A & D Maintenance and Construction Limited -v- Pagehurst Construction Services Limited
Technology and Construction Court
His Honour Judge David Wilcox
(Judgment delivered 23rd June 1999)
FACTS
The Claimant was a sub-contractor undertaking building works on behalf of the Defendant main contractor at a school. During the course of the contract, the Claimant issued various invoices to the Defendant of which a balance of £98,802.64 was not paid. On 28th November 1998, a fire occurred causing considerable damage to the school and the loss adjusters reported that the cause of the fire was the "negligent installation of the boiler" that formed part of the Claimant’s sub-contract works.
On 1st February 1999, the Claimant sent a notice of adjudication claiming the balance of its outstanding invoices. On 16th February 1999, the Defendant wrote to the Claimant and to the Adjudicator asking that the adjudication process be suspended on the basis that the issues in dispute identified in the notice of adjudication should not be determined in isolation of the Defendant’s own claims against the Claimant relating to the fire damage.
The Adjudicator proceeded and in the Defendant’s response documentation in the adjudication, the Defendant maintained their contention that adjudication was not the appropriate forum to decide the dispute. The Defendant argued that the sub-contract had ended and that the process of adjudication was primarily supposed to be used for minor disputes during the course of the contract. On 8th March 1999 the Adjudicator gave his decision that the Defendant pay the Claimant the sum of £103,665.80. The Defendant failed to comply with the Adjudicator’s decision and the Claimant commenced proceedings under CPR Part 24 for Summary Judgment. The matter came before His Honour Judge Wilcox QC.
ISSUES AND FINDINGS
Do the adjudication provisions implied into a contract by virtue of the Scheme survive the determination of the contract?
Yes, by analogy, with arbitration provisions, there is clear authority for the proposition that terms governing reference to arbitration survive the determination of a contract.
Does the Court have power to open up and examine an adjudication?
Not in circumstances where the adjudicator has been properly appointed and is considering matters under the contract properly within his remit.
EXTRACTS FROM THE JUDGMENT
The Defendants participated in the adjudication. They could have challenged the Adjudicator as they threatened to do so, or sought an immediate ruling by the Adjudicator as to his jurisdiction which could have been the subject of an immediate challenge. They did not do so. There is an issue about the terms of the contract, and about the termination of the contract. I assume, for the purposes of this application, that the contract came to an end on 19th November 1998. The Defendant argues that, since the contract came to an end, then so did the implied terms. Accordingly there was not in being at the relevant time, any subsisting contract and the adjudication provisions Miss Dumaresq submits do not survive the termination of the contraction as would arbitration provisions post repudiation.
Section 108(1) provides:
"(1) A party to a construction contract has the right to refer a dispute arising under this contract for adjudication under a procedure complying with this section. For this purpose "dispute" means any difference.
(2) The contract shall:
(a) Enable the party to give notice at any time of his intention to refer a dispute to adjudication " (My Emphasis)
Even if the contract had been terminated, the matters referred to the Adjudicator remain disputes under the contract. Where there is a contract to which the Act applies, as in this case, and there are disputes arising out of the contract to be adjudicated, the adjudication provisions clearly remain operative just as much as an arbitration clause would remain operative.
Had it been the intention of Parliament to limit the time wherein the party could give notice of his intention to refer a matter to adjudication, in the exercise of his right under Section 108(1), it could have imposed a clear limit. Precise limits as to the appointment of Adjudicators and the time tabling of the process of adjudication are clearly set out in the Scheme. By contrast there is no such limitation under the Act or the Scheme as to when a notice of intention to refer a matter to adjudication may be made. By analogy with arbitration provisions, there is clear authority to the proposition that those terms governing reference to arbitration survive the determination of the contract. See Heyman v. Darwins (1942) AC Page 356. Doubtless the position in relation to arbitration was in the minds of the legislators when the clear words of Section 108 were enacted.
This claim arises out of the Adjudicator's decision following a reference properly made under the Act relating to a dispute under a construction contract in writing and the Defendant participated in that adjudication.
Section 108(3) of the Act and Clause 23(2) of the Scheme, applicable here, provides that:
"(23)(2) The decision of the Adjudicator shall be binding on the parties and they shall comply with it until the dispute is formally determined by legal proceedings by arbitration (…if the parties.. agreed to arbitration..) or by agreement between the parties"
Miss Dumaresq, by necessary implication, invites the court nonetheless to open up and examine the adjudication. She submits that certain of the invoices raised by the Claimant did not become payable under the timetable laid down in the Scheme, and should not form part of the Adjudicator's decision. The powers of the Adjudicator under the Scheme are wide. They are set out in paragraph 12,13, 14, 15 and 16 of the Scheme. Paragraph 20 provides:
"Adjudicator's Decision
(a) Open up, revise and review any decision taken or any certificate given by any person referred to in the contract unless the contract states that the decision or certificate is final and conclusive,
(b) Decide that any of the parties to the dispute is liable to make a payment under the contract (whether in Sterling or some other currency) and subject to Section 111(4) of the Act, when that payment is due and the final date of payment.
