Adjudication Update

It has been reported that the CA has overturned the decision in C&B Scene Concept Design Ltd v Isobars Ltd (see Dispatch Issue 15) and upheld the original adjudication decision. The judgment has not yet been released. However, it appears that the CA did not feel the need to consider the question of withholding notices and the effect of the failure to serve them. Therefore this key question, particularly given the differing approach taken by those who have to deal with notices, still remains unresolved.

HHJ Cockcroft in Jerome Engineering Ltd v Lloyd Morris Electrical Ltd, upheld the decision of an adjudicator and awarded summary judgment in Jerome's favour. Jerome had referred a dispute to adjudication under clause 38.A of the DOM/2 conditions of contract. Lloyd claimed that the adjudicator did not have jurisdiction since the Notice of Intention to Refer did not comply with clause 38A and/or did not provide a statement of the relief or remedy sought.

Jerome submitted that this was a valid referral because clause 38.A makes no provision for the need for a precise statement of relief within the Notice. The clause says that the party referring the dispute must give notice of the intention to refer and must briefly identify the nature of the dispute. The clause continues that it is the Referral, which shall include a statement of the relief or remedy, which is sought.

HHJ Cockcroft agreed that the Notice did not express the exact relief sought, but thought it appropriate to consider the background known to both parties at the material time. Both parties knew that Jerome was owed money, which had been withheld. The "officious bystander" could not have come to any other conclusion than that Jerome had gone to adjudication because they wanted payment of an interim valuation. Further, the Judge agreed that as the contract was governed by clause 38.A of DOM/2, then provided the relief sought was set out fully in the Referral, this would be sufficient. Finally, as the adjudicator had asked the right question namely "how much should be paid", the approach he had adopted was immaterial.

In Shimizu Europe Ltd v Automajor Ltd, HHJ Seymour QC had to consider whether an adjudicator had exceeded his jurisdiction. Part of the award related to alleged variations. Included in the calculations of these variations were amounts in respect of alleged variations to smoke ventilation works. This was notwithstanding that the adjudicator did not consider that there had been any variation in those works.

Automajor believed that this represented an error, which went to the jurisdiction of the adjudicator. Accordingly, the Adjudicator was invited to amend his decision pursuant to the slip rule.

HHJ Seymour QC commented that if the Adjudicator had made an error, and he did not say that he necessarily had, then the proper mechanism for correcting that error was either in the course of final account negotiation or by referring the dispute to arbitration.

Here, Automajor had only paid up that part of the decision, which they did not challenge. HHJ Seymour QC commented that it could not be right that it is open to a party to an adjudication to both "approbate and to reprobate a decision of the adjudicator." Either the whole of the relevant decision must be accepted or the whole of it must be contested.

That said, HHJ Seymour QC continued, if an adjudicator had a made decision both on the question of how much money is due to a party and as to what (if any) extension of time a party is entitled, it may be open to a party to that adjudication to accept the determination in relation to the sum due but to dispute the assessment of the extension of time or vice versa. Here, two separate questions had been referred to the adjudicator. However, what you cannot do is challenge part of a financial award or part of an extension of time decision.

Finally, HHJ Seymour QC held that, Automajor by inviting the adjudicator to correct the award under the slip rule, had accepted that the award was valid. The invitation to correct the award could only be consistent with recognising that award as valid. Presumably, therefore, Automajor would have been estopped from challenging the jurisdiction had their other arguments succeeded.

Other Cases of Interest

In Baxall Securities Ltd and Anr v SWP & Others, the CA overturned part of the decision of Bowsher QC (see Dispatch Issue 5) who had held that SWP, the project architects, were liable in tort in respect of the consequences of certain flood damage in an industrial unit occupied by Baxall.

One of the main points of interest in the judgment revolves around a discussion of the difference between a patent and latent defect. A latent defect is a concealed flaw. It is the actual defect not any danger presented by that defect.

Here, the CA confirmed that a defect is not latent if it was reasonably discoverable by a party with the benefit of such skilled third party advice, as that party might reasonably have been expected to seek, regardless of whether that advice was in fact sought or obtained. Actual knowledge of a defect or having a reasonable opportunity to carry out an inspection, which would unearth the defect, will usually be sufficient for a defect to be patent.

In this case, the effective cause of the damage was the absence of overflows, which was a defect, which ought to reasonably have identified (and then remedied) by the Claimant having arranged for a survey of the property to be carried out.

In the Scottish case of Howes v Crombie, Lord Eassie had to consider whether a chartered engineer owed a duty of care to a subsequent purchaser where he had provided written confirmation of the structural stability of a property.

The chartered engineer, a building and engineering consultant, had assisted in the construction of the property. A sale was agreed. The purchaser did not commission her own structural survey. However she did seek finance to assist with the purchase.

The purchaser's lender asked for a report as to the structural stability of the property. The builder's solicitors asked the engineer to provide a letter confirming the structural stability. This letter was duly provided.

However, the Court accepted that the engineer did not know when he wrote the letter that the property was the subject of a sale. The letter would not have been written with the purchaser in mind. As a result of this and because the purchaser had apparently been happy to buy the property without any structural survey (and the request had come from the lender), the Court found that it was not reasonable to impose a duty of care upon the engineer, particularly when the purchaser could issue proceedings against others with whom she had a closer or more proximate relationship.

Society of Construction Law Delay Protocol

The SCL has issued, for consultation, a draft Protocol for determining extensions of time and amounts of compensation (if any) for delay and disruption. The Protocol aims to provide a best practice guide on how to record and manage delay during any construction process. It is hoped that, if the Protocol were to be followed, then this would reduce the scope for argument and dispute about the causes of and extent of any delay.

A key feature of the Protocol is the recognition that transparency of information and methodology is central to both dispute prevention and dispute resolution. For example, the Protocol recommends the production of regular transparent programme updates to reflect progress on site. It aims to provide a framework both for the management of a programme during the project and a framework for the measurement of any delay.

A copy of the Protocol can be downloaded at www.eotprotocol.com. The consultation period comes to an end on 28 February 2002.

Health & Safety

The HSE has published a new enforcement policy statement. A copy of the statement can be found at www.hse.gov.uk. The policy sets out the principles and approach which enforcing authorities are expected to follow in deciding whether to investigate and/or prosecute for breaches of health & safety law. The policy requires inspectors to consider the role of the "management chain" including the conduct of individual directors or managers. In selecting which complaints to investigate the relevant criteria include:-

• the severity of the potential or actual harm;
• the seriousness of any potential breach of law;
• past health and safety performance; and
• the wider relevance of the event to the public

Back to the previous page