Aveat Heating Ltd v Jerram Falkus Construction Ltd

A contractual adjudication procedure that fails to comply with the statutory requirements is displaced by the adjudication provisions of the Scheme for Construction Contracts, unless the contract provides a coherent mechanism for their coexistence. Under section 108(2)(c) of the Housing Grants Construction and Regeneration Act 1996, referral occurs when the adjudicator receives the notice. The corresponding date under paragraph 19 of the Scheme is likewise the date of receipt. The Scheme’s requirements for the contents of a notice of adjudication are directory. A notice is sufficient where, in its factual context, the responding party understands the dispute. An adjudicator appointed under the contractual procedure may nevertheless have jurisdiction where the Scheme applies. An adjudicator has no jurisdiction under the Scheme to award a party its costs and expenses.

The claimant sought summary enforcement under Part 24 of the Civil Procedure Rules of an adjudicator’s decision concerning payment for plumbing and mechanical works carried out under a construction sub-contract. The defendant challenged the adjudicator’s jurisdiction on several grounds, including alleged non-compliance between the contractual adjudication provisions and the Housing Grants Construction and Regeneration Act 1996, lateness of the decision, defects in the notices, absence of a dispute, invalid appointment, and alleged bias.

The central issues were whether the Scheme for Construction Contracts replaced the contractual adjudication provisions, whether the adjudicator had reached a decision in time and had jurisdiction, and whether the award of costs and expenses could be enforced.

1. Contractual procedure and the Scheme. The court rejected the submission that referral under section 108(2)(c) of the Housing Grants Construction and Regeneration Act 1996 occurs on despatch. Referral occurs when the adjudicator receives the notice. The contractual provisions were nevertheless non-compliant because they purported to validate a decision issued out of time. Sections 108(2)(c) and (d) were mandatory. The Scheme therefore applied in place of clause 38A.
2. The contractual procedure and the Scheme could not coexist as competing and partly contradictory adjudication packages without contractual machinery explaining how they operated together. The court followed the reasoning in John Mowlem Ltd v Hydra-Tight Ltd and the court’s earlier decision in Epping Electrical Company Ltd v Briggs and Forrester (Plumbing Services) Ltd.
3. Timing and appointment. Under paragraph 19 of the Scheme, the date of the referral notice was the date of receipt by the adjudicator. The decision was therefore in time. The notice of referral was served within seven days of the notice of adjudication, and the claimant’s written seven-day extension was valid. Reliance in the notice on clause 38A did not deprive the adjudicator, whose jurisdiction derived from the Scheme, of jurisdiction. The absence of the contractual appointment notification required by clause 38A.3.2 had no such effect.
4. Notice and dispute. The requirements in paragraph 1(3) of the Scheme were directory rather than mandatory conditions of enforcement. Although the notice did not comply fully with paragraph 1(3)(b) and (c), the dispute was sufficiently identified in context. There was a real dispute concerning application for payment no. 7, and the defendant knew what dispute was being referred.
5. Costs. The adjudicator had jurisdiction to award costs only under clause 38A.6. Since the Scheme governed the adjudication, he had no jurisdiction to award the claimant its costs and expenses. The award was unenforceable to that extent only. The defendant was given permission to defend the claim to that extent.