Pre-referral directions: mind the gap

Articles
30 Nov 2020

Here’s a situation that arose recently in an adjudication where I acted for the responding party. It is a helpful reminder of how strict the adjudication time limits are, and the restrictions upon an adjudicator’s ability to change them without agreement from both parties.

The adjudication

The adjudication proceeded as follows:

You may already have spotted the problem. The Scheme for Construction Contracts 1998 (specifically, paragraph 7(1)) gives the referring party seven days from the date of the notice of intention in which to serve the referral notice. Failure to serve the referral notice within that time renders the referral defective, and deprives the adjudicator of jurisdiction (Hart Investments Ltd v Fidler).

Here, the notice of intention had been served on day one, so the referral notice had to be provided (at the latest) by day eight. Service on day 12 was four days out of time. The adjudication was over before it had even started.

Can the adjudicator extend the time limits?

What about the fact that the adjudicator gave directions extending the timetable – does that make a difference? In a word, no. The reason is simple. The adjudicator does not have jurisdiction to grant such an extension. In fact, until the dispute has been formally referred to them (by service of the referral notice), the adjudicator has no jurisdiction at all.

This point was decided by Coulson J (as he then was) in Hart Investments:

“At one point Mr. Quiney, with customary acuity, suggested that the adjudicator could extend without consent the seven day time limit as part of his general powers under para.13 of the scheme. That was a typically ingenious argument, but I do not believe that it can be right. Everything done pursuant to the Scheme, including the 28 day period for the adjudication itself, flows from the date of the referral notice. The adjudicator is not seized of the adjudication until the referral notice is provided and the 28 day period starts to run. He therefore has no power until he gets the referral notice; thus he has no power to extend the seven day period which occurs before his jurisdiction begins.”

If this point is taken against them, a well-read referring party might raise the case of William Verry Ltd v North West London Communal Mikvah, where the referral notice had been served outside the seven-day time period, but in accordance with a direction given by the adjudicator. HHJ Thornton QC enforced the adjudicator’s decision.

Does this case give hope for a referring party in a situation similar to that described above? Unfortunately not. In Verry, the responding party had conceded the crucial point that would later be decided in Hart Investments – they accepted that the adjudicator’s direction was an exercise of the adjudicator’s contractual power to give procedural directions. They resisted enforcement on a more limited basis. They said that the adjudicator’s power was limited by the terms of section 108 of the Construction Act 1996 so as to prevent him from extending the seven-day timetable. HHJ Thornton QC rejected that narrow argument.

Commenting on Verry in the subsequent case of Cubitt Building & Interiors Ltd v Fleetglade Ltd, HHJ Coulson QC said that Verry is a case “on its own particular facts” that is “not perhaps authority for any wider proposition”. He noted that Verry was not a case of an adjudication under the Scheme for Construction Contracts 1998, which in any event is:

“… entirely clear on this point. The referral notice must be provided by a date which is not later than seven days after the notification of the notice of intention to refer. If it is not, it cannot be a referral notice in accordance with the Scheme.”

At most, Verry can be read as authority that the parties are free when they contract to give the adjudicator the power to extend the seven-day period – section 108 will not strike down such an agreement. It certainly is not authority that, in an adjudication under the Scheme for Construction Contracts 1998, the adjudicator has the power to grant such an extension unilaterally.

Some takeaways

Some takeaway points for parties conducting an adjudication under the Scheme for Construction Contracts 1998:

  • If you are an adjudicator, wait until after you have received the referral notice to make procedural directions. In my experience, most adjudicators will contact the parties immediately following their appointment to notify them of their appointment and seek agreement to their standard terms, but will hold off on setting the timetable until after the referral notice has been served. That is a perfectly sensible approach.
  • If you are a referring party, make sure you refer the dispute to the adjudicator by serving your referral notice within seven days of the notice of intention. If the adjudicator gives pre-referral directions purporting to allow a longer timetable, ignore them!
  • If you are a responding party, double check the dates of the notice of intention and referral notice, and if the referral notice is out of time raise this point at the earliest opportunity.

Simon Kerry – November 2020.  This article previously appeared in the Practical Law Construction Blog.

Author

Simon Kerry

Call: 2012

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