Construction Adjudication Law: Legal Problem - Coursework Example

?PART A Construction Adjudication Law – Legal Problem This report is a legal advise for two parties in a construction adjudication dispute. In the facts of the case, Prestige Development Plc (PDP) and Paramount Construction Limited (PCL) entered a building contract for the construction of a waterfront apartment in south England. The JCT Design and Building Contract 2011 is the fundamental legal system adopted for the research. The project was completed successfully, however there were severe cracks in the project at the exterior of the war. Investigations show that there ground conditions of the soil was not good and the project was not destined to succeed due to the soil conditions. The architects in question who did the preliminary design had the obligation to check the ground conditions and foundation requirements. PCL bears a partial responsibility for the design flaw. The matter is referred to adjudication under clause 9.2 of the JCT Design and Building Contract. There were a number of issues with the adjudication process and this include a reliable information that the CEO of PDP and the Adjudicator went for a weekend in a country hotel where they were overhead discussing things related to the case. From the case study, there is the need for the following things and matters to be examined in relation to the relevant rules about: 1. The scope of the Adjudicator's obligations and whether it was met or not. 2. The independence of the Adjudicator. 3. The impartiality of the Adjudicator's processes in dealing with the case 4. The ability of the case to be escalated to a court dispute. Scope of Adjudication The main issue of contention is to define the actual question and the actual point of law that the adjudicator of the case at hand was supposed to handle. This is in response to the accusation of the CEO of PDP that the adjudicator addressed the wrong question. The goal of adjudication is to reach a decision in accordance with applicable law relating to contract and avoid unnecessary expense1. Thus the adjudicator has the obligation to use the fundamental contract and agreement as the basis to ascertain facts and the relevant law that relates to it. The adjudicator decides the procedure and requests parties to supply evidence2. In application of the relevant provision, it can be said that the obligation of the Adjudicator in this case is to identify the procedure that was used by the contracting party and which party deserves to be held responsible for the damage. In other words, the Adjudicator has to examine the contract between PDP and PCL and identify who is responsible for the determination of the soil condition and the point in the contract that it went wrong. The evidence of both parties were to be examined and a conclusion could be drawn. However, in this case, it is apparent that the Adjudicator did not spend too much time studying those documents. Rather, he examined just two variables, the architects and PCL's relative positions. He did not go deep into the contract, neither did he set out a fair procedure. Hence, it can be concluded that he did not operate within the scope of the contract. Independence of the Adjudicator The Adjudicator happened to be the brother-in-law of the MD of PCL. This shows clearly that they had an informal relationship that could have implications for the independence of the Adjudicator. The Adjudicator, as a professional, has codes of ethics in the profession he belongs to, whether he is a legal professional or a construction expert. Every adjudicator needs to be independent and be seen to be independent in his decisions and procedures3. In a landmark ruling in a construction arbitration case in France, which is part of European Union Law, it was stated that “An Arbitrator should not have any commercial or other similar connection with either party which may give rise to suspicion in the mind of a reasonable person that he may be biased”4. The implication is that there should be no relationship that exists between an adjudicator and any of the parties that could infringe on the independence of the process. This could normally be as a result of being too close or having a private or informal relationship with one of the parties in question. And this could include the fact that they are related as a family or not. Independence is a major aspect and element of arbitration because when an Arbitrator is seen to have some kind of connection with a party in question, then it means the ruling could be potentially affected and the rights of the aggrieved party would be infringed upon. This is because Article 6(1) of the UK Human Rights Act states that: “In the determination of his civil rights and obligation, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law” In this case at hand, it is obvious that the relationship between the Adjudicator and the first respondent CEO of PDP was strong enough to infringe upon his independence and fairness. This is because the relationship of being a brother-in-law means that he has family ties to the CEO of PDP. Hence, every reasonable person would indicate that he would not act fairly. Secondly, there is an apparent informal relationship between the Adjudicator and the CEO of PDP. For the two of them to go to a hotel and have long discussions together means that they are strongly linked not only through marriage but in terms of camaraderie and personal contact. Hence, the relationship is close enough to arouse suspicion. It is therefore conclusive that the Adjudicator was not independent from the onset. This is because he had significant connections with the CEO of PCL which made him less independent. This also means that the Adjudicator's decision could be challenged significantly. Impartiality of the Adjudicator's Processes As identified in the UK Human Rights Act, impartiality is a fundamental human right that all parties in every case in the UK are entitled to. However, Section 108 (2) e of the Housing Construction and Registration Act 1996 states that an adjudicator needs to be impartial in his approach to a case. In the Balfour-Beatty case, it was held