Contractual adjudication provisions

In the following case, two issues arose:

  • Did the contract adjudication provisions comply with the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”)?
  • What were the consequences if the adjudication provisions were non-compliant?

Epping Electrical Co v Briggs and Forrester [2007] EWHC 4 (TCC)

The contract between the parties incorporated the Construction Industry Council Model Adjudication Procedure (third edition) (“CIC Procedure”). The court found that the adjudicator reached his decision seven days out of time, as a result of which the adjudicator’s decision was not enforceable.

The issue then arose as to whether the adjudicator’s decision was saved by the paragraph 25 of the CIC Procedure:

“(25) If the Adjudicator fails to reach his decision within the time permitted by this procedure, his decision shall nonetheless be effective if reached before the referral of the dispute to any replacement adjudicator ... but not otherwise. “

The CIC Procedure is non-compliant

The court considered paragraph 25 in the light of Section 108(2) of the Construction Act, which states:

”The contract shall -

... (c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred”

The court found that Section 108(2) provided for a mandatory time limit. The apparent effect of paragraph 25 of the CIC Procedure was:

  • inconsistent with the mandatory nature of Section 108(2) and other paragraphs in the CIC Procedure which reflected Section 108(2); and
  • to render these other paragraphs in the CIC Procedure not mandatory. This meant that the contract did not comply with Section 108(2) of the Construction Act.

As a result - under Section 108(5) of the Construction Act - the mandatory provisions of the Scheme for Construction Contracts (the “Scheme”) applied in place of the contract adjudication provisions:

“The Scheme applies in place of the adjudication provisions of the contract. If it were otherwise, two competing sets of adjudication provisions would simultaneously apply to the contract and many other contracts. That is a recipe for confusion and uncertainty and in my judgment cannot have been the intention of Parliament in passing section 108(5) of the [Construction] Act”.