KNN Coburn LLP v GD City Holdings Ltd

A referral notice under the adjudication scheme is not automatically invalid merely because supporting documents required by the scheme are supplied later. The question is whether the notice identifies and refers the dispute in writing, or whether the deficiency is so fundamental that the adjudication process is invalid. A party that fully participates in an adjudication timetable, while reserving jurisdictional objections, may thereby acquiesce in an extension of the decision period. A later adjudicator may decide an issue not determined by an earlier adjudicator. An inadvertent failure to address a defence makes a decision unenforceable only where the omission is material and means that the major issues were not effectively addressed.

KNN sought summary judgment to enforce an adjudicator’s decision concerning liquidated damages under a construction contract. GD City challenged enforcement on four grounds: late delivery of the decision, re-opening matters determined in an earlier adjudication, and failure to consider a contractual defence said to provide a complete answer to the claim. The adjudicator had received the referral document on 31 January 2013 and supporting documents on 1 February, set a timetable ending on 1 March, and issued his decision on that date. The central issues were whether the referral notice started time running, whether GD City had acquiesced in the timetable, what the earlier adjudicator had decided, and whether the omission concerning clause 2.17.4 breached natural justice.

1. Referral notice and time. The document sent on 31 January 2013 was a referral notice within paragraphs 7(1) and 19 of the Scheme for Construction Contracts (England and Wales) Regulations 1998. Paragraph 7(1) is distinct from paragraph 7(2). Failure to provide accompanying documents immediately is ordinarily a procedural defect, not an automatic jurisdictional failure. The notice identified the dispute and referred it in writing. The supporting documents were important evidence, but the dispute could be understood without them. Only a deficiency so fundamental that the referral notice fails to identify or refer the dispute will invalidate the process.
2. Acquiescence and extension. GD City participated fully in the adjudication in accordance with the timetable, sought an additional day for its response, and raised no objection to a decision on 1 March until after it had been issued. Its reservation of jurisdictional objections did not make its participation procedurally invisible. The circumstances amounted to acquiescence in the timetable. KNN’s compliance also signified consent under paragraph 19(2), so the decision was in time.
3. Earlier adjudication. The later adjudicator could not re-open matters decided by Mr Eyre. However, Mr Eyre had decided only that liquidated damages could not be withheld from the final account because no valid withholding notice had been given. His conditional reference to a possible sum was not a decision on entitlement to liquidated damages or their correct amount. Those issues therefore remained open.
4. Natural justice. The court adopted the principles in Pilon Limited v Breyer Group Ltd [2010] EWHC 837. An adjudicator must attempt to answer the question referred. An inadvertent omission will ordinarily not invalidate the decision, but an omission may do so in an exceptional case where it is material and the adjudicator has not effectively addressed the major issues. The burden of proving materiality rested on GD City. The omitted defence was not a complete defence on its proper construction, and it was inapplicable to the liquidated-damages claim on the facts.
5. Clause 2.17.4. The clause applied only where a consultant or subcontractor had carried out work in connection with the relevant Employer’s Claim. It did not apply merely because such parties had worked on the contract generally. It was generally inapplicable to liquidated damages, which arose from delay rather than its cause, and did not apply here. All grounds of challenge failed. KNN was entitled to enforce the adjudicator’s decision.