that impartiality is about an Adjudicator carrying out his activity in such a way that outsiders would be unable to call it unfair5. The implication for this is that every case must be handled with so much fairness and so much effort to provide a fair hearing and a fair grounding for all the parties. Another angle to look at impartiality is the principle of a level playing field. Impartiality is about giving each of the parties a fair chance. The processes used must be neutral and free of systematic and other unconscious biases that are designed to make the parties to the case suffer any kind of discrimination. In this case, there is a major problem with the obligation for the detection of the soil and structural status of the land on which the building was to be built before work commenced on the site. This implies that a fair adjudicator should have sought to investigate the contracts and the fundamental problems relating to the obligations for various activities. After that, he should have given each of the parties an equal level of time to explain what they think about the contract and then decide on who was responsible for the failures of the systems and the structures. However, this adjudicator can be said to have done so many things that suggested that he was partial and unfair on many accounts. Independence Problems The adjudicator's close relationship with the MD of PCL discussed above shows that he was not independent in the first place. Insider Dealing The fact that the Adjudicator went away with the MD of PCL on the first weekend of the 28-day period indicates that he was willing to share some privileged information with him and help him to win the case. This shows that he had an intention to provide an unfair advantage to the MD of PCL who was a party to the contract. Also, since CEO of PDP was not invited to the weekend, it is apparent that there was a malicious intention of helping the MD of PCL to get some unfair advantage of him. This is a clear sing of impartiality. Hearing Procedure During the hearing, it seems that the procedures were not fair or evenly conducted. This is because the CEO of PDP was not given ample time to express his point of view. The Adjudicator gave prominence to the evidence given on behalf of PCL and questioned the witness of PDP aggressively. This implies that he was in favour of the MD of PCL to the detriment of the CEO of PDP. Decision of the Adjudication The decision of the Adjudicator indicated that the architects of the project were fully responsible and PCL had no obligation for the process. The decision was a one-sided decision and it seems the Adjudicator was in a hurry to rule in favour of PCL. This is a very strong sign of bias. Conclusion From this series of events, it is apparent that there is a systematic set of adverse findings that shows that there were issues in the ruling of the Adjudicator. It is apparent that the Adjudicator operated ultra vires or out of scope. The Adjudicator was not independent and the adjudicator was impartial in his decision making. PDP & A Court Redress This section examines whether the MD of PDP could seek a court redress to reverse the decision in light of these circumstances or not. The rule is that in the normal sense, the decision of an adjudicator or expert will be final and conclusive. Overall, the courts are reluctant to interfere with arbitral awards on the grounds of procedural defects, provided that the parties' rights to due process have been respected6. The courts do not normally allow for people to seek to nullify the decisions of arbitration and experts' decisions are final and conclusive except if the decision was erroneous in law7. In other words, if the Arbitrator answered the right question in law the wrong way, his decision is binding but if he answered the wrong question, the decision would be nullified8. In this case, it is clear that the Arbitrator made mistakes in procedure and used impartial approaches in answering the question. In its strict sense, a redress would be denied on the grounds of procedural errors and limits. However, in this case, it seems the Arbitrator sought to answer the wrong question. The Arbitrator seem to have been interested in proving who was not guilty. And in the process, he exonerated PCL. However, in reality, he should have sought answers to what the contract said and what the contract implied for both parties. This way, he could have gotten solutions and found who was to take liability for the building failure. Since the Arbitrator answered the wrong question, PDP has the right to go to court to seek redress. In this case, the elements of impartiality and independence can be raised to support the claims. Section B Introduction This paper would examine the features of both expert determination and arbitration in statutory adjudications in the Housing Grants, Construction and Regeneration Act of 1996 and related legislation. It would attempt to examine whether these statutory adjudications can be described as expert determination or they are simply adjudications. General Preamble of Adjudication in Construction Disputes The Joint Contracts Tribunal rules state in Section 9.2 that the parties to a construction contract have to specify the name or body for adjudication in order to deal with disputes. Adjudication is carried out in a way that all the applicable laws related to the contract can be interpreted without having to incur too much cost as the case may be in a court settlement9. Section 108(1) of the Housing Grants, Construction and Regulation Act states that it is a statutory right of parties in a construction contract to go through adjudication. The adjudication must go through a strict time line and a decision must be taken in 28 days after setting the timetable in 7 days. The decisions of adjudicators are binding until it is challenged in court. The Arbitration Act 1996 provides rules and regulations for adjudication and the adoption and modifications. Within the seven-day period of the arrangement for the preparation of adjudication, the adjudicator has the obligation to define the procedure that would be used within the adjudication10. The adjudicator