17/03/2015
In the previous posts on this series discussing the adjudication process, we have covered:
In this article we move on to discuss the issuing of a referral notice to appointed adjudicator and the response to this from the responding party.
The Referral Notice
The referral in writing of dispute to the adjudicator is known as the referral notice, and until this notice is received the adjudicator has no jurisdiction to issue binding directions. This must be done no later than seven days after the notice of adjudication.
Tip: Put the referral notice and supporting documents together before you issue a notice of adjudication. The preparation of the referral notice may take longer than you anticipate.
The Contents of a Referral Notice
The referral notice is one of the most important documents in the adjudication process as it sets out all the elements of the referring party’s case. Not only does it need to be clear and concise, it must contain all the evidence and submissions needed to persuade the adjudicator to issue directions in favour of the referring party.
An ideal referral notice should contain the following information:
Tip: It is important that the referral notice contains all the information required for the referring party to prove their case. In most cases an adjudicator will allow parties to submit further information, however, they are under no legal obligation to do so.
Late Referral Notice
In the recent case of Wilmott Dixon v Newlon the High Court observed that a late referral notice would not result in the adjudicator’s jurisdiction being automatically displaced. In his obiter statement Ramsey J stated that at most, a late referral notice could bring into question whether the adjudication procedure complied with the rules of natural justice.
The Response
The Scheme for Construction Contracts (England and Wales) Regulations 1998 does not expressly state that there must be a response to the referral notice from the responding party, however, the construction contract may set out the requirement for a response to be sent.
Best practice suggests that on receiving the notice of adjudication, the responding party should provide the adjudicator with a brief response that sets out any jurisdiction issues that may be challenged, and notifies the adjudicator as to how much time they require to deliver a detailed response to the referral.
Challenging Jurisdiction
The first thing the responding party needs to assess after receiving the Notice of Adjudication and the Referral Notice is whether or not the jurisdiction of the adjudicator can be challenged on grounds such as the non-crystallisation of a dispute or incorrect appointment.
Tip: The courts have made it very clear that challenges to jurisdiction must be made at the earliest opportunity possible; otherwise the right to challenge on this ground will be lost.
It is good practice for a responding party to always reserve their right to raise a later jurisdictional argument and this should be included in the response. This is called a general reservation. If it turns out that there is no basis to challenge the jurisdiction of the adjudicator then the reservation may be null and void and the adjudicator’s decision will stand.
If the responding party knows of a specific reason the adjudicator does not have jurisdiction then they must ensure they set out the argument for lack of jurisdiction within the response, however, it is best to ensure a general reservation is still included alongside the specific reservation or reservations, so if the specific reservation/s falls short, the responding party still has a right to challenge jurisdiction. A clear example of where the failure to do this resulted in an enforcement of an adjudicator’s decision despite there being a clear lack of jurisdiction occurred in the case of Allied P&L Ltd v Paradigm Housing Group Ltd. In this case, the responding party (Paradigm) raised two specific jurisdictional arguments. In fact, its stronger jurisdictional argument that no dispute had crystallised, was held by the Court to be quite correct as it was clear that for parts of the claim, no dispute had crystallised and the adjudicator lacked jurisdiction.
However, the problem for Paradigm was that its representatives had failed to properly reserve its position during the adjudication. No general reservation was made. Instead, Paradigm argued that two specific reservations were made. However, the Court held that the reservations made by Paradigm's were not reservations; they were more criticisms of the method adopted by the referring party. Therefore, the Court went onto enforce the adjudicator's decision in full, even though it was clear that the adjudicator lacked jurisdiction. The basis for the enforcement of the decision was the ineffective reservation of the responding party’s rights in relation to the jurisdiction of the adjudicator.
How the Response Should be Drafted
The purpose of a response notice is to set out the responding parties defence. However, unlike in the case of formal court proceedings, the respondent is not required to address every point in the referral document.
The responding party needs to bear in mind that the adjudicator (who is likely to have had no prior experience of the dispute in front of him or her) needs to be able to follow both parties’ positions clearly. Therefore, it is advisable for the respondent to order their response in such a way that the adjudicator can easily see the respondent’s rebuttals to each allegation contained in the referral notice.
The respondent can refer to appending documents from the referral party; there is no need to submit the same documents twice.
Failure to Respond
If the responding party fails to respond to the referral notice then the adjudicator can, under paragraph 15(a) of the Scheme for Construction Contracts (England and Wales) Regulations 1998, continue with the adjudication and make a decision based on the documents received by the referring party.
In Part 5 of this series we will go on to discuss the powers of an adjudicator at length. If you would like to find out more in the meantime, please phone our office on 0 207 993 6960.
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