CJP Builders Ltd v William Verry Ltd

An adjudicator has power under a contractual provision requiring him to set his own procedure to extend time for a response, subject to the overall timetable and the parties’ right to be heard. Clear wording is required before that right is excluded. Deliberately disregarding a substantial response may amount to a material breach of natural justice where there is a real possibility that the result could have differed. The breach need not be shown to have probably changed the outcome.

Where a construction contract provides that the contractor may value interim applications and that the subcontractor is entitled only to sums properly due, the applied-for valuation does not automatically become payable merely because no payment or withholding notice was served. Payment remains limited to work properly executed.

William Verry Limited engaged CJP Builders Limited under a construction subcontract incorporating DOM/2 conditions. Following non-payment of an interim valuation, CJP commenced an adjudication. Verry served a substantial response several hours after the deadline agreed between the parties.

The adjudicator concluded that he had no power to extend time, disregarded the response, and ordered Verry to pay the valuation. CJP sought enforcement and summary judgment. Verry brought separate proceedings seeking declarations concerning the applicable adjudication regime, the adjudicator’s jurisdiction, natural justice, and the contractual payment provisions. The central issues were whether the adjudication was governed by DOM/2 or TeCSA rules, whether the adjudicator had jurisdiction, whether exclusion of the response invalidated the decision, and whether the valuation was payable without payment or withholding notices.

1. Applicable adjudication regime. The contractual documents created an ambiguity between the DOM/2 adjudication provisions and the TeCSA regime in the main contract. Applying the contractual priority clause, the unamended DOM/2 clause 38A governed the adjudication. The same conclusion followed from the contra proferentem rule because the ambiguity arose from Verry’s documentation.

2. Jurisdiction and waiver. Verry had not clearly reserved its position on jurisdiction. It had encouraged nomination by the RICS, which was inconsistent with the TeCSA nomination procedure, and had participated on the basis that clause 38A applied. Verry was therefore estopped, or alternatively no longer entitled, to challenge the adjudicator’s jurisdiction on that basis. The parties had also effectively invited the adjudicator to determine which adjudication regime applied.

3. Dispute referred. The adjudicator had decided the dispute referred to him, namely the non-payment of valuation 15. It was immaterial that he might have answered the question wrongly or for the wrong reasons.

4. Natural justice. Clause 38A gave the adjudicator discretion to extend time for a response. The power to set his own procedure and the absolute discretion to take the initiative in ascertaining facts and law were inconsistent with a rigid prohibition on extensions. The parties’ right to be heard required clear and fair opportunity to present their case. The adjudicator’s honest and open conduct did not cure his decision consciously to exclude Verry’s substantial response.

   The breach was material. Excluding the whole of the response was pervasive, and there was a real, rather than fanciful, possibility that consideration of it could have produced a different decision. It was unnecessary to determine that the result probably would have changed. The adjudication decision could not be enforced.

5. Payment provisions. Under the amended DOM/2 clause 21, the absence of a payment notice or withholding notice did not make CJP’s applied-for valuation automatically payable. The subcontractor was entitled only to sums properly due for work properly executed. Verry was accordingly entitled to a declaration to that limited effect.

CJP’s enforcement claim was dismissed. Verry’s claim for declarations was allowed to the limited extent stated.