The recent decision of St Austell Printing Company -v- Dawnus Construction Limited [2015] EWHC 96 (TCC) the TCC ruled that a period of silence after notification of a claim is sufficient for a dispute to have crystallisation to allow an Adjudication to commence.
It is only rarely that a dispute will not have crystallised after notification of a claim has been given, for example as in the facts of Beck Interiors v UK Flooring Contractors [2012] EWHC (TCC) the Adjudicator had no jurisdiction to decide a liquidated damages claimwhere a letter of claim was posted on the last posting day before Easter weekend, and the notice of Adjudication was sent on the Tuesday after that weekend. The silence over the weekend could not amount to a rejection of the claim and so the claim had not been crystallised and the Adjudicator had no jurisdiction to hear it.
When does a dispute crystallise?
It was decided in AMEC Civil Engineering Limited v Secretary of State for Transport [2004] EWHC 2339 the (TCC) that the mere fact that one party ("the claimant") notifies the other party ("the respondent") of a claim does not automatically and immediately give rise to a dispute.
This is because:
(i) a dispute does not arise until it emerges that the claim is not admitted. It may emerge that a claim is not admitted by for example, there may be an express rejection of the claim.
(ii) there may be discussions between the parties from which objectively it is to be inferred that the claim is not admitted.
(iii) the respondent may prevaricate, thus giving rise to the inference that he does not admit the claim.
(iv) the respondent may simply remain silent for a period of time, thus giving rise to the same inference.
(v) the period of time for which a respondent may remain silent before a dispute is to be inferred depends heavily upon the facts of the case and the contractual structure.
(vi) where the gist of the claim is well known and it is obviously controversial, a very short period of silence may suffice to give rise to this inference.
(vii) where the claim is notified to some agent of the respondent who has a legal duty to consider the claim independently and then give a considered response, a longer period of time may be required before it can be inferred that mere silence gives rise to a dispute.
It is generally accepted that crystallisation requires no more than the service of a claim by the claiming party and subsequent inactivity for a further short period by the responding party. In most cases the court has found that the dispute had crystallised by the time of the notice of adjudication.
In Ringway Infrastructure Services Ltd v Vauxhall Motors Ltd Akenhead J summarised the principles of crystallisation and said:
"(1) The existence of a dispute or difference may be inferred from what is said or not said by the party in receipt of what may be termed "a claim".
(2) There does not have to be an express rejection of a "claim" by the recipient.
(3) It must be determined as to whether there is a "claim" and whether or not that claim is disputed from the surrounding facts, circumstances and evidence to see whether a dispute has crystallised.
The crystallisation argument is almost never successful. This can be illustrated by the extreme circumstances that existed in the Beck case referred to above in which it has been upheld.
Can you “prune” and Adjudicate upon a part of a valuation?
The second point that was decided in St Austell Printing Company -v- Dawnus Construction Limited [2015] EWHC 96 (TCC)isthat there is nothing wrong with “pruning” parts of a valuation and, after having done so, to then make a claim in an Adjudication for only part of that valuation. It had been argued by the Respondent that the adjudicator did not have the power to order St Austell to make any payment, because the dispute that was referred to the adjudicator was strictly limited to just one part of interim application in question.
The relevant authorities on this point are the cases, of Fastrack and David McLean. The definition of the word 'dispute', referred to in countless adjudication enforcement judgments since, is that of His Honour Judge Thornton QC in Fastrack Contractors Ltd v Morrison Construction Ltd [2000] BLR 168. In his judgment the judge talked about the "pruning" that may be made by the referring party of any existing claim before it was referred to the adjudicator.
A "dispute", and nothing but a "dispute", may be referred. If two or more disputes are to be referred, each must be the subject of a separate reference. It would then be for the relevant adjudicator nominating body to decide whether it was appropriate to appoint the same adjudicator or different adjudicators to deal with each reference. Equally, what must be referred is a "dispute" rather than "most of a dispute" or "substantially the same dispute."
