Can I Challenge the Enforcement of an Adjudicator’s Decision?

Resisting Enforcement of an Adjudicator’s Decision

Adjudication is intended to bind the losing party, but in order to enforce an Adjudicator’s decision the winning party has to go to court and obtain a court judgment stating that the Adjudicator’s decision must be followed. This is known as the ‘enforcement stage’ of an adjudication.

It is only necessary where the losing party fails to voluntarily comply with the Adjudicator’s decision. Such failures are rare, and they most commonly occur when a losing party believes that he has legitimate reason not to comply (as opposed to simply not wanting to comply because he’s lost).

The Technology and Construction Court (TCC) will usually enforce an adjudicator’s decision - particularly one requiring payment by the losing party to the winning party. There are, however, limited circumstances in which the paying party may succeed in resisting enforcement.

Lack of Jurisdiction

The TCC may be willing to decline to enforce an Adjudicator’s decision if the losing party can show that the Adjudicator lacked jurisdiction to make the decision.

There are a number of possible jurisdictional challenges. These include arguments that:

• the contract was not a ‘construction contract’ under the Construction Act 1996;

• the Adjudicator was not appointed in accordance with the applicable adjudication rules;

• the dispute had not yet crystallised when the dispute was referred to the Adjudicator;

• the dispute referred was different from a dispute that had crystallised;

• the same or substantially the same dispute had already been decided;

• the adjudicator failed to decide the dispute actually referred;

• the decision was not reached within the required time; and

• the adjudicator imposed a pre-condition on publication of the decision.

Material Breach of Natural Justice

The TCC may also be willing to decline to enforce an Adjudicator’s decision if the procedure followed by the Adjudicator during the adjudication was materially unfair.

Examples are numerous, but include failing to consult both parties about the Adjudicator’s proposed approach, that taking of third-party advice, or the commissioning of a report. Other examples include failing to give sufficient time to respond to evidence or submissions, failing to properly consider a party’s submissions, defence, or counterclaim, or failing to provide reasons for his decisions (providing that reasons were required or requested).

Over the years, parties have sought to argue that many different things amount to a breach of the rules of natural justice. The court is generally keen to limit the ‘breaches’ that are sufficient to render the Adjudicator’s decision unenforceable. A breach, per se, will not suffice: it must be material. The Technology and Construction Court has rejected challenges based on the dispute being too complex for adjudication.

Other Possible Routes

In some circumstances, the losing party may be in a position to avoid the enforcement of an Adjudicator’s decision by seeking a declaration under CPR Part 8. A Part 8 claim is one used where a party wishes the court to decide a question that does not involve a substantial dispute of fact. It is suited, in the context of adjudication enforcement, to points of law which can be dealt with quickly and which, if decided in the losing party’s favour, will completely undermine the Adjudicator’s decision.

For example, if an Adjudicator has decided that a contractual notice was served too late, and has based the rest of his decision on the consequences of that notice being late, the losing party might bring a Part 8 claim (which will be heard alongside any application by the winning party for enforcement) to argue that in fact the notice was served in time and that, as a result, the Adjudicator’s decision should not be enforced.

Part 8 claims are not uncommon at enforcement stage, but they do not always succeed and the TCC has warned that they are not normally an appropriate way to challenge or prevent enforcement.

Alternatively, a losing party may apply to the court for a stay of execution. This does not avoid the enforcement of the Adjudicator’s decision, but effectively postpones it. It is ordinarily sought when the winning party is (or is about to become) insolvent, and the losing party is concerned that any money paid to the winning party will be lost in the insolvency and not available for recovery by the losing party in subsequent planned litigation about the dispute.

Losing a Challenge

If enforcement is successfully resisted, payment may be avoided by the losing party. However, if the challenge fails the losing party must pay the amount awarded and may also have to pay interest and the costs of the enforcement proceedings, potentially on the indemnity basis.

Regardless of whether a decision is enforcement, the underlying dispute may still be litigated or arbitrated and the final determination might reverse the Adjudicator’s decision and/or the outcome of the enforcement proceedings.

If you are contemplating resisting the enforcement of an Adjudicator’s decision, or you have a decision in your favour that the other party is failing to comply with, contact Hamshaw today to discuss how we might help.