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

Mr Justice Fraser in the Technology and Construction Court (TCC) has delivered a detailed judgment summarising previous authorities on the enforcement of adjudicator’s decisions and reaffirming the TCC’s approach to enforcement.

The defences raised are now typical of adjudication enforcement proceedings and the case also contains the familiar scenario where parties are in dispute as to the existence and form of a contract and the impact that this has on the adjudicator’s jurisdiction.

Background

  • Ground Developments Ltd (GDL) tendered to perform works for a Joint Venture comprising the defendants (the JV) at the Mersey Gateway Project
  • GDL and JV exchanged correspondence with a view to entering into an NEC3 contract
  • The JV instructed GDL to start the works, but no contract was formed on the NEC3 terms
  • GDL started the works and by letter of 8 September 2015 notified the JV that it was acting on the terms of a letter dated 8 August 2015, the JV did not respond
  • The parties found themselves in dispute in relation to outstanding payments
  • GDL issued a Notice of Adjudication (the Notice) on 2 March 2016 and applied to the ICE for nomination of an adjudicator, the nomination form advised that the parties were in dispute as to the formation of the contract
  • The JV reserved its position throughout the adjudication and raised jurisdictional challenges, they also stated that the issues as to the contract would be better resolved in the Technology and Construction Court (the TCC), rather than through adjudication
  • The adjudicator issued his decision on 22 April 2016 and found that the JV owed £207,000 to GDL
  • The JV did not pay the sums and GDL applied to the TCC to enforce the decision.

Enforcement

After reciting the facts, the judge criticised the approach of the JV for not stating its primary position as to whether there was, or was not, a contract in place. After encouragement, the JV clarified its position that there was a contract, but not on the terms that the adjudicator decided.

The judge also suggested that an appropriate course of action for the JV, given the position they adopted as to the contract, would have been to start proceedings in the TCC to determine the contract issue (which the JV had suggested might have been appropriate at the start of the adjudication). The JV’s argument that they needed GDL’s consent to do this was dismissed.

Mr Justice Fraser went on to address the seven defences to enforcement advanced by the JV.

Defence 1

The adjudicator decided a different dispute to the one referred.

The judge addressed this defence at length and summarised the position in light of the recent case law including MJ Harding Contractors v Paice and Springall [2015] EWCA Civ 1231 and Brown v Complete Building Solutions Ltd [2016] EWCA Civ 1 as guidance as to the scope and ambit of a dispute referred to adjudication. 

The judge quoted from Carillion Construction Ltd v Devonport Royal Dockyward Ltd [2005] EWHC 788 (TCC) reiterating the point that it is only in the “plainest cases” that the court will fail to grant enforcement. The judge referred to that judgment on more than one occasion and stated that the approach of Chadwick J in that case reflects the approach he has taken to defences 2, 4 and 5. 

The judge dismissed the argument advanced by the JV that the dispute referred was narrow in scope. One element of the dispute referred was about a lack of pay less notice and that was the basis on which the adjudicator reached his decision. The JV’s argument that the adjudicator answered the wrong question was also dismissed.

Defence 2

The adjudicator decided more than one dispute at the same time, without the Defendant’s consent.

The JV relied on Deluxe Art & Theme Ltd v Beck Interiors Ltd [2016] EWHC 238 (TCC) as authority that two disputes of different character cannot be decided at the same time, however the argument was quickly dismissed and the case distinguished on the facts. The judge referred to his comments as to the ambit of the dispute regarding Defence 1 and confirmed only one dispute was referred to adjudication and the adjudicator had decided it. This defence, he said to be “verging upon, if not completely, unarguable”.

Defence 3

The Claimant appointed the adjudicator pursuant to an NEC3 contract that was not agreed between the parties.

The JV argued that GDL had drafted its Notice on the basis that the contract was formed by a letter of September 2015 and the Scheme for Construction Contracts (the Scheme) ought to apply, yet sought nomination of an adjudicator pursuant to NEC3 provisions (which incorporated the TeCSA rules). Mr Justice Fraser considered in detail the Notice and the nomination form and noted that GDL had made it clear that there was a difference between the parties about the contract terms. The Notice was clear that the application was made under the Scheme. 

The JV relied on Twintec Ltd v Volkerfitzpatrick Ltd [2014] EWHC 10 (TCC) but again, the judge distinguished that case on its facts and reiterated that the adjudicator’s appointment was sought under the Scheme because the contract did not contain any adjudication provisions.

Defence 4

The adjudication was conducted without clarity as to which rules applied and the adjudicator only decided that the Scheme applied in the Decision.

The judge dismissed this argument briefly, describing it as “factually wrong”, again stating that GDL made clear that their primary case was that the contract was the September letter and the Scheme applied, TeCSA was only ever referred to in the alternative. 

The judge also found that it was not correct to say that the adjudication was conducted without clarity as to the rules, the adjudicator had given directions that would have been contrary to TeCSA. Further the JV’s solicitors themselves had in correspondence complained that GDL was not complying with the Scheme. This defence also failed.

Defence 5

The decision as to the formation of the contract lacked jurisdiction or was a material breach of the natural rules of justice.

This defence referred to the adjudicator’s finding that the contract was entered into in June 2015 and supplemented by the September letter. The JV’s argument was again dismissed quickly by the judge who stated “It is trite law, or should be, that the decision of an adjudicator is enforceable regardless of any mistakes of fact or law”. 

The judge asserted that the JV was attempting to challenge the finding made by making a jurisdictional or natural justice challenge that had no merit. This defence also failed.

Defences 6 & 7

The decision should not be enforced at all as the issue is not capable of summary judgment (6) and there is a compelling reason for a trial (7).

The 6th and 7th defences were dealt with together by the judge as they both related to the JV’s submission that the matter of the contract between the parties ought to be decided at trial and there should not be summary judgment in GDL’s favour.

It was stated that the approach of the court should be the conventional one on an enforcement, namely, was the adjudicator validly appointed, did he act within his jurisdiction and in accordance with the rules of natural justice? The JV had indicated in the adjudication that it was still in the process of preparing its arguments as to the contractual position, Fraser J stated that the JV had been entitled to adopt this position but it could not avoid enforcement by stating it wished to advance other evidence. 

The judge concluded that the alternative contentions advanced by the JV had no real prospect of success and defences 6 and 7 also failed.

The judgment contains a clear criticism of the JV’s approach to the adjudication and the enforcement hearing and expressly stated that the JV’s reluctance to state their primary position was for tactical reasons.

At the conclusion of the judgment there is also a criticism of the costs expended by the parties (£55,000) in challenging the enforceability of a decision over just over £207,000

The case represents a further authority supporting the TCC’s approach to the enforcement of adjudicator’s decisions. Mr Justice Fraser referred to Chadwick LJ’s views in Carillion v Devenport and stated that his comments could have been “tailor written, in my judgment, for the approach of the Joint Venture to this Decision”. Chadwick LJ’s remarks are a poignant reminder to those seeking to resist enforcement on uncertain grounds:

“To seek to challenge the adjudicator’s decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead to a substantial was of time and expense – as, we suspect, the costs incurred in the present case will demonstrate only too clearly”.