Adjudication in Construction Law

Darryl Royce

Document

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CHAPTER 3 Appointment and referral

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3.1 Who may act as an adjudicator

3.1.1 Individuals and the role of an adjudicator

3.1 Part II of the Housing Grants, Construction and Regeneration Act 1996 Act does not restrict the performance of the functions of an adjudicator to a particular class of person.1 Nevertheless, the role of an adjudicator is one which can only be performed by an individual. It is not possible for ‘X and Co’ or ‘Y Ltd’ to act as an adjudicator. It is a contract for the provision of personal professional services and must be undertaken by a person. The work to be done by that individual cannot be performed by someone else.2 Where the work was done by one person who happens (like many others) to practice in a partnership or limited company which administers his or her fees and recovers them for him or her, there is nothing in the Statutory Scheme that requires the adjudicator to sue for his or her fees in any personal/natural capacity.3 Any person requested or selected to act as an adjudicator in accordance with that scheme must be a natural person acting in his or her personal capacity.4 He or she must also not be an employee of any of the parties to the dispute.5 An individual adjudicator who carries on business through a firm or company may seek payment through that entity.6 3.2 It is simply a question of fact in any given case whether the adjudicator's agreement was made with an individual or with a firm or limited company. In circumstances where it is understood by all parties that the role of the adjudicator is to be personally performed by an individual, the natural starting point is likely to be that the adjudicator's agreement would also be with that same individual. It should therefore be made clear if the common intention is that the parties to the adjudication will enter into an adjudicator's agreement with a legal entity other than the individual. Whether that is the common intention depends on the words used and the background in which the contract was concluded. The adjudicator's agreement will be made with the adjudicator himself or herself where:

• The nomination letter from the adjudicator nominating body names the adjudicator personally and makes a number of references to him or her fulfilling the role;
• A reference to the adjudicator's limited company in the nomination letter may be merely given as part of his or her professional address and the only function of the nominating body is to nominate the adjudicator, which is a role which must be performed by an individual;
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• The adjudicator's initial letter sent to the parties is written in the first person singular and says he or she is enclosing a copy of ‘my’ standard terms of engagement and makes no reference to the company at all; and
• The terms are replete with references to the adjudicator personally and there is no hint whatsoever that the terms are to be applied to a limited company.7

3.1.2 Restriction to ‘experts'

3.3 Provisions restricting appointments to those with particular technical expertise are rare. The norm is for a person to be named or a nominating body to be named with no more. Assuming that such limiting provisions comply with the Act, the courts would be cautious not to allow such a provision to thwart the appointment of an adjudicator in the time required by the Act. Under the Statutory Scheme, where a nominating body is named or no nominating body is named, there is simply no provision for any limitation on the description of the person to be appointed as the adjudicator.8 Where the construction contract provided for an adjudicator to be appointed by the President for the time being of the Chartered Institute of Arbitrators from a panel to comprise three ‘experts in the field of biomass energy plants', and the appointees were a quantity surveyor dually qualified as a barrister (non-practising), Queen's Counsel (with a specialist practice in construction and engineering) and a practising barrister (with further technical qualifications), two issues are raised: (i) what is the meaning of ‘experts in the field of biomass energy plants’ and (ii) if the appointees do not meet that description, what is the consequence in law? If the words ‘experts in the field of biomass energy plants’ are taken in isolation, one would be surprised if a lawyer were to profess such expertise. But if the expression were used in the context of expertise in contracts related to or disputes related to the field of biomass energy plants, the answer might be different. To take an example, a specialist barrister who has acted as advocate and arbitrator in numerous cases about the construction of bridges would not naturally refer to themselves as an expert in bridges but as an expert in cases about bridges or disputes about bridges or even projects about bridges. But much would depend on the context. If an inquiry was being made of the same counsel's clerk along the lines of whether he or she had expertise in bridges, the answer might well be ‘yes’ because, in context, the nature of the expertise would be a given. The use of ‘expert’ is similarly opaque. In the context of court proceedings, an expert would be someone giving expert evidence, not the lawyers, but in a dispute resolution scenario where different expertise may be relevant, a lawyer may well be an expert and the word is clearly not being used here as if it refers to expert evidence. The words ‘in the field of’ themselves suggest that something wider than a specific technical expertise is intended. Context is material here in two respects. The context is that of dispute resolution and that militates in favour of a meaning which relates the nature of the expertise to dispute resolution. That does not mean that additional words about expertise in dispute resolution should be read in but rather that who may be an expert in the field of disputes is wider than those who have

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a specific technical qualification or expertise. Second, it is fair to say that the disputes that may arise in respect of defects are likely to be of a technical nature, but they are not so limited. They may well extend to health and safety issues, performance measurement and other issues relating to liquidated damages, cost of remedial works, other loss and damage and so forth. There are no clear words to limit those experts to those who have particular technical qualifications (whatever they may be) or to exclude those whose expertise consists of or is derived from dispute resolution in that field, and it is open to the President to appoint adjudicators who do not profess to be technical experts.9

