Adjudication: Instant justice

An awful lot of blood, sweat and tears have been put into resisting the enforcement of adjudicators’ awards over these past 11 years. Money put in, and money thrown away, too. The snag is that £20,000-30,000 is generally at risk in legal costs – and that’s if the argument is a simple one. There are two recent cases you should look at: Geoffrey Osborne vs Atkins Rail, and Shaw vs MFP Foundations. I will tell you a lot about the Osborne case but not so much about Shaw (I’ll explain why later).

Okay, let’s recap. Adjudicators sometimes go wrong. It’s a mad dash to get all the arguments together, then a mad dash to examine them. A case is supposed to have about the same lifespan as a monarch butterfly at the back end of February. And yet, that daft, half-baked decision by our frazzled adjudicator, Mr Lepidopterus, is binding and enforceable in the High Court even if it’s patently wrong. So instead the lawyers run arguments about technical “unfairness” in the process or about “jurisdiction” in the hope of winging the danaus plexippus and bringing down the award.

Osborne did some railway signalling and civil engineering works for main contractor Atkins Rail. They fell out over how much money Osborne was due. A barrister adjudicator was appointed, came up with his award of £500,000 but dropped a real clanger. The High Court judge said: “Unfortunately, having carefully assessed the value of the two items of work and associated loss and expense, the adjudicator omitted to deduct the amounts already included in respect of those items in Certificate 25 …” Osborne was not owed the £500k that the adjudicator ordered to be paid because Atkins has paid for the work in a previous interim certificate. As you might expect, Atkins invited the adjudicator to correct the mistake. The adjudicator declined. I suspect he could see all sorts of legal ramifications but there are times when a dose of common sense might be a better approach.

Atkins, somewhat miffed, refused to write the cheque. Osborne and Atkins then traipsed into the High Court for a chat with Mr Justice Edwards-Stuart. Some of you may remember a similar set of circumstances to all this in Bouygues vs Dahl-Jensen about 10 years ago. In short, and notwithstanding the plain and obvious mistake in good faith by the adjudicator, his award stands. It is binding, says the law, until “finally decided by an arbitrator or by a court”. Anyway, on the morning of the enforcement hearing by Osborne, it so happens that Atkins had their tackle in order, paperwork in place to seek a “finally decided” judgment from Mr Justice Edwards-Stuart.

Credit: Simone Lia

The judge reminded himself of the Bouygues case, which went to the Court of Appeal, and had no hesitation in following that decision. He ordered that the adjudicator’s decision in favour of Osborne should stand lock, stock and barrel. Then he said: “I am not prevented by the decision in Bouygues from entertaining an application that this court should reach a final decision on a question decided by the adjudicator … provided of course that it is a question that does not involve any substantial dispute of fact and is one I can finally determine on the material before me.”

In other words, if a key issue could be heard here and now, he can do so. And he could and did. He detected an issue: it was whether the adjudicator was entitled in law to order the payment of £504,385 to Osborne. And since the two parties agreed it was a mistake (a binding mistake) by the adjudicator, it was nevertheless here and now capable of being “finally decided” by the court … which decided that the £504k cheque should be torn up. Part of the adjudicator’s decision was instantly tried out and reversed by the court.

In the Shaw vs MFP case, the adjudicator decided that Shaw had repudiated the contract. He went on to decide the financial consequences. Shaw wouldn’t pay. MFP got an enforcement order. Shaw still wouldn’t pay and began an arbitration. There was a hearing immediately upon the arbitrator being appointed. The issue was: who repudiated the contract. The decision there and then was that it was the opposite to what the adjudicator decided. Notice the speed! So Shaw took the arbitrator’s decision to the court and the judge stopped the enforcement of the earlier adjudicator’s decision. So the arbitrator these days will move quickly to travel the same ground and make a final decision.