Adjudication – Disputes in the construction industry

Generally, a contractor will have resorted to adjudication because he has not been paid and seeks an award of a payment of a sum of money. However, an adjudicator has no power to assist in enforcing the award if the losing party does not pay.

If enforcement becomes necessary the successful party in the adjudication (the Claimant) should apply to the Technology and Construction Court (TCC) to enforce the adjudicator’s decision. The TCC will not interfere with an adjudicator’s decision unless the adjudicator plainly had no jurisdiction or there has been a serious breach of natural justice. (However, see Part 2 below for what might possibly be done to contest a decision).

Where the decision being enforced is an award for the payment of money, the Claimant should issue a claim under Part 7 of the Civil Procedure Rules (“CPR”) together with an application for summary judgment under CPR Part 24. To ensure that the application is dealt with speedily a lot of work has to be done at the point of issuing the claim. All evidence in support of the application should be filed at the TCC from the outset (and served on the Defendant) together with an application to abridge time to ensure the matter is considered quickly. 

The Claimant should mark the documents: “paper without notice adjudication enforcement claim and application for the urgent attention of a TCC judge”.

The judge will generally deal with the application on paper within three working days. The judge will give directions, which will include when the Defendant should file an acknowledgement of service, when the Defendant should serve its evidence and the date for a full hearing (usually within 28 days of the order).

If the defendant fails to acknowledge service of the papers the Claimant should apply for judgment in default of acknowledgement of service. If the Defendant acknowledges service, but then indicates it will take no further part in the proceedings, the Claimant should apply to the court to bring the hearing date forward. At the hearing, the court will decide whether to enforce the adjudicator’s decision. The court will give reasons for the decision, usually in a written judgment. The judgment will then be enforceable in the same way as any other money judgment.

Part 2 - Grounds for resisting enforcement of the adjudicator’s decision.

Now the boot is on the other foot. What can a paying party do to resist enforcement of an award?

Remember the basic presumption is that an award should be paid. The TCC will enforce that decision unless the paying party can persuade the court that:

• The adjudicator had no jurisdiction to make the decision.
• There was a serious breach of the rules of natural justice.

Adjudication was meant to be a straightforward mechanism to ensure quicker payment within the construction industry. However, many adjudications become mired in disputes about the adjudicator’s jurisdiction. If a paying party intends to run a jurisdiction defence, he/she must run it from the outset. They must reserve their right during the adjudication to challenge the adjudicator’s jurisdiction and must state that any further involvement in the adjudication is without prejudice to the objection about jurisdiction. In the absence of such a reservation a court is unlikely to hear a later argument about jurisdiction.

Jurisdiction challenges include:

• The contract was not a construction contract.
• There was in fact no dispute evident e.g. no valid demand for payment had been made.
• The dispute referred to the adjudicator was different to the dispute that had crystallized.
• The dispute referred to adjudication was the same or substantially the same as a dispute already decided by an adjudicator.
• The adjudicator did not determine the dispute referred to him.
• The adjudicator failed to reach the decision within the required time.
• The adjudicator imposed a pre-condition on the publication of his decision.

Examples of a breach of the rules of natural justice include the adjudicator’s failure to:

• Consult with both parties about: communications from one party; his approach to the dispute; taking advice from a third party; or relying on a report he commissioned.
• Give a party sufficient time to respond to a submission or evidence.
• Take into account submissions from one party.
• Give reasons for the decision (if requested or required).

Arguments that are unlikely to succeed in the TCC as reasons for not paying an award include:

• The dispute is too complex for adjudication.
• Enforcement proceedings should be stayed pending the decision in a cross adjudication, or to allow the parties to mediate.
• The matter will be referred to arbitration or litigation.

If the Claimant is successful in enforcing an award the paying party will usually have to pay the amount of the decision, interest and the costs incurred in the TCC, so beware. As adjudication is an interim measure the paying party may ultimately issue litigation to unravel the award but most often the adjudication decision is seen as water under the bridge.