Construction Case Update - Adjudication - Part 3 of 2018

but the adjudicator may not do so without the consent of all the parties. In this instance, Mr Hunter did not receive or request that consent. Sheriff Ross held that he came to the same conclusion even on the ordinary construction of plain wording on s108 of the Act and regulation 8(2) of the Scheme: that consent was required to hear two related adjudications at the same time. The Court commented that the Scheme appears to limit simultaneous adjudications but not consecutive adjudications to ensure that each one is done properly as an incorrect decision carried out through correct procedure is difficult to challenge. The Sheriff Court held that the adjudicator did not have jurisdiction as he had not obtained consent from all parties and the adjudication could not be enforced. 4. Jurisdiction—disputed oral novation—effect of mis-description in adjudication notices (1) M Hart Construction Ltd and (2) P K Maintenance Ltd v Ideal Response Group Ltd 10 The factual background is simplified and condensed for the sake of brevity. There were three adjudications. 1. The Hart Retrofit adjudication The first claimant, M Hart Construction Limited (“MHCL”) claimed payment of invoices on account of profit share. MHCL said its entitlement arose from a novation to it by inference of the original construction made between Mr Hart and Ideal Response Group Limited (“Ideal”). It relied on an oral agreement and subsequent conduct as evidence of novation by inference. Ideal denied any novation of the contract it had with Mr Hart and contested jurisdiction. It also relied on a pay less notice. The adjudicator found there was a novation and awarded MHCL £750,000 on invoice 2589 but nothing else. 2. The Hart Defects adjudication MHCL claimed £450,000 on two invoices. It appeared to allege that it was the original contracting party (though the company MHCL did not exist at the date of the contract). It later contended there had been a novation of the contract to it. Ideal denied any novation and said the contract was with Mr Hart and the adjudicator had no jurisdiction. It also relied on pay less notice. The adjudicator found for MHCL and awarded them £450,000. 3. The PKM Defects adjudication P K Maintenance Limited (“PKM”) relied on a single tripartite oral agreement between itself, MHCL and Ideal. Although it did not so claim in the notice of adjudication or referral, its case was that the original contract was made with Mr Hart and novated to PKM. Ideal denied any novation, said the contract was with Mr Hart in person and therefore the

adjudicator had no jurisdiction and relied on its pay less notice. The adjudicator found for PKM and ordered payment on three invoices totalling £176,620. Ideal did not pay any of the sums awarded and MHCL and PKM each sought summary judgment. Their defence was that the adjudicator in each case lacked jurisdiction because on each case he was appointed under a contract alleged to have been made with MHCL whereas it was common ground the original contracts were with Mr Hart. Implied novation raised mixed questions of fact and law. The evidence revolved around oral conversations - the date, circumstances and content of which were contested, as well as on conduct and emails, on applications for payment and payments on account. There was such a conflict as could not be resolved on an application for summary judgment and on such basis it was difficult to see how it could be decided there was no realistic prospect of Ideal succeeding in its case that there was no novation. The question of the validity or otherwise of the pay less notices did not assist in putting the question of novation beyond argument. Thus on the claims of MHCL, Ideal had a real prospect of successfully defending the claims of the first claimant, MHCL. Although not necessary to that decision, the Court also dealt with three further arguments raised by Ideal. Whilst fact sensitive, the issues raised are of general interest. 1. The adjudications were not brought under the alleged novated contracts because the notices of intention to refer in each case relied on specific contracts that did not exist. 2. The Scheme expressly or impliedly required the notice to identify the contract under which the dispute arose. 3. The adjudicators each acted under two contracts because they derived jurisdiction from the contracts relied on in the notices, but made their decisions on the basis of a novated contract. The Court considered section 108 of the Act, the Scheme and the terms of the notices of intention to refer and the referrals and concluded as follows. • There was no discrete procedural requirement to set out the contract giving rise to the dispute. • The absence of particularity in the notices of intention to refer to a particular contract did not render them invalid or restrict the adjudicator’s jurisdiction to determine the dispute referred. • The description of the contract formation was factually incorrect but the notices of intention to refer captured the legal effect of the alleged novation. Even if the contracts particularised did not exist, then a contract did exist between Ideal and MHCL under which a dispute about entitlement to profits could be and was referred to adjudication.


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