In the recent case of Billingford Holdings Limited and BFL Trade Limited -v- SMC Building Solutions Limited and another (8 March 2019) the TCC considered an urgent application for an interim injunction of an ongoing adjudication. Mr Justice Fraser considered the application, but refused the interim injunction that would have stopped the adjudication from proceeding. The reasons for this refusal and its implications for responding parties may come as a surprise against the background of the Court of Appeal decision of Bresco Electrical Services Ltd (In Liquidation) -v- Michael J Lonsdale (Electrical) Ltd Cannon Corporate Ltd -v- Primus Build Ltd of January this year.
In Billingford, the contractor (SMC Building Solutions) issued a notice of intention to refer a dispute to adjudication on 21 February 2019. It then proceeded to have an adjudicator nominated by the RICS. The RICS Dispute Resolution Services is commonly selected as the adjudicator nominating body in contracts and is often a default nominating body in standard forms of contracts such as the JCT suite. This is a far more common route for the appointment of an adjudicator than the parties either selecting an agreed adjudicator in the contract, or agreeing an adjudicator prior to the commencement of the adjudication. In Billingford, the adjudication process was said to be fundamentally flawed, due to the use of the RICS as the adjudicator nominating body. Although it is not entirely clear from the judgment (as is not essential to the judgment), the contract must have selected a different adjudicator nominating body than the RICS or a named adjudicator.
Generally, it is understood that where the adjudicator’s nomination and appointment, or the procedure for commencing the adjudication are incorrectly carried out, the decision will be fundamentally flawed and unenforceable. Accordingly, where the adjudicator is incorrectly nominated, it might have been expected that the court would grant an interim injunction. After all, the responding party would not wish to incur the cost of responding to the adjudication in circumstances where any decision will be null and void. However, the court in Billingford took a pragmatic approach driven by public policy. The courts have always been reluctant to interfere in the adjudication procedure, except in the rarest of circumstances. Simply put, the policy is for adjudications to be allowed to proceed and for their decisions to be upheld by the courts in order to keep the procedure effective. In Billingford, Fraser J said that only in exceptional cases would injunctive relief be granted. The court said that the test was not whether the adjudication had no prospect of reaching a binding decision. The court noted that the adjudicator had considered the issue of his jurisdiction and decided to proceed with the adjudication. The court emphasised that in most cases, the correct place to consider jurisdictional challenges was at the enforcement stage of the decision.
Billingford is perhaps surprising, given the recent emphasis on utility of adjudication and the need to avoid wasted costs where there is no utility in an insolvent company proceeding by way of adjudication in Bresco Electrical Services Ltd (In Liquidation) -v- Michael J Lonsdale (Electrical) Ltd Cannon Corporate Ltd -v- Primus Build Ltd.
It remains open to the responding party, who considered an adjudication to be fundamentally flawed, not to engage in the adjudication at all. Normally, a responding party will engage, but under reservation that it considers the adjudication to be without jurisdiction and to be fundamentally flawed. Unfortunately, that will normally involve the responding party in considerable irrecoverable costs.
Fortunately, most adjudications are commenced in accordance with the contract and, where a referring party recognises that there has been a nomination error, a referring party will normally decide to stop the adjudication and recommence in obtaining an enforceable decision from an adjudicator. This is driven by the fact that a referring party with an unenforceable decision cannot refer the same matter to adjudication again, and so is likely to be disadvantaged if it proceeds with a fundamentally flawed adjudication.