Double exposure?

Last June, Herschel agreed to carry out electrical work for Breen at Cornwall Gardens, London SW7. Two invoices were issued but Breen paid neither. The contract contained reference to adjudication but Herschel decided to ignore all that and simply sued in the local county court.

Let me pause here. I keep on hearing people say that adjudication is compulsory. It is not. The Construction Act says any party may adjudicate, and if that party does so, it is compulsory for the other party. Do you follow? So it was open to the electrical contractor simply to sue.

It did, but things began to drag on in that forum. So Herschel had a word with Henry Cooper Consultants of Norwich, who wrote to Breen triggering adjudication and asking the Technology & Construction Solicitors Association to appoint a referee. It appointed solicitor Victoria Russell on 22 February 2000.

By this time, Breen had applied to the court to injunct Herschel from adjudicating, but that idea fell away. Despite two invitations from the adjudicator, Breen wouldn’t participate. So Russell ordered Breen to pay the sums claimed. It said no, so Herschel was advised to go to solicitor Fenwick Elliott and enforce the award in the High Court.

Breen made an irritable riposte to all this. It told the High Court that it was already defending the disputes, counterclaiming in the county court and was “being vexed, harassed and put to unnecessary expense by the pendency of two actions in respect of the same subject matter, and seeks the protection of the court against such double vexation”. Isn’t that wonderful language? It smacks of quill pens, wigs and gunpowder.

Breen had two points in its argument in court. First, there is a long line of cases that prevent a claimant from pursuing the same quarrel in two tribunals at the same time when one will do. For example, you can’t litigate in court and concurrently arbitrate. The judge would absolutely agree with that – but litigation is not at all the same as adjudication. Whereas litigation or arbitration make final decisions, adjudicators do not. The decision is binding, but it need not be final unless accepted as such. It can go on to a final tribunal for the same dispute to be examined all over again. In any case, the Construction Act says that any party may adjudicate “at any time”.

They both consider the same dispute, but whereas litigation or arbitration makes final decisions, adjudicators do not

The judge said: “The intention of parliament in enacting the act was plain. It was to introduce a speedy mechanism for settling disputes … on a provisional interim basis, and requires the decision of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement.” He concluded that if parliament had intended that a party should not be able to refer a dispute to adjudication once litigation or arbitration proceedings had commenced, it would have expressly stated so.

The second point of Breen’s barrister was that if litigation is started, this is taken as a waiver or repudiation of the adjudication clause, as it would be if an arbitration clause existed. This again was rejected, since the Construction Act allows adjudication at “any time”. In short, adjudication and litigation or arbitration are not mutually exclusive routes to dispute resolution.

Breen’s final plea was to ask the judge, once he had given summary judgment, to exercise his discretion to stay execution of the judgment – to hold up the actual payment of cash to Herschel because the trial of the dispute was coming along in court. But no date had been set: the trial might easily have been delayed until the autumn. The judge could see no reason why Herschel should be kept out of the money on that basis.

There was a hint that Mr Justice Dyson was easing back from a position he seemed to have taken in earlier cases. He said that if evidence had been adduced that there was a real doubt as to Herschel’s ability to repay if it eventually lost in the county court, “I would probably have granted a stay of execution, pending the final determination of the county court proceedings”.

I suspect such a stay would be granted only if the trial was pretty soon after enforcement, because other cases in the High Court have paid little or no attention to the financial standing of a party to whom cash was ordered to be paid by a losing party in an adjudication. I would not rely on any court keeping an successful but impecunious claimant out of its money simply because litigation had begun.