Nowadays parties take for granted that an adjudicator’s decision is enforceable (subject to valid natural justice and jurisdictional challenges), but rarely do parties give thought to the status of the decision.
What is the status of an adjudicator’s decision?
This question troubled judicial minds way back when adjudication was in its infancy, but seems to have been before the courts less in recent years:
- Is it a contractual obligation? HHJ Hicks QC concluded (in VHE Construction plc v RBSTB Trust Co Ltd [2000] BLR 187) that enforcement proceedings were proceedings to enforce a contractual obligation.
- Or is it a contractual entitlement to immediate payment? HHJ Thornton QC thought so (in Bovis Lend Lease Ltd v Triangle Development Ltd [2002] BLR 125). He thought there could be no deduction, set-off, withholding etc against an adjudicator’s decision because of the statutory and contractual nature of it.
- It isn’t the same as an arbitrator’s award. Similarly, HHJ Lloyd QC (in David McLean Housing Contractors Ltd v Swansea Housing Association Ltd [2003] CILL 1939) concluded that an adjudicator’s decision could not be equated to an arbitrator’s award. He said that enforcing an adjudicator’s decision was an action to enforce the right or liability which had been upheld by that decision.
Regardless of the precise status of an adjudicator’s decision, everyone knows that the TCC takes a robust to enforcement, and that the decision is binding, until litigation, arbitration or agreement between the parties.
Should an adjudicator always reach a decision?
But what happens if the responding party offers to settle the adjudication before the adjudicator has reached his decision? Should the adjudicator always reach a decision?
This has happened to me recently on a couple of occasions. Both times, the referring party has insisted that I reach a decision even though the responding party has said it will pay-up. The referring parties’ rationale on insisting on a decision, even though they were being paid, was that if they were paid then they would not have to enforce the decision (which would save money), but they also wanted the comfort of a decision (an undisputed debt), in case things didn’t go quite to plan.
I can see the logic of this. There are a number of reasons why it may be to the referring party’s advantage to have an adjudicator’s decision:
- Enforcement. While the parties can always reach a settlement of a claim, and negotiate the terms of that agreement, an adjudicator’s decision is likely to be easier to enforce in the TCC than a settlement agreement. For a start, there is the procedure set out at section 9 of the TCC Guide, which is specifically designed for the enforcement of an adjudicator’s decision. I would have thought it would be much easier to follow this, than to bring summary judgment proceedings on the settlement agreement.
- Is it a “construction contract”? An adjudicator’s decision also means the parties do not have to consider the thorny issue of whether the settlement agreement is a “construction contract“, giving them a right to adjudicate over its terms or for breach of that agreement.
- Binding effect of the decision. Finally, even though the parties may think they have reached a compromise, there may always be a next time. An adjudicator’s decision always binds subsequent adjudicators. A settlement agreement, if disclosed by either party (and ignoring any arguments about without prejudice), would be just part of the evidence before that adjudicator.
I agree with Matt about the potential benefits of having a decision even if payment is made. However, there could be a question about whether in such a situation there is no longer a dispute and what impact that would have on the adjudicator’s jurisdiction.
It may well be that once the dispute has been referred the jurisdiction remains in place regardless of subsequent events. Halki v Sopex dealt with arbitration and there have been subsequent decisions on the point but in that case it was held that there is a dispute once money is claimed unless and until the defendant admits the sum is due and payable. This suggests that once the claim is accepted there is no longer a dispute.
I also suspect that a respondent would try to argue that the adjudicator has a duty to limit unnecessary costs (e.g. under paragraph 12 of the Scheme) so he should not incur further costs in writing his decision if payment has been made. Whether that is right might depend on the wider implications the decision might have.
I think if the payment directly relates to the dispute and is unconditional then, in the interests of limiting costs, I think it could well be appropriate to stand down/not proceed to reach a Decision.
I recall a situation a few years ago in circumstances involving an interim payment dispute where the Responding Party made a payment, but the Referring Party said that it still wanted a decision as it required findings/declarations on some matters of principle and also because the payment was expressed to have been made on an “on account” basis. Ultimately the Responding Party agreed to the declarations sought and the Decision was issued. In effect, it was a “consent” award.