Summary: What happens when a construction contract provides for statutory adjudication, but also contains an arbitration clause? The clause contained an exception relating to all disputes concerning enforcement of an adjudicator’s decision. But was a part 8 claim concerning the legal elements of the adjudicator’s decision caught by this exception? This was the question that the English courts had to grapple with in Maelor v Rawlings.

Staying the dispute to arbitration, the court held that a part 8 claim was not a matter relating to enforcement. The judgement in Maelor Foods Ltd v Rawlings Consulting (UK) Ltd [2018] is particularly interesting, because the parties agreed there was no existing authority on the point in question, which relates to the wording of the unamended JCT 2011 standard form.

Introduction

Generally, if a contract contains an arbitration clause, and a party starts court proceedings, the defendant can apply to have the proceedings stayed to arbitration, pursuant to s9 of the Arbitration Act 1996.  One caveat to this general position occurs where the contract is a construction contract in England, Wales or Scotland, to which the HGCRA applies. Either party is free to refer a decision to adjudication at any time, and that decision is temporarily binding until finally decided by arbitration. The losing party must pay up following which it has the option to seek a final determination of the underlying dispute by arbitration.

What if the losing party does not pay the amount of the adjudicator’s decision? The winning party can apply to the court to enforce the adjudicator’s decision.  The court will not stay the application but will deal with it by means of the summary judgment procedure set out in section 9 of the TCC Guide (M&E Electrical Contractors v Honeywell Control Systems Ltd [2010]).

Facts

Maelor and Rawlings entered into a contract to carry out works at a meat distribution facility, based on a JCT 2011 standard form of building contract with approximate quantities. The contract provided that any dispute or difference should be referred to arbitration, with the exception of

any disputes or differences in connection with the enforcement of any decision of an adjudicator.

Rawlings obtained an adjudicator’s decision in its favour, but Maelor did not pay the amount of that decision. Maelor applied to the court for a declaration pursuant to CPR Part 8.  In that application Maelor noted that it would be relying on jurisdictional points to challenge any enforcement application by Rawlings, and sought a declaration that the adjudicator’s decision was wrong in law. Rawlings applied to have these Part 8 proceedings stayed, pursuant to s9 of the Arbitration Act 1996.  The court had to decide whether the dispute which was the subject of the Part 8 proceedings fell within the exception to the arbitration agreement, i.e. was the dispute in connection with the enforcement of the adjudicator’s decision?

Court grants stay to arbitration

The court stayed the proceedings to arbitration, holding that the dispute articulated in the Part 8 application did not fall within the exception to the arbitration clause.  The judge had regard to the wording of the exception: the parties could have provided for the exception to extend to any disputes or differences in connection with adjudication, but instead they provided that only disputes relating to enforcement were excepted.  A Part 8 application to decide the underlying dispute referred to the adjudicator was not a dispute relating to enforcement.  The court recognised that a Part 8 application is often used as a pre-emptive strike, which, if successful, could render the enforcement of an adjudicator’s decision completely valueless. However, this did not mean that the Part 8 application itself concerned enforcement.

Restrictions on use of Part 8 Procedure

A practice has grown up of challenging elements of adjudicators’ decisions through the CPR Part 8 procedure, in parallel to or even in advance of enforcement proceedings. This practice is even recognised in section 9 of the TCC guide. However, the use of the Part 8 procedure is subject to a number of restrictions: for example it is only suitable where the decision does not concern contested issues of fact and does not require an oral hearing, and a Part 8 application relating to the underlying dispute should not be treated as “adjudication business” for the purpose of obtaining an expedited hearing (see Merit v Lonsdale [2017]). This judgment highlights yet another restriction on the use of the Part 8 procedure: it cannot be used to get around the existence of an arbitration clause.