20010126 "Ask Yourself This"

How would you feel if an adjudicator decided your case on a question you didn't ask her, without giving you a chance to put your views on it? And do you think a judge would agree with you?

"She took the issue into the conference hall of her own mind and relied on her one-woman debate. Karl was not happy"

Karl Construction (Scotland) was determined not to comply with adjudicator Janey Milligan's decision that £39 872.24 should be paid to Sweeney Civil Engineering. It said she had answered a question not put to her and which, therefore, did not fall within her jurisdiction. More than that, it reckoned that the adjudicator had thought of the question herself, had mulled over the question herself, had not told either party she was asking and answering the question and, above all, had not given the parties an opportunity to have their say. Assume, please, that Karl is right. Now answer this: will a court nevertheless enforce the adjudicator's decision? And will you put your last 10 shillings on that answer?

Let's deal with each of these two points, one at a time. The first is whether a question or contention that is not mentioned in the adjudication notice or referral documentation is nevertheless "in scope". The answer is "sometimes". The pathway to a decision about a dispute will meet numerous dilemmas. They are forks in the pathway. Each will be a sub-issue or contention that has to be answered before moving on. In Sweeney's case, it had a dispute about money payable in an interim account. Karl said the money wasn't due yet. Ordinary stuff. Yet the path will be strewn with umpteen questions. The adjudicator will have to make a finding, explaining why she was not going along one or other of the paths suggested to her by the parties. Moreover, the adjudicator will invariably think of questions herself. Indeed, the whole idea of adjudication is to use an independent outsider who knows the business of construction so well that he or she knows what to look for. But she would be wrong to proceed to address a new issue not yet in dispute; she can't tag on a list of disputes that had not been put. The adjudicator's investigative powers only permit contentions to be addressed that are an integral part of the route to answering the ultimate question.

So what was it the adjudicator spotted? Karl and Sweeney entered into a homemade subcontract invented by Karl. It did not have the now unlawful pay-when-paid clause. Instead it had the pay-when-certified clause. It said that although interim payments became due, they were only payable when the value of the equivalent works were included in the certificate from the architect or contract administrator under the main contract or otherwise approved by the employer under the contract. So, while we had a become-due date that was clear, the final date for payment was less certain.

The adjudicator, who by the way is one of the most experienced and well respected in Scotland, took a look at that pay-when-certified clause and asked if it complied with that part of the Construction Act that requires contracts to "make adequate provision" for determining what payments became due and when. She announced that it was not compliant because it was so uncertain about the payment day. Therefore she forked right on the path and applied the Scheme for Construction Contracts' payment rules to the question of when the money fell due. The judge decided that the question was an ordinary and legitimate part of the dispute. It did not trespass outside jurisdiction.

And what of the second point? It was said that the adjudicator did not ask the parties to address her on this question. She took the issue around the conference hall of her own mind and relied on her one-woman debate. Karl was not happy with that approach, if it is true. Had she come to them with her thoughts, they would have hotly contested her thinking, they told the judge. Lord Caplan said: "When a case is decided even provisionally, on a point which parties may have had no opportunity to address, the court is left feeling uncomfortable." Nevertheless he would not set her decision aside. Karl must still pay up.

The uncomfortable feeling will arise in the mind of every lawyer. If this had been litigation or arbitration, it would be an error of procedure for the tribunal to put up and answer its own questions without seeking observations from the parties. But adjudication is not a fast-track species of an old idea. The adjudicator is trusted to impartially investigate in any way she sees fit unless the contract limits her activities. There is no time for all the niceties of the legal system and some will complain that the adjudicator here was unfair when compared with traditional dispute resolution procedures. And am I uncomfortable? Yes, I am.

Readers are invited to forward recent judgments for reporting in this column (with full acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple, London EC4Y 7EU. DX:007I LDE

Ask yourself this