Adjudications can be costly, and those costs are not recoverable from the other side. Where there are concerns that the adjudicator does not have jurisdiction to deal with the matter referred to him, there has been a growing trend to make an application to court for an injunction to prevent the adjudication from continuing.
Court refuses to grant injunction to stop adjudication
However, in what is a further sign of the courts’ disapproval of trying to involve them in ongoing adjudications, the Technology and Construction Court (“TCC”) recently refused to grant an injunction in circumstances where it was argued that the adjudicator had no jurisdiction.
The case was Billingford Holdings Ltd & BFL Trade Ltd v SMC Building Solutions Ltd and Nigel Anthony Dight [2019] EWHC 711 (TCC).
Billingford made an application to court for an urgent instruction to prevent the adjudication that had been brought against it from continuing. The application was brought against both the referring party (SMC) and the adjudicator (Mr Dight).
Billingford had written to the adjudicator stating he did not have jurisdiction. When he replied saying he did have jurisdiction, Billingford made its application to court for the injunction.
Showing the speed with which the TCC can move, the judge dealt with the injunction application the very next day after it was issued. The defendant SMC was only notified of the hearing the night before – at 8.40pm.
Courts will rarely interfere in ongoing adjudications
The judge confirmed that the courts do have the power to intervene in an ongoing adjudication. However, the judge made clear that “It is only in extremely rare cases that the TCC will interfere by [granting injunctions or similar such orders] in ongoing adjudications.”
The judge made the point that adjudications should be allowed to continue without interference from the courts. Arguments about jurisdiction should normally only be taken up with the court at the enforcement stage, after the adjudicator has given his decision.
Policy reasons given for non-interference in jurisdiction challenges
A large part of this was for policy reasons, such as the fact that adjudication is designed to be quick and inexpensive. There is no time within the short duration of an adjudication for the court to deal with challenges on jurisdiction without delaying the adjudication timetable.
The judge in this case found that the arguments on jurisdiction put forward by Billingford were run-of-the mill jurisdiction arguments that did not justify the court’s intervention. As a result, the injunction application was refused. Billingford would have been found liable for the responding parties’ costs of the application.
Adjudication costs are irrecoverable
Unfortunately, the effect of this decision, and others like it, is that where a party believes that the adjudicator does not have jurisdiction, it has to incur the costs of engaging in that adjudication, albeit raising its jurisdictional arguments before the adjudicator. It will have to wait until the enforcement stage before addressing the court on the issue.
The drawback with this approach of the courts is that adjudication costs are irrecoverable. So even if the court finds that the adjudicator lacked jurisdiction and so his decision is unenforceable, the party will have lost its costs incurred in that adjudication. Whilst it remains an option for a responding party in adjudication not to engage in the process at all, leaving it to argue at the enforcement stage that the adjudicator did not have jurisdiction, that is a high-risk option that is often not recommended.
If you have any issues with the above and would like guidance, please contact our construction lawyers.
