Adjudication: Enforcing an Adjudicator’s Decision
Not all construction projects run smoothly, and disputes may arise between the parties; sometimes they may even require an adjudicator’s intervention.
An adjudicator is a qualified third-party who will consider a dispute and provide a legally binding decision based on the facts. The decision will usually involve one party paying a sum of money (including interest) to the other, along with paying the costs of the adjudication.
Even though the decision is legally binding, the losing party may have reservations regarding the situation between the parties, which may result in payment not being made in accordance with the decision.
If this happens to your organisation (or if your organisation does not want to make payment) what can it do? Below, is a brief overview of the most common process of trying to enforce an adjudicator’s decision via the courts. Please note, this is only a brief overview, and your organisation should always seek formal legal advice.
For the purposes of the below, Party A is the successful party and Party B is the unsuccessful party.
First, Party A must formally demand payment of the decision from Party B. If Party B does not satisfy the demand, or the parties do not agree a compromise position, then Party A will need to issue a claim for enforcement of the decision before the Technology and Construction Court (the “TCC”), which forms part of the High Court of England and Wales.
The claim will usually be in two parts:
- The claim for enforcement of the decision; and
- An application for summary judgment.
For the claim, Party A will need to prepare several documents (with help from their legal team) including the claim form and the Particulars of Claim. The Particulars will set out Party A’s case, which will usually include the background to the parties’ relationship, how the dispute arose, the adjudication process including the outcome, and the subsequent non-payment by Party B.
An application for summary judgment is made when a defendant (Party B) has no real prospect of succeeding in the claim and there is no other compelling reason why the case or issue should be disposed of at trial. The reason summary judgment applications are commonplace here is that the parties succumb to the jurisdiction of the adjudicator and agree to comply with the decision. Therefore, it is unlikely that the defendant will have any real prospect of succeeding, namely that it should not have to comply with the decision.
Additionally, construction disputes tend to have a ‘pay now, argue later’ approach. Therefore, the court will expect parties to make payments in accordance with contracts/adjudicator’s decisions in the first instance and then argue about it later.
For the application, Party A (with the assistance from its legal team) will need to prepare the application notice and witness evidence in support. The evidence will need to address similar issues to the Particulars of Claim, but also additional matters it wishes to put forward in support of its application, including any security/guarantee offered and relevant correspondence between the parties.
After the claim and application have been issued, the TCC will list the matter for a hearing. Additionally, the TCC will give directions on further evidence, including Party B replying to the claim and application and Party A responding to that evidence.
For Party B’s evidence, for the reasons mentioned above, it is difficult to argue that a claim for enforcement of an adjudicator’s decision (and subsequent application for summary judgment) should be dismissed. As such, what options does Party B have in reply?
Usually, you would expect Party B to issue its own application (within the ongoing claim) seeking a stay of the enforcement of the decision. The application seeks to stay (or pause) the enforcement of the decision until a specified date and pending the outcome of a specified action. The most common situation will involve Party B arguing that Party A is in financial difficulties, that Party A will not be in the position to repay a portion of the money in due course (if so required), and inadequate security has been provided to counteract these concerns. The specified action will usually be a True Value Adjudication or another form of adjudication/separate claim that seeks to decide the final amounts due between the parties.
In doing so, Party B will need to provide evidence regarding the solvency and financial position generally of Party A at the time the parties entered contractual relations, how that financial position has deteriorated over time, that Party A is now insolvent, and that Party B has insufficient security should Party A need to repay a portion of the money in due course. To do this, Party B will need to put forward witness evidence in support of its application and, most likely, evidence from an independent expert (such as a forensic accountant).
In response, Party A will likely put forward its own witness evidence and, if appropriate, expert evidence. This evidence will likely focus on Party A’s (positive) financial position and/or any security offered being adequate.
Following the exchange of evidence, the TCC will hear submissions from the instructed barristers at the hearing. The TCC will also scrutinise the evidence before it; however, it is very rare for oral evidence to be given at the hearing. It will then hand down its judgment.
In addition to the above, your organisation could consider issuing a statutory demand against the party withholding payment. For more information on this, please see the firm’s article on all things statutory demands
If your organisation faces the prospect of having to enforce an adjudicator’s decision or wants to stay such enforcement, it should take legal advice as soon as possible so all matters can be considered in good time. If you or your organisation has any questions regarding the enforcement of an adjudicator’s decision, do not hesitate to reach out to Geldards LLP’s expert Commercial Dispute Resolution and Construction teams who can assist.