must form a timetable for the hearing and provide the basis for the formulation of a preamble. This implies that the adjudicator has to identify how the hearing would go and more importantly determine when and where and how an expert should be called in. So the primary obligation of the adjudicator is to mediate and identify the procedural framework and pointers of law and contract that must be used for the adjudication. The adjudicator has a fundamental obligation to mediate and identify which of the processes and procedures to use. So the adjudicator can be said to play a mediating role and a dispute administrative role. Thus, adjudication is more involved with decision making about a given dispute. It is more of a broad framework that sets the tone for the settlement of disputes. Adjudication is not really a clearcut approach with strict implications. Adjudication can also be seen as some kind of alternative dispute resolution that is different from the traditional court dispute system which is often expensive and time consuming11. It has been identified that adjudication is a statutory right and could be seen as somewhat mandatory. Adjudication is a broad term and it provides for two streams, administration of dispute resolution and the arrangement for the use of experts to provide an independent view of what actually happened after studying relevant facts and figures. One may ask how much would an adjudicator do in terms of resolving the dispute in question and how much would the expert contribute to the situation at hand? This causes a kind of conflict between two extremes. Arbitration and Expert submissions are two sides. Arbitration can be seen as the administration of the case and the use of appropriate legal procedures and application of the rightful pointers of law in deciding on the case. Expert determination on the other hand revolves around providing scientific evidence. So effectively, who is doing more in the adjudication process? Importance of Arbitration in Adjudication Normally, the use of arbitration is disclosed in a construction contract and it is a right for parties of contracts12. In this sense, it can be said that the HGCRA 1996 and other provisions are instruments that makes it imperative for parties in a construction contract to pursue an alternative dispute rather than court litigation which might be a little too expensive. The arbitrator is required to apply some very objective standards and expectations in the cases that they deal with. Arbitration involves using standards but not subjective metrics of what the arbitrator deems to be fair13. The Arbitration Act 1996 requires an arbitrator to have some standards of objectivity and follow some important procedures and directions for the process. Arbitration is primarily a set up through which the parties defend their own views and present facts. The Arbitrator has a fundamental duty to ascertain the facts. The Arbitrator has to decide the procedure that would be used and he would request the parties to supply documents and submissions where necessary. The Arbitrator meets and questions the parties of the contract. Under the principles of the arbitration, the arbitrator has to make site visits and take up technical tasks where necessary. In cases where the Arbitrator does not have the necessary expertise, he is required to appoint experts to conduct studies and determine findings14. In order to ensure that arbitrations are done right, paragraph 14 of the JCT rules states that the parties of the construction dispute have to comply with the arbitrator's direction. This implies that the arbitrator is given some authority and none of the parties can disrespect his authority or mandate. Without such a figurehead and a party to take up that authoritative role, adjudications would lack the kind of seriousness they deserve and this would lead to so much contempt and the disregard of the process. The absence of such an empowered person like the Arbitrator would lead to parties flouting the rules and the arbitration would lose its quality and its power as a source of dispute resolution. The same paragraph 14 empowers an Arbitrator to continue with the adjudication even if there is the failure of one party to comply. In other words, if a party does not cooperate, the arbitrator must take a decision provided enough information is available to do so. This prevents people from opportunistic gains. This role of the arbitrator ensures that the adjudication process is treated with seriousness and eliminates contempt amongst parties in the adjudication. Expert Determination Expert witnesses are almost inevitable in construction contract disputes15. This is mainly because the arbitrator is bound by professional ethics which might be connected to his career, whether he is a lawyer or a professional arbitrator. Such professional bodies require that an arbitrator only takes up jobs and activities that they are qualified to do. Also, any professional who goes beyond what he is qualified to do is holding himself up for a potential case of negligence. This is because it is wrong for a person to hold himself out for a given job or project when he knows that he does not have the competence. This could be misleading and can lead to serious damages when a lawsuit is filed. Thus, the arbitrator has to desist from what he is not qualified to do. In that case, he has to give way for an expert to carry out test and other determinations when the need arises for some expertise that the arbitrator has no competence in. An example of an expert determination is in the case where the arbitrator is a lawyer by profession and there is the need for an appraisal by a valuer to ascertain the worth of a given property. In that case, it would be inappropriate and illegal for the arbitrator to hold himself out as a valuer, because he might not have the competence. This means that ta valuer would have to be called in to ascertain the worth of the projects in question and come up with an opinion of the value of the asset. Since the opinion of an expert might be crucial and critical in a given case or situation, there is the need for an arbitrator to stand back and get an