Part II of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996) as amended by the Local Democracy, Economic Development and Construction Act 2009 (LDEDC Act 2009) (together the “Act”) gave parties to a construction contract the right to adjudicate any dispute under that contract. This is well known, but what about, asks Philip Barnes, the process for serving your Referral, the key document which sets out the detail of your claim?
The relevant Section 108 states:
“108 Right to refer disputes to adjudication
(1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.
(2) The contract shall include provision in writing so as to –
(a) enable a party to give notice at any time of his intention to refer a dispute to adjudication;
(b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within seven days of such notice.”
If the parties have not made adequate provision for adjudication in their contract, then the procedure specified in Scheme[1] applies. The Scheme requires:
“7. (1) Where an adjudicator has been selected … the referring party shall, not later than seven days from the date of the notice of adjudication, refer the dispute in writing (the ‘referral notice’) to the adjudicator.”
That paragraph of the Scheme is mandatory. It requires the referral to be served within seven days of the notice.
The usual procedure is, therefore, that a party gives notice of its intention to refer a dispute to adjudication, and then it provides its referral to the responding party and the adjudicator within seven days of the notice. Timescales have been strictly enforced and if the adjudicator and the other party do not receive the referral within seven days, then the referring party has to start the whole process again. Normally, this would be little more than an inconvenience and does no more than cause delay to the whole process. The referring party just starts again and (likely) the same adjudicator is appointed.
Occasionally, the timing of the notice is important for other contractual reasons, and the question has arisen as to whether the parties can agree to extend the seven-day deadline to serve the referral.
This question arose in the two recent cases, Bellway Homes Ltd v Surgo Construction Ltd[2] and Battersea Project Phase 2 Development Company Ltd v QFS Scaffolding Ltd.[3]
Bellway
In Bellway Homes, an amendment in the contract stipulated service of the referral “as soon as reasonably possible” instead of “not later than seven days” after the notice, but the question arose as to whether this was permitted, particularly given the mandatory nature of the Scheme wording.
The Court held that the wording of s.108 of the Act requiring the referral to be served “with the object” of it being within seven days of the notice did not preclude a slightly longer period as the parties had agreed that by contract. Although paragraph 7(1) of the unamended Scheme required service of the referral within seven days of the notice, parties can contract out of the Scheme as long as they comply with the Act. Therefore, “as soon as possible” was compliant with the Act and so an enforceable contractual amendment to the Scheme.
In Bellway Homes, there had been an amendment to the contract permitting service of the referral more than seven days after the notice, but can parties agree, on a purely “ad hoc” basis, to extend time for service of the referral even after the notice has been served? In effect, can the responding party agree to “waive” its right to have the referral served within seven days of the notice?
QFS
This “ad hoc agreement to extend time” or “waiver” occurred in Battersea v QFS. In that case, there was no amendment to the contract as had been the case in Bellway Homes. The contract was mandatory in that it followed the Scheme by stating that the referral “shall” be referred to the adjudicator within seven days of service of the notice. The parties agree to extend time for service of the referral after the service of the notice and before the seven days expired.
The nominated adjudicator stated that he preferred confirmation that no point would be taken about late service of the referral or alternatively re-service of the notice. However, re-serving the notice was not viable for other reasons of which the adjudicator was unaware.
The court held that both parties had agreed (at least at the outset) to defer service of the referral, rather than there being a waiver by the responding party, as there was consideration from both parties. However, as the effect of waiver or agreement was the same, there was no need to decide this point. The agreement to extend time for service of the referral was binding.
Conclusion
It now seems clear that parties can by contract allow themselves more time between service of the notice and service of the referral (following Bellway) and, following QFS, can also mutually agree to extend time for service of the referral after the notice has been served (or the receiving party can unilaterally waive its entitlement to receive the referral within seven days of the notice).
The safer course of action is to ensure the correct procedure is followed, the notice served, the adjudicator then appointed and the referral served within seven days of the notice unless there are pressing legal reasons not to do so.
[1] The Scheme for Construction Contracts (England and Wales) Regulations 1998 as amended by the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011
[2] [2024] EWHC 269 (TCC)
[3] [2024] EWHC 591 (TCC)
