Adjudication Error Stays Enforcement

Adjudication is designed to be a simple and quick process for the resolution of differences and the adjudicator’s decision is normally one which has to be accepted ‘warts and all’. An adjudicator’s award stands until the matter is finally decided by an arbitrator or the court.

For many years, the position has been that even if the adjudicator makes a decision which is wrong in law or fact, this cannot prevent the enforcement of that decision by the court. However, a recent judgment saw the judge take a somewhat different approach in such circumstances.

A contractor had hired a subcontractor to carry out railway signalling work. When a dispute between the two arose, they went to adjudication. In reaching his decision, the adjudicator failed to take into account all of the payments made under the contract, with the result that the subcontractor was deemed to be entitled to more than £1/2 million. Had the adjudicator not made this error, no sum would have been payable.

The matter ended up in court, with the subcontractor seeking summary judgment against the contractor and the contractor claiming that the adjudicator lacked jurisdiction and that the decision was wrong as a matter of fact, so should not be enforced.

The court ruled that whilst the adjudicator did have the appropriate jurisdiction, the decision was in error in fact and/or law. In this case, the judge ruled that it was open to the court to make a final decision because the contract did not contain an arbitration clause and so the matter did not have to be decided by means of arbitration. Furthermore, there was no substantial dispute over the facts of the case and the court was able to reach a decision on the material before it. The court therefore decided that no sum was payable.

In practical terms, this means that where an adjudicator has made a mathematical error which is easy to demonstrate, it may be possible in some circumstances to go to court to obtain a declaration of parties’ rights that will prevent enforcement of the adjudicator’s award. Where matters are more complex, however, it may not be possible to obtain a decision of the court. One possible strategy in such circumstances might be to refer some points directly to the court in the first instance.

Construction disputes are often complex and can spiral out of control unless handled carefully.

Bill Duncan or Jennifer Tear can advise you if you are in dispute over a construction contract.