3.2 Appointment

3.2.1 Statutory requirements

3.4 The Act requires a construction contract to provide a timetable with the object of securing the appointment of an adjudicator and referral of a dispute to him or her within seven days of notice of intention to refer, but does not specify a mechanism by which an adjudicator can be appointed.10 The Statutory Scheme refers to an adjudicator being selected.11 In the case of a person specified in the construction contract, the referring party must request that person to act as adjudicator.12 If no person has been named in the construction contract or the person named has already indicated that he or she is unwilling or unable to act, and the contract provides for a specified nominating body to select a person, the referring party must request the nominating body named in the contract to select a person to act as adjudicator, or where neither of those situations applies, or where the named adjudicator has already indicated that he or she is unwilling or unable to act and the contract does not provide for a nominating body, the referring party must request an adjudicator nominating body to select a person to act as adjudicator.13

3.2.2 Non-compliance

3.5 Given that the Statutory Scheme adjudication provisions apply by operation of section 108(5) of the Act, it can be argued that the Statutory Scheme itself gives priority to a contractually specified nominating body to nominate the adjudicator. However, the question arises as to whether this circular reversion by the Statutory Scheme back to what is specified in the contract is, so to speak, ‘trumped’ by section 108(5). On balance, it is because that is consistent with the overall statutory purpose of incorporating the Statutory Scheme as a whole when there are key non-compliances with section 108. Put another way, one disregards the adjudication provisions agreed by the parties in these

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circumstances.14 A contractual clause enabling one party to the construction contract to nominate adjudicators is contrary to the Act and in particular the statutory policy of having impartial adjudicators.15

3.2.3 Procedure

3.6 A person requested to act as adjudicator in accordance with the provisions of the Statutory Scheme shall indicate whether or not he or she is willing to act within two days of receiving the request,16 which must be accompanied by a copy of the notice of adjudication.17 The request must doubtless be in writing since it must be so accompanied.18 An ‘adjudicator nominating body’ means a body (not being a natural person and not being a party to the dispute) which holds itself out publicly as a body which will select an adjudicator when requested to do so by a referring party.19 The nominating body named in the contract or the adjudicator nominating body must communicate the selection of an adjudicator to the referring party within five days of receiving a request to do so. Where the nominating body named in the contract or the adjudicator nominating body fails to do so, the referring party may agree with the other party to the dispute to request a specified person to act as adjudicator or request any other adjudicator nominating body to select a person to act as adjudicator. The person requested to act as adjudicator in accordance with the provisions of the scheme must indicate whether or not he or she is willing to act within two days of receiving the request.20 3.7 Where an adjudicator who is named in the contract indicates to the parties that he or she is unable or unwilling to act, or fails to respond within two days, the referring party may request another person (if any) specified in the contract to act as adjudicator, request the nominating body (if any) referred to in the contract to select a person to act as adjudicator or request any other adjudicator nominating body to select a person to act as adjudicator. The person requested to act shall indicate whether or not he or she is willing to act within two days of receiving the request.21 Any unwillingness or inability to act should be indicated to all parties22 Non-compliance with the provisions of the Statutory Scheme deprives the adjudicator of jurisdiction unless the parties have submitted to the

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adjudicator's jurisdiction in the full sense of having agreed not only that the adjudicator should rule on the issue of jurisdiction but also that they would be bound by that ruling.23 3.8 Where neither the Statutory Scheme nor the contractual candidate rules prescribe that the notice of adjudication or any request to an adjudicator nominating body should specify the contractual terms as to adjudication or the power (if the Scheme) under which adjudication is being pursued, a notice or request for a nomination is not invalid without this information. That would mean that in a case where the referring party's contention as to the applicable contractual terms was correct (or there was no real prospect of the responding party being able to prove otherwise) and where the adjudicator had been appointed in accordance with those terms, the court could still decline to enforce the decision because, at the time the notice of adjudication was served or the nomination was requested, those terms were not stated as being the terms applicable. In such a case the court would be loath to reach that conclusion. The substantive (as opposed to the formal) validity of the notice of adjudication depends on whether it can be shown that the correct rules are or have been applied. It does not depend on what is said in the notice. The same goes for the request for a nomination.24

3.2.4 Contacts between parties and adjudicators and nominating bodies

3.9 It is better for all concerned if parties limit their unilateral contacts with adjudicators both before, during and after an adjudication; the same goes for adjudicators having unilateral contact with individual parties It can be misconstrued by the losing party, even if entirely innocent. If any such contact, it is felt, has to be made, it is better if done in writing so that there is a full record of the communication. Nominating institutions might sensibly consider their rules as to nominations and whether they do or do not welcome or accept suggestions from one or more parties as to the attributes or even identities of the person to be nominated by the institutions If it is to be permitted in any given circumstances, the institutions might wish to consider whether notice of the suggestions must be given to the other party.25 3.10 A fair-minded observer would conclude that it was inappropriate for a decision-maker who knows about, and fails to disclose, a material but unilateral conversation, subsequently to say that it was not disclosable because it had taken place with his or her practice manager/wife/husband, not him or her personally. That might be regarded as the sort of artificial distinction beloved of lawyers, but not a proper approach to the business of decision-making.26 What also matters is not what the timing is, but what the conversation is about. If the conversation is, amongst other things, about the very same claim, which the adjudicator is just about to adjudicate upon, the fact that there is a two-month gap between

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the conversations and the adjudication is immaterial.27 The fair-minded observer would conclude that a deliberate decision not to disclose such unilateral conversations does give rise to the real possibility that the adjudicator is biased.28

