Adjudication is a fast-paced process. With decisions typically reached within 28 or 42 days, parties invest significant time, money and resources in presenting their case.
Then comes the adjudicator’s decision/award.
An adjudicator may uphold your position and make a monetary award in your favour. However, the unsuccessful party may refuse – or may not have the means – to pay. They may even seek to resist the consequences of the decision itself.
How then do you enforce an adjudicator’s decision and what are the potential grounds for resisting enforcement?
Enforcing an adjudicator’s decision
The Housing Grants, Construction and Regeneration Act 1996 (or the ‘Construction Act’) provides that an adjudicator’s decision is binding on parties to a qualifying construction contract. This means the decision must be complied with “until the dispute is finally determined”.
Final determination comes in the form of litigation (court) or arbitration – depending on the contract’s terms. In addition to those, parties may reach a final determination by agreement (e.g. a commercial settlement). If the unsuccessful party fails to comply with the decision, enforcement proceedings can be raised at Court. If successful, the judicial expenses of that process can be awarded and steps to recover the now ‘debt’ can be undertaken.
Seeking a ‘final determination’ of the dispute and ‘enforcement’ of the decision are not the same. Final determination allows the dispute to be opened up and parties to re-argue the merits of their respective positions, whereas enforcement proceedings raised at Court should be (relatively) procedurally speedy and the Courts should not permit arguments on the substance of the dispute to be rehearsed.
Normally, the proper course for an unsuccessful party is to comply with the decision and then pursue litigation or arbitration (if it considers the adjudicator reached the wrong conclusion). So too can the successful party (if it is dissatisfied with the extent of the award).
Resisting enforcement
There are limited circumstances in which the Court may refuse to enforce an adjudicator's decision. The two principal grounds are ‘lack of jurisdiction’ and ‘breach of natural justice’.
Lack of Jurisdiction
An adjudicator derives jurisdiction from the contract and/or Construction Act (along with the Scheme for Construction Contracts (Scotland) Regulations 1998 (the ’Scheme’).
Jurisdictional challenges can be based on pure technicalities and commonly focus on issues such as:
- whether there was a qualifying ‘Construction Contract’;
- whether a dispute had ‘crystallised’ (or was different to one that had);
- whether the adjudicator decided matters outside the scope of the ‘Referral’ (which sets out the dispute that is referred to the adjudicator for determination);
- whether the adjudicator revisited matters already decided in a previous adjudication;
- whether the decision was issued out with the statutory timescale; and/or
- whether the adjudicator’s appointment itself was invalid.
Provided the adjudicator was validly appointed over a crystallised dispute and is addressing that dispute referred – the Courts approach such challenges with caution. Misunderstanding evidence, applying the wrong legal test, or reaching an arguably incorrect conclusion will not usually deprive adjudicators of their jurisdiction. The focus tends to be on whether the adjudicator had authority to decide the dispute.
Breach of Natural Justice
The Construction Act and its Scheme require adjudicators to “act impartially”. The Courts have consistently held that only serious and material breaches will justify non-enforcement. Blatant examples include:
- bias or procedural irregularities disadvantaging a party;
- the adjudicator goes off on “a frolic of his own” (i.e. personal conclusions on arguments not advanced by parties); and/or
- a failure to ‘exhaust jurisdiction’ (e.g. failing to address/determine the issue(s) referred to the adjudicator)
Errors in reasoning, misunderstandings of evidence, or favouring one party's argument over another will not ordinarily amount to a breach. For a challenge to succeed, the breach must be ‘material’. In other words, it must have had a potentially significant bearing on the outcome.
Why early action matters
Parties who wish to resist enforcement based on jurisdiction and/or a breach of natural justice grounds must do so clearly and promptly during the adjudication itself. If not, raising objections during enforcement proceedings may be dismissed.
So too is cautiousness required for enforcement. A saying, often quoted in business, is: "you have to spend money to make money". In the world of litigation, a fitting adaptation would be: "you have to spend money to recover money" and, even then, full recovery is far from guaranteed. Parties should always consider the commerciality of taking further proceedings.
Whether seeking to enforce an adjudicator's decision (or resisting enforcement), a clear, focused and commercially minded strategy from the outset (i.e. from the moment a dispute begins to crystallise) is essential. Understanding the merits of your (and opponent’s) position, the economics involved, prospects of recovery and the practical realities of enforcement/resisting can make the difference between a successful outcome and an expensive exercise.
How we can help
If you have any queries relating to the enforcement of an adjudicator’s decision, please contact Ayub Ahmed or a member of our Construction Disputes team.