The Technology and Construction Court recently considered when adjudication proceedings are commenced for the purposes of Part 1 of the Schedule to the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the “Scheme”) and considered various arguments advanced by the Claimant, which attempted to invalidate the Notice of Adjudication received from the Defendant.
The Claimant engaged the Defendant to undertake construction works. Under the contract, the Scheme was to apply in the event of a dispute or difference arising under the contract which either party wished to refer to adjudication. The parties fell into dispute over payment and on 13 February 2014 the Defendant served a Notice of Adjudication (the “First Notice”) on the Claimant.
The Claimant argued that the First Notice was ineffective to commence adjudication proceedings on four main grounds
That under the Scheme an adjudication is not commenced until a Referral Notice is served on a properly appointed adjudicator;
The First Notice was invalid because it did not comply with the Scheme in that it did not identify and was not served at the contractually required address;
No adjudication proceedings were commenced as the Defendant sought to appoint the adjudicator via the wrong nominating body; and
The defects in the First Notice (and resignation of the First Adjudicator) could not be cured.
Under the terms of the contract, the Defendant had until Friday 14 February 2014 to commence adjudication proceedings and challenge the payment required under the contract, before a final certificate would become conclusive evidence of the matters referred to in the contract. Accordingly, the Claimant sought to argue that the Defendant had failed to commence adjudication proceedings in time and therefore the final certificate was valid and unchallengeable.
Referring to previous authority in the context of arbitration proceedings, Mrs Justice Carr OBE held that when interpreting a commercial contract the aim is to determine “what the parties meant by the language used, which involves ascertaining what the reasonable person would have understood the parties to have meant“. She held that in this context the “reasonable person” is one who “has all the background knowledge which would reasonably have been available to the parties in the situation they were in at the time of the contract.” In particular, Mrs Justice Carr considered the case of Tracey Bennett v FMK Construction Limited  101 Con LR 92 (a case that considered the question of when adjudication proceedings are commenced in the context of a conclusive evidence clause) and confirmed that the key factor was the giving of a notice of intention to refer and not the appointment of the adjudicator himself. Otherwise, it was held, delay in the appointment of the adjudicator could lead to an applicant failing to serve a referral notice within the relevant period through no fault of their own. Mrs Justice Carr explained that if the Notice of Adjudication was not the important document for the commencement of adjudication proceedings then it would be difficult to see why the Scheme contained such detailed provisions as to what should be included in it.
In relation to the Claimant’s argument that the Notice of Adjudication was invalid as it did not correctly state and was not correctly served on the correct address, it was held that “not every breach of a requirement of the Scheme is such as to render a notice invalid.” Accordingly, Mrs Justice Carr held that the omission of an additional address for the Claimant in no way affected the fact that the First Notice achieved its purpose of informing the Claimant of the dispute being raised against it. In relation to service, Mrs Justice Carr was not convinced that the particular terms of the contract referred to applied to the Notice of Adjudication and in any event, under the Scheme, there was no specific requirement for a particular method or place of service. It was held that the Claimant was informed of the intention to refer to adjudication and the failure to mention or serve on a particular address did not affect the substantive purpose of the Notice of Adjudication. Similarly, it was held that once it was understood that proceedings are commenced by serving a Notice of Adjudication, the suggestion that proceedings are not commenced because of the incorrect identification of the nominating body falls away. Under the Scheme, the Defendant was not required to identify the nominating body in the First Notice at all. Accordingly, the Court held that an invalid referral does not render invalid a Notice of Adjudication for the purpose of commencing adjudication proceedings.
This case emphasises the importance of the Notice of Adjudication, as this is the document that first puts the parties on notice that a dispute has arisen. The case also indicates that the Courts are hesitant to find a Notice of Adjudication to be invalid merely on technical grounds.
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