(c) Having regard to any term of the contract relating to the payment of the interest decide the circumstances in which, and the rate at which, the periods for which simple or compound interest should be paid."
It is clear that the matters complained of by Miss Dumaresq are matters that are within the competence of the Adjudicator, because of the very wide powers conferred upon him.
These payments and such matters as set off under the contract or abatement may properly be within his remit, as matters arising under the contract. Given that the Adjudicator has been properly appointed under the Scheme and the timetable laid down has been properly observed, he would have the jurisdiction to consider the types of issues raised as to the payment of these invoices. The correctness of his decision is not a matter that falls to be considered at this time by this court which is considering the limited issue arising out of the Claimant's claim, namely the enforceability of the Adjudicator's decision. For this court to review the Adjudicator's decision - given that he has been properly appointed under the Scheme and was considering matters arising under the contract, properly within in his remit would be to go behind the intention of Parliament that his decision should be binding. The correctness of the decision may be reviewed, revised, challenged where appropriate in subsequent arbitration proceedings or legal proceedings or by way of an agreement. In the instant case there are the pending legal proceedings commenced by the Defendant under 1999 TCC 170, where the disputes between the parties, now provisionally adjudicated by the Adjudicator, will be finally determined by the court.
I return to Part 24.2 under which this application is made. The Claimant, in my judgement, has discharged the burden of showing that the Defendant has no real prospect of successfully defending the claim, which depends upon the binding nature of the adjudication at this time. The Defendant has not discharged the burden of showing that there are other reasons why the case or issue should be disposed of at trial. Matters of abatement and claims for damages for breach of contract could all have been canvassed before the Adjudicator and it seems that they were, but they are all matters that will be dealt with in the other Action. Were there not another Action pending I would not have been disposed to give leave to defend in this Action. I am mindful of the overriding objectives set out in Part I of the Civil Procedure Rules of 1998, particularly as to paragraphs 2C and 2D. It is undesirable in most cases to have duplication of proceedings. In some cases it may be necessary. I adopt the observations of His Honour Judge Humphrey LLoyd QC in Outwing Construction Ltd v. H Randell & Son Ltd 1999 TCC 100, judgment delivered on 15th March1999.
"Action to enforce an Adjudicator's decision is not comparable to the ordinary process of recovering an apparently undisputed debt.... The HGCRA (and the statutory instruments made under it) constitute a remarkable (and possibly a unique) intervention in very carefully selected parts of the construction industry whereby the ordinary freedom of contract between commercial parties (without regard to bargaining power) to regulate their relationships has been overridden in a number of areas, one of which is in dispute resolution. The overall intention of Parliament is clear: Disputes are to go to adjudication and the decision of the Adjudicator has to be complied with, pending final determination. There is no provision for a "stay of execution" (unless it is part of the decision itself), presumably, since that would undermine the purpose which is finality, at least temporarily. In addition, the provisions of the Scheme for the enforcement of peremptory orders, which is thought to be a quick and effective procedure, reinforce the conclusion that Parliament intended that adjudicated decisions and orders, if not complied with were to be enforced without delay. It is clear that the purpose of the Act is that disputes are resolved quickly and effectively and then put to one side and revived, if at all, in litigation or arbitration, the hope being that the decision of the Adjudicator might be accepted or form the basis of compromise, or might usefully inform the parties as the possible reaction of the ultimate tribunal."
This is a proper case for summary judgment, I give judgment for the Claimant against the Defendant in the sum of £104,392.41, which sum includes interest. The Defendant should bear the costs of the Claimant in this application.
This is a case where I think it is appropriate to give leave to appeal.
For the Claimant: Michael Bowsher (instructed by Shadbolt & Co.)
For the Defendant: Delia Dumaresq (instructed by Edward Lewis)
COMMENTARY
Following Macob, Outwing and the Rentokil decision in Scotland this decision provides further confirmation of the courts support for adjudication under the Act. In this case the court granted enforcement of the adjudicator’s decision by way of an application for summary judgment made under CPR 24. The test now is for a Claimant to demonstrate that the Defendant has no real prospect of successfully defending the claim.
In this case the court refused to consider the substantive merits of the adjudicator’s decision. However, it is apparent from this decision that there may well be jurisdictional grounds where a court may be prepared to refuse enforcement of an adjudicator’s decision.
The Judge made the following comment:-
"For this court to review the Adjudicator’s decision - given that he has been properly appointed under the Scheme and was considering matters arising under the contract, properly within his remit would be to go behind the intention of Parliament that his decision should be binding."
This statement indicates the circumstances when a court might be prepared to review an adjudicator’s decision, for example, where there are irregularities in the adjudicator’s appointment or presumably where an adjudicator exceeds his remit, for example, deciding upon a dispute not forming part of the original referral in the absence of an express power to so act. To date, none of these jurisdictional type issues have come before the court although it is likely to be only a matter of time. What is also left unanswered is the situation where an adjudicator’s decision is plainly wrong on a question of law or fact.
What is also clear from this decision is that if a jurisdictional challenge is to be made, it should be made as soon as possible. If a party proceeds with an adjudication without raising a jurisdictional issue it may be prevented from raising the issue at a subsequent date.