Morrison Construction is the main contractor at a shopping centre in Greyfriars, Carmarthan, South Wales. Macob Civil Engineering is the groundwork subcontractor. There was a dispute about valuation number six. Rather than fall out about it, Macob called for an adjudicator to referee the difference of opinion. The Chartered Institute of Arbitrators appointed the adjudicator, and within 28 days he made his decision.
First, he said that Morrison's in-house form of adjudication did not comply with the Construction Act. So, the Scheme for Construction Contracts applied. Next, he decided that Morrison's in-house payment provisions did not provide an adequate mechanism for calculating interim payments, so the scheme applied again. Next, he decided that the notice for withholding money did not comply with the scheme. Next, he decided that Morrison owed particular sums of cash, and that that cash was to be paid forthwith, plus interest. Finally, he decide that if Morrison did not pay, the court was entitled to use a provision of the Arbitration Act 1996 that empowered the court to order compliance.
But Morrison did not comply, so Macob began proceedings in court to enforce the adjudication decision.
Morrison's defence to the enforcement was that the adjudicator's decision was invalid because he had made a technical error by not hearing argument on whether Morrison's payment provisions in subcontracts were in accordance with the act. Failure to hear argument is a breach of natural justice.
If the decision of an adjudicator is wrong, either on the facts or because of procedural error, it is still a decision. It binds
They asked Mr Justice Dyson, senior judge in the Technology and Construction Court, not to decide whether the adjudicator had gone wrong with his procedure, but simply to refuse to oblige Morrison to pay out while a dispute about the decision was sent to trial or arbitration. The argument was, in essence, that no one yet knew whether the decision was valid or invalid, so there wasn't one.
The judge said: "It will be seen at once that if this argument is correct, it substantially undermines the effectiveness of adjudication. The intention of parliament in enacting the act was plain. It was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis, and requiring decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement." There was an arbitration clause in Morrison's in-house contract. Therefore, Morrison argued that the question of whether a proper decision had been made should go to arbitration – after the practical completion of the main contract. The impact this would have on the groundwork dispute does not need explaining.
This, said the judge, "was the mischief at which the act was aimed". All a disappointed party need do is tell a court that an argument about the validity of a decision had to go to arbitration or trial. That would drive a coach and horses through parliament's intention.
The judge held that if the decision of an adjudicator on the issue referred to him is wrong, whether because he erred on the facts or the law, or because in reaching his decision he made a procedural error, it is still a decision on the issue. It binds.
Postscript
Tony Bingham is a barrister and arbitrator specialising in construction.
