Should adjudication have its own bespoke system of enforcement

The Housing Grants, Construction and Regeneration Act 1996 came into force in May 1998[1].

The Act introduced the right to adjudicate under Construction Contracts as the Act defined them.

The Act was silent on how to enforce adjudicators’ decisions.  Nor did the draughtsmen of the Civil Procedure Rules 1998 introduce any new rule or regime for the enforcement of adjudicators’ decisions.

In the first months after the Act came into force, there was discussion among construction lawyers about the best method of enforcement.  Some favoured mandatory injunctions to compel compliance.  Others favoured winding up or bankruptcy proceedings if a payment under a decision was not made forthwith.  The majority concluded that summary judgment was the right route and that one should apply under CPR Part 24 to obtain  summary judgment to give effect to an adjudicator’s decision.

Given that the purpose of introducing statutory adjudication was to achieve fast track resolution of disputes, principally over payment, in an industry the lifeblood of which is cash flow, the main concern initially was to find some method of enforcement which was fast and effective. 

Soon, the judiciary in the Technology and Construction Court (“TCC”) was giving guidance that a party seeking to enforce an adjudicator’s decision should issue proceedings in the TCC marking the proceedings “In the Matter of an Adjudication”, whereupon the matter would be dealt with swiftly under Part 24.  Further written guidance on enforcement followed in the TCC Guide (Section 9 Adjudication Business).

So it came about that in the absence of any bespoke procedure for enforcement, an existing piece of Court machinery was bent to the purpose of enforcing adjudicators’ decisions.

At the time that the Courts were first confirming that Part 24 was the correct route to enforcement, many of the challenges to the enforcement of adjudicators’ decisions, which have since arisen, were not apparent.  

An impressive body of case law raising such challenges has now materialised.  These include challenges to jurisdiction over procedural failures such as not serving the Referral within 7 days of the Notice of Adjudication, or objection that the wrong nominating body had appointed the adjudicator, or that the nominating body’s rules were defective. 

The Court of Appeal determined that all the terms of a construction contract had to be in writing, prompting a distinct category of new challenge[2].

The argument that the dispute which had been referred to adjudication had not crystallised became a popular challenge, as did the argument that more than one dispute had been referred.

Challenges based on the adjudicator’s non-compliance with natural justice also became commonplace.

The Courts have repeatedly said that adjudicators’ decisions should be given effect.  For example, in Balfour Beatty Construction Northern Limited –v- Modus Corovest (Blackpool) Limited[3],  Mr Justice Coulson noted the overriding principle that the Courts will always endeavour to enforce the decision of an adjudicator.  However, the Courts have not, apparently, seen any discrepancy or disparity between this overriding principle and the criteria for success under Part 24. 

Part 24 requires that the Respondent has no real prospect of a successful defence and there is no compelling reason why the case should be disposed of at a full trial.  According to CPR 24.2.3 “in order to defeat the application for summary judgment it is sufficient for the Respondent to show some “prospect” i.e. some chance of success” and “a case may be held to have “a real prospect” of success even if it is improbable”.  The burden of proof rests on the applicant.

The Part 24 procedure is not a robust, bullet proof enforcement procedure at all.  The enforcer fails if the party not wishing to comply with the adjudicator’s decision can show even an improbable ground for not enforcing as long as it is “real”.

So it comes about that the advocate for the enforcing claimant is directed and trammelled down a Part 24 procedure which has become a trap.  He is obliged and constrained to follow that procedure knowing that he will meet an opponent who will be able to select from a now well established precedent database of challenges to the decision and who need only show that he has a prospect of success on one of those challenges.

As an alternative to Part 24, Part 8 of the CPR has been enlisted as a means of resolving disputes over the validity and enforceability of adjudicators’ decisions.  It is applicable where the claimant seeks the Court’s decision on a question which is unlikely to involve a substantial dispute of fact, for example a declaration as to the proper interpretation of a document.  Part 8 is appropriate to a claim under an enactment.  It will therefore be appropriate to answer the question of whether a statutory adjudication is enforceable or not.

Part 8 has the advantage that evidence is served with the claim form and that the defendant files his evidence and serves it on the claimant when he acknowledges service.  So the procedure is potentially swift.  However, the defendant has 14 days to acknowledge.   The Court gives directions for a trial and the Court may allow or permit oral evidence.  With the Court’s permission, counterclaims may be allowed.  There is a significant opportunity for defendants who wish to do so, to make the Part 8 procedure last for some months and to make it costly.

Although Part 8, properly used, is a useful mechanism for resolving questions over the enforceability of adjudicators’ decisions, it would be better to devise a simple, fast, bespoke enforcement system with its own rules and timetable.

Enforcement by summary judgment under Part 24 is too fastidious a process and too easy to circumvent.

The Housing Grants, Construction and Regeneration Act 1996 introduced a whole new statutory regime enabling a significant element of the administration of justice under building contracts to be removed from the Court system to adjudication.  It was essential that that regime had its own mechanism for enforcement.  It was a mistake not to provide this.

The advent of the Local Democracy, Economic Development and Construction Bill[4], which reforms statutory adjudication, provided an opportunity for adjudication enforcement to be reconsidered.  It seems that that opportunity has been missed.  The Bill does not deal with it.

Since adjudication is now of considerable importance to the construction industry as a means of dispute resolution and very widely used, the argument for giving it its own specialist enforcement mechanism can only grow in strength.

Precisely what the enforcement mechanism should be requires consultation and debate and the painstaking work of a drafting committee.

However, it may be prudent to allow the Court to dismiss of its own motion those challenges which it considers are bound to fail.  As regards all other challenges, the Court could be given considerable flexibility to decide how to determine those challenges within a very short timeframe,  devising suitable procedures for each case.  Such flexibility might permit an inquisitorial approach.  There might also be giving of brief oral evidence as well as argument at any hearing which was required.  This would in many cases dispose of the argument that fast track enforcement was inappropriate because oral evidence was required at trial. 

Having some prospect or chance of success at trial in a challenge to enforcement should no longer be enough to prevent early enforcement.  The Courts should be empowered to rapidly resolve all challenges not requiring detailed factual investigation.

Philip Harris FCIArb Solicitor, England & Wales, Chartered Arbitrator, Accredited Mediator.