Adjudicator's Jurisdiction under GC/Works/1

CBC engaged Banner to build the Vinoly Visual Arts Facility in Colchester under a contract which incorporated the GC/Works/1 form of contract and Model Form 24. There were disputes between the parties and CBC purported to determine Banner’s contract. Banner disputed the validity of the determination, and a trial date was set for November 2010.

On 13 January 2010, two days before the Case Management Conference, and unknown to the judge, CBC issued a Notice of Adjudication, which referred the issue of the validity of the determination of the contract to the adjudicator. Mr. Stephen Furst was appointed. On 22 January 2010, Banner issued a CPR 8 claim, seeking a declaration that Mr. Furst had no jurisdiction to hear the dispute.

Banner argued that Condition 59(8) of the contract specifically provided that an adjudicator did not have the jurisdiction to vary or overrule any decision about determining the contract which might be made by CBC. CBC’s case was that, if Banner were correct about the effect of Condition 59(8), then the contract did not comply with section 108 of the Housing Grants Construction and Regeneration Act 1996, and should be replaced by the provisions of the Scheme for Construction Contracts.

Condition 56 of the contract sets out under what grounds the employer might determine the contract. Condition 57 dealt with the consequences of the determination, including payments, and the employer’s right to do anything in order to complete the works. This clause entitled CBC to the costs of completion from Banner.

Condition 59 was the adjudication clause. Sub clause (8) gave the adjudicator the power to vary, or overrule any previous decision made by the employer, project manager, or quantity surveyor, except in respect of a number of itemised circumstances. One of these was decisions to give notice under Condition 56(1)(a) , or give notices under Condition 56(1), and “decisions or deemed decisions of the Employer to determine the contract under Condition 56(8) (Determination by the Employer)”. If any of the circumstances itemised in this clause applied, then the contractor’s only remedy against the employer would be financial compensation.

Condition 57(4) provides that if the employer shall be deemed to have determined the contract “at will” under Condition 56(8), conditions 58(5) and (6) (Determination by the Contractor) shall apply, as if the contractor had determined the contract under that condition.

CBC maintained that it had validly determined the contract because of defects and delays in completion which it had itemised in its notices i.e. the contract had bee determined for cause. If this argument proved unsuccessful, then they would be deemed to have determined the contract “at will. This was Banner’s case in the main action.

The court concluded that the dispute did not fall outside the adjudicator’s jurisdiction. CBC was not asking the adjudicator to overrule or vary their decision, but to affirm that their decision to determine the contract had been valid. On its face, the claim did not fall foul of Condition 59(8)(c). The adjudicator would not be varying or overruling the decision if he concluded that the contract had not been validly determined under Condition 56(1), but if that were his finding, then the determination would automatically be a determination at will under condition 56(8). All the adjudicator would be doing would be identifying the status of the determination and its financial consequences.

Condition 59(8) as a whole preserved Banner’s right to argue in an adjudication that a decision had been wrong, and that they were entitled to compensation. The last part of Condition 59(8) made it clear that an adjudicator can consider whether the types of decisions listed were correct or not because only after he had done that would he be able to decide whether or not a contractor is entitled to compensation.

In case he were wrong on the first issue, the judge then turned to consider whether or not Condition 59(8) complied with s. 108 of the Housing Grants Construction and Regeneration Act 1996. CBC’s argument was that, if Banner were correct, and the adjudicator were prevented from considering the dispute concerning the determination, then they had been deprived of their right to adjudication. If this were the case, then Condition 59 should be replaced by the Scheme for Construction Contracts.

The Contract was a construction contract within the meaning of the Act. If the judge were incorrect in finding that Condition 59(8) did prevent CBC from referring a dispute to adjudication, then it did not comply with section 108 of the Act. If a contract’s adjudication provisions do not comply with the Act, then those in the Scheme for Construction Contracts apply. There has been some discussion about whether this means that ALL the provisions of the Scheme for Construction Contracts apply, or just some of them are incorporated into the contract. The court reviewed the competing decisions, and indicated that he considered that the “wholesale” approach was probably the correct one, although because he did not have to decide the issue in the present case, he declined to finally decide the matter. Here, it did not matter whether Condition 59 was partially or totally replaced. However, the judge was satisfied that Condition 59 did not operate to limit an adjudicator’s jurisdiction because that interpretation of Sub clause (8) was at odds with the other provisions

Even if the Scheme were to replace Condition 59(8), paragraph 20 would not operate so as to deprive the adjudicator of jurisdiction. Accordingly, the CPR Par8 proceedings were dismissed.

(Banner Holdings Ltd. Colchester Borough Council; 29 January 2010 [2010] EWHC 139 (TCC))

Author: Ann Glacki

Date: March 2010

Commentary by Scott Milner

Where GC Works 1 terms and conditions are agreed, Condition 59(8) only prohibits the Adjudicator from varying or overrulling in relation to specific circumstances where the Employer (or its agent/certifier) has decided an issue. That provision does, therefore, give the Adjudicator the jurisdiction to affirm that decision.

Before challenging an adjudicator's jurisdiction, Parties should carefully read the terms and conditions of their respective agreement they made earlier in order to familiarise themselves of what can be decided by the Adjudicator as this may ultimately save or perhaps avoid the time and cost debating such issues at enforcement.

For more information, please contact Scott Milner by telephone 0114 2180 668 or by email scott.milner@alway-associates.co.uk

Scott Milner

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