UK: Adjudication - 28 Days Means 28 days

David Philp (Commercials) Limited ("Philp") (the employer) entered into a construction contract with Ritchie Brothers (PWC) Limited ("Ritchie") (the contractor). A dispute arose between the parties and Ritchie commenced an adjudication against Philp which was conducted in accordance with the provisions of the Scheme for Construction Contracts (Scotland) Regulations 1998 ("the Scheme").

The Referral sent by Ritchie to the adjudicator was undated, but was sent with a covering letter dated 18 September 2003. The adjudicator did not receive the Referral until 23 September, from which date the adjudicator determined that the 28 day period (under the terms of paragraph19(1)(a) of the Scheme) for him to reach his decision commenced.

On 21 October 2003 Philp wrote to the adjudicator challenging his jurisdiction on the ground that his decision should have been reached by 16 October 2003 i.e. 28 days after the date of the covering letter to the Referral. In response to this challenge, the adjudicator (on 21 October 2003) requested Ritchie to consent to the postponement of his decision until 23 October 2003, which Ritchie duly did. However, even with this extension the adjudicator delayed delivery of his decision for four days beyond the extended date in order to ensure payment of his fee.

The adjudicator found in favour of Ritchie and ordered Philp to make payment to Ritchie of his award. Philp did not make payment on the ground that the adjudicator's decision was ultra vires, having been reached after the 28 day period, and therefore invalid. Ritchie then raised enforcement proceedings.

The principal legal points in dispute were:-

1. Is the referral effected at the date the referral is sent or received by the adjudicator?;
2. Can an extension beyond the 28 day period be sought and granted after the expiry of the 28 day period or does an adjudicator's jurisdiction cease automatically on the 28th day?;
3. Is an adjudicator permitted to delay the issuing of his decision beyond the prescribed time limit for reaching his decision until he is paid, and can he be said to have 'reached' a decision without communicating it?; and
4. Is an adjudicator's decision binding where it is made after the prescribed time limit?

In response to the principal legal points noted above, Lord Eassie reached the following conclusions:-

1. The 28 day period commences on the day the referral is sent to the adjudicator;
2. The request for an extension to the prescribed 28 day period can be made at any time. The appointment of an adjudicator does not cease at the end of the 28 day period, notwithstanding that the adjudicator has not reached or communicated his decision; and
3. Delay by an adjudicator in producing his decision within the prescribed time limits does not bring the adjudication process to an end. The Scheme allows a fresh adjudicator to be appointed, should either party wish to do so, if the presiding adjudicator fails in any of his duties. In affording the parties this opportunity the time provisions for adjudication must be considered directory rather than mandatory. Consequently, if parties do not choose to replace the adjudicator, the decision, though late, is still valid and enforceable.

Philp then appealed.

By the time the appeal came before the Inner House there was only one remaining live issue which offered two possibilities: (i) did the adjudicator's jurisdiction expire on 16 October 2003 because he failed to reach his decision by that date; or (ii) did it continue having been validly extended by Ritchie's consent to the postponement of his decision which came after 16 October 2003.

Ritchie argued that:

• if the jurisdiction of an adjudicator automatically expired after the 28 day period, there would be no need for paragraph 19(2) (which allows, at the option of either party to an adjudication, to serve a fresh notice of adjudication); and

• an adjudicator who failed to reach his decision within the prescribed limit had, at worst, committed a procedural error.

Philp retained the position it had taken in the case at first instance, namely that:

• The Scheme gives an adjudicator the opportunity to seek an extension, which will avoid him losing his jurisdiction. If an adjudicator does not seek an extension within the 28 day period, his jurisdiction will expire on the 28th day.

The Opinion of Lord Justice Clerk is straight forward and applies the ordinary meaning to the words used in paragraph 19(1)(a) of the Scheme. In doing so Lord Justice Clerk opined that an adjudicator's jurisdiction ceases on the expiry of the time limit if it has not already been extended in accordance with paragraph 19(1).

In the Lord Justice Clerk's view, the suggestion by Ritchie that an extension could be sought after the expiry of the 28 day period would require a contrived interpretation. Further such a contrived interpretation would not provide a criterion by which a court could determine for how long after the time limit a failure to reach a decision was merely a procedural error or in what circumstances the jurisdiction could be said to have come to an end.

Lord Justice Clerk also failed to see how, as submitted by Ritchie, the service of a fresh notice of adjudication under the terms of paragraph 19(2) of the Scheme would terminate the jurisdiction of the adjudicator, as this on its own need not result in the appointment of a new adjudicator.

Lord Nimmo Smith agreed with the Opinion of the Lord Justice Clerk adding only, in contradiction to the Opinion of Lord Abernethy (which is discussed below), that the intention of Parliament for a speedy process is

Dissenting, Lord Abernethy agreed with the Decision of Lord Eassie that the time limit provided in paragraph 19(1)(a) of the Scheme was discretionary and not mandatory. His reasoning appears to be based on three premises:

1. the intention of Parliament - Lord Abernethy states that the fact that the Scheme affords parties the opportunity to extend the period of 28 days clearly means that Parliament intended some latitude in the prescribed period and that consequently it is not fixed. In Lord Abernethy's view, this latitude supports the purpose of the Act and Scheme: to provide a speedy provisional resolution to a dispute;
2. his interpretation of paragraph 19(2) of the Scheme - Lord Abernethy took the view that it is only when a fresh notice and a new adjudicator is requested to act in terms of paragraph 19(2) that the jurisdiction of the first adjudicator comes to an end; and
3. constructive purpose - Lord Abernethy noted that as the merits of the adjudication were not disputed (and Philp appeared to have no interest in pursuing a fresh adjudication) it would be for Ritchie to raise a fresh adjudication which would result in further time and expense being incurred. If an award was then made in favour of Ritchie, the decision would be binding and Philp would be obliged to pay the adjudicator's award. Consequently, no constructive purpose would be served in interpreting the 28 day prescribed period as a mandatory provision - to do so undermined the effectiveness of the Scheme.

The decision of the Inner House is clear: 28 days means 28 days. There is no discretion to extend this period without consent under the terms of paragraph 19(1) of the Scheme which must come before the expiry of the original 28 day period. Given that this is a decision of the Inner House it appears (for the moment at least) that any uncertainty regarding the time limits for adjudication arising from decisions at first instance such as St Andrew's Bay Development Ltd v HBG Management Ltd and Simon's Construction Ltd v Aardvark Developments Ltd, has been removed.