In giving judgment on 22 February 2021 in the case of Motacus Constructions Limited (MCL) -v- Paolo Castelli S.P.A. (PC), in which our specialist Construction team were pleased to act for the successful Claimant, Motacus, the court has reinforced the importance of adjudication as a dispute resolution forum in the construction industry.

The sole issue in the Summary Judgment Application was whether the court had jurisdiction to determine the application in circumstances in which the construction contract conferred exclusive jurisdiction on the courts of Paris, France.

In the words of His Honour Judge Hodge QC the application raised ‘the apparently novel question whether the inclusion within a construction contract for works in England of an exclusive jurisdiction clause in favour of a foreign court precludes the English court from entertaining proceedings for breach of the term implied by paragraph 23 of the Scheme that the decision of an adjudicator binds the parties until the final determination of the dispute’.

Background

The underlying dispute concerned a supply and installation agreement dated 23 May 2019 relating to fitting-out works to One Bishopsgate Plaza Hotel in London (‘the Project’). MCL was engaged by PC as a sub-contractor to perform the supply and installation of plasterboards, internal walls and partitions, false ceilings, conduit back boxes, raised floors and related painting.

Clause 19 of the contract between MCL and PC included a provision entitled ‘Governing Law & Dispute Resolution’ which provided, inter alia, that ‘This Agreement shall be governed by and construed in accordance with the laws of Italy’ and that all disputes will be ‘submitted to the exclusive jurisdiction of the Courts of Paris, France’.

In the course of the Project a payment dispute developed between MCL and PC. In consequence, notwithstanding the terms of the Exclusive Jurisdiction Clause, MCL commenced adjudication proceedings against PC.

PC actively participated in the Adjudication.

The Adjudicator's decision was issued on 15 December 2020 which provided that MCL was entitled to payment in the sum of £454,678.65 plus VAT (as applicable) plus interest (‘the Award’).

PC was required to make payment of the Award by 22 December 2020. No payment was made so MCL commenced adjudication enforcement proceedings on 12 January 2021. PC challenged the enforcement proceedings, saying those proceedings could only be commenced in Paris under the contract jurisdiction clause.

The Decision

The Summary Judgement application was considered by reference to:

a) Article 6 c) of the 2005 Hague Convention; and b) Article 7 of the 2005 Hague Convention

Article 6

The question under Article 6 c) was whether giving ‘effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy’.

In his judgment, His Honour Judge Hodge QC concluded that the burden was on a claimant to prove ‘manifest injustice’ and/or that giving effect to the parties’ agreement ‘would be manifestly contrary to the public policy’ and that there was a ‘high threshold’ for a claimant to prove its case.

His Honour Judge Hodge QC decided that MCL had not exceeded the ‘high threshold’ and that it was a matter for parliament to legislate upon if it considered cashflow issues in the construction industry warranted derogating from exclusive jurisdiction clauses in parties contracts.

Article 7

The question under Article 7 was whether adjudication enforcement represents an ‘interim measure’. If so, the result would be that MCL would be able to enforce the Award in the English courts.

His Honour Judge Hodge QC concluded that adjudication is an interim measure, and so granted MCL summary judgment. In reaching this decision at Paragraph 56 he stated: ‘As Lord Ackner recognised in his contribution to the debate in the House of Lords (cited at [24] above), the underlying purpose of the adjudication remedy is to address the need to produce a ‘quick, enforceable, interim decision’.

As Dyson J explained in the passage from his judgment in Macob, also cited at [24] above, parliament's intention in enacting the 1996 Act was plainly ‘… to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis and requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement …’.

In the passage from her judgment in Babcock Marine, cited at [31] above, O'Farrell J described adjudication as ‘… a sui generis system of dispute resolution which is in many respects unique. The primary aim of adjudication is the swift temporary resolution of the question of the dispute pending the final determination of the issues between them’.

Takeaway points

What has been apparent since the passing of the Construction Acts is that the industry has sought to find loopholes in the legislation. Had PC succeeded with its defence, I query whether we would have seen the emergence of all sorts of obscure exclusive jurisdiction clauses in an attempt to put the kibosh on adjudication and the cashflow benefits associated therewith.

This decision is therefore important for the construction industry in that it promotes and reinforces adjudication as ‘a speedy mechanism for settling disputes’ whatever governing law and jurisdiction clauses might apply.