Practical Law

Those of you who’ve been following this blog will be aware that I’ve written about adjudication in Ireland multiple times, and had been waiting for what I’d call a “proper” enforcement judgment to discuss. That arrived in the summer with the judgment in Principal Construction Ltd v Beneavin Contractors Ltd. We now have another one, this time in the form of Garrett Simons J’s judgment in Aakon Construction Services Ltd v Pure Fitout Associated Ltd, which was handed down last month. He is the judge nominated in Practice Direction HC 105 to deal with High Court adjudication enforcement applications (something else I discussed earlier this year).

The opening couple of paragraphs of the judgment refer to some very familiar terminology, like the fact that it was a statute (this time, the Construction Contracts Act 2013 (CCA 2013)) that introduced a statutory scheme whereby disputes under construction contracts could be referred to adjudication; that adjudicators’ decisions are provisionally binding on the parties; and that they will be enforced summarily.

It is all part of the “pay now, argue later” approach that we’ve known for the last 20-odd years. The only real difference in Ireland is that it is only payment disputes that can be referred to adjudication, and their payment rules are quite different from ours. Also, the CCA 2013 makes express provision for the enforcement of an adjudicator’s decision with the leave of the court “in the same manner as a judgment or order of the High Court”. If leave is given, judgment is entered “in the terms of the adjudicator’s decision”. We all know that in England and Wales, the TCC had to develop the enforcement procedure that we are all familiar with.

It comes as no surprise that the paying party raised jurisdictional and natural justice arguments to defend its position (a third ground related to impartiality was “sensibly” withdrawn). Perhaps it is also no surprise that the court rejected these grounds and enforced the adjudicator’s decision. However, I’m getting ahead of myself and need to tell you how the court arrived at that conclusion.

Aakon Construction Services Ltd v Pure Fitout Associated Ltd

This was a payment dispute that arose after the responding party (Pure Fitout) had purported to terminate the parties’ contract.

The adjudicator decided that the referring party’s (Aakon Construction) payment claim notice was a valid notice in accordance with the CCA 2013 and the parties’ contract and, as the responding party had failed to respond and serve a pay less notice, it was obliged to pay the full amount invoiced (so far, all very familiar). However, the adjudicator did not go further and carry out a valuation of the sum properly due. Instead, the adjudicator acknowledged that while Pure Fitout would be entitled to adjudicate the true value, it could not do so until it had complied with his decision and paid the sum awarded. The adjudicator cited the Court of Appeal’s decision in Grove Developments Ltd v S&T (UK) Ltd as authority for this proposition.

Before Garrett Simons J, Pure Fitout raised a number of arguments that the judge ultimately rejected in his detailed (and rather long) judgment. However, before doing so, he provided an overview of the CCA 2013, setting out the (familiar) aims of the legislation, namely to provide a fast-track process that leads to an adjudicator’s decision that is enforceable on a provisional basis; it enforces “the payment of moneys from one party to another” until the dispute is finally resolved, whether that is by settlement or through litigation or arbitration.

The judge also reminded everyone of the interim binding nature of adjudicators’ decisions and the rationale of a “pay now, argue later” process. He highlighted that there is a risk of injustice in this approach, which the courts in England and Wales have addressed. Interestingly, he said that the Irish courts cannot simply “read across” case law decided under the Construction Act 1996 and apply it to the CCA 2013. However, he also said (somewhat confusingly perhaps) that same case law is “of great assistance in addressing the question of principle as to whether and when a court should depart from the literal meaning of the legislation” when it comes to looking at an adjudicator’s jurisdiction and whether the adjudicator has complied with fair procedures (which we’d call the rules of natural justice).

Importantly in my view, the judge also emphasised that on an application for leave to enforce the adjudicator’s decision, he was not concerned with whether the adjudicator got the law right but rather whether the alleged failure to carry out a valuation meant the adjudicator had breached the fair procedure requirement (as Pure Fit argued) because he’d failed to deal with all the defences.

The first part of Pure Fitout’s challenge related to that fact that (it said) the adjudicator had exceeded his jurisdiction because the decision went beyond the terms of the payment dispute referred to him. The judge considered this aspect under three broad headings:

• Adequacy of the notice of intention to refer.
• Whether the adjudicator dealt with multiple disputes.
• Whether the payment dispute was validly referred to adjudication.

