Adjudication: Ritchie Brothers (PWC) Limited v David Philp (Commercials) Limited

The 28 day time limit for an adjudicator to issue his decision is mandatory. If an adjudicator has not issued his decision by the end of the 28th day, or has not by then sought and received an extension of the period in accordance with the applicable adjudication provisions, any decision subsequently issued is made without jurisdiction and will not be enforced.

Court of Session, Scotland – Inner House (The Lord Justice Clerk, Lord Abernethy and Lord Nimmo Smith)

24 March 2005

In this decision the appeal court in Scotland overturned the decision of the judge at first instance, which we reported in Adjudication Watch on 14 April 2004.

Philp was the employer and Ritchie was the contractor under a construction contract to which the Scottish version of the Scheme for Construction Contracts applied. The provisions of the Scottish Scheme under consideration in this appeal are identical to the corresponding provisions in the Scheme which applies in England and Wales. Ritchie was successful in an adjudication against Philp and sought to enforce the adjudicator's decision through the courts. At first instance Ritchie was successful and the award was enforced. Philp appealed.

The facts agreed for the purposes of the appeal were as follows:

• The date of the referral notice was 18 September 2003.
• The 28 day period for the adjudicator to reach his decision expired on 16 October 2003.
• The adjudicator did not reach his decision by 16 October 2003.
• On 21 October 2003 the adjudicator sought Ritchie's consent to the postponement of his decision until at least 23 October 2003.
• On 23 October 2003 the adjudicator intimated to the parties that he had reached his decision.
• On 27 October 2003 the adjudicator sent the parties his decision, dated that day.

The sole issue for the appeal court was whether the adjudicator's jurisdiction expired on 16 October 2003 because he failed to reach his decision on that date; or whether his jurisdiction continued and was validly extended by virtue of Ritchie's consent to the extension which was given on 21 October 2003.

The Lord Justice Clerk and Lord Nimmo Smith decided that the adjudicator's jurisdiction came to an end on 16 October 2003 because the time limits contained in paragraph 19 of the Scheme were mandatory, not directory. Their reasoning was as follows (the text of paragraph 19 of the Scheme is given at the foot of this article for ease of reference):-

• The true interpretation of paragraph 19 of the Scheme is that the adjudicator's jurisdiction ceases on the expiry of the 28 day time limit if it has not already been extended in accordance with the provisions for extension of the deadline.
• The language of section 108 of the Housing Grants, Construction and Regeneration Act 1996 and the Scheme pertaining to the time limit for the adjudicator's decision is such as to suggest that the time limit is mandatory. This interpretation reflects the natural meaning of paragraph 19(1) of the Scheme. It provides a clear time limit that leaves all parties knowing where they stand. It has the sensible result that paragraph 19(2) comes into operation only after the original adjudicator's jurisdiction has expired.
• It is a contrived interpretation of paragraph 19 to suggest that its effect is that an adjudicator whose decision is not issued within the time limit retains jurisdiction to decide the dispute until a fresh notice of adjudication is issued under paragraph 19(2). The Lord Justice Clerk disagreed with Judge Seymour's reasoning in Simon Construction Ltd v Aardvark Developments Ltd [2004] BLR 117, reported in Adjudication Watch on 29 October 2003 on this point. In any event, even on such an interpretation, it does not follow that the mere fact that a fresh notice of adjudication is served should bring the original adjudicator's jurisdiction to an end because the notice might not result in the appointment of a new adjudicator. The party serving the notice might not follow it up by seeking appointment of a new adjudicator.
• The argument that if the adjudicator loses his jurisdiction after 28 days, delay would be caused while a fresh adjudicator is appointed is not a good one. The same result could occur if service of a fresh notice of adjudication brings the original adjudicator's jurisdiction to an end prior to his decision being issued.
• An adjudicator should be able to assess the prospects of reaching his decision within 28 days as soon as he receives the papers in the case. If he is in doubt he should at once seek an extension of the period in accordance with the relevant provisions for doing so. If any party is concerned that the adjudicator may not meet the deadline, that party can raise the question in good time.
• It is incorrect to characterise a failure to comply with the time limit as a technical error which did not vitiate the adjudicator's decision. Such an approach provided no hard and fast criterion by which a court could determine what length of delay was merely a "technical" failure, or in what circumstances jurisdiction can be said to come to an end. The Lord Justice Clerk disagreed with Lord Wheatley's decision in St. Andrew's Bay Development Ltd v HBG Management Ltd (2003) SLT 740 reported in Adjudication Watch on 20 March 2003 and distinguished HHJ Humphrey Lloyd's decision in Barnes and Elliot Ltd v Taylor Woodrow Holdings Ltd [2004] BLR 111 reported in Adjudication Watch on 20 June 2003 on this point. The Lord Justice Clerk did not, however, deal with the issue of the validity of a decision which was reached timeously but was not communicated to the parties until after expiry of the time limit.
• "If a speedy outcome is an objective, it is not achieved by leaving the parties in doubt as to where they stand after the expiry of the 28-day period. These considerations reinforce the view that paragraph 19 means exactly what it says, so that it is not open to an adjudicator to purport to reach his decision after expiry of the time limit."

Although Lord Abernethy disagreed with the other two judges, the definitive position, in Scotland at least, is now as described above.

Paragraph 19 of the Scheme provides as follows:-

19(1) The adjudicator shall reach his decision not later than –

(a) twenty eight days after the date of the referral notice mentioned in paragraph 7(1); or

(b) forty two days after the date of the referral notice if the referring party so consents; or

(c) such period exceeding twenty eight days after the referral notice as the parties to the dispute may, after the giving of that notice, agree.

(2) Where the adjudicator fails for any reason to give his decision in accordance with sub-paragraph (1) –

(a) any of the parties to the dispute may serve a fresh notice under paragraph 1 and shall request an adjudicator to act in accordance with paragraphs 2 to 7; and

(b) if requested by the new adjudicator and insofar as it is reasonably practicable, the parties shall supply him with copies of all documents which they had made available to the previous adjudicator.

(3) As soon as possible after he has reached a decision, the adjudicator shall deliver a copy of that decision to each of the parties to the contract.

For more information please contact Alasdair McKenzie on 0207 367 2834 or at [email protected]