REUTERS | Amr Abdallah Dalsh

The ostrich approach to dealing with adjudication

When I was reading Stuart-Smith J’s judgment in Lobo v Corich, I started thinking about the different types of party that come to adjudication, or get embroiled in the process as a responding party. As you might imagine, not everybody takes part enthusiastically. In fact, some could be said to be extremely reluctant.

As Lobo v Corich demonstrates, attempting to bury your head in the sand is not a sound tactic. (Apparently it wouldn’t be very good for an ostrich either, as it wouldn’t be able to breathe!)

Lobo v Corich

This is an unusual case, as it is all about the contractor’s address for service and whether documents were ever received by it.

In 2010, the parties entered into a contract based on the JCT Intermediate Building Contract, 2005 Edition, Revision 2 2009. Work was due to last 60 weeks (it isn’t clear exactly when it was due to start or finish), and the contract sum was £683,000. Mr Corich was named as the contractor, and Mr E Lobo and Dr C Lobo were named as the employer. The contract particulars provided that the contractor’s address was 7 Gunter Grove, or such other address as it might notify, or, failing that, its last known principal business address.

In April 2014, the employer terminated the contract and indicated another contractor would complete the works. To ensure the contractor received this letter, it was sent and hand delivered to a number of addresses. It was subsequently emailed to the contractor at more than one email address.

The termination certificate, prepared under clause 8.7.4 of the contract, was sent to the contractor in January 2016. Again multiple addresses were used. In February 2016, the letter was hand delivered to those addresses.

An adjudication followed in the autumn of 2016. In addition to delivering the notice by hand to three addresses, four email addresses were used. The adjudicator’s decision was emailed on 19 October and sent by post the following day.

Unsurprisingly, the adjudicator’s decision was not complied with. In February 2017, Jefford J in the TCC granted summary judgment to enforce the adjudicator’s decision. She was told about the steps taken to serve and inform the contractor about the hearing. To secure the judgment, at the end of February, Coulson J made an interim charging order over the contractor’s property at 25 Gunter Grove.

According to the contractor, it was only at the beginning of March 2017 that it became aware of what had been happening. Only then were steps taken to set aside the orders that had been made and this time, the matter came before Stuart-Smith J.

Did the contractor know about the adjudication and what happened subsequently?

In short, yes. As the judge put it:

“Taking his evidence as a whole, I stop just short of being satisfied to the requisite standard that the [contractor] is lying.”

He went on:

“However, I am satisfied that most if not all of the adjudication and litigation documents that were delivered to 25 Gunter Grove were there to be collected by him in accordance with the practice he described; and I am equally satisfied that the emails I have listed above were all present in his email accounts on his periodic use of each of those accounts. I reject the suggestion that he did not see the emails in his inboxes. At best for him, he chose not to look and see what they were about. It is not necessary to find precisely how or why he did not look at either the physical documents or the emails; but I am satisfied that his failure to do so was the result of a conscious decision, in the case of the emails, not to open them and, in the case of the physical documents, not to look at them. I also reject the suggestion that he neither saw nor picked up the physical documents at 25 Gunter Grove: he may not have picked them up, but they were there to be seen and, if he did not do so, it was as a result of a conscious sifting process.”

Were the adjudication proceedings properly constituted, and had due notice been given?

Again the answer was yes. The adjudication notice and referral had been effectively served, the adjudication was properly constituted and the contractor had due notice. The same could be said of the enforcement proceedings under CPR 6.9.

Interestingly, 7 Gunter Grove remained the contractual address for service, but 25 Gunter Grove was an effective address for service because it was the contractor’s most consistent and reliable address.

Should the court orders be set aside?

This time the answer was no. There had been no procedural unfairness or breach of natural justice. Even if the contractor’s failings had been unconscious, that would not have justified setting aside the adjudicator’s decision, the summary judgment or the interim charging order. The contractor only had itself to blame for such a:

“… protracted, pervasive, serious and inexplicable failure to behave with the prudence of a normally intelligent and educated businessman”.

I thought it was interesting that the court went on to say that the employer was under no duty to contact the contractor to find out if it was aware of the proceedings, that no such duty existed in the circumstances of this case. At the same time, the court suggested that there may be circumstances where a party should take such steps, otherwise they may be exposed to an application to set aside.

What would I do?

It’s extremely rare to conduct an adjudication from start to finish where the responding party is not involved at all, like the contractor in Lobo v Corich. Obviously, you may get a party that chooses not to take part because it has made a jurisdictional challenge that it is standing by, or there is an ex parte application for relief, but that is different to silence in the sense of this case.

As the adjudicator, when faced with silence, I consider it prudent to adopt a procedure whereby you can be reasonably satisfied that your correspondence is being received by both parties. For example, asking the email system for a read or delivery receipt, and making sure your emails don’t come back to you because the recipient is unknown. Additionally, hard copies of correspondence should be sent by means of signed for post or confirmation of a courier delivery. At least then you can record in your decision that you are satisfied that the silent party was given an opportunity to participate. The principle of natural justice may require that both parties are given an opportunity to be heard, but they don’t really go much further than that, at least not yet anyway.

It is a strange situation for the contractor to be in, because we all know these things don’t go away. Without a contrary argument, the adjudicator was almost bound to find in the employer’s favour, and the court was almost certainly going to enforce that decision (provided service could be demonstrated). I guess the interim charging order being granted in the employer’s favour was also rather inevitable. It feels a bit like the situation where someone’s debts are spiralling out of control. Instead of sitting down and dealing with those debts, some people choose to pretend nothing is happening, putting their bills and other letters in a drawer unopened. Only when the bailiff comes a knocking does the enormity of the situation hit them.

MCMS Ltd Matt Molloy

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