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When is a Dispute not a Dispute for the Purposes of
Adjudication?
A matter can only be referred to adjudication if it has become a
"dispute". Unfortunately, there has been no clear, definitive
guidance as to what exactly amounts to a dispute for this purpose.
Different judges have taken different views in different cases.
In the case of Orange EBS Limited –v- ABB Limited, this issue
came to a head again, and the Technology and Construction Court was
asked to consider the various cases involved on the issue. In this
case, Orange submitted its final account to ABB on 2 December 2002.
It is important to note that in July 2002 Orange had written to ABB
stating that there was a contractual dispute between them in
relation to allegations as to defects and that Orange had abandoned
their work.
On 12 December 2002, ABB's solicitors wrote to Orange stating
that there was no "dispute" between the parties capable of
adjudication because ABB had not a duty to consider Orange's final
account. They said that they were considering the final account but
would not complete that exercise until 20.01.03.
Orange's representatives replied to the letter of 12 December
stating that they would take instructions and revert to them "in
due course".
In fact, what happened was that Orange commenced adjudication,
servings its notice of intention to refer to adjudication dated 6
January 2003. The adjudicator decided in Orange's favour. ABB
contended that the adjudicator lacked jurisdiction to decide how
much ABB should pay Orange pursuant to Orange's final account
claim, because there was no "dispute" in relation to it at the time
Orange commenced the adjudication.
The court adopted a two part test as to whether or not a dispute
had arisen. It adopted firstly, the following test:
"There was a dispute once money is claimed unless and until the
Defendants admit that the sum is due and payable".
That is a simple and clear test and can be readily applied and
understood.
However, the second test which the court held should be adopted
is more complicated. This is:-
"For there to be a dispute for the purposes of exercising the
statutory right to adjudication it must be clear that a point has
emerged from the process of discussion or negotiation that has
ended and that it is something which needs to be decided".
The court in Orange and ABB was of the view that there was no
conflict between those tests. The court specifically rejected any
attempt to give a more precise definition of dispute, feeling that
it was appropriate for the matter to be left to the discretion of
the court based on the facts of each particular case. In relation
to the latter more complex test, this test is not strictly binding,
but was held to be one which the courts should "give careful
attention to.
On the facts of this case, under the short simple test, by 6
January 2003 ABB had not admitted the final account claim or paid
it. Therefore, a dispute had arisen.
Under the more complex second test, the court felt that this was
a more difficult test to apply, given that at the date of the
adjudication notice, ABB were still considering the final account,
and had neither rejected or accepted it. However, on the facts the
court held that ABB had had sufficient time to consider the final
account and negotiated with Orange. Therefore, applying the second
test, it held that a dispute under that test had also arisen.
Unfortunately, this case only serves to confirm the somewhat
grey area of the law at present. In relation to the complex second
test, the court only said that it should give "careful attention to
it", leaving other courts free simply to ignore it. This more
complex second test gives considerable scope for argument and
discretion. It is likely, therefore, that this issue will appear
before the courts again, and we will keep you updated in respect of
any such decisions