3.2.5 Invalid appointments

3.11 An adjudicator appointed by a body other than the contractually specified nominating body will have no jurisdiction.29 Unless the adjudicator is appointed under the correct contractual provisions, his or her appointment would be a nullity. The jurisdiction of the adjudicator derives from the agreement of the parties, as reflected by the terms of the contract they have entered into. An adjudicator cannot be validly appointed under a contractual provision that does not in fact exist. He or she would have no jurisdiction to take up the appointment and, in consequence, any decision that he or she might make would not be capable of enforcement.30 On the other hand, it may be linguistically and even technically correct to describe one party's various alternative formulations as different contracts from the contract alleged by the other. But that difference should not be determinative when it is remembered that the court is concerned with one contracting process, with the only question being which party has correctly identified where in that process the relevantly binding contract was formed. Where it is agreed that each of the alternatives was sufficient to found jurisdiction under the identical route of the Statutory Scheme, to rule the referring party out of court because it may have misidentified the contractual provisions that would give the adjudicator jurisdiction under the Statutory Scheme is to return to a formalistic obstacle course. The court bears in mind:

• that the adjudication system was and is meant to provide quick and effective remedies to parties, equally accessible to those who are legally represented as to those who are not; and
• that the system now covers not only written contracts but also oral contracts which increase the likelihood that they may be misdescribed.31

3.12 Where a party has made a fraudulent representation to the adjudicator nominating body in order to eliminate candidates on the basis they had a conflict of interest when they had none, that would invalidate the process of appointment and make the appointment a nullity so that the adjudicator would not have jurisdiction.32

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3.3 Contract of appointment

3.3.1 Contractual relationship between adjudicator and parties

3.13 Neither the Act nor the Statutory Scheme requires parties to a construction contract who wish to refer a dispute to adjudication to enter into a contractual relationship with an adjudicator. Contractual adjudication provisions do, however, generally prescribe the execution of such a contract, and it is the practice of adjudicators requested or selected in accordance with the provisions of the Statutory Scheme to stipulate the terms under which they are prepared to act, to be agreed by the parties. 3.14 The ability of an adjudicator to obtain fees depends on there being a contractual right to payment under the adjudicator's agreement with one or both of the parties. There is nothing in section 108 of the Act which gives the adjudicator a right to payment. The adjudicator's contractual right to payment does not arise under and is not affected by the terms of the decision by which the adjudicator decides which party is to pay his or her fees and expenses. That decision determines who, as between the parties, is to bear those sums but it does not affect any contractual right to payment which the adjudicator may have or provide a right to payment if he or she has no contractual right. It may, in practice, lead to the relevant party making payment direct to the adjudicator but it gives the adjudicator no enforceable rights to payment.33

3.3.2 Unilateral appointments

3.15 The process of adjudication requires a rapid appointment of an adjudicator. Under the provisions of the Housing Grants, Construction and Regeneration Act 1996, section 108(2)(b) states that the construction contract shall ‘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'. The fact that the appointment of the adjudicator is intended to be rapid means that the referring party is likely to be the one who seeks the appointment and who is keen for the objective of early appointment to be met. The referring party is therefore likely to be the party which responds positively to the adjudicator's terms and conditions and may do so unilaterally if the responding party is slow to react or raises an objection to the adjudication on jurisdictional or other grounds.34 3.16 In such circumstances, it is not uncommon for the adjudicator's agreement to be entered into only with the referring party and not with the responding party. This raises questions as to the liability of the responding party for the fees and expenses of the adjudicator.35 3.17 Where one party agrees to the adjudicator's terms but the other does not, then, except for such terms as might require the agreement of the other party in order to become binding, the adjudicator can enforce those terms against the party with whom he or she has a contract. There is nothing objectionable in an adjudicator being appointed unilaterally and, indeed, it is not uncommon for this to happen in arbitrations with three arbitrators.36

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3.3.3 Contract with neither party

3.18 In general terms, absent any jurisdictional objections, if an adjudicator is appointed and neither party makes a contract with the adjudicator, the parties by participating in the adjudication and thereby requesting the adjudicator to act, enter into a contract with the adjudicator who acts in that capacity as a result of that request. Such a contract would be formed by conduct. There would be implied terms that the party would be liable to pay the reasonable fees and expenses of the adjudicator and would be jointly and severally liable with the other party to do so. There would also be an implied term that the adjudicator would act in accordance with the terms of the Adjudication Agreement between those parties37 3.19 In principle, there is no reason why the position should not be similar where only one party makes a contract with the adjudicator but the other one does not. In those circumstances, the party who does not make a contract but participates in the adjudication thereby requests the adjudicator to act and there is a contract made by conduct with the adjudicator who acts in that capacity as a result of that request. There would similarly be implied terms that the party would be liable to pay the reasonable fees and expenses of the adjudicator, that the party would be jointly and severally liable with the other party to make payment and that the adjudicator would act in accordance with the terms of the Adjudication Agreement between those parties.38

3.3.4 Joint and several liability

3.20 The question of joint and several liability might give rise to some difficulties in the case where one party agrees to the rates of remuneration with the adjudicator, but the other party does not and has to pay a reasonable remuneration. In Merkin on Arbitration Law at paragraph 10.61, a similar issue is raised in relation to the statutory provision in section 28(1) of the Arbitration Act 1996 that the parties are jointly and severally liable to pay to the arbitrators’ reasonable fees and expenses. How does this apply where there is an agreed sum? In Merkin, it is suggested that it might be possible to argue that joint and several liability only applies to the amount regarded as reasonable. That seems to be the view of the Departmental Advisory Committee at paragraph 123 of their Report on Arbitration Law. If one party agreed fees and the other party was liable for a reasonable fee then generally joint and several liability would apply only to the reasonable fee which could, in principle, be lower or higher than the agreed fee. However, in practice, the agreed fee is likely to be the same as or accepted to be a reasonable fee.39

3.3.5 Effect of jurisdictional challenge

3.21 Whilst the position as set out above would apply where there is no jurisdictional issue, such issues are frequently taken, and some succeed. What then is the position?

