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Adjudication - A Short Cut to Justice? [July 2010]

Adjudication was primarily introduced under the Housing Grants, Construction and Regeneration Act 1996 to provide “the short… the dirty fix that the industry asked for”.   However, both commentators and lawyers alike observe that the decisions of adjudicators are regularly challenged by unsuccessful parties seeking to avoid liability. 

The judgment in the case of Amec Group Limited v Thames Water Utilities Limited is extremely helpful in illustrating adjudication law in the United Kingdom in that it contains a useful résumé of the case law in relation to challenges to the enforcement of adjudicators’ decisions. 
 
In his judgment, Coulson J sets forth how the courts have approached jurisdictional challenges and claims of breaches of natural justice.   The key points illustrate that the courts will take a quick, robust and pragmatic approach to enforcement and that frivolous or badly founded challenges will not meet with success.
 
The key points arising out of the judgment can be summarised as follows:
 
1.   It is the notice of adjudication that forms the basis of the adjudicator’s jurisdiction.
 
2.   Irrespective of whether the adjudicator is right or wrong, his decision will be enforced provided he has asked himself the right questions, in particular the questions referred to him in the notice of adjudication and the referral notice, and that he has further attempted to answer those questions. Questions not referred to the adjudicator do not fall within his jurisdiction.
 
3.  Adjudicators’ decisions are principally challenged on the basis that the adjudicator lacked jurisdiction and/or that the adjudicator had breached the rules of natural justice.
 
4.  In enforcement proceedings, the court is not concerned with whether the adjudicator’s decision was right or wrong. The court will simply make a decision as to the validity of adjudicator’s decision and the process by which that decision was reached.
 
5. Whether the adjudication was made pursuant to the Act or to contractual provisions has no effect on the enforceability of the adjudicator’s decision. It will be binding until the matter is finally determined in arbitration or litigation or by agreement. Where there are no express contractual adjudication provisions, such provisions are implied into the contract by virtue of the Act and the Scheme for Construction Contracts.
 
6.  Under a construction contract, a party may only refer a single dispute to an adjudicator at any one time. An adjudicator does not have the jurisdiction to determine multiple disputes arising under a construction contract in a single adjudication.
 
7.   Although the rules of natural justice apply to adjudication, the enforcement of the adjudicator’s decision should “not to be thwarted by an overly-sensitive concern for procedural niceties”.
 
8.   There are limited grounds which a party may rely upon for resisting the enforcement of an adjudicator’s decision, namely that the adjudicator answered the wrong questions or that the adjudicator acted in a manner that was obviously unfair.  
 
9.    The size and/or complexity of a dispute will not make adjudication an unsuitable forum for resolving disputes under a construction contract. The court will decide whether the adjudicator, in reaching his conclusion that he could determine the dispute within the time provided, acted outside the rules of natural justice. In making that decision, the court will look towards the basis upon which the adjudicator reached his conclusion.
 
10.   Unless expressly permitted, parties to a dispute are not entitled to make innumerable rounds of submissions. It was never intended for adjudication to resolve a dispute in this manner.
 
11.   An adjudicator, whose overriding objective is to reach a decision within the tight time table, is not obliged to consider further responses of either party in any great detail where it is submitted late on in the adjudication. A party challenging the decision of the adjudicator on grounds that he failed to have regard for a submission must show that their rights were materially affected by such failure.
 
12.   The decision of an adjudicator will not be enforced where the adjudicator fails to have regard to the defence of the responding party. In such instances, the adjudicator would have failed to address the question referred to him and will, therefore, not have acted within the rules of natural justice.
 
13.   If an adjudicator asks himself the right question but gets the answer wrong by way of a mistake, his decision will still be enforced and no jurisdictional issues or issues of breach of natural justice will arise.
 
14.   Whilst, given his previous conclusions, Coulson J considered it unnecessary to decide the matters of approbation and reprobation, it would appear from the judgment that where a party is opposing the decision of an adjudicator whilst also implementing that decision across a range of ongoing contractual disputes, their conduct could amount to approbation and reprobation. 
 
15.   Although Coulson J thought it unnecessary to decide the issue of severability, in the judgment he suggests that, subject to the individual circumstances and whether a party is successful in their argument, an adjudicator’s decision could be severed.
 
It is noteworthy that this case was heard on 24th February 2010. The adjudicator’s decision was dated 24th December 2009, only two months earlier. This indicates that enforcement proceedings on adjudication decisions are ‘fast-tracked’. Enforcement proceedings are, quite simply, a shortened procedure to get in front of the court as soon as possible in order to give effect to the intention of Parliament that adjudication is a quick, albeit temporary, fix to keeping cash flowing in the construction industry.
 
The information provided in this article is not a comprehensive analysis of the law and must not be treated as a substitute for legal or professional advice.  To the extent permitted by law, Kerrigans will not accept or otherwise be held liable for any loss or damage incurred in relying upon the contents of this article. Should you require any legal or professional advice about any of the topics covered in this article we recommend that you contact Kerrigans.

 

07/12

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