appropriately qualified person to do the project. Campbell writes that sometimes, each of the parties in question would insist on his own expert. And if it is permitted in the agreed procedure of the arbitration, they can both present their expert reports and the arbitrator might have to agree the figures or get a third expert to do the analysis and ascertain the accuracy of the figures given by the different experts. The arbitrator only supervises and since the process must last for no more than 28 days or one month, the arbitrator might have to just wait for the expert's report and take a decision16. To buttress the point raised above, Judge Peter Bowsher is quoted as saying that since judges and arbitrators are often trained in law, there is the need for an “interventionist judge” when there are issues of technical importance to be decided in the arbitration17. In expert determinations, an expert answers the questions and issues in the process and provides a report on the issues at hand18. The experts agree facts and figures that are the source of a major dispute or uncertainty. Also, the expert might be needed to explain why the arbitration cannot reach an agreement. The expert might need to visit sites and the timescale of the work of the expert must be fixed by the arbitrator and the arbitrator also decides whether the expert would be called to give oral evidence or not19. In effect, the expert is a professional who has the competence and he does the empirical testing in the field and provides feedback that is used by the arbitrator to arrive at a decision. Justice Knox stated in a case20 relating to arbitration that: “The expert's decision will be final and conclusive and therefore not open to review or treatment by the courts as a nullity on the ground that the expert's decision on the construction was erroneous in law, unless it can be shown that the expert had not performed the task assigned to him. If he has answered the right question in the wrong way, his decision will be binding. If he has answered the wrong question, his decision will be nullified”21 This means that an expert's opinion is considered to be the absolute and final decision. The implication is that the review and the report of the expert provides an empirical and well tested report. And this provides an authoritative finding that becomes the basis of the ruling. By extension, it can be said that the findings of the expert in a construction dispute forms the foundation and the basis of the opinion of the arbitrator. This is because the arbitrator might not normally have the right to right to dispute or challenge the report of the expert. Hence, the arbitrator would have to accept it. Moreover, since the arbitration is supposed to be completed in a period of 28 days, it is almost normal to say that the arbitrator might not be able to arrange for a second opinion. This is because the time constraint and the need to finish the case with the minimum level of resources constraints arbitrators from getting a second view. Thus, effectively, the arbitrator would have no other option but to endorse the findings of an expert and the expert's decision in the report would form the final opinion. In this case, it might be accurate to say that the arbitrator just endorses or adds an assent to the decision of the expert. This is because in practice, there is little an arbitrator can do to verify or test the findings of the expert. Hence, the expert's decision in a construction dispute forms the basic and core elements of the final decision. Conclusion Adjudication is a voluntary solution to a dispute, but it now has a statutory backing. Arbitrators mediate and administrate disputes in construction contracts. The arbitrator has to work within objective standards to resolve a construction dispute. The arbitrator sets out the framework and procedure for the adjudication and this is binding on the parties involved. The arbitrator is empowered to take decisions and the parties to the disputes need to follow the decision and instructions of the arbitrator. In reality though, the arbitrator might be trained in law or legal matters. There might be the need for some technical reports on areas of the situation. The arbitrator might not be qualified to do so and hence, he has to get an expert to examine the case and provide a report and opinion on the matter. The expert acts as an interventionist judge. Although the arbitrator sets the time and scope of the operation of the expert, the expert's determination is somewhat independent. The ruling of an expert is final and accepted by the courts. The arbitrator has to endorse the decision this is because the 28-day timeframe of the arbitration is woefully inadequate for a second opinion in most cases. Thus, it is conclusive that in the real world, expert determination is the fundamental aspect of arbitration decisions. This is because their reports are inevitable and they are binding on the arbitrator. However,the arbitrator sets the scope of activities of the expert. Books Campbell, Peter. Learning from Construction Failures: Applied Forensic Engineering (London: Wiley, 2011) Chappell, David. The JCT Intervening Building Contracts (London: Wiley, 2011) Coulson, Paul. Coulson and Construction Adjudication (Oxford: Oxford University Press, 2011). Jenkins, Jane. International Construction Arbitration Law (Amsterdam: Klwuer Law International, 2011) Ramsey, Vivian. Construction Law Handbook (London: Thomas Telford, 2009). Redmond, John. Adjudicating Construction Contracts (London: Wiley, 2012) Reynolds, Michael. The Expert Witness – Construction Disputes (London: Wiley, 2011) Journals Klein, Helen. “Alternative Dispute Resolution Procedures Used to Resolve Disputes in the UK” Shaping Change XXII Congress October 2006 Statutes Arbitration Act 1996 Housing Construction and Registration Act 1996 Human Rights Act 1998 Joint Contracts Tribunals Rules Cases Balfour-Beatty Construction Ltd V London Borough of Lambeth [2002] TCC BLR 288 Bougues UK Ltd V Dahl-Jensen UK Ltd 1999 Jones V Sherwood Computer Services Ltd 1989 Kuwait Foreign Trading V Icon Estero SpA [1993] ADRLJ 167 Nikko Hotel V MEPC Ltd 1991 Read More