Last week the TCC declined to enforce another adjudicator’s decision. The case is interesting for three reasons:

  1. It is yet another recent case highlighting when the Construction Act does not apply to letters of intent (LOIs). While the LOI grounded a contract it was not governed by the Act because, applying settled principles, there was no agreement in writing: the changes to the LOI’s duration, work scope and payment terms were not made wholly in writing. As there was no express adjudication clause either, the adjudicator had no jurisdiction to reach his decision and it was unenforceable.
  2. Judge Thornton QC said that the adjudicator should not have made his decision’s release conditional on the referring party paying his fee (even though the decision determined how much of the fee, if any, the responding party should pay the referring party). This is the third time a court has said that this previously common practice is impermissible. The judge, however, went significantly further than the two previous cases saying that the referring party’s payment made the adjudicator appear biased in his favour. This alone might have justified not enforcing the decision. This imperils any decision, yet to be enforced, which was released on the referring party paying the adjudicator’s fee.
  3. In the first judgment on the point, the judge held that the decision would also have been unenforceable because it was communicated late. The court’s current approach to late decisions is that they are valid if they are reached within 28 days of the referral (subject to extensions) and communicated one or, possibly, two days later. The adjudicator’s decision in this case was reached within the time limit when the final (but unsigned) draft was produced. However it was only communicated six calendar (or four working) days later (because the adjudicator was waiting to be paid - and when he was he only posted the decision). This was not "as soon as possible" as the Scheme, which applied, required. It seems the position would have been the same if:

    1. the decision had not been communicated one day after the deadline for reaching it but had been communicated within that deadline; and
    2. the Scheme did not apply given that prompt communication of a decision, once reached, is implicit in the Act and other adjudication rules.

Although it remains to be seen whether other judges will follow all aspects of this judgment:

  1. We suggest that payees review their LOIs to ensure incorporation of the Act’s adjudication and payment regimes.
  2. If an adjudicator tries to make his decision’s release conditional on payment of his fees, you might cite the judgment in this case. Adjudicators might consider asking both parties early on in adjudications to provide security for their fees.
  3. There should be fewer late decisions if adjudicators no longer require payment to release them. This benefits not only parties but also adjudicators (who should not assume that the immunity clause in their appointment protects them from a negligence suit for a late decision).
  4. One can foresee decisions being challenged because they were reached more than two days before they were communicated (even if this was within 28 days of the referral or the extended period).

Reference: Mott MacDonald Limited v London & Regional Properties Limited [2007] EWHC 1055 (TCC).

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The original publication date for this article was 01/06/2007.