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Where a party wishes to raise a jurisdictional argument, as has now become common in adjudications, it has one of two options. First, it can make an assertion of lack of jurisdiction and withdraw, taking no further part in the adjudication proceedings and leaving the adjudicator and the other party to proceed at their risk. It might then seek an urgent declaration as to jurisdiction from the court or seek to challenge any decision on the grounds that the adjudicator had no jurisdiction. In such circumstances, in the absence of any agreement with the adjudicator, there would be no request for the adjudicator to do anything and it would be difficult to make that party liable for the fees and expenses of the adjudicator. Second, it can make an assertion of lack of jurisdiction but continue to participate in the proceedings, without prejudice to that contention. It might seek to persuade the adjudicator to make an early non-binding decision on jurisdiction. If this is in favour of the party, the adjudicator would be obliged to withdraw and the adjudication would come to an end. If the adjudicator finds that he or she has jurisdiction that party might continue to participate in the adjudication, again without prejudice to its right to challenge any award on the basis of a lack of jurisdiction. By participating in this way, whilst the party is not giving the adjudicator jurisdiction to make a binding decision, it is requesting the adjudicator to carry out work and make a decision. If the adjudicator makes a decision on jurisdiction or on the merits, then the party would have a potential benefit. If the adjudicator decides that he or she does not have jurisdiction, then that party has the benefit of the decision because the adjudication comes to an end. If the adjudicator decides he or she does have jurisdiction and then proceeds to make a decision on the merits, the party is seeking a favourable decision on the defences raised. Whether that party maintains the jurisdictional arguments may depend on how it fares in its defence on the merits. If, for instance, the adjudicator were to dismiss the claim, the party would doubtless abandon the jurisdictional argument and assert the temporarily binding nature of the adjudicator's decision.40 3.22 In many cases it is clear that parties raise jurisdictional arguments so that they cannot be said to have waived any such arguments but then fight the case on the merits and attempt to use the jurisdiction arguments to negotiate a favourable outcome or oppose enforcement. It is currently a regrettable feature of adjudication that, in many cases, the parties spend a great deal of time and money considering and arguing about jurisdictional matters with the effect that the adjudicator, either at an early stage or in his or her decision, also spends much time dealing with the jurisdictional points raised. The fact that a party makes a jurisdictional challenge should not in itself change the position where a party participates in the adjudication proceedings. If the adjudicator makes a decision which he or she did, in fact, have jurisdiction to make then there is no reason why the mere fact of the erroneous jurisdictional challenge should change the position.41 3.23 If there is a valid jurisdictional challenge and if a party has not participated in the adjudication, then, on the basis of the view expressed above, that party can have no

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liability for the fees and expenses of the adjudicator. If, however, a party has participated in the adjudication process, albeit without prejudice to its contention that the adjudicator did not have jurisdiction, then in principle by participating and thereby requesting the adjudicator to adjudicate on the dispute, that party will generally be liable for the reasonable fees and expenses of the adjudicator on the same basis as set out above. This is a matter of contract between the adjudicator and the relevant party. If the adjudicator did not have jurisdiction, then any decision made by the adjudicator will be null and void. This will preclude one party from recovering from the other party any sums based on the adjudicator's allocation of the fees and expenses contained in the invalid decision.42 It is, however, a fact-specific situation. It is possible to signify acceptance of proposed contract terms by conduct such as a party's agreement to a person as adjudicator following a full reservation of rights. It would be difficult to argue that the other party did not do so too, given its participation in the adjudication.43

3.3.6 Resignation

3.24 The Housing Grants, Construction and Regeneration Act 1996 makes no provision for an adjudicator to resign from his or her appointment. The Statutory Scheme provides that an adjudicator may resign at any time on giving notice in writing to the parties to the dispute,44 and must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication and a decision has been taken in that adjudication.45 In addition, it is implicit that an adjudicator can resign where a dispute varies significantly from the dispute referred in the referral notice and for that reason he or she is not competent to decide it.46 The Statutory Scheme can be taken to have provided comprehensively for an adjudicator's method of resignation. If, in any event, an adjudicator can resign by serving notice on one of the parties only, there can have been no obvious reason to provide specifically for an adjudicator to serve notice on each party unless this was to take separate advantage of the provision for the service of fresh notices where an adjudicator ceases to act. However, it is difficult to discern any logic in drawing such a distinction for this limited purpose. Moreover, it is obviously good practice for adjudicators to serve notice of resignation on each party and it is difficult to see why adjudicators should be entitled to resign by serving notice on only one of the parties.47 Such a notice is to be objectively construed in accordance with the principles in Mannai v Eagle Star 48

