Construction News

Fri October 30 2020

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Jumping the gun

21 Sep Appointing an adjudicator before serving notice has proved to be a decisive error. Alison Lockwood, legal assistant at Irwin Mitchell LLP, reports.

Lane End's Rilshaw Lane development in Winsford, seen in January 2020 (image from www.laneend.org)
Lane End's Rilshaw Lane development in Winsford, seen in January 2020 (image from www.laneend.org)

The law reports are generously populated with cases where the losing party in adjudication seeks to avoid enforcement by arguing that the decision was invalid. Most of the time, such challenges fail. However, the Technology & Construction Court recently considered such a challenge that was based on the argument that the adjudicator had not been validly appointed at all.

The case was Lane End Developments Construction Limited v Kingstone Civil Engineering Limited. The adjudicator decided that Lane End must pay Kingstone £358,970.39. Lane End contended that the adjudicator’s decision should be set aside and/or not be enforced.

Background

Lane End Developments had a housing development on Rilshaw Lane in Winsford, Cheshire.  Kingstone Civil Engineering was subcontracted to carry out enabling works for the development. The subcontract did not make express provision for disputes to be referred to adjudication.

On 2nd March 2020 Kingstone issued interim payment application No.17 in the sum of £356,439.19 for the period ending on 29th February 2020.  Lane End did not serve a pay less notice – nor, until 26th March, did it serve a payment notice.

Adjudication

The adjudicator advised the parties that the Royal Institution of Chartered Surveyors (RICS) had nominated him to act and he accepted the nomination.

Lane End challenged the nomination of the adjudicator on the grounds that Kingstone had failed to give Lane End notice of adjudication under the scheme before seeking the nomination of the adjudicator.  Lane End initially contended that the notice of adjudication did not comply with the scheme because it did not do enough to disclose an intention to refer the dispute to adjudication.  Lane End did not specifically take a point about the timing of the notice of adjudication but stated they wished to reserve their position as to the adjudicator’s jurisdiction.

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The adjudicator proceeded and, in his decision, he concluded that Kingstone was entitled to the full amount of the interim application No.17.

Court proceedings

Lane End instigated court proceedings to seek a determination that the adjudicator’s decision be set aside and/or not enforced, whereas Kingstone sought summary judgment for payment of the sum awarded by the adjudicator.

The main issues in dispute were whether the adjudicator had been validly appointed and, if not, whether Lane End had waived its right to object to the sequence in which Kingstone had served the notice of adjudication and applied to the RICS for appointment of an adjudicator.

The court concluded that the adjudicator was not validly appointed because Kingstone had submitted its request for appointment of an adjudicator in advance of issuing its notice of adjudication to Lane End.  That was  a breach of paragraph 2(1) of the scheme.  Due to that breach, the adjudicator had no jurisdiction to make his decision and therefore this decision was void.

Kingstone argued that Lane End had waived its right to object to the procedural error by participating in the adjudication.  The court held that Lane End could not have, even if it had wanted to.  The issue did not relate to there being an issue or defect in how the adjudicator was appointed, but that the adjudicator was not properly appointed to act in the adjudication at all.  That is not something that a party can waive.  The court also found that, in any event, Lane End would not have been found to have waived its right to object, particularly given that it had insufficient knowledge of the facts to enable the company to give such a waiver.

Analysis

It is clear from the decision in this case how important it is that parties in a construction contract are aware that when starting an adjudication, the referring party must serve the notice of adjudication on the responding party before submitting a request for appointment of adjudicator.  Unfortunately for Kingstone, the error in this case proved decisive.

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MPU

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