Only last week, I was part of a CIArb panel discussing 25 years of adjudication or, to be more accurate, 25 years of the Construction Act 1996. As we all know, the Act really only started to bite sometime in 1998 (because it only applied to contracts entered into after 1 May 1998), but it was a little while longer before we saw the first adjudication enforcement case (Macob Civil Engineering Ltd v Morrison Construction Ltd), which was heard by Dyson J, who was the Judge in Charge of the TCC at the time.
Macob laid the foundations for what we all now take for granted when it comes to adjudication enforcement and the support the process gets from the courts, whether that is in the TCC or all the way up to the Supreme Court. As Nicholas Gould said, everyone was waiting for someone to go first.
I guess you could say it set the ball rolling and now Ireland has its own Macob to set the enforcement ball rolling there following the judgment in Principal Construction Ltd v Beneavin Contractors Ltd.
Adjudication in Ireland
I’ve written about adjudication In Ireland many times. It has followed a similar path to here, although it has taken much longer to get to this point. The Construction Contracts Act 2013 (CCA 2013) introduced statutory adjudication to Ireland and it has applied to construction contracts entered into since 25 July 2016.
Despite adjudication being around for some time, it is only this year that I’ve had court stuff to discuss, with a practice direction that suggests enforcement hearings will take place on a Wednesday before Simons J and judgments like Construgomes & Carlos Gomes SA v Dragados Ireland Ltd. However, we had been waiting for what I’d call the first proper adjudication enforcement case, and now we have it, although I note it was before a different judge (Meenan J) and was heard on a Friday!
Principal Construction Ltd v Beneavin Contractors Ltd
This was an application to enforce an adjudicator’s decision dated 4 August 2020 for almost €644,000. The dispute centred on the value of variations that Principal Construction Ltd had carried out during works at a nursing home in Glasnevin, Dublin.
In the enforcement proceedings that followed the adjudicator’s decision, the judge started off by looking at the CCA 2013 and highlighted that its main purpose was to provide a “summary procedure to enforce the payment of moneys from one party to another in a building contract”. He referred to section 6 and highlighted that section 6(11) provides that an adjudicator’s decision “if binding” should be enforced like a court order or judgment. Such applications could be made on an expedited basis (Gravity Construction Ltd v Total Highway Maintenance Ltd) and the court should work on the assumption that the adjudicator’s decision should be enforced (DG Williamson Ltd v Northern Ireland Prison Services and N10, which was actually decided under the UK’s Construction Act 1996).
In its application to enforce, Principal relied on the wording and purpose of the CCA 2013. However, Beneavin (unsurprisingly) resisted enforcement, raising three arguments in support. Two of those are very familiar defences (an adjudicator’s material breach of the rules of natural justice and a lack of jurisdiction) and one not so – the use of the phrase “if binding” in section 6(11) meant that it was easier to resist enforcement in Ireland than in the UK.
Meaning of “if binding”
The judge dealt with this point briefly. He noted that section 6(11) had to be read subject to section 6(10), which provides that an adjudicator’s decision is binding until the payment dispute is finally settled by the parties. Also, although these words are not included in the UK’s legislation, the UK courts have held that a decision may only be unenforceable on natural justice or jurisdiction grounds. Thus, section 6(11) should be given a narrow interpretation.
Conclusivity of the final certificate point
The adjudicator’s lack of jurisdiction was said to arise because the contract provided that the final certificate became conclusive if notice of arbitration was not given within ten days of issue. Here, the final certificate was issued in December 2019 and the notice of adjudication was not issued until June 2020.
Beneavin relied on Coulson J’s judgment in Trustees of the Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Ltd in support of its argument.
On this point, the judge said there was a distinction between the jurisdiction of an adjudicator to hear a claim and the adjudicator’s decision on that claim. Jurisdiction to hear a claim was derived from the terms of the CCA 2013 and this gave a party an unfettered right to refer a payment dispute to adjudication. However, once that payment dispute was referred, the adjudicator may have regard to the terms of the construction contract. On the facts here, the adjudicator decided that the final certificate issued in December 2019 “may be invalid”.
Breach of the rules of natural justice
Beneavin argued that the adjudicator had materially breached the rules of natural justice by failing to allow it to prosecute its counterclaim. It relied on Coulson J’s judgment in Pilon Ltd v Breyer Group plc.
On this point, the judge noted that the “counterclaim” was set out briefly in the response and took the form of a claim for liquidated damages for €134,000. The adjudicator had decided that he lacked jurisdiction to deal with the counterclaim as that was “in law … a separate action”. He said the CCA 2013 only allowed him to deal with a defence that included “abatement, set off, etc”. He was supported in this by Lord Briggs’ words in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd, where he said that:
“… a set-off may be advanced by way of defence to the exclusion of the claim referred to adjudication, but not as an independent claim for a monetary award in favour of the respondent to the reference.”
Also, in any event, the adjudicator had dealt with the substance of the counterclaim because he had considered the matter of delay (which gave rise to the claim for liquidated damages) and had concluded that the delays were caused by “OKP and the design team by their instructed variations”. That is why he’d awarded Principal some €568,000 for variations. Therefore, the judge concluded that the adjudicator acted “well within the principles set out by Coulson J in Pilon Ltd v Breyer Group plc“.
Consequently, the adjudicator’s decision was enforced.
At last week’s panel event, Kim Franklin made the point that, in the beginning, there were a lot of known unknowns surrounding adjudication and Macob was instrumental in being at the start of the process that sorted most of them out, helped along by the TCC’s judges (like Coulson J, Akenhead J and Jackson J). They gave the parties clarity and, while everything might be in good order now, it all took time.
Ireland is just at the start of this process. It only just has its first “proper” adjudication enforcement judgment – its Macob moment – but there is one fundamental difference. It also has over 20 years of UK case law to draw on when deciding what the CCA 2013 really means and what levels of behaviour will be tolerated (from the parties and the adjudicators). That is a massive helping hand – a heads-up – and should save parties considerable money in the long run as it short-circuits much of the uncertainty that Kim alluded to.