Referring Parties 3 – Responding Parties 0: TCC rejects three recent challenges to the decisions of adjudicators
You may have spotted from the title of this Blog that I have been missing live sport during the past few months of the Covid-19 pandemic. However, while sport has been postponed, business as usual has continued for Adjudications and their enforcement in the TCC. This Blog reviews three recent cases involving challenges to Adjudicators’ decisions in which the responding party, left unhappy with the Adjudicator’s decision, sought to refuse to comply with it. However, in each case, responding parties’ attempts to challenge the Adjudicators’ decisions were unsuccessful, resulting in a clear win for the referring parties.
J Tomlinson Ltd v Balfour Beatty Group Ltd
J Tomlinson Limited (“JTL”), a subcontractor, referred a “smash and grab” adjudication against main contractor Balfour Beatty Group Limited (“BB”) seeking payment in full of its interim application for payment no. 30 (“IA 30”). The Adjudicator decided that JTL’s IA 30 was a default payment notice and awarded JTL the sum of £1.25m. When BB failed to pay, JTL brought enforcement proceedings against BB.
As regular readers will know, the courts take a robust approach to adjudication enforcement. The dicta of Mr Justice Dyson (in Macob Civil Engineering Limited v Morrison Construction Limited ) that “it should be only in rare circumstances that the courts will interfere with the decision of an Adjudicator” and Chadwick LJ (in Carillion v Devonport Royal Dockyard ) that “the need to have the right answer has been subordinated to the need to have the answer quickly” are often cited in judgments on this subject.
There are some, albeit fairly narrow, grounds to resist the general rule of enforcement. The two main grounds are if the Adjudicator lacked jurisdiction or breached the rules of natural justice. However, in defending the enforcement proceedings in this case, BB relied on the additional, arguably even narrower, grounds given by Coulson J in Hutton Construction Ltd v Wilson Properties (London) Ltd: that there is a short self-contained issue that arose in the adjudication over, for example, the timing, categorisation or description of a payment or pay less notice, which is something it would be unconscionable for the court to ignore.
BB argued that IA 30 could not have been a default payment notice because it had not been served in accordance with the subcontract; it had been served on the wrong date and had been served by the wrong method of service.
In giving his judgment, Fraser J emphasised the very narrow application of the exceptions in Hutton, repeating the comments in Caledonian Modular that the exceptions would be irrelevant in 99 cases out of 100. He also cited Coulson J’s comments in Huttonthat an example of when the exception might apply would be if Adjudicator’s construction of a contract clause was “beyond any rational justification”.
Far from considering it beyond rational justification, Fraser J in fact agreed with the Adjudicator’s decision and rejected both of BB’s arguments that the default payment notice was invalid. Fraser J concluded that the subcontract did not provide a specific date for the service of IA 30 and the wording regarding the service of IA 30 was not mandatory. The exceptions in Hutton therefore did not arise in any event and the Adjudicator’s decision was enforced.
1-0, to the Referring Parties.
ISG Construction Limited v Platform Interior Solutions Limited
This case involved another attempt by an unsuccessful Responding Party to use the Hutton exceptions to resist the enforcement of an Adjudicator’s decision.
Platform Interior Solutions Limited (“Platform”) was engaged as ISG Construction Limited’s (“ISG”) subcontractor in connection with a hotel redevelopment project in Edinburgh. Platform commenced an adjudication seeking declarations that ISG had repudiated the subcontract and of the sum payable to Platform on termination. The Adjudicator decided that while ISG had lawfully terminated the contract, payment was due to Platform of approximately £0.5 million.
ISG refused to make payment of the sum due and Platform sought to enforce the decision in the usual way by making an application for summary judgment under Part 7 of the Civil Procedure Rules (“CPR”). ISG sought declarations under Part 8 of the CPR that the Adjudicator’s decision was not to be enforced. Unusually, the two applications were not heard together. In the first Part 7 hearing, the Court gave summary judgment in favour of Platform enforcing the decision. In the second Part 8 hearing, ISG sought to overturn that decision.
The basis of ISG’s challenge in the Part 8 hearing centred on the second exception set out by Coulson J in Hutton that the Adjudicator’s decision was “wrong and beyond any rational justification”. ISG argued that the Adjudicator had failed to correctly apply the post-termination provisions in the subcontract when making her decision to award Platform sums, having decided that ISG had correctly terminated it.
The Court reviewed the judgment in Hutton in detail and highlighted that in order for ISG’s challenge to be successful it must involve a short self-contained issue that arose in the adjudication and the Adjudicator’s construction of the contract must have been beyond any rational justification.
The Court held that the Hutton exception could not apply because the issue had not arisen in the adjudication. During the adjudication, ISG and Platform had agreed the way in which the Adjudicator should approach the valuation; the Adjudicator had followed that approach but it produced a result that neither party had expected. The issue of whether the post-termination provisions had been applied correctly had therefore not been raised in the adjudication and so the Court decided that ISG could not rely on Hutton to resist the enforcement of the Adjudicator’s decision. The Court also held that ISG could not, in any event, succeed in its argument that the Adjudicator’s decision was beyond rational justification when she had done what she was asked to do by the parties.
The Referring Parties take a 2-0 lead.
MW High Tech Projects UK Ltd v Balfour Beatty Kilpatrick Ltd
In this case, MW High Tech Projects UK Ltd (“MW”) sought to challenge the Adjudicator’s decision by seeking a Part 8 declaration that the Adjudicator had lacked jurisdiction to resolve the dispute.
Following delays to the works, MW’s subcontractor, Balfour Beatty Kilpatrick Ltd (“BBK”), had referred its claim for an extension of time to adjudication. Eight days prior to this, BBK had served a new delay report on MW which contained a new critical delay analysis and claimed a slightly longer extension of time. The Adjudicator found for BBK and awarded it the whole of the extension of time sought.
MW argued that the Adjudicator lacked jurisdiction because no dispute had crystallised in respect of the claims made in the new delay report and participated in the adjudication subject to that reservation. Its position was that the new delay report amounted to a fresh notification of a claim for an extension of time and, because it had 16 weeks to assess a claim for an extension of time, no dispute could crystallise until a reasonable time had elapsed for MW to consider the claim and either accept or reject it. The eight days between the service of the report and the notice of adjudication fell far short of this.
In response, BBK argued that there had already been a crystallised dispute; it had given MW notice of the same delay and claimed an extension of time in five notices sent between March 2018 and February 2019, to which it had received no response. The service of the new delay report was simply evidence in support of the claims already made and did not amount to a fresh notification of a claim or affect the existence of a dispute.
The Court held that the new delay report had not amounted to a fresh notice of delay as it was not materially different from the claim BBK had already notified. The Court noted that the new delay report could have amounted to a fresh notice had it been sufficiently different to displace the original claim. However, in this case BBK did not need to wait a further 16 weeks before it referred the matter to adjudication.
The Adjudicator therefore had jurisdiction to determine the dispute and the adjudication decision was valid.
3-0; a comprehensive victory for Referring Parties.