Adjudication enforcement: to challenge, or not to challenge?

As we know, an adjudicator’s decision is binding on the parties until the dispute is finally determined by litigation, arbitration or agreement between the parties (section 108(3) Housing Grants, Construction and Regeneration Act 1996 (as amended)). This concept is supported by the guiding principle behind construction adjudication: ‘pay now, argue later’.

However, what happens if one party does not comply with an adjudicator’s decision, for example, where it had been ordered to make a payment of money to the other party? Well, that other party does have a remedy because it has the right to ask the court to enforce the decision through a specific and expedited process developed by the Technology and Construction Court (the TCC).

The TCC has adopted a robust attitude to the enforcement of adjudicators’ decisions and will generally enforce any decision made by an adjudicator who had jurisdiction to make that decision. Subsequently, it is commonly accepted that challenges to adjudicators’ decisions in the Court rarely succeed.

This article explores the raft of recent case law and provides a timely reminder of the guiding principles of adjudication enforcement.

Adjudication enforcement: general principles

The recent case of Exyte Hargreaves Ltd v NG Bailey Ltd [2023] EWHC 94 (TCC) provides a useful reminder of the general principles of adjudication enforcement. In this case, Her Honour Judge Kelly summarised at paragraph 15 of the judgment that:

1. Adjudicators’ decisions were binding, even if wrong, until overturned by a court. The only defence to enforceability was if the findings offended the principle of natural justice or if the adjudicator lacked jurisdiction.
2. An adjudicator’s jurisdiction is not limited to the adjudication notice. The TCC will consider the adjudicator’s decision, the parties’ position adopted during the adjudication, evidence submitted to the adjudicator and claims and assertions made before adjudication.
3. If a previous adjudicator had reached a decision on a dispute, a subsequent adjudicator had no jurisdiction to determine the same or substantially the same dispute.
4. Even if an adjudicator had answered the right question in the wrong way; the decision would be binding. If the wrong answer had been answered, the adjudicator would lack jurisdiction.
5. If an adjudicator is asked to consider the issue of interim payment, the adjudicator is obliged to consider the defences raised which go to that issue.
6. An employer may be entitled to set off any sums awarded by an adjudicator against monies payable to it by way of liquidated or ascertained damages, but only if that liability has in fact accrued and the relevant contractual provisions have been complied with.
7. In circumstances where the adjudicator considers valuations only, the TCC has the power to enforce payment in accordance with the valuations without the need for a further adjudication to convert those binding valuations into orders for payment.
8. There are limited circumstances in which the TCC would allow a set off against enforcement of an adjudication decision.

Recent cases of unsuccessful challenges to enforcement

Failure to comply with Pre-Action Protocol not a basis for a stay: J&B Hopkins Ltd v A&V Building Solution Ltd [2023] EWHC 301 (TCC)

Following multiple adjudications between the parties, J&B Hopkins Ltd (J&BH) applied to the TCC for enforcement of an adjudication decision. Prior to the enforcement hearing, A&V Building Solution issued an application requesting that the enforcement proceedings should be suspended. The ground for the application was that J&BH had not complied with the Pre-Action Protocol for Construction and Engineering Disputes (the Protocol).

Mr Roger Ter Haar QC, sitting as a deputy High Court judge, enforced the adjudicator’s decision finding there was no basis for the challenge to enforcement and a failure to comply with the Protocol was not a basis for a stay given that the Protocol did not apply to adjudication enforcement proceedings.

Adjudicator did not exercise a lien: Nicholas James Care Homes Ltd v Liberty Homes (Kent) Ltd [2023] EWHC 360 (TCC)

Nicholas James Care Homes Ltd (NJCH) instigated the original adjudication proceedings during which the adjudicator, Dr Cyril Chern, and his clerk sent multiple requests and chasers for payment of fees on account. The last request was issued only four days before issue of the adjudicator’s decision. Liberty Homes (Kent) Ltd (Liberty) paid the required fees but reserved their rights to raise jurisdictional challenges.

When NJCH later brought proceedings to enforce the adjudicator’s decision, Liberty argued that the adjudicator’s requests for payment of fees on account amounted to a threat of lien and/ or evidence of the adjudicator’s bias against Liberty, thus making the decision unlawful and unenforceable.

Recorder Andrew Singer KC, sitting in the TCC, held that the adjudicator’s request for advance payment on account of his fees did not amount to the exercise of a lien, and further noted that Liberty had failed to raise any complaints of bias during or immediately after the adjudication proceedings. The decision was enforced and there were no grounds to stay enforcement.

Stay of execution of enforcement refused: WRB (NI) Ltd v Henry Construction Projects Ltd [2023] EWHC 278 (TCC)

WRB brought proceedings against Henry Construction Projects to enforce an adjudication decision previously made in their favour. Henry Construction Projects sought a stay of execution on the grounds that they were due to issue a notice for adjudication for a cross-claim totalling £755,000 in liquidated damages, which was more than the circa £121,000 being sought by WRB under the enforcement proceedings.

While Henry Construction Projects admitted that a possible cross-claim did not provide a defence to enforcement proceedings, they argued that WRB’s status as a dormant company constituted a ‘parlous financial standing’, and that if the adjudication decision was enforced it was highly probable that any monies paid now by Henry Construction Projects would not be repaid in the event that they should subsequently succeed in their own claim, and that this justified a stay in execution of enforcement.

The judge agreed with WRB and refused a stay. It was held that Henry Construction Projects had taken the risk of contracting with a dormant company and it would be ‘unfair and contrary to the spirit of adjudication’ to allow them to escape liability based on WRB’s unchanged financial position. It was also noted that Henry Construction Projects had declined the offer of a guarantee from a group company.

A lesson for all when challenging an enforcement application

Notwithstanding the fast-paced nature of adjudication, due consideration must always be given by both parties to the general principles of adjudication and potential enforcement proceedings. As these cases demonstrate, parties with concerns over any element of an adjudication, such as the adjudicator’s jurisdiction, a procedural matter or whether natural justice is being served, that issue should be raised contemporaneously, and not for the first time within enforcement proceedings. Remember, unless it is pretty clear cut that an adjudicator has exceeded his jurisdiction or breached the rules of natural justice, challenging an enforcement application is risky business.