Coming back to haunt us

‘This spells the end for adjudication,” commented a member of the law courts branch of the Arbitration Club drily following a heated debate at our last meeting. Chairing this branch, which brings together an eclectic mix of lawyers and non-lawyers with more experience of resolving construction disputes than its members normally care to acknowledge, is one of the real pleasures I get from my work. This particular debate involved two recent Technology and Construction Court (TCC) decisions concerning the enforcement of adjudication.

Why did these cases arouse such passion? To answer that question one has to travel back in time to 1996 when the Construction Act was introduced. Parliament’s intention was to provide safeguards to ensure proper payment within the industry, backed up by an effective and accessible sanction in the shape of adjudication. To achieve that, adjudicators’ decisions were to be binding, although they could subsequently be reopened for final determination in arbitration or litigation. The concept of temporary finality was born.

It soon became clear that none of this was going to work without the support and nurturing of the courts. Mr Justice Dyson, as he then was, courageously led the way with the Macob decision in 1999. This was the TCC’s first enforcement decision, and the judge invoked parliament’s intentions to arrive at what was for some a surprising result (which was that the adjudication should be enforced even though the adjudicator had made a procedural error). To do otherwise in this case would, said the judge, amount to driving a coach and horses through those intentions.

The courts have in the main been highly supportive of the adjudication process warts and all. I believe the industry is truly grateful for that. It is therefore hardly surprising that these recent decisions should have aroused some concern and, as at my recent meeting, some passion.

The concern is whether, and to what extent, these decisions may tilt the balance in favour of the party searching for tactical opportunities not to honour an adjudication decision. The fact that these concerns are being expressed in the first place suggests an uncertainty about the continuing effectiveness of the process that will itself affect the status quo.

The more important of these recent decisions is that of Judge Edwards-Stuart in Geoffrey Osborne vs Atkins Rail. This is particularly poignant because the facts were remarkably similar to those in Bouygues vs Dahl-Jensen, in which the Court of Appeal surprised many by holding that an obvious error by the adjudicator did not justify refusing enforcement.

the judge himself recognised that Atkins’ application was a tactical expedient designed to stifle the enforcement of the decision

 

Atkins had refused to honour an adjudicator’s decision in Osborne’s favour on the grounds that there was an obvious error. The existence of the error was not disputed. Osborne commenced enforcement proceedings and shortly thereafter Atkins applied to have the decision set side. In effect, Atkins was using its right to seek the final determination of the matters that had been adjudicated in what the judge himself described as a “pre-emptive strike” to prevent the enforcement of the adjudicator’s decision. Since the two applications related to the same matters, the court listed them for hearing at the same time.

“So, what’s wrong with any of that?” was the retort from the lawyers round the table at our meeting. They have a point. After all, even though the legislation does make the decision binding, there is nothing there that says you must honour a decision before seeking to have it overturned. Furthermore, surely having one judicial bite of the cherry is more consistent with the overriding objective of achieving cost-effective civil litigation than having two.

Those arguments certainly persuaded Judge Edwards-Stuart, who rejected Osborne’s arguments, which were based on the Bouygues case and parliament’s intentions in introducing the act. He duly set aside the adjudicator’s decision in part.

Justice may indeed have been done in practice but at what cost to the process? After all, the judge himself recognised that Atkins’ application was a tactical expedient designed to stifle the enforcement of the decision. Although the more recent case of Forest Heath District Council vs ISG Jackson suggests that this sort of pre-emptive strike may not be permitted if the issues at stake involve substantial factual questions, where, in practice, are courts going to draw the line?

Frankly the sooner the courts stake out the territory fully the better. The irony is that that is going to require more enforcement decisions, which means more enforcement challenges. My money is on that being exactly what the industry is going to get.