1 business day not enough to crystallise a dispute

A common reason to challenge the jurisdiction of an adjudicator is that the responding party has not been given enough time to consider the claim before the adjudication is commenced. In a recent judgment, Akenhead J found that one business day was not a sufficient period within which to infer that a dispute had crystallised but five days probably was. The parts of the adjudicator’s decision where he did not have jurisdiction were easily identifiable and could therefore be severed from the remainder to render the decision partially enforceable.

While it is established law that, in the absence of an express rejection of a claim, it can be inferred that a dispute has arisen between the parties after a certain period of silence, not much guidance has been provided about how long that period of silence must be. In this case:

1. Beck sent UKFLC a “Schedule of Costs Incurred” on 15 March 2012 and revised this slightly on 27 March 2012.
2. On 5 April 2012 (the Thursday before Easter bank holiday weekend) Beck sent an email just before 5pm enclosing a short letter claiming liquidated and ascertained damages (“LADs”) for the first time.
3. On 10 April 2012 (the first working day after Easter and a Tuesday) at 16.48 Beck issued its notice of intention to refer the dispute to adjudication. The notice claimed both the costs in the amended Schedule of Costs Incurred and also LADs, albeit that the claim for LADs was not really the same claim that had been intimated in Beck’s letter of 5 April 2012 (it being for a much lower value).

The parties accepted that there was a crystallised dispute in relation to the claim relating to the Schedule of Costs Incurred but UKFLC disputed the adjudicator’s jurisdiction to determine the LADs claim. Akenhead J said that the real issue on the specific facts was whether the letter of 5 April 2012 was disputed in effect by silence over the Easter weekend. He said that:

“In normal circumstances, a gap of five days from the time that a claim or assertion is put forward will often be sufficient to give rise to an inference that it is disputed, particularly, as here, where there had been previous claims and where liability was obviously in dispute for some two months before.”

However, he held that as the letter of 5 April 2012 was sent after close of business on the last working day before a four day holiday weekend, the period of time in these particular circumstances was not sufficient to give rise to an inference that whatever the letter of 5 April 2012 meant was disputed, especially as there had been no real hint before that date of a claim of this nature. The adjudicator therefore lacked jurisdiction over the element of the dispute that related to LADs.

As this part of the dispute had been dealt with separately in the submissions and in the adjudicator’s decision (including the fact that the amount awarded was broken down into separate elements by the adjudicator) so that in effect the claim was made up essentially of two parts, Akenhead J said that severance should take place. Accordingly, the part of the adjudicator’s decision that awarded Beck a sum for relating to the Schedule of Costs Incurred should be enforced.

The case provides helpful guidance about how long a referring party should wait after submitting a claim before commencing an adjudication. It is also a useful reminder about the benefits of structuring claims in such a way so as to make certain parts easily severable if there is ever any doubt about whether the adjudicator has jurisdiction to determine the dispute as a whole.

Further reading: Beck Interiors Limited v UK Flooring Contractors Limited [2012]