In some cases, a referring party might decide to cut out of the reference some of the pre-existing matters in dispute and to confine the referred dispute to something less than the totality of the matters then in dispute. So long as that exercise does not transform the pre-existing dispute into a different dispute, such a pruning exercise is clearly permissible.
However, a party cannot unilaterally tag onto the existing range of matters in dispute a further list of matters not yet in dispute and then seek to argue that the resulting "dispute" is substantially the same as the pre-existing dispute."
In David McLean Housing Ltd v Swansea Housing Association Ltd [2002] BLR 125 there was a debate about what relief the claimant was seeking (and was entitled to seek) in the adjudication. The particular problem was that the claimant in the notice of adjudication had sought a declaration as to his entitlement, but had failed expressly to seek a sum by way of payment.
Although the adjudicator had ordered payment, he had ordered it sufficiently far in the future to allow the defendant to raise a legitimate set-off prior to the due date. Therefore, the question for His Honour Judge Humphrey Lloyd QC was the extent to which the claimant was entitled to summary judgment. Because of the problem to which I have just referred, the judge refused the claim for summary judgment. He dealt with the relief that could be sought in adjudication in this way:
"…The Scheme (and, so as far as I am aware, other standard forms of contract) does not confer on an adjudicator a right to adapt, vary or otherwise modify a contract. Under the statutory Scheme an adjudicator has to decide a dispute under the contract (and in other schemes, disputes arising out of or in connection with the contract). It is a decision about the rights and liabilities of the contract which are questioned.
Thus paragraph 20 of the Scheme expressly provides for the review of a certificate that has been issued (sub-para (a)) and for the adjudicator to decide a person "is liable to make a payment under the contract … [emphasis supplied] and, subject to section 111(4) of the Act, when that payment is due and the final date for payment". His decision does not create or modify a right or liability except, perhaps, in one respect. I agree with Mr Harding that since the Scheme (see paras 20 (b) and 21) provides for the time for compliance with an adjudicator's decision to be set, it or the adjudicator's decision may alter the time within which, for example, a payment might otherwise have had to have been made, where an adjudicator decided that there had been an under-payment or under-certification. The purpose is of this is clear.
If an adjudicator were merely to decide that a different certificate should be issued or a different payment should be made the paying party could properly take the view that it would have the contractual period in which to honour the decision. Hence the statutory provisions make it clear that it has not to have that time. Indeed, it may have had it already, and more, and that therefore a shorter period of time may be appropriate. Thus the Scheme permits the time within payment is to be made to be altered. If the decision does not set a time compliance is immediate which in my view shows that the decision does not affect or create a new cause of action.
The scheme is an implied term of the contract. As part of the contractual scheme it therefore modifies the ordinary contractual relationship. Only to that extent might one say that there has to be, as it were, in the words of Judge Hicks, compliance with the adjudicator's decision other than in accordance with what would otherwise be the strict terms of the contract. The scheme and the other contractual terms have to be read together. The words "due under the contract" mean what is due on facts and on a proper application of the contractual terms. The adjudicator decides that issue.
The decision establishes what is due under the contract. The parties have agreed to accept the decision as binding (section 108(3) of HGCRA and paragraph 23(2) of the Scheme) so, unless otherwise agreed by them or determined by a court or arbitral tribunal, each agrees that, for example, the amount to be paid is and was due, and each must act accordingly and accept any assumptions upon which the decision must have been based…If, for example proceedings are necessary to enforce the award the defendant cannot be allowed to be heard to allege that the decision was incorrect, i.e. that the claimant has not got a right or cause of action as some necessary fact or aspect of the law is missing, and is in effect temporarily estopped by its agreement from doing so. But ultimately the claimant will, if necessary, have to establish its right and cause of action. If the decision was itself a cause of action then it would supplant any cause of action.
Anthony Philpott
11August 2016
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