20030613 "Ah-ha!!!"

There we were thinking that adjudication was an ambush-free zone, and then the High Court finds in favour of an ambusher – and a Christmas ambusher at that!

“Is it fair that a company stands another out of substantial sums simply because some in the industry do not work over the Christmas period?”

When a Judge says of a building dispute "I have found this case difficult," it is worth reading. Let me tell you the story. What do you make of it? I confess I don't like the result. I suspect the judge didn't either. The reason I don't like the result has nothing to do with whether it is right or wrong; it is because it makes adjudication a breeding ground for ambushers. And I think ambushers should be chucked out.

Here is what happened. In Orange EBS Ltd vs ABB Ltd (22 May 2003), Orange took on the mechanical services sub-subcontract for ABB at the trauma centre at the John Radcliffe Infirmary in Oxford. In May 2002, Orange withdrew from site. So ABB employed someone else and threatened Orange with the bill. That was a repudiatory breach.

The usual correspondence was exchanged. Then it cooled down. Six months later, in time for Christmas, Orange sent ABB its final account. That was 2 December 2002. The account included claims against ABB for wrongfully terminating the sub-subcontract. The rib-tickler in adjudication goes like this: "When is the best time to begin an adjudication?" Answer: "Just before the whole industry shuts down for Christmas and the new year."

Orange didn't do that. Instead, having submitted the account on 2 December, it gave notice of adjudication on the same day. But of course you cannot come to adjudication unless a dispute has crystallised. ABB protested about this previously unseen claim. The appointed adjudicator resigned, saying he could not deal with a mere claim. ABB now said to Orange: "Give us until 20 January to get our head around this lot and either we agree or we agree to differ." ABB put a consultant on the account. On 6 January, Orange called in a second adjudicator. I bet ABB was fuming. The second adjudicator just got on with it. Perhaps he doesn't knock off for Christmas and the new year.

ABB said it would play adjudications but maintained at the same time that the whole processes was wasteful and void. The adjudicator decided that Orange had been wrongfully dismissed and was entitled to damages and other payments. He ordered ABB to pay a lump of money. ABB said no. Orange trotted off to court.

Now then, we have had a string of cases in the High Court questioning the nature of disputes. The question in this case is whether Orange had actually referred a dispute or not. The test for whether a dispute has arisen is neat and tidy: "Has the process of discussion or negotiation ended and is there now something to be decided?" That's fine. The analysis now turns on the facts. If I send you a claim for loss and expense and you tell me to go to blazes, that is a dispute. If you ignore me, that too is a dispute. If you want time to consider, you are entitled to a reasonable time. What is a reasonable time? That is a matter of opinion.

And my guess is that the judge in Orange found this a tight call. Counsel for ABB argued that since the industry shuts down over Christmas and the new year, it was unreasonable and absurd to conclude that the final account could have been answered by 6 January. It was easy for the judge to decide that the second adjudicator was quite right to press on with the question of whether ABB wrongly barred Orange from the site. All that had been well rehearsed in the correspondence. But the account served six months later was more difficult. The intervening holiday period was a practicality that companies must deal with, said the judge. On the other hand, is it fair that one company prevents another from obtaining substantial sums simply because some in the industry do not work over the Christmas period? Then again Orange waited six months before putting up its account and case. Not without difficulty, the judge gave the benefit of the doubt to Orange. The nagging doubt for me is whether going ahead with the adjudication on 6 January rather than 20 January made the adjudication unfair. And if a dispute arises about whether a dispute has arisen, get another adjudicator to decide that single point. Easy. It can be done in hours and will tell the first adjudicator where they stand.

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