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Do multiple grounds of objection increase the prospects of resisting enforcement of an adjudicator’s decision?

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18/10/2016

Ground Developments Ltd v FCC Construction SA and Others [2016] EWHC 1946 (TCC)

Ground Developments Ltd (GDL) sought to enforce an adjudicator’s decision against a Joint Venture known as Mersey Link Civil Contractors JV (the JV). The dispute related to the construction of a six lane toll bridge over the River Mersey between Runcorn and Widnes. The adjudication related to 3 interim applications of GDL which had not been paid by the JV. The JV had not issued any payment notices or pay less notices in respect of the applications. The JV resisted enforcement of the Adjudicator’s decision on 7 grounds.

Defence 1

The JV argued that the dispute referred to adjudication was confined to whether or not valid pay less notices had been issued, and that the Adjudicator did not have jurisdiction to value GDL’s works. The JV said that the Adjudicator had valued the works in his decision and as such had exceeded his jurisdiction.

The TCC said the starting point in determining the Adjudicator’s jurisdiction was the terms, scope and extent of the dispute referred in the Notice of Adjudication and the Referral Notice. The court must then look at the dispute in fact decided by the Adjudicator in his decision.

Here the dispute referred was the failure to pay the three interim applications. One limb of this dispute was the lack of pay less notices, however the dispute referred was not confined to the lack of pay less notices. On the facts, the court did not need to decide whether or not the Adjudicator had jurisdiction to decide the dispute on a valuation basis, because upon examination of his decision the court concluded that the Adjudicator had decided the dispute on the basis of the lack of pay less notices only, and had not carried out a valuation of the works as the JV alleged.

Accordingly this defence was rejected.

Defence 2

The JV again argued that the Adjudicator had valued the works as part of his decision and as such had adjudicated at the same time on more than one dispute without the JV’s consent, the valuation of the works being a separate dispute to the lack of pay less notices.

The TCC found that this defence was verging upon unarguable and that only one dispute had been referred to adjudication, i.e. the lack of payment in respect of the interim applications.

Defence 3

This defence related to how the Adjudicator had been appointed. There was a dispute between the parties as to whether or not the terms of the NEC3 subcontract applied to the contract. The JV said that GDL had appointed the Adjudicator under the NEC3 provisions, and that this had not been agreed between the parties.

The TCC found that upon consideration of GDL’s application for the appointment of an adjudicator, GDL had not in fact requested that the Adjudicator be appointed pursuant to the NEC3. The application made clear that there was a dispute over the nature of the parties’ contract and referred to the Scheme for Construction Contracts 1998 (the Scheme) with an ‘in the alternative’ reference to the NEC3 subcontract terms. It was clear that the Adjudicator had not been appointed in accordance with the NEC3 terms, and had instead been appointed in accordance with the Scheme.

The court therefore rejected this defence.

Defence 4

The JV said it was unclear which adjudication rules applied to the adjudication: the Scheme or the Technology and Construction Court Solicitors’ Association (TeCSA) adjudication rules (as referred to in the NEC3 subcontract).

The TCC found that GDL had maintained throughout the adjudication that GDL’s primary case was that the Scheme applied to the adjudication.

The JV did not object when the adjudicator set out his proposed procedure for the adjudication even thought this procedure did not comply with the TeCSA adjudication rules. As such, the JV knew that the Scheme was being applied. If the JV had considered that the TeCSA rules applied, then the JV should have raised this at the time.

Accordingly, this defence was also rejected.

Defence 5

In his decision, the Adjudicator set out findings as to the terms of the contract between the parties. In particular, he found that the contract had been amended or supplemented by a later letter from GDL. The JV argued that the Adjudicator lacked jurisdiction to make these findings, and that this amounted to a breach of natural justice.

The TCC also rejected this defence because it related to the substantive findings of the Adjudicator himself, rather than to there being an issue of jurisdiction or natural justice. The court held that the applicable contract terms were an issue within the Adjudicator’s jurisdiction and the Adjudicator’s decision had been made fairly. As such, there had been no breach of natural justice.

Defences 6 and 7

The JV contended in both of these defences that the question of the nature of the parties’ contract and the applicable contractual terms should be referred to a full trial rather than summary judgment being awarded by the court.

The TCC rejected these submissions and said that they were contrary to the “ethos and policy of adjudication”. The court said that for the Adjudicator’s decision to be enforced it was not necessary to conclude that all of the arguments raised by the JV had no real prospect of success in order to give summary judgment to GDL. The court need only consider:

  • Was the Adjudicator validly appointed?
  • Did he act within his jurisdiction? and
  • Did he act in accordance with the rules of natural justice?

Costs

The TCC commented that the parties had together spent over £55,000 in legal costs in respect of the enforcement proceedings. This was over a quarter of the £207,000 which was the subject of the Adjudicator’s decision. The court said that this was contrary to the purposes of Parliament when it introduced the adjudication regime.

The question of costs was left for another hearing, but given the court’s comments it appears that the JV may be ordered to pay GDL’s costs on the higher, indemnity basis.

Comment

As set out above, the court dismissed all 7 of the JV’s grounds for objection and ordered that the adjudicator’s decision be enforced.

This case is a reminder that in order to avoid enforcement, it is necessary to show a breach of natural justice, or that an adjudicator has exceeded his jurisdiction.

The ‘kitchen sink’ approach of raising multiple spurious grounds to resist enforcement will not be welcomed by the courts, and as a result the party resisting enforcement could be penalised by the courts in respect of costs.

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