced by other legislation especially the HGCRA 1996. Since the
proposed CIPAA is not come into force yet, there still room for all construction industry
players especially the adjudicators to get ready to face similar issues that have been
experience by other countries that already implemented statutory adjudication. Hence, the
objective of the proposed CIPAA to provide a speedy dispute resolution can be achieved.
384 Naseem, N., A. and Kwan, H., H. (2007) Proposed Malaysian ‘Construction Industry Payment and Adjudication
Act’ (CIPAA). Pasific Association of Quantity Surveyors Newsletter. Issue 12. December 2007.The Pasific
Association of Quantity Surveyor, p.20.
142
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