A decision in the Technology and Construction Court (TCC) has reinforced the principle that an adjudicator’s decision should only be challenged in exceptional and narrow circumstances, and provided guidance on what those circumstances should be. Dale Hilton reviews the decision in Hutton Construction Ltd –v- Wilson Properties (London) Ltd [2017] EWHC 517 (TCC) and its implications.

Background

The defendant was engaged by the claimant on a project to convert Danbury Palace, Chelmsford, in accordance with the JCT Standard Building Contract Without Quantities. A dispute arose between the parties regarding whether a valid interim certificate or pay less notice had been issued in accordance with the terms of the contract.

The adjudicator’s detailed decision rejected all of the defendant’s arguments and found in the claimant’s favour, awarding just under £492,000.

The defendant subsequently challenged the adjudicator’s decision at the enforcement hearing, by way of a Part 8 claim for summary judgment, on the basis that the adjudicator’s decision was wrong and should not be enforced. The Part 8 claim fell to be decided by Mr Justice Coulson in the TCC.

Decision

In giving judgment for the claimant, and rejecting the defendant’s challenge, Coulson J restated the fundamental principles that, if:

  1. an adjudicator’s decision had addressed the issue(s) referred to him, and
  2. had done so broadly within the rules of natural justice

then that decision should be enforced, even where the adjudicator had made an error.

Coulson J recognised two narrow exceptions to that principle, namely:

i. Where an error is admitted and accepted by everyone with no arbitration clause in the contract, so that the Court had justification.

ii. Where there is a dispute as to the proper timing, categorisation or description of the relevant payment application, notice or pay less notice.

The second exception was more relevant in this case.

In the previous authority of Caledonian Modular Limited -v- Mar City Developments Limited [2015] EWMC 1855 (TCC), Coulson J had allowed the defendant’s challenge of the adjudicator’s decision under the second exception, which was also generally supported in the TCC guide, paragraph 9.4.3. However, Coulson J rejected the challenge in this case, distinguishing Caledonian and superseding paragraph 9.4.3 of the TCC guide. In doing so, he reasoned that:

i. The defendant’s challenge should have been the subject of a prompt Part 8 claim, whereas the defendant’s claim (and reasoning) was very late, incomplete and failed to seek any specific declarations.

ii. The defendant’s arguments initially sought to rerun the entirety of the issues in the adjudication and rely on additional factual matters, which it would have been inappropriate to consider at an enforcement hearing.

iii. The adjudicator’s decision was a lengthy 73 paragraph decision, based on the detailed consideration of arguments and evidence. To allow the Court to reconsider that decision during an enforcement hearing would relegate adjudication to the first of a two stage process, which was unacceptable.

Points to take away

This decision not only reinforces the principle that an adjudicator’s decision should only be challengeable in exceptional and narrow circumstances, but also provides guidance on what a defendant will need to do if it does wish to make such a challenge.

It is now clear that a defendant must make a prompt Part 8 claim, clearly setting out the issue(s) and declaration(s) it seeks. Furthermore, in order to be considered, the issue(s) must be short, self-contained and have arisen in the adjudication. They must not require further oral evidence or any other elaboration beyond that capable of being provided during the enforcement hearing. Lastly, the issue(s) must be such that it would be unconscionable for a court to ignore on such an application.

Going forward, the decision should prevent disgruntled defendants from seeking to use enforcement proceedings to challenge adjudication decisions and/or delay payment. Defendants with legitimate arguments must take immediate action and, where possible, seek the claimant’s consent or agreement to the proposed challenge.