REUTERS | Gary Hershorn

Only the “plainest cases” will not be enforced, and this was not one of them!

It is a fundamental principle of English law that a defendant “who wishes to defend all or part of a claim must file a defence” (CPR 15.2). If a defendant fails to file a defence, the claimant may obtain judgment in default (CPR 15.3). Similarly, it is a principle of adjudication enforcement that the defendant does not file a defence as envisaged by CPR 15.2 but, instead, files a witness statement “in opposition to the relief being sought” (paragraph 9.2.6, TCC Guide). Presumably in practice, that witness statement takes the form of a defence and is a defence in all but name.

All of this I’m sure you are very familiar with. I mention it simply to remind ourselves of how Fraser J came to be discussing the defendants’ seven defences in his judgment in Ground Developments Ltd v FCC Construccion SA and others.

Ground Developments Ltd v FCC Construccion SA and others

The parties’ dispute arose out of certain groundworks (known as DSM column works) carried out by Ground Developments Ltd (the sub-contractor) for the joint venture responsible for constructing a new six-lane toll bridge over the Mersey, connecting Runcorn to Widnes (the JV).

The judgment does not go into the “fine detail of the substantive dispute” because the court resisted the JV’s attempts to “immerse it” in those details. Suffice to say, it involved the usual things, like payment, repudiation and “other matters that occur from time to time on such projects“. The amount in issue was just under £200,000, as set out in the sub-contractor’s notice of adjudication. It was also the sum that the adjudicator found was due to the sub-contractor, when he issued his decision in April 2016. In reaching that decision, the adjudicator had:

  • Looked at the JV’s failure to serve payment and pay less notices against three interim applications for payment. Deciding the sums claimed were in fact due to the sub-contractor was probably inevitable, given the way the case law has developed on this point.
  • Concluded that the parties’ contract was based on the sub-contractor’s letter of 8 August 2015. He rejected the alternative argument that the contract was based on an NEC3 sub-contract. He also rejected the JV’s “no contract” argument or, alternatively, that the contract was under the terms of its email of 19 June 2015.

Lack of jurisdiction and/or natural justice breaches

The number and scope of the JV’s seven defences makes it difficult to do each one justice in this blog post. Suffice to say, the court considered and rejected each one in turn, giving detailed reasons for doing so (which I set out briefly below).

Four of the JV’s seven defences alleged a lack of jurisdiction and/or a breach of the rules of natural justice. We know that it is difficult to establish that an adjudicator has exceeded his jurisdiction or breached the rules of natural justice. Therefore, I thought it was particularly reassuring to see Chadwick LJ’s judgment in Carillion Construction Ltd v Devenport Royal Dockyard Ltd referred to in the context of alleged breaches of those rules, and to highlight that an adjudicator’s decision will be enforced:

“…unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair.”

Chadwick LJ went on to set out the court’s approach to adjudication enforcement, which I think is worth summarising:

  • The court will interfere only in rare circumstances and will enforce unless the adjudicator answered a question that was not referred to him or he acted unfairly.
  • The court should not encourage parties who are:

    “…simply scrabbling around to find some argument, however tenuous, to resist payment.”

  • The Scheme was introduced to deal with cash flow:

    “The need to have the ‘right’ answer has been subordinated to the need to have an answer quickly.”

  • Acknowledging that adjudicators do not act as arbitrators or judges, and are not usually chosen for the expertise as lawyers:

    “The scheme was not enacted in order to provide definitive answers to complex questions.”

  • The unsuccessful party should pay up and, if it wants to establish the “true position”, it should bring court or arbitration proceedings.
  • Challenging an adjudicator’s decision is:

    “…likely to lead to a substantial waste of time and expense.”

In Ground Developments, Fraser J adopted this approach, at least in relation to the jurisdiction and natural justice challenges.

JV’s seven defences fail

Defence one failed. The adjudicator did not decide a different dispute to the one referred. The court rejected the JV’s argument that the adjudicator had been asked to decide a narrow payment dispute regarding the lack of pay less notices, he had not been asked to value the works. The court noted that the JV was:

“…straining to interpret both the Notice, and the Decision, in an artificial and constrained way far beyond what the natural meaning of the words themselves used can bear, concentrating on isolated sentences out of context, in order to demonstrate that there was some imaginary straying by the Adjudicator outside the ambit of the dispute that was referred to him.”

Defence two failed. The adjudicator did not adjudicate on more than one dispute at the same time (valuation was not a separate dispute). Interestingly, the court suggested that this point was:

“…verging upon, if not completely, unarguable.”

Defence three failed. The adjudicator was not appointed under the adjudication provisions of an NEC3 sub-contract. It was clear from the sub-contractor’s application to the ICE that it was relying on the Scheme for Construction Contracts 1998 and only mentioned the NEC3 sub-contract in the alternative. It was equally clear that the adjudicator did not think the NEC3 sub-contract terms applied, or that he was appointed and accepted his appointment under them.

Defence four failed. The sub-contractor did not argue that the TeCSA adjudication rules applied. The adjudication provisions of the Scheme for Construction Contracts 1998 applied to the adjudication. It was “factually wrong” to argue otherwise and:

“…the Scheme was applied by the Adjudicator and the parties knew this at the time.”

Defence five failed. The adjudicator was entitled to make the findings of fact that he did regarding the nature of the parties’ contract. The JV’s approach was:

“…being used to disguise what is in reality a challenge to the findings that the Adjudicator made. It cannot be said to be a finding that he did not have jurisdiction to make, or one that he made unfairly.

“…this is unarguable in the circumstances…”

Defences six and seven failed. Taken together, these two defences related to whether the question of the nature of the parties’ contract should be dealt with at trial. Although the JV described these defences as a “knockout blow” for the summary judgment application, the court did not agree. It referred to the “seminal” case of Macob Civil Engineering Ltd v Morrison Construction Ltd, which established how to enforce an adjudicator’s decision. The court said that it would follow the conventional approach (to consider if the adjudicator was validly appointed, acted within jurisdiction and complied with the rules of natural justice).

Further, the JV had chosen to put only limited evidence before the adjudicator. While it was entitled to do that, it should not be:

“…permitted to avoid enforcement by stating that it wishes to put other evidence before the court now on contract formation, after it has lost the adjudication.”

Seven nil to the sub-contractor

This was a “meaty” adjudication enforcement judgment. We may have waited a while to have something to write about, but then we got it all in one go, a sort of kitchen sink approach to challenging enforcement, with arguments about jurisdiction and breaches of the rules of natural justice aplenty. I will leave you with a few more of Fraser J’s choice words:

“The views of Chadwick LJ could have been tailor written, in my judgment, for the approach of the Joint Venture to this Decision, so far as the challenges to jurisdiction and alleged breaches of natural justice are concerned.”

MCMS Ltd Matt Molloy

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