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by asking how it would appear to a reasonable recipient in the same factual context. On balance, an adjudicator's email, not purporting to resign in express terms but simply stating that a party's email had ‘effectively’ terminated the adjudication, accompanied by an observation that ‘you are of course responsible for my fees’ is intended to be a notice of resignation and is to be construed as such.49 3.25 The Statutory Scheme requires an adjudicator to resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication, and a decision has been taken in that adjudication.50 An adjudicator can, if satisfied that a jurisdictional challenge is a good one, decline to adjudicate on the part of the reference he or she regarded as lacking jurisdiction.51 An adjudicator should reach an early view as to jurisdiction and if concluding that the adjudication could not be properly progressed, the right course is resignation.52 A referring party being entitled to withdraw its claim,53 it would follow that the adjudicator should then resign, having no dispute to decide. An adjudicator has to decide at the outset whether or not he or she can discharge the duty to reach a decision impartially and fairly within the time limit prescribed by the Act. If not, he or she ought to resign.54

3.4 Referral

3.4.1 Meaning of ‘referral'

3.26 ‘Referral’ bears three different meanings within the context of adjudication. The first is the step at the beginning of an adjudication whereby the dispute comes before the adjudicator after he or she has been appointed.55 Second, some standard forms use the word to describe a document setting out the referring party's case.56 Finally, it is used more colloquially of the whole process of the adjudication of a dispute, just as the term 'reference’ is used in relation to arbitration and the word ‘action’ in relation to court proceedings.

3.4.2 Method of referral

3.27 The requirement in the Act57 that a construction contract should provide a timetable with the object of securing the appointment of an adjudicator and referral of a dispute

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to him or her within seven days of notice of intention to refer, does not identify any method of referral. This is usually achieved in standard forms by a requirement for the service of a ‘referral’ or ‘referral notice’ from which date the period for the adjudicator to reach a decision begins.58 3.28 In cases where the provisions of the construction contract do not comply with the requirements of the Act, the Scheme for Construction Contracts applies.59 Where an adjudicator has been selected in accordance with the Statutory Scheme, the referring party must, not later than seven days from the date of the notice of adjudication, refer the dispute in writing (the ‘referral notice') to the adjudicator. A referral notice must be accompanied by copies of, or relevant extracts from, the construction contract and such other documents as the referring party intends to rely upon. The referring party must, at the same time as sending to the adjudicator the referral notice and accompanying material, send copies of those documents to every other party to the dispute.60

3.4.3 Late referral

3.29 In the overall scheme of things, it might be difficult to say that the delay of one day in the provision of the referral notice should be accorded great significance and that it would be harsh to rule that the whole adjudication was a nullity because of that one day's delay. But, on a more detailed analysis, this is not so easy to justify. Indeed, all kinds of difficult questions arise if the failure to comply with the time period is ignored: What if the delay was not one day, but one month? What if important events occurred during the period of any delay in the provision of a referral notice which put the responding party in a much worse position as against the referring party than it would have been if there had been no delay? If the words ‘not later than seven days’ are to be qualified in some way, then how is such a qualification to be formulated, let alone assessed? ‘Not later than seven days and perhaps one or two more'? ‘Not later than a period that seems just and equitable in the circumstances'? The whole point of adjudication is that speed is given precedence over accuracy. What matters is a quick decision, not necessarily a correct one. There is a summary timetable with which both the parties and the adjudicator must comply. If the swift timetable is kept to, the vast majority of adjudicators’ decisions are then enforced by the court in accordance with the 1996 Act. If the timetable can be extended without consent either at the beginning of the process or, at the end of the 28 days, there is a great danger of uncertainty and of a watering-down of the critical importance of the tight timetable on which the entire adjudication process is based. In other words, if it is a correct statement that a decision reached outside the 28 days is a nullity,61 the same principle must also apply to the event which signals the commencement of the same 28-day period, namely the provision of the referral notice within seven days of the intention to refer.62

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3.30 The provisions of the 1996 Act at sections 108(2)(b) and (c) address the 28-day period for the decision in different, and possibly stronger, language than the seven days for the referral notice. But, even then, the Act requires the appointment and the referral notice to be ‘secured’ within seven days. Moreover, the Scheme is entirely clear on this point. The referral notice must be provided by a date which is not later than seven days after the notification of the notice of intention to refer. If it is not, it cannot be a referral notice in accordance with the Scheme. In that event, of course, the responding party may consent, expressly or by implication, to waive the irregularity. If the responding party does not waive the irregularity, the referring party must start again. The adjudicator cannot extend without consent the seven-day time limit as part of his general powers under paragraph 13 of the Scheme. Everything done pursuant to the Scheme, including the 28-day period for the adjudication itself, flows from the date of the referral notice. The adjudicator is not seized of the adjudication until the referral notice is provided and the 28- day period starts to run. He or she therefore has no power until he or she gets the referral notice; thus, he or she has no power to extend the seven-day period which occurs before his or her jurisdiction begins. In any event, paragraph 13 of the Scheme does not permit the adjudicator to disregard the time limits set out in the Scheme if the relevant extension is not agreed to. He or she certainly could not do so retrospectively.63 3.31 The reasoning behind section 108(5) makes the concept of repudiation of an adjudication agreement within a ‘construction contract’ difficult to comprehend because the statute requires in an unqualified way that a party to such contract ‘has the right’ ‘at any time’ to refer a dispute to adjudication. The party cannot lose its right to adjudicate by in some way repudiating the adjudication agreement and the concept of repudiation does not apply to statutory rights. It follows that there can be no repudiatory breach on the part of a referring party in deliberately failing to serve its referral within two days of an adjudicator being appointed.64 The proposition that a claimant can allow an adjudication to lapse because it disapproves of the appointed adjudicator and then start a fresh adjudication before a different adjudicator is not an appealing one. It does sometimes happen that an adjudication is not pursued further after the preliminary steps have been taken. There is no authority to suggest that as a consequence the claimant loses its right to adjudicate that dispute for all time. It is possible to think of many situations, not all of which are provided for by express terms, in which the adjudication procedure would be thwarted if there were no right to re-start an abortive adjudication. It is quite impossible to imply a term in a construction contract or the 1996 Act and the Scheme that the claimant will only lose the right to adjudicate if it deliberately and without good reason fails to serve referral documents by the due date.65

