Charles Edwards, Barrister and TECBAR Adjudicator, reviews the case of Hutton Construction Ltd v Wilson (London) Properties Ltd [2017] EWHC 517 (TCC). This matter involved a summary judgment application for the enforcement of an Adjudicator’s decision in the sum of £491,944.73. The Defendant sought to challenge the enforcement of an Adjudicator’s decision by way of Part 8 proceedings on the basis that the Adjudicator simply got it wrong, rather than on the basis that the Adjudicator lacked jurisdiction or had breached the rules of natural justice.
Hutton Construction Ltd was the Claimant in this matter, whilst Wilson Properties (London) Ltd was the Defendant. The parties entered into an agreement on the basis of a contract which incorporated the JCT Standard Building Contract, Without Quantities, 2011. The construction works involved the conversion of Danbury Palace in Chelmsford into 13 apartments.
A dispute arose between the parties with regard to the Claimant’s Application for Payment No. 24 which was then decided by adjudication. The issues in the adjudication included whether there was a valid interim certificate or pay less notice response. This required consideration of the contract between the parties, the factual background to the relevant documents said to constitute the notices and the notices themselves.
The Defendant argued amongst other things that, its pay less Notice of 23 August 2016 was actually an interim certificate (because it was thought that this improved the Defendant’s position as to when the document should have been served under the contract), or that, if it was a pay less notice, it was valid both as to its timing and its contents. The Adjudicator in the circumstances rejected all of the Defendant’s submissions.
On 16 February 2017, the Defendant, seeking to challenge the enforcement proceedings in the Technology and Construction Court (TCC), issued a Part 8 Claim Form. The Defendant, defended the summary judgment application on the grounds that the Adjudicator was wrong to reach the conclusion that he did. The Defendant did not seek any specific declarations and instead confined itself to the following:
“7. The Claimant asked the Court to decide that the Decision was incorrect because the Claimant’s Notice dated 23 August 2016 amounted to a valid Interim Certificate notwithstanding that it bore the title ‘payless notice’ given that the Contract does not prohibit the use of an Interim Certificate before the due date for payment.
8. In the alternative, the Claimant asks the Court to decide that the Claimant’s Notice dated 23 August 2016 was validly issued as a payless notice notwithstanding clause 4.13.1.3 of the Contract because no Interim Payment Notice has been physically given by the Defendant.”
Paragraph 9.4.3 of the TCC Guide provides with regard to Part 8 challenges to the enforcement of Adjudicators’ decisions as follows:
“It sometimes happens that one party to an adjudication commences enforcement proceedings, whilst the other commences proceedings under Part 8, in order to challenge the validity of the adjudicator’s award. This duplication of effort is unnecessary and it involves the parties in extra costs, especially if the two actions are commenced at different court centres. Accordingly there should be sensible discussions between the parties or their lawyers, in order to agree the appropriate venue and also to agree who shall be claimant and who defendant. All the issues raised by each party can and should be raised in a single action. However, in cases where an adjudicator has made a clear error (but has acted within his jurisdiction), it may on occasions be appropriate to bring proceedings under Part 8 for a declaration as a pre-emptive response to an anticipated application to enforce the decision.”
The Court stated that this paragraph must now be taken to be superseded by the guidance given in this Judgment.
The Court’s guidance to Defendants seeking to resist the enforcement of Adjudicators’ decisions in these circumstances using Part 8 includes:
“The first requirement is that the defendant must issue a CPR Part 8 claim setting out the declarations it seeks or, at the very least, indicate in a detailed defence and counterclaim to the enforcement claim what it seeks by way of final declarations. For the reasons already explained, I believe a prompt Part 8 claim is the best option….
…the defendant must be able to demonstrate that:
(a) there is a short and self-contained issue which arose in the adjudication and which the defendant continues to contest;
(b) that issue requires no oral evidence, or any other elaboration beyond that which is capable of being provided during the interlocutory hearing set aside for the enforcement;
(c) the issue is one which, on a summary judgment application, it would be unconscionable for the court to ignore.”
In practice, the Court stated that this meant that an Adjudicator’s construction of a contract clause is beyond any rational justification, or that the Adjudicator’s calculation of the relevant time periods was obviously wrong, or that the Adjudicator’s categorisation of a document as, say, a payment notice when, on any view, it was not capable of being described as such a document and that such an issue could only be considered if it was clear-cut. If the effect of the issue that the Defendant wishes to raise is disputed, then it is most unlikely that the Court will take it into account on enforcement. The Court made it clear that any arguable inter-leafing of issues, would almost certainly be fatal to a suggestion by the Defendant that its challenge falls within this limited exception.
The Court concluded that the challenge to the Adjudicator’s decision raised by the Defendant by way of Part 8 proceedings should not and could not be considered by the Court during the adjudication enforcement hearing. The Court decided amongst other things that:
“…31. First, I am in no doubt that this type of challenge should have been the subject of a separate Part 8 claim at the outset. The defendant’s solicitor’s correspondence did not make clear how and why the enforcement was being resisted. Neither did the witness statement served on 3 February 2017…
36. There is nothing unconscionable in this result. On the contrary, since the defendant described the document as a pay less notice and the adjudicator explained at length why it was a pay less notice, on enforcement the court is hardly likely to say that it was, in fact, something else altogether. As to the timing and content of the document, the adjudicator considered all the relevant issues carefully and decided them against the defendant. In the ordinary way, the claimant is entitled to the fruits of that victory….
37. Finally, it is appropriate to stand back and to consider the ramifications of all this. The adjudicator’s decision ran to 73 closely-typed paragraphs. It was the product of an adjudication which lasted from 11 October to 15 November 2016. I have only seen some of the documents relating to the adjudication but they fill more than one file. It cannot be right, absent any consent from the claimant, to let the defendant shoehorn into the time available at the enforcement hearing the entirety of that adjudication dispute. Such an approach would mean that, instead of being the de facto dispute resolution regime in the construction industry, adjudication would simply become the first part of a two-stage process, with everything coming back to the court for review prior to enforcement. That is completely the opposite of the principles outlined in Macob, Bouygues and Carillion and cannot be permitted.
38. For these various reasons, the challenge to the adjudicator’s decision must fail.…The claimant is entitled to summary judgment in the sum of £491,944.73. That must be paid in 7 days. The defendant is entitled to pursue its Part 8 claim separately…”
Conclusion
It is essential that dissatisfied parties challenging Adjudicators’ decisions by way of Part 8 proceedings in the Technology and Construction Court review this recent Judgment, in particular the guidance with regard to Part 8 proceedings which must be followed and which now supersedes Paragraph 9.4.3 of the TCC Guide. The Court also made it clear that it cannot be right, absent any consent from the Claimant, to let the Defendant shoehorn into the time available at the enforcement hearing, the entirety of their adjudication dispute.
The above is for general information only and to encourage discussion and does not constitute legal advice. The author does not assume any responsibility for the accuracy of any statements made and appropriate legal advice should be taken and relied upon before taking or omitting to take any action in respect of any specific matter.
Charles Edwin Edwards MSt(Cantab) MSc(Lond) FCInstCES Barrister
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