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Business as usual for adjudication enforcement

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08/06/2020

Covid-19 has caused extensive disruption across the construction industry, raising questions as to the practicality of referring disputes to adjudication and/or enforcing an adjudicator’s decision. However, the Technology and Construction division of the Business and Property Courts (the TCC) has made clear in a line of recent case law that it will continue to robustly enforce adjudicator’s decisions and that adjudication business should continue as normal despite the Covid-19 situation. It has emphasised that parties cannot seek to rely upon Covid-19 to avoid participating in an adjudication or complying with an adjudicator’s decision. Set out below is a summary of the recent cases and our practical tips for managing an adjudication during lockdown.

Millchris Developments Ltd v Waters

Millchris sought an application for an interim injunction prohibiting Waters from proceeding with an ongoing adjudication. The adjudication timetable required submission of evidence by 3 April 2020, and a site visit on 14 April 2020. On 26 March 2020, Millchris asked the Adjudicator to suspend the adjudication until the government lockdown measures were lifted, stating that it was not possible to comply with the adjudication timetable during the lockdown. The Adjudicator declined to suspend the adjudication and Millchris then made an application to the TCC for an interim injunction on the grounds that, if allowed to proceed, the adjudication would breach natural justice as Millchris would not have sufficient time to prepare its case.

The TCC declined to grant the requested injunction.  The Judge concluded that there was insufficient evidence to establish why the relevant information could not be transmitted by Millchris electronically despite the lockdown measures. It was not necessary for the parties to meet in person and in respect of a site visit, it was noted that the parties had no right to be present at a site visit in any event, and arrangements could have been made for the site visit to have been recorded, or for specific points to have been brought to the adjudicator’s attention prior to the visit.

In short, the Judge considered that Millchris’ reasons for not being able to obtain evidence during the adjudication timetable had little to do with the Covid-19 restrictions and was in fact more to do with other difficulties that Millchris was experiencing.

The TCC confirmed that, despite the highly unusual circumstances presented by Covid-19, parties are expected to adapt as best they can. A party cannot rely upon Covid-19 to seek to avoid participating in or to suspend an adjudication.

Broseley London Ltd v Prime Asset Management Ltd

Here, there had been two previous interim value adjudications between the parties. Prime Asset sought a stay of execution of the two previous Adjudicators’ decisions in order to allow a third “true value” adjudication in respect of the final account. The Judge accepted that there could be a genuine dispute as to the value of the final account, but was critical of the amount of time that had passed since the first adjudicator’s decision, with little having been done by Prime Asset during that time to resolve the issues at hand.

The Judge further considered the question of whether it was improbable that Broseley would be able to repay the judgment sum, taking into account that the burden of proof for establishing this rested with Prime Asset. While Broseley’s turnover suggested that it would probably be able to make payment, the Judge did accept that Covid-19 lockdown measures might well impact Broseley’s financial position, and certainly made any assessment of liquidity more difficult. The application for a stay of execution was declined and the Judge noted that if Prime Asset had moved with due diligence upon receiving the first Adjudicator’s decision, it could have had a result by adjudication in respect of the final account prior to the Covid-19 crisis and at a time when Broseley would have been able to repay.

The case confirms that the TCC will continue to enforce the “pay now, argue later” ethos of adjudication despite the cashflow difficulties that may arise due to the Covid-19 lockdown. A paying party subject to an unfavourable “no notice” Adjudicator’s decision must comply with the same prior to referring a true value dispute to adjudication. The true value adjudication should be referred as soon as possible to minimise the risk of the other party entering financial difficulty before any overpayment can be corrected.

Platform Interior Solutions Ltd v ISG Construction Ltd

ISG sought to resist enforcement of an Adjudicator’s decision on the grounds that the adjudicator had reached an award adopting a method of valuation that had not been advanced by either party, and that the Adjudicator had not provided adequate reasons for doing so.

The TCC dismissed ISG’s challenge and proceeded to enforce the Adjudicator’s decision. The Judge concluded that the Adjudicator had made clear in the Decision how she had arrived at her conclusion. Whether the adjudicator was right or wrong as a matter of law was not the question for the purposes of enforcement.

This case is a salient reminder of the TCC’s robust approach to enforcement of adjudicators’ decisions. Unless an Adjudicator has acted beyond their jurisdiction or in breach of natural justice, challenges to their decisions will rarely succeed even if the Adjudicator has made an error in fact or law.

Practical Tips

Walker Morris has dealt with a number of adjudications through the Covid-19 lockdown period. In our experience, adjudicators have been keen for parties to agree a sensible timetable during lockdown and to agree extensions where, for example, key staff are furloughed or it is difficult to obtain access to documents.

Before referring a dispute to adjudication, the Referring Party should ensure that it has access to all relevant documents and personnel required to substantiate the claim. The Referring Party should check in good time the addresses for service of the Adjudicator and the Responding Party (such as to home addresses where individuals are working remotely), and should be prepared to serve more than one hard copy of the submissions (for example, to the home addresses of various individuals). It is also useful to create an electronic document room or similar document sharing platform to avoid emails with large attachments failing to be delivered.

Meetings with adjudicators have been taking place via videoconference. The parties should also consider whether ‘in person’ events such as site visits are necessary, or whether these could take place remotely for example with a tour via video.

In summary, with a few practical adjustments with regards to timetable and sharing of documents, adjudication business can continue as normal throughout the Covid-19 crisis.

Cases referred to:

Millchris Developments Ltd v Waters [2020] 4 WLUK 45

Broseley London Ltd v Prime Asset Management Ltd [2020] EWHC 944 (TCC)

Platform Interior Solutions Ltd v ISG Construction Ltd [2020] EWHC 945

Contacts