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3.32 A different view as to late service of the referral has been expressed in relation to contractual provisions for adjudication. It is that the language of section 108(2)(b) is not rigid: it requires that the contractual timescale should have the object of securing the referral of the dispute to the adjudicator within seven days of the adjudication notice. Thus, the statute is setting a minimum requirement for the contract. The contract must allow a referring party, if it chooses, to issue a referral notice within the prescribed seven-day timescale. However, there is nothing in the language of section 108(2)(b) to preclude the contract from being drafted so as to provide additionally a machinery that enables the adjudicator to extend that timescale and enable the referring party to refer the dispute outside it if it chooses to. In other words, the language of section 108(2)(b) requires contractual machinery that enables the referring party to refer the dispute within seven days of the adjudication notice but does not prohibit a machinery which additionally enables the referring party to refer the dispute outside the timescale if it elects to take longer in making the reference. However, this view proceeds on the basis that no point is taken as to the validity of the directions given by the adjudicator and such directions have been complied with.66

3.4.4 When does referral take place?

3.33 ‘Referral’ in section 108(2)(c) of the Act does not mean despatch of the notice of referral. Receipt might occur later. A thing is not referred to another unless that other receives it. It may be sent with the intention of referring it but never received. It has then not been referred. The word is unambiguous. Referral takes place upon receipt of the notice by the adjudicator.67 Similarly, in paragraph 19 of the unamended Statutory Scheme, the ‘date of the referral notice’ meant the date of despatch of that notice.68 Particularly because a referral notice may be undated and given an interpretation of section 108(2)(c) to similar effect, the date of the referral notice means the date of its receipt by the adjudicator. There seems to be no reason why the Scheme should provide a lesser time than is permitted by the Act.69

3.5 Accompanying documents and contents of the referral notice

3.5.1 Non-compliance

3.34 Apart from the requirement the referral notice must be accompanied by copies of, or relevant extracts from, the construction contract and such other documents as the referring party intends to rely upon, the Statutory Scheme does not specify what the contents

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of the notice should be.70 In approaching the issue of whether or not a failure to provide the adjudicator with the relevant documents until after the day when the referral notice was served should be held to deprive the adjudicator of jurisdiction, it is to be recalled that, where the scheme applies, it does so as an implied term of the construction contract under section 114(4) of the Act. The consequence of a party's failure to comply with the terms of a contract will generally be a breach of contract, which may have a number of consequences depending on the nature of the term and the breach. Under the Act, there are a number of terms which are fundamental to the process of adjudication, and which are set out in section 108. The central purpose of the scheme is to incorporate those fundamental provisions which, when absent, lead to the Statutory Scheme being imposed as an implied term. The provision in paragraph 7(1) of Part 1 of the Statutory Scheme is derived from section 108(2)(b) of the Act. That makes paragraph 7(1) of the Statutory Scheme one of the fundamental provisions in the process of adjudication. On that basis, the decision that a late referral under paragraph 7(1) of the scheme took the process outside the scheme so as to make a decision unenforceable71 can be distinguished from a breach of paragraph 7(2), which refers to an associated procedural requirement.72 3.35 It is undesirable that every breach of the terms of the Statutory Scheme, no matter how trivial, should be seized upon to impeach the process of adjudication. To do so would increase the tendency of parties to take a fine-tooth comb to every aspect of the adjudication in the hope of finding some breach of the Statutory Scheme on which to impeach an otherwise valid adjudication decision. That was neither intended nor the natural effect of a failure to comply with the Scheme. There may, of course, be cases where the documents included with the referral notice are so deficient that it affects the validity of the adjudication process. However, a failure to include the relevant construction contract until a day later cannot do so. Nor can a failure to include the construction contract be said to amount to such a serious breach of the rules of natural justice that the decision should not be enforced. There is nothing obviously unfair in the documents relied on in relation to the construction contract being received by the adjudicator later than the referral notice.73

3.5.2 Effect of referral notice on jurisdiction

3.36 A referral notice under the Statutory Scheme or a ‘referral’ under a contractual scheme, which comes into existence following the notice of adjudication, does not cut down or, indeed enlarge, the dispute unless the parties agree so to do. The adjudicator is appointed to decide the dispute which is the subject of the notice of adjudication and that notice determines his or her jurisdiction. The adjudicator's jurisdiction does not therefore derive from the referral notice, although the referral notice is likely to help the adjudicator

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to find out what needs to be decided in order to arrive at a conclusion on the dispute.74 It is plain that it is the notice of adjudication, rather than the referral notice, which is intended to identify and describe the dispute.75 There may be scope, however, in the case of ambiguity, for reading the notice of adjudication in the light of the referral notice.76