Adequacy of the notice of intention to refer

Ireland’s payment and adjudication rules are different and so I’m not going to dwell on the detail, rather just highlight some of the points he made. For example:

• The judge felt that parties shouldn’t assume that a notice of adjudication in Ireland has the same “canonical status” as a notice of adjudication in the UK, which means there is (potentially) more scope in Ireland for a party to argue that the notice does not fix the parameters of the adjudicator’s jurisdiction in the same way as here. One feels this may well get tested again at some point, something I think even the judge acknowledged when he said it was unnecessary on the facts of the case before him because the:

“… terms of the notice of intention [were] comprehensive enough to clothe the adjudicator with jurisdiction to reach the decision that he did.”

• The responding party must know the case that it has to meet and be given a “meaningful opportunity to respond” and, depending on the facts, “refinement of legal argument in the referral will normally be permissible”.
• A notice of intention to refer should not be interpreted narrowly “so as to deprive a respondent of a potential defence”. The judge accepted that the referring party will inevitably draft the notice so as to be confined to its case, and that a notice will rarely refer to points that might be raised by way of a defence. However, the notice should be interpreted as encompassing “any legitimate defence” (and he referred to Coulson J’s judgment in Pilon Ltd v Breyer Group on this point).

Here, there was no basis for saying the adjudicator exceeded his jurisdiction. Nor did he take a too narrow view of his jurisdiction and act improperly by failing to consider the true value of the payment claim. (The judge noted this line of argument was a “contradictory and self-serving approach”, something we might call having your cake and eating it!).

Dealing with multiple disputes

The CCA 2013 allows an adjudicator to deal with several payment disputes arising under the same construction contract or related construction contracts at the same time, which is a marked difference to the Construction Act 1996 and the Scheme for Construction Contracts 1998, which both refer to “dispute” in the singular. Therefore, it is hard to see why this argument was advanced and, as the judge noted, was “predicated on two assumptions, both of which are incorrect”.

Was the dispute validly referred?

This was really all about the procedure of the referral to adjudication and the involvement of the adjudicator nominating body (ANB). It focused on the language used to describe the dispute in the application form and the notice of adjudication. As the judge noted, any difference in the wording was “legally irrelevant”.

Failed to take into account one of the defences

The second part of Pure Fitout’s challenge related to the allegation that the adjudicator failed to comply with the requirements of a fair procedure because he failed to take into account one of its defences (that the true value should be calculated).

The judge strongly disagreed and felt the criticism did not accurately reflect what the adjudicator did. As I’ve mentioned above, the adjudicator relied on the Court of Appeal’s judgment in Grove Developments and decided that, by failing to respond to the payment claim, that triggered a “default requirement to pay the amount claimed”, and there could only be an adjudication about the true value after that sum had been paid. (Put another way, this was effectively a smash and grab adjudication where the lack of a valid pay less notice meant the sum claimed became the sum due to be paid, and there is never much in the way of a defence to that!)

The judge noted the adjudicator had made a reasoned decision on this point and was effectively saying the defence was inadmissible at the time, he was not disregarding or ignoring it. The judge went on to comment that although the adjudicator’s approach was “tenable”, he was not considering the broader issue of whether principles similar to those set out in Grove Developments also apply in Ireland. That was a matter for another day and was not a relevant debate to have on this enforcement application.

Consequently, the judge granted leave to enforce.

Does subsequent adjudicator’s decision impact the judgment?

The case came back before the judge earlier this month to deal with the form of order that should be made following the principle judgment. The judge also had to deal with the question of whether the judgment debt should be adjusted by reference to the outcome of a second adjudication between the parties, and also had to deal with interest and costs.

He determined Aakon Construction was entitled to judgment in the full amount of the first adjudicator’s decision. In reaching this conclusion, the judge rejected the submission that a subsequent adjudicator’s decision superseded the first decision, rendering the first no longer binding on the parties. He felt it would undermine the purpose of the CCA 2013 and would require the court to go beyond acting as a mechanism to enforce adjudicators’ decisions. However, he clearly didn’t shut the door to arguments about setting off one decision against another, suggesting instead that it wasn’t necessary or appropriate on this occasion.

My take aways

A body of case law is developing in Ireland. It is interesting to watch this happen, and to see how the judges manage this process, having just an eye on what is happening over here.

However, it is also clear that the judges are not going to accept that body of case law to support parties’ submissions and adjudicators are well advised to tread carefully too. Although it is very easy to look to what is happening here, to find cases to support the arguments you want to make, as this judge goes to great lengths to explain, although the two pieces of legislation adopt the same “pay now, argue later” approach, they achieve this in quite different ways.

Adjudicators have a tough enough job answering the question asked, not exceeding their jurisdiction (or not going far enough sometimes) and making sure they do everything fairly. Don’t let English or Scottish authorities trip you up!