Legal Review of 2009 - Part 2

Adjudication

Enforcement of adjudication decisions – or, more precisely, attempts to resist enforcement – continued to occupy much of the time of the Technology and Construction Court.

Arguments about natural justice still arise but are not usually successful. Such arguments often arise out of what have been called kitchen sink references, particularly concerning final accounts, where every matter in dispute is referred for adjudication. The argument is that it is not possible for such extensive disputes to be dealt with fairly within the short period allowed. Judges have accepted, in principle, that such circumstances could arise; however, there has so far been no case in which enforcement of an adjudicator's decision has been refused on this ground.

In HS Works Ltd v Enterprise Managed Services Ltd (8 April) (see below), one of the applications for enforcement before the judge concerned an adjudication of this kind, and the respondent to the reference argued that the adjudicator should have resigned. However, the judge said that this was not one of those exceptionally rare cases where this should have happened. The judge also made the point that the tight time frame was in the legislation, so rough justice must in some situations have been contemplated. The judge approved the adjudicator's use of spot checks to assess the credibility of some of the heads of claim.

In Dorchester Hotel Ltd v Vivid Interiors Ltd (19 January), the respondent to an adjudication asked the court to intervene, on the basis that the timetable was too tight and gave rise to a real risk of there being a breach of natural justice. This was another adjudication concerning a final account claim, which was set out in 37 lever arch files and issued just before the Christmas break.

The Court ruled that it had power to intervene in ongoing adjudications on such grounds, but would only do so in rare cases and would not do so in this case. The judge nonetheless said:

It is a matter of regret that the adjudication process, which was itself introduced as a method of dispute resolution which would avoid unnecessary legal disputes and procedural shenanigans, is now regularly exploited in the same way. I am confident that the enthusiasts for adjudication in and out of parliament in 1996 did not envisage that the system would be used for the making of a claim of this type and in these circumstances.

Of course, disputes may have been escalating for some time and the respondent to an adjudication may well be familiar with the issues, however extensive they are. In Bovis Lend Lease v Trustees of The London Clinic (28 January), the Court held that the employer had not been "ambushed" by the loss and expenses claim and the amount of material submitted by the contractor did not mean there had been a breach of natural justice.

Breaches of natural justice must be serious in order to invalidate the adjudicator's decision, and will usually involve one or other party not having a proper opportunity to comment on an important matter affecting the claim and its outcome. In Primus Build Ltd v Pompey centre Ltd and anor (16 June), the adjudicator had made an award for a claim for loss of profits on the basis of a calculation based on the claimant's accounts, even though both parties had agreed that the accounts were irrelevant. The adjudicator had not given the parties the opportunity to make submissions on what he was doing. The court held that this was a breach of natural justice and the award could not be enforced.

Multiple Adjudications

A situation before the courts with increasing frequency is where there have been multiple adjudications, and how various awards may affect each other. The general rule is that an adjudication award should be complied with straight away and, if necessary, enforced by the courts, even if another decision is pending which may mean that any payment made under the first decision has to be paid back, or even if the second decision has already been given but is disputed and an application to enforce it is still pending.

However, in HS Works Ltd v Enterprise Managed Services Ltd (8 April), the court had before it simultaneous applications to enforce two awards, one requiring payment by one party, the other by the other. In this situation, the court held that sums due under one adjudication could set off against those due under the other, with the resulting net amount only being paid.

With multiple adjudications taking place, there may be challenges to adjudicator's decisions on the ground that the decision is on a dispute that has already been decided in another adjudication. Balfour Beatty Engineering Services v Shepherd Construction Ltd (1 September) was concerned with an adjudicator's decision to award a sub-contractor an extension of time, where there had been an earlier adjudication rejecting a claim for an extension. The Court, however, accepted the argument that, in the earlier adjudication, the claim for an extension had been based on a prospective analysis, which the adjudicator decided was the wrong approach, whereas in the second adjudication the claim was based on a retrospective analysis, so the disputes in the two adjudications were different.

In Vision Homes Ltd v Lancsville Construction Ltd (4 August), two adjudications (with different adjudicators) proceeded at the same time on a similar issue. The court said that the statutory Scheme for Construction Contracts (which applied to the adjudications) makes no provision for an adjudicator to resign where the referred dispute had already been referred to adjudication but no decision in that adjudication had yet been made. Thus it is possible for two adjudications on the same dispute to take place at the same time. However, only the first decision to be given would be enforceable, unless open to challenge on another ground.

The issue of cross-claims, as a possible way of defeating an adjudicator's award, never seems to go away, even if the cross-claim has not been the subject of another adjudicator's award. In Letchworth Roofing Co v...