3.5.3 Effect of notice of adjudication

3.37 A party which identifies the dispute in simple or general terms in the notice of adjudication has to accept that any ground that exists which might justify the action complained of is comprehended within the dispute for which adjudication is sought. It takes the risk that its bluff may be called in an unexpected manner.77 An adjudicator's decision must be made on the basis of the facts as they are at the time of the decision. If a final certificate is issued during the adjudication, depending upon what the adjudicator has been charged to decide, it may have to be taken into account as impacting on the parties’ dispute. This may in particular be the case if the certificate stands unchallenged. Where, however, the final certificate was immediately disputed by a formal notice and by provision of the claimants’ calculations for the final account, the adjudicator is entitled to treat it as of little weight.78 3.38 The assertions that it is necessary to set out in a notice of adjudication, if it is to be effective, particulars of a dispute which disclose what amounts in law to a cause of action and show not only what the dispute is about, but also in detail how it has arisen, are misconceived. What precisely must be set out in a notice of adjudication for it to be effective as such depends upon what is required by the relevant rules agreed by the parties as a matter of contract, or by the Scheme, as the case may be. Where agreed rules require only that the notice includes a brief statement of the issue or issues which it is desired to refer and the redress sought, the notice has to state what the dispute is about and what remedy was desired, but is not required to disclose on its face what in law would amount to a cause of action. Equally, it is not required to specify the nature of the dispute intended to be referred to in a form similar to that in which preliminary issues are often drafted in the Technology and Construction Court. If the notice of adjudication identifies a dispute as to whether the responding party is in law liable to the referring party for deficiencies alleged in the operation of works designed by the responding party, and it is then made clear in the referral notice that the contention advanced is that the responding party has failed to perform its contractual duty with reasonable skill, care and diligence, the dispute

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described in the referral notice is not a different dispute from that referred by the notice, because the general includes the specific.79 3.39 The decision in Fastrack v Morrison 80 makes plain that a referring party is entitled to prune its original claim for the purposes of its reference to adjudication. So if its interim application for payment is for measured work and loss and expense, it may decide that, because the loss and expense claim could be difficult to present in an adjudication, it will instead focus in those proceedings on just the straightforward claim for measured work. That is not only permissible, but it is a process that is to be encouraged. Claims advanced in adjudication should be those claims which the referring party is confident of presenting properly within the confines of that particular jurisdiction. What if the claim for loss and expense is recognized by the referring party as being very difficult to sustain? What if it in fact it decides that it no longer intends to pursue it? It would be nonsense if it had to include such a claim in its notice of adjudication merely because that claim formed part of its original interim application. The mere fact that the referring party has limited its own claim to the measured work value of changes, does not in any way limit or prevent the responding party from defending that claim, and raising its own cross-claim by way of set-off. That would be an entirely legitimate defence to the claim in the adjudication, whatever the notice of adjudication or the referral might have said.81 It follows that a party cannot refer to adjudication a disputed claim to payment and dress up the definition of the dispute in such a way as jurisdictionally to prevent a defending party from raising any defence, whether good or bad, in the adjudication. A distinction is to be drawn between a potential evidential weakness in a defence, which can be highlighted in the notice of adjudication; an example would be that a money claim is based exactly on what the defending party's own architect has certified or approved such that this represents, so to speak, strong evidence in the referring party's favour. To seek, however, to refer a payment claim and say, at the same time, that the referring party is not referring parts of the claim which might be challenged by the defending party is illogical, unmeritorious and wrong. It is a device which cannot and should not work.82 It would be absurd if the claiming party could, through some devious bit of drafting, put beyond the scope of the adjudication the defending party's otherwise legitimate defence to the claim.83 3.40 The jurisdiction of an adjudicator operating under the terms of Part 1 of the Statutory Scheme derives from the notice of adjudication referred to in paragraph 1 of that Part, and although at one level that is correct, it should not be overlooked that paragraph 20 of that Part expressly provides that an adjudicator ‘may take into account any other matters which the parties to the dispute agree should be within the scope of the adjudication, or which are matters under the contract which he considers are necessarily connected with the dispute'. Grammatically, the language used suggests that what the

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adjudicator may do is to take these other matters into account in determining the dispute or disputes otherwise referred to him or her for decision. However, upon proper construction, what the words quoted mean is that, first, the adjudicator can decide any matters which the parties to the adjudication agree, after all the initial notice of adjudication should be within the scope of the adjudication but was not originally; and second, that he or she can decide any matter arising under the relevant contract which he or she considers is necessarily connected with the dispute. As what is contemplated in relation to the first of these alternatives is that something which was not originally within the scope of the adjudication is brought within it by agreement of the parties and that the adjudicator is entitled, but not bound, to decide such matters, it must follow that the matters are other disputes. If that is correct, it follows that the matters under the contract which the adjudicator considers are necessarily connected with the dispute mentioned next in paragraph 20 of Part 1 of the Statutory Scheme are other disputes which are aspects of or the resolution of which is necessary to resolve the dispute or disputes the subject of the notice of adjudication.84

3.5.4 Contents of referral and subsequent submissions

3.41 One has to be very careful in comparing documents which are exchanged between the parties in adjudication with pleadings in court, or indeed even in arbitration. That is because they are not pleadings as such, but they are documents in terms of the referral, the response, the reply and, if there is one, a rejoinder, which should set out in comprehensible form what each party's case and defence respectively is. But they should not be construed as if they were commercial contracts or as if they were pleadings in the court sense of the term. There are no strict rules in adjudication as to how these documents should be drafted.85

