31 May 2012

A dispute about disputes

As many contractors will know, the statutory right to refer a dispute to adjudication is just that – a right to refer “a dispute”.  Since the Courts first began considering adjudication, one of the key issues that has arisen is what amounts to “a dispute”; and how “a dispute” differs from “disputes”.  The importance is that the former (“a dispute”) can be referred to one adjudication, but the latter (“disputes”) must be referred to separate adjudications.

This issue was recently revisited by the High Court in the case of Witney Town Council -v- Beam Construction (Cheltenham) Ltd [2011].  Beam were employed by Witney Town Council under a JCT 2005 Design & Build contract, incorporating 2009 amendments, to construct a Community Hall.  As is the way with these things, matters did not progress smoothly and, as the job neared completion, issues arose over extensions of time, the date of practical completion, snagging and the final account.  Eventually the Town Council changed the locks on the building thereby terminating the contract.

Against that background it was not surprising that the parties could not agree a final account.  Beam submitted a draft final account, against which the Town Council certified an interim nil payment; then Beam submitted a final account in respect of which no certificate was issued.

In due course, Beam prepared a Notice of Adjudication.  The body of the Notice referred to previous disagreements over the non-payment of both the draft and final accounts; the level of retention; the date of practical completion; and interest owed on previous late or non-payments.  The Notice asked the adjudicator to determine the amounts due to Beam from the Town Council (including interest) and the date for payment.

An adjudicator was appointed and the Town Council reserved its position on jurisdiction throughout, arguing that what had been referred to the adjudicator was not “a dispute”, but “disputes”.  The adjudicator disagreed and proceeded to make a determination on the dispute, finding largely in Beam's favour.

The Town Council did not pay and when Beam sought summary judgment from the Technology and Construction Court, the Town Council resurrected its previous submissions that the adjudicator did not have jurisdiction because what had been referred to him was a number of disputes, not one single dispute.

The TCC reviewed the key caselaw in this area and came up with the following propositions on what amounted to “a dispute”:

1. A dispute arises generally when and in circumstances in which a claim or assertion is made by one party and expressly or implicitly challenged or not accepted.
2. A dispute in existence at one time can in time metamorphose in to something different to that which it was originally.
3. A dispute can comprise a single or any number of issues within it.  However, a dispute between parties does not necessarily comprise everything which is in issue between them at the time that one party initiates adjudication.
4. What a dispute in any given case is will be a question of fact albeit that the facts may require to be interpreted.  Courts should not adopt an over legalistic analysis of what the dispute between the parties is, bearing in mind that almost every construction contract is a commercial transaction and parties can not broadly have contemplated that every issue between the parties would necessarily have to attract a separate reference to adjudication.
5. The Notice of Adjudication and the Referral Notice are not necessarily determinative of what the true dispute is or as to whether there is more than one dispute.  A Court looks at those documents but also at the background facts.
6. Where on a proper analysis, there are two separate and distinct disputes, only one can be referred to one adjudicator unless the parties agree otherwise.  An adjudicator who has two disputes referred to him or her does not have jurisdiction to deal with the two disputes.
7. Whether there are one or more disputes again involves a consideration of the facts.  It may well be that, if there is a clear link between two or more arguably separate claims or assertions, that may well point to there being one dispute.  A useful if not invariable rule of thumb is that, if dispute claim no.1 can not be decided without all or parts of disputed claim no. 2, that establishes such a clear link and points to there being only one dispute.

Against that background the TCC concluded that what had been referred to adjudication by Beam was one dispute about what was due and owing to Beam.  This dispute comprised a number of elements, all of which had to be considered before the dispute (the final account sum) could be determined. 

This case is a good example of the TCC doing exactly what it said it should do, namely not adopt an overly legalistic interpretation of the meaning of “a dispute”; and taking seriously the recognition that commercial bodies signing construction contracts do not intend that every issue that arises between them must be subject to separate dispute resolution processes.

For more information contact Ian Seeley  01473 298228  iseeley@prettys.co.uk