Adjudication in practice

United Kingdom
Andrew Rawstron looks at a number of important recent judgments

It is now some 18 months since Part II of the Housing Grants, Construction and Regeneration Act (“the Act”) became law. Whilst the provisions of the Act concerning payment had immediate practical effect, the arrival of a statutory right to adjudication has taken rather longer to catch on.

Not any more. In the last few months a steady stream of cases on adjudication have reached the Courts. According to the RICS, there were 45 requests for the appointment of an Adjudicator in July of this year, and many of the other nominating bodies have also reported an increased volume of traffic. Very few of these will ever end up being considered by the Courts; indeed, if Court intervention became common place it would defy the purpose of the legislation. That said, those issues which have been considered by the Courts shed light on the value of the adjudication process to the industry and a number of potential pitfalls.

Enforcement

For reasons which are difficult to gauge, the Act says nothing about the enforcement of an Adjudicator’s decision. Whilst Section 108(3) of the Act provides that the decision of the Adjudicator is final until the dispute is “finally determined by legal proceedings”, an absence of obvious teeth to the legislation hardly encouraged its use.

It was therefore no surprise that the first reported decision on statutory adjudication, handed down by Mr Justice Dyson on 12 February 1999, concerned the enforcement of an Adjudicator’s decision. The factual background to the dispute in Macob Civil Engineering Ltd v Morrison Construction Ltd is of little interest to anyone other than the immediate parties. Morrison, it was alleged, had failed to pay Macob monies due on interim certificates. The Adjudicator agreed, found in Macob’s favour but Morrison would not pay.

In reaching his decision, Mr Justice Dyson emphasised the intention of Parliament in bringing the legislation into force. It was, he noted, intended to:

“... introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis ... requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement.”

In that context, the Judge held that an Adjudicator’s decision should normally be enforced by an application to the Court for summary judgment under Part 24 of the Civil Procedure Rules. In passing, he stated that the Courts would not normally grant a mandatory injunction to enforce an Adjudicator’s decision, although he did not rule out the possibility that it could.

Mr Justice Dyson’s judgment in Macob has subsequently been supported in Outwing Construction Ltd v H Randall & Son Ltd (15 March 1999) and most recently, in A&D Maintenance and Construction Ltd v Pagehurst Construction Services Ltd (23 June 1999). In Outwing, Judge Humphrey LLoyd QC also endorsed the Plaintiff’s application to abridge time in respect of the application for summary judgment following the Adjudicator’s decision. Indeed, the Judge made clear that an action to enforce an Adjudicator’s decision is not comparable to the usual process for recovering a debt and that the Courts would expedite the process where possible.

In A&D Maintenance the position was a little more involved. Whilst the Adjudicator had awarded the Claimant £103,665.80, the Sub-Contract in question had, in fact, been determined by the Defendant. This issue was raised in the Court action, and the Defendant submitted that since the Sub-Contract had been determined, the Claimant was no longer entitled to refer the dispute to adjudication. The Judge disagreed, citing the well known decision in Heyman v Darwins (1942) AC at 356 which concerned similar facts in arbitration proceedings. So far as the Judge was concerned, there is no temporal bar to when adjudication proceedings can be commenced and if Parliament had intended there to be one, it would have said so.

Challenges to jurisdiction

So when might the Courts refuse to enforce an Adjudicator’s decision? In most circumstances it is now clear that Adjudicators’ decisions will be enforced summarily. However, in Project Consultancy v Gray Trust (16 July 1999) Mr Justice Dyson indicated that the Courts would consider, in appropriate circumstances, whether there was a defence to a claim based on the decision of an Adjudicator.

By way of background, the Defendant participated in the adjudication proceedings but expressly reserved its rights on the question of whether the Adjudicator did, in fact, have jurisdiction to deal with the dispute. The specific issue was whether the Contract in question had been concluded before or after the date on which the Act came into force (1st May 1998). The Judge held:

  • that the Defendant had not accepted that the Adjudicator had jurisdiction; and

  • that it was unclear whether there was a concluded contract at all.

Given that the statutory right to refer a dispute to adjudication only applies to construction contracts as defined by Section 104 of the Act the Judge was unwilling to allow enforcement by way of summary judgment in these circumstances.

So what should the Plaintiff have done? Similar issues arose in Palmers Ltd v ABB Power Construction Ltd (6 August 1999). In Palmers the parties acknowledged that there was a dispute as to whether Palmers were entitled to specific payments under the contract and a dispute as to whether the contract itself was a “construction contract” as defined by the Act. Palmers therefore asked the Judge for a declaration and His Honour Judge Thornton QC considered this issue before concluding that the contract was caught by the legislation. He then went on to find that payment was due.

Whilst it is tempting to view these decisions as being confined to their own facts, it would be unwise to do so. Where contracts are unexecuted or work is carried out under letters of intent, jurisdictional problems lie in wait for the unwary. It follows that any party seeking to enforce an Adjudicator’s decision in circumstances where the Adjudicator’s jurisdiction has been challenged may be best advised to resolve these issues before applying to the Court for enforcement of the decision itself.

The costs of adjudication

Whilst it has to be acknowledged that Parliament intended statutory adjudication to be quick and inexpensive, it is by no means clear why neither the Act nor the Scheme for Construction Contracts made any provision for the award of costs.

Until recently, it had been assumed that any legal fees incurred during the course of an adjudication would not be recoverable unless the parties had made specific provision in this respect. Not so, according to His Honour Judge Marshall Evans QC in John Cothliffe Ltd v Allen Build (North West) Ltd (29 July 1999, unreported). In that case, the Judge held that an Adjudicator appointed under the Scheme does have the power to award costs, either under the Scheme itself or as an implied term.

It is understood that the Judge’s decision is subject to appeal, and in our view it is unlikely to survive judicial challenge. If Parliament, or the parties to the contract, wanted costs to be recoverable surely they would have said so? Be that as it may, for the time being the decision in Cothliffe is binding on Adjudicators and it goes without saying that it makes adjudication far more attractive to a potential claimant.