In the case of Lane End Developments Construction Limited v Kingstone Civil Engineering Limited  EWHC 2338 (TCC), the High Court considered whether an adjudicator had been validly appointed and had jurisdiction to issue his decision in the adjudication. The case highlights the importance of paying close attention to the applicable rules when seeking to commence adjudication proceedings.
Lane End was the main contractor on a housing development on a site in Cheshire. Lane End engaged Kingstone to carry out enabling works for the development under a sub-contract. The Scheme for Construction Contracts (England and Wales) Regulations 1998, as amended (the “Scheme”) applied to the sub-contract.
The chronology of the main events in 2020 was as follows:
- 2 March: Kingstone issued an interim payment application for £356,439.19.
- 20 March: Kingstone submitted a request to the RICS Dispute Resolution Service for the appointment of an adjudicator (the “Request”) by an email sent at 07:46.
- Later on 20 March: a meeting took place between Kingstone and Lane End (the “20 March Meeting”) during which, shortly after 11am, a Kingstone representative handed the Lane representatives a Notice of Adjudication recording Lane End’s failure to pay and seeking redress in adjudication of £356,439.19.
- 23 March: letter from Paul Jensen advising the parties that he had been nominated by RICS to act as adjudicator and he had accepted the nomination. He gave directions for Kingstone to send its Referral and for Lane End to provide its Response. Kingstone circulated a Referral dated 23 March.
- 24 March: by an email at 18:25 to Mr Jensen and copied to Kingstone, Lane End’s agent challenged Mr Jensen’s nomination on the grounds that Kingstone had failed to give Lane End notice of adjudication under the Scheme.
- 25 March: Mr Jensen informed the parties that he found that the Notice of Adjudication contained a clear intention to refer the dispute to adjudication.
- 8 April: an email was automatically generated at 08:39 from Lane End advising that due to Covid-19, the office was closed for business until further notice.
- 8 April: by an email at 10:00, Mr Jensen responded to Lane End: “this effectively terminates this adjudication” and that it would receive an invoice for his fees. Mr Jensen copied in Lane End’s agent but not anyone from Kingstone (the “Termination Email”). Mr Jensen’s invoice dated 8 April for his fees was addressed to each of the parties.
- 15 April: Lane End notified Kingstone that Mr Jensen had purported to terminate the adjudication.
- Later on 15 April: Kingstone emailed Mr Jensen asking him to continue with his appointment and issue his decision in the adjudication. It sent a further email to Mr Jensen the same day confirming it had not received a notification from Mr Jensen that the adjudication had been terminated and that his notice was null and void. Lane End electronically transferred payment to Mr Jensen of the full amount due under his invoice.
- 16 April: Mr Jensen emailed both parties that it was apparent to him that Lane End was “not closed for business” and that he had not resigned and would continue with the adjudication. Lane End’s agent emailed later asking for permission to serve a rejoinder having previously reserved Lane End’s position as to Mr Jensen’s jurisdiction. Mr Jensen gave revised directions to which Lane End agreed.
- 23 April: Lane End emailed its rejoinder reserving its position as to Mr Jensen’s jurisdiction.
On 27 April, Mr Jensen gave his decision concluding that Kingstone was entitled to the full amount of the interim application £356,439.19 (the “27 April Decision”).
High Court proceedings
Lane End sought a declaration from the court that the 27 April Decision be set aside and/or not enforced. Kingstone applied for summary judgment in respect of the 27 April Decision for payment of the £356,439.19 awarded by the adjudicator. In the High Court proceedings, the main issues were whether the adjudicator had jurisdiction to make the 27 April Decision and, if not, whether as the responding party, Lane End, had waived the defect by election or was estopped from relying on it.
The case was heard before HHJ Halliwell as a Judge of the High Court at Manchester (Technology and Construction Court).
The Judge first considered whether Mr Jensen had been validly appointed as adjudicator under the Scheme. Lane End submitted that Part 1, Paragraph 2(1) of the Scheme expressly provides for the referring party to submit its request for the appointment of an adjudicator “following the giving of a notice of adjudication”. It contended that since Kingstone had submitted the Request for the appointment before the 20 March Meeting (during which the Notice of Adjudication had been provided), Mr Jensen had not been validly appointed and he did not have jurisdiction to make the 27 April Decision. Kingstone submitted that Part 1, Paragraph 1(1) of the Scheme provides that the notice of adjudication can be given at “any time”, i.e., before the request for the appointment of an adjudicator.
The Judge was satisfied that the rules of the Scheme were clear that the notice of adjudication must be given before the request for the appointment of an adjudicator is made. This was reinforced by Part 1, Paragraph 3 of the Scheme which provides that the request for the appointment of an adjudicator must be accompanied by the notice of adjudication. He therefore held that Mr Jensen had not been validly appointed as adjudicator.
The Judge also found that whilst Mr Jensen’s Termination Email was intended as a notice of resignation, it was not effective as it did not comply with Part 1, Paragraph 9 of the Scheme which required a notice of resignation to be served on both parties.
The court also considered whether it was open to Lane End to waive the defect in Mr Jensen’s appointment by election. It is an established principle that a person waives, by election, its right to establish a substantive right by acting inconsistently with the right when presented with a choice. The Judge found that Lane End had not been presented with a relevant choice; there could be no adjudication until the Notice of Adjudication was served and until then, no opportunity could have arisen for Lane End to choose between two alternative courses of action.
Finally, the Judge dismissed Kingstone’s submission that Lane End was estopped from challenging the adjudicator’s decision. He held that even if Kingstone could identify a promise, representation or mistaken belief on which to base a case on estoppel, there was no evidence that Kingstone acted to its detriment in reliance upon it.
Judgment was given for Lane End and Kingstone’s application for summary judgment was dismissed.
If you would like to discuss any issues in this case or in relation to construction disputes please contact the Dispute Resolution team at Boyes Turner.
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