Adjudicator’s Decision Binding Pending Arbitration

This is the second in the series of articles chronicling Damian’s experiences as an expert and consultant. This time, Damian takes a look at the temporarily binding nature of an adjudicator’s decision:

“The determination of the Adjudicator is binding pending Arbitration”

I was appointed as the adjudicator in a matter between a contractor and employer. The contract was administered by the Architect.

The key facts may be summarised as follows;

• The agreement entered into between the parties expressly states the determination of the adjudicator is binding on the parties. Where parties are dissatisfied with the adjudicator’s determination, either (or both) parties must inform both the adjudicator and the other party. They must also refer the matter to arbitration. Furthermore, the arbitration shall proceed afresh (or ‘de Novo‘) and shall be both final and binding.

• The original duration for the works was 12 months.

• The contractor delayed the works during the course of the erection of the concrete structure. The employer delayed the works owing to a number of factors. These included the late appointment of subcontractors, late supply of free issue materials and late issuing of information relating to final finishing trades.

• The contractor accepted liability for the late completion of the structure. They submitted claims resulting from the delays occasioned by the agents of the employer.

• The Architect, acting on behalf of the employer rejected the claims. They noted that the delays occasioned by the employer were concurrent with erection of the structure. The structure is a matter for which the contractor is liable.

Items Agreed

The parties agreed as follows:

1. An adjudicator would be appointed to determine at which point in time the critical path of the works shifted from the structure and which of the succeeding activities fell on the critical path of the works.
   
2. The contractor would continue to submit claims for any further delays encountered. However the adjudication of the new claims would be held over pending the determination of the adjudicator.

The Adjudication

The adjudication proceedings took longer than anticipated (albeit justly so).

The employer, being frustrated by the delay in the outcome of the proceedings, instructed the Architect to adjudicate the new claims of the contractor. The Architect remained of the opinion that all delays encountered were as a result of the late completion of the structure for which the contractor was liable. In the event, the Architect was unable to substantiate its reasoning for this determination. The Architect could not provide any evidence to support its position, other than to state that the contractor was able to proceed with other areas of the works. This despite the lack of information, free issue materials and appointment of certain subcontractors.

Needless to say, the Architect rejected the claims of the contractor. Additionally, the original period for completion having lapsed, the Architect certified penalties against the contractor. Furthermore, the Architect recorded in a letter that it would not have regard for the outcome of the adjudicators determination when finally issued.

Despite the issuing of the adjudicator’s determination, which succinctly determined the critical path of the works at the time of analysis, the Architect continued to ignore the findings of the adjudicator in the adjudication of both the prior and new claims of the contractor.

Having regard for the determination in the prior adjudication, I proceeded in assessing the claims of the Contractor in determining the rights and liabilities of the parties.

The Outcome – A Binding Decision

In the circumstance, I determined that;

1. the agreement expressly provides that the employer is bound by the findings of the adjudicator. To the extent that it is dissatisfied with the outcome thereof, the employer must follow the relief provided, in the accordance with the terms.

• The Architect is obliged to administer the terms of the agreement entered into between the parties. It may not act on the instruction of one of the parties where such instruction would potentially be in conflict with the express provisions of the agreement and to the prejudice of the other party to the agreement.

• The contractor has an entitlement to certain extensions of time including both costs thereon. They also have entitlement to interest under the agreement, following wrongful rejection of the claims and unlawful deduction of penalties.

The contract provisions provide the basis for relief whether you like the decision of an adjudicator or not. Should you need assistance with adjudication or any form of dispute resolution, get in touch today.