3.5.5 Limitation of the length of referral

3.42 An adjudicator's powers when dealing with complex matters include the power to limit the amount of documentation placed before him or her. A fortiori the parties can agree in advance to limit the extent of documentation constituting a referral. There is nothing in a provision in a construction contract limiting the length of the referral notice to 20 single-sided A4 pages which is contrary to section 108 of the Act. Neither is there anything in such a provision which conflicts with paragraph 17 of the Statutory Scheme which obliges the adjudicator to consider evidence put before him or her by the parties following a properly constituted reference in accordance with the contract and the Statutory Scheme. Such a provision is prescriptive as to the form of the referral notice the parties have agreed to, which founds the adjudicator's jurisdiction. Until there is receipt by him or her of a referral in proper form, he or she has no jurisdiction.86

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3.6 Nominating bodies

3.43 The contract may provide for a specified nominating body to select a person to act as adjudicator. In addition, the Scheme provides for selection by an ‘adjudicator nominating body', which means a body (not being a natural person and not being a party to the dispute) which holds itself out publicly as a body which will select an adjudicator when requested to do so by a referring party.87 There is no requirement for either type of nominating body to be accredited by any public body or non-governmental organization. The leading nominating bodies are the Centre for Effective Dispute Resolution (‘CEDR', pronounced ‘cedar'), the Chartered Institute of Arbitrators (‘the CIArb'), the Institution of Civil Engineers (‘the ICE'), the Royal Institute of British Architects (‘the RIBA'), the Royal Institution of Chartered Surveyors (‘the RICS'), the Technology and Construction Bar Association (‘TECBar') and the Technology and Construction Solicitors Association (‘TeCSA').

3.7 Declarations of interest

3.7.1 Adjudicator's duty of impartiality

3.44 A construction contract subject to the provisions of the Housing Grants, Construction and Regeneration Act 1996 must include provision in writing so as to impose a duty on the adjudicator to act impartially,88 just as an arbitrator is obliged to act fairly and impartially as between the parties.89 An adjudicator, like an arbitrator and a judge, must always be alive to the possibility of apparent bias and of actual but unconscious bias. The possibility of unconscious bias on the part of a decision-maker is known, but its occurrence in a particular case is not. The allegation of apparent unconscious bias is difficult to establish and to refute. One way in which an adjudicator can avoid the appearance of bias is by disclosing matters which could arguably be said to give rise to a real possibility of bias. Such disclosure allows the parties to consider the disclosed circumstances, obtain the necessary advice and decide whether there is a problem with the involvement of the adjudicator in the reference and, if so, whether to object or otherwise to act to mitigate or remove the problem. When, on being asked to accept an appointment, an adjudicator knows of a matter which ought to be disclosed to the parties to the reference, prompt disclosure to those parties of that matter provides the safeguard as the quality of impartiality is shown to have been there from the beginning. But the obligation of impartiality continues throughout the reference and the emergence during the currency of the adjudication of matters which ought to be disclosed means that an arbitrator's prompt disclosure of those matters can enable him or her to maintain the ‘badge of impartiality'.90

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3.45 Although it is clear that an adjudicator may fail to make disclosure for entirely honourable reasons, such as forgetfulness, oversight or a failure properly to recognize how matters would appear to the objective observer. But as stated in Davidson v Scottish Ministers (No 2),91 ‘[h]owever understandable the reasons for it, the fact of non-disclosure in a case which calls for it must inevitably colour the thinking of the observer'.92 3.46 The present position under English law may be taken to be (by analogy with arbitration) that disclosure should be given of facts and circumstances known to the adjudicator which would or might give rise to justifiable doubts as to his or her impartiality. This means facts or circumstances which would or might lead the fair-minded and informed observer, having considered the facts, to conclude that there was a real possibility that the adjudicator was biased. An arbitrator can disclose only what he or she knows and is, as a generality, not required to search for facts or circumstances to disclose. But that does not rule out the possibility of circumstances occurring in which an adjudicator would be under a duty to make reasonable enquiries in order to comply with the duty of disclosure. For example, if a would-be adjudicator had a business relationship with a person (A), which, because of a financial interest, would have prevented him or her from being an adjudicator in a reference in which A was a party, he or she, if offered an appointment in an adjudication in which B was a party, might be under an obligation to enquire if he or she had grounds to think that B might be a business partner of A. Nor can it be ruled out that an adjudicator is under a duty to make reasonable enquiries as to whether there are facts or circumstances which might lead the fair-minded and informed observer to conclude that there was a real possibility of bias.93 3.47 What is meant by the words ‘would or might'? If some matter would give rise to justifiable doubts as to an arbitrator's impartiality, the disclosure of that matter would not as a general rule remove the difficulty. The correct course for the adjudicator would usually be not to take up or, if the matter arose later, to withdraw from the reference. On the other hand, to require disclosure of some matter which was trivial and could not materially support a conclusion that there was a real possibility of bias, would be to risk causing the parties unnecessary concerns about an arbitrator's impartiality and also to encourage vexatious challenges by a party to the arbitrator's position. As stated in Helow:94

[T]o take two opposite extremes, disclosure could not avoid an objection to a judge who in the light of the matter disclosed clearly ought not to hear the case; and non-disclosure could not be relevant, if a fair-minded and informed observer would not have thought that there was anything even to consider disclosing.

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