Adjudication Update: South Coast Construction Ltd v Iverson Road Ltd [2017] EWHC 61 (TCC)

The recent TCC case of South Coast Construction Ltd v Iverson Road Ltd [2017] EWHC 61 (TCC), serves as a timely reminder that the courts take a pro-enforcement approach in respect of adjudicators’ decisions and also considers the hierarchy between enforcement and a statutory moratorium as per the Insolvency Act 1986.

In South Coast Construction Ltd, Coulson J was faced with two applications. The first, a relatively straightforward matter, in that the Claimant wished to enforce a decision reached by an adjudicator. These proceedings were defended on the basis of a lack of jurisdiction. The second application related to the belated discovery that the Defendant had issued no fewer than three Notices of Intention to Appoint an Administrator (‘NOI’).

The reference to belated stems from the fact that the Defendant, two days before the listed hearing, wrote to the Court enclosing an NOI dated 4 January 2016. The first two NOI’s which had been issued had also neither been disclosed to the Court nor the Claimant. Coulson J was particularly critical of the fact that the Solicitor for the Defendant had been aware of the third NOI since 5 January 2017, but had not disclosed the same until 16 January 2017.

Crucially, the third NOI gave rise to a moratorium on other legal proceedings due to expire at the close of business on the day of the hearing. Coulson J gave his judgment on the following day, which was after the expiry of the moratorium, and also after the directors of the Defendant had resolved to put the company into liquidation. As such, the question of whether or not the enforcement proceedings should be stayed was not technically necessary to decide. However, Coulson J considered that it was appropriate to deal with this matter for a number of reasons, including the fact that the issue potentially had wide ramifications, and as such, may be of relevance to a number of other cases in the following months.

Coulson J outlined that the principles to be applied in terms of whether or not the court should exercise its discretion to continue the proceedings could be grouped into the following subcategories:

(1) General;
(2) The State of Proceedings; and
(3) Considerations of Conduct.

Coulson J confirmed that he would have allowed the enforcement proceedings to continue based upon a strict interpretation of the case law outlined in respect of the above subcategories. However, he also held that he reached his conclusion based upon a consideration of the separate principles applicable to adjudication enforcement. The following key points can be distilled from the judgment.

  • By reference to the case of Re Atlantic Computer Systems PLC [1992] CH 505, the relevant balancing exercise favoured the claimant continuing with the enforcement proceedings. In particular, there was no evidence that the purpose of the moratorium, namely, to provide assistance to the administrators, would be jeopardised if the decision in terms of jurisdiction were made. In fact, it was considered that such a decision would assist the administrators in that they would have an answer to the only dispute between the parties.
  • When considering the question of fairness and conduct, it would be inequitable if the court did not give judgment in respect of the jurisdictional issue. The Claimant had acted properly throughout, and at considerable expense, had obtained a lengthy adjudicator’s decision. In contrast to the behaviour of the Claimant, Coulson J outlined that:

‘On the material before the court I conclude that, on the balance of probabilities, the conduct to which I have referred means that the defendant has been playing somewhat of a deliberate double game: the paucity of information in the NOIs; the failure to appoint an administrator despite 3 such NOIs; and the failure to disclose the NOIs to the claimant and the court, all inexorably point to that conclusion.’

  • In terms of the second, separate reason for reaching his conclusion, Coulson J referred to the nature and purpose of adjudication, as aptly summarised by Chadwick LJ in Carrillion Construction Ltd v Royal Devonport Dockyard [2005] EWCA Civ 1358. Coulson J observed that adjudication enforcement proceedings, such as those in question, presuppose that there has already been a decision, on the merits, that there is a sum of money which, prima facie, is due and owing under contract or statute. As such, where all that remains is an enforcement hearing, he considered that this would meet the ‘exceptional’ test as laid down by Patten J in AES Barry Limited v TXU Europe Energy Trading [2004] EWHC 1757 (Ch).

The decision provides clear guidance that adjudication enforcement proceedings are likely to take priority over a statutory moratorium as per the Insolvency Act 1986.

Find the full decision at http://www.bailii.org/ew/cases/EWHC/TCC/2017/61.html

Disclaimer

The information and any commentary on the law contained on this web site is provided for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by the author. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comments on this site.

 

Construction Law Update: Deluxe Art & Theme Limited v Beck Interiors Limited [2016] EWHC 238 (TCC)

The recent case of Deluxe Art & Theme Limited v Beck Interiors Limited [2016] EWHC 238 (TCC) has confirmed that an adjudicator does not have jurisdiction to deal with concurrent but separate disputes without the consent of the parties.

The decision is an important one, as it is the first time that the Court has considered a wider interpretation of Paragraph 8 (1) of Part 1 of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011 (‘the Scheme’).

In the case Deluxe referred three separate disputes to adjudication as per the Scheme, the third adjudication being commenced prior to a decision having been reached in the second adjudication. Beck wrote to the adjudicator objecting to the same. The matter came before Coulson J for summary judgment, as Beck did not comply with the second and third decisions. Beck resisted the Application, arguing that Para 8 (1) prohibited an adjudicator determining more than one dispute without the consent of the parties.

Paragraph 8 (1) reads as follows:

‘The adjudicator may, with the consent of all the parties to those disputes, adjudicate at the same time on more than one dispute under the same contract.’

In order to overcome Paragraph 8 (1) Deluxe contended that the second and third disputes were, in actuality, a single dispute. This was despite bringing the matters as separate disputes under separate notices. This argument was unsuccessful, and the Court finding, amongst other matters, that Deluxe clearly considered the disputes were separate, as there would have been no need to commence the third adjudication if it was the same as the second.

Further, Deluxe sought to argue the following:

  1. Paragraph 8(1) is only intended to apply where an adjudicator is dealing with multiple disputes arising out of the same notice of adjudication; and
  2. Paragraph 8(1) would be contrary to section 108(2)(a) if it applies in respect of multiple adjudications because it would restrict the right to adjudicate at any time.

The Court again rejected these arguments, finding as a matter of construction, Paragraph 8 (1) did not create any distinction between single and multiple disputes.

In respect of the second point, the Court held that there was no fettering of the right to adjudicate at any time, as all that the parties have agreed to is that if one party wants to adjudicate more than one dispute at the same time before a particular adjudicator, then that party needs the consent of the other party.

Thus, given the absence of consent, the Court refused to enforce the third adjudication decision.

It is now clear that separate disputes under the same contract cannot now be dealt with by the same adjudicator at the same time unless consent is gained where the Scheme applies. A simple solution is to wait for the decision in the earlier dispute before bringing the second where consent is withheld. Further, you may wish to consider alternative forums for the resolution of the dispute, for example, Part 8 proceedings where there is no complex dispute of facts, or perhaps expert determination which may be dealt with relatively quickly.

Disclaimer

The information and any commentary on the law contained on this web site is provided for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by the author. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comments on this site.