A new form of pest control

This story shows that if you don’t comply with an adjudicator’s award, you will be hammered by the High Court – hard. So without further ado, here is the story of Mentmore Towers.

Three limited companies have been set up by a family trust in Jersey. They were formed to acquire and develop the In & Out club in Piccadilly, and Mentmore Towers in Buckinghamshire.

Structural engineer Packman Lucas was engaged under a consultants’ agreement. All went well until each of the projects stumbled into planning difficulties and stopped. By now Packman was owed significant fees. It called for an adjudicator last April. He decided a narrow point: had Mentmore or the other two companies issued an effective “withholding notice”? The adjudicator said, no. So he ordered £420k to be paid to Packman.

The adjudicator did not decide whether or not the amounts should be withheld. He didn’t have to once they failed the withholding notice test. Be that as it may, Mentmore and the others would not obey the adjudicator’s order. Unsurprisingly Packman sought and obtained a High Court enforcement order. Mentmore and the others would not obey that, either. Charging orders were made on the properties.

Mentmore now issued court proceedings. (Remember, an adjudicator’s award is binding until finally decided in litigation or arbitration.) It claimed £420k had been overpaid. In its response to the High Court, Packman said the action could not proceed until the adjudicator’s award was honoured.

Now then, that’s the first time in 400-odd adjudication cases that I’ve seen an attempt to block the litigation of the adjudicator’s pro-tem decision. But blocked it was. The High Court undoubtedly has the power and discretion to stay proceedings if justice requires it. Here, the judge identified exceptional circumstances and ordered the court action to stop until Mentmore paid Packman.

All that was in December 2009; the judgment was by Mr Justice Akenhead.

But the story goes on.

You will remember that the adjudicator had made a narrow decision on a technical point about whether the “withholding notice” was properly served or at all. None of the merits of Mentmore’s allegations were yet decided. So a few weeks ago Mentmore decided to bring its own adjudication.

Presumably it felt confident that it really had overpaid and it wanted an award to set against the earlier awards. In adjudication it is very ordinary for an adjudicator to decide a technical claim about the withholding notice and order that the money be paid. Ordinary, too, that some time later they are presented with the merits or substantive issues and decide that the money should be repaid. It’s that second leg that Mentmore now brought.

Packman hit the blocking button. Hardly surprising. It’s getting on for a year since the first adjudicator ordered the £420,000 to be paid. They had successfully stymied Mentmore’s attempt to begin litigation because the court had the discretionary power to stop an action. But does the court have an identical power to stop an adjudication? The judge this time was

Mr Justice Edwards-Stuart. He also said stop. In 433 adjudicating cases I have not seen that happen before. It’s cat and mouse. Mentmore is the mouse. Every time it moves, the judge puts a paw on its shoulder.

But this is not a game. Packman is very worried about its money. The Construction Act says the adjudicator will be obeyed. When you see two judgments containing the words “bad faith”, the message is plain: the court is fretting about Mentmore’s foot dragging over that first award.

Adjudication is being elevated to a position where the court says you will obey or else. That’s all very well but it calls for quality decision-making from adjudicators of a high order (as in this case). And it calls for a process removed from any idea of a rushed decision, which many an adjudicator feels compelled to give, and does.