Author: David Weare
This recent case highlights that applications for the court to make a declaration in a dispute which is the subject of an ongoing adjudication will only be allowed in exceptional circumstances.
In 2007 WW Gear Construction Limited (WW) appointed McGee Group Limited (McGee) to carry out works for a development in south London under a JCT Trade Contract for £1.8 million.
In 2010 McGee claimed an entitlement to loss and expense caused by events materially affecting the progress of the works. WW sought and obtained a court declaration that this claim was time barred. McGee subsequently claimed additional costs for variations to the works, which in turn was referred to adjudication.
In response, WW sought a further court declaration that McGee could not claim under this clause either. This went to the heart of the subject of the adjudication.
The judge found that the declaration should not be granted. He did not agree with WW’s interpretation of the contract and held that McGee was entitled to claim for variations. Importantly, the court also considered the application of the general principle that court declarations in ongoing adjudications should be granted only rarely and only when it was appropriate to do so.
Was a declaration appropriate?
Adjudication is a process conducted in a very short timetable; the norm is 28 days from start to finish. This means that, in cases where an adjudication is already underway, there may not be time for the court to grant a declaration without intruding on the adjudication.
In this case, the adjudicator would have had one working day to consider the declaration. In the judge’s view this would be "an unacceptable imposition on an adjudicator and one that may result in unfairness, misunderstandings and mistakes – not least because the parties may well have no right or opportunity to make submissions to the adjudicator in light of the judgment".
Accordingly, a declaration in this case would not be appropriate. Although he had reached a decision in favour of McGee, the judge held that it should not be communicated to the adjudicator unless both parties agreed.
The judge emphasised that declarations sought during the adjudication process would only be appropriate in rare circumstances, namely:
It will be interesting to see the impact of this case; it is expected the courts may now be reluctant to grant declarations on issues of contractual interpretation in ongoing adjudications.
Although this case confirmed the general principle, by considering what circumstances would be considered appropriate to make a contractual declaration, it has narrowed the scope for applications. Responding parties may feel that the position is unfair. A party cannot make an application for a declaration until it is aware of the claim. In many cases adjudications are commenced without notice, and so the first time a party will reasonably be able to make the application will be after the process has begun.
David Weare, Partner, Fladgate LLP (firstname.lastname@example.org)