Further clarity on the enforcement of adjudicators’ decisions in construction payment disputes

Key Contacts: Clare Cashin – Partner Michael Cahill – Senior Associate

The High Court’s decision in John Paul Construction Limited v Tipperary Co-Operative Creamery Limited [2022] IEHC 3 has brought further and welcome clarity to the Court’s role in the enforcement of adjudication awards made in payment disputes arising under the Construction Contracts Act 2013 (the “Act”).

Facts of the case

John Paul Construction Limited (“JPC”) was a contractor party under a construction contract with Tipperary Co-Operative Creamery Limited (“TCC” / the employer). JPC had successfully pursued a payment dispute in adjudication under the Act and applied for leave to enforce the adjudicator’s award pursuant to section 6(11) of the Act. TCC sought to resist JPC’s enforcement application by arguing that the adjudicator failed to comply with the requirement of fair procedures and natural justice and that the adjudicator had reopened an issue that he had already decided upon in an earlier and separate adjudication between the parties.

Grounds for resisting enforcement

  1. TCC argued that the adjudicator had “ignored” and not considered a substantive defence put forward by it. Simons J found that it was “readily apparent” that the adjudicator “fully understood the overall nature of the defence being put forward by” TCC and that his decision expressly referenced the “general complaint made by” TCC. The Court further found that “the fact that adjudicator resolved the rival submissions, in many instances, in favour of [JPC] does not mean that he failed to consider one aspect of the defence”. The Court went so far as to state that “it is difficult to understand what more [TCC] says the adjudicator should have done”. Therefore it could not be said that there had been a failure by the adjudicator to consider TCC’s defence or that “he ignored the defence”.
  2. TCC also complained that the adjudicator has allowed JPC to introduce a “new claim” – the Court found that this complaint was “premised on a misunderstanding on the part of [TCC]” and that the new claim was “in fact, simply a better-particularised version of the original claim”. It is of note that the revised figures which were alleged by TCC to constitute a “new claim” had been produced by JPC in response to a request by TCC for further and better particulars. TCC had been given a period of nine days to respond to these revised figures and it was held by Simons J that this period was reasonable in the context of a statutory arbitration (with the Court noting adjudication is intended to be a much quicker process than arbitration or litigation) and so it was not a basis of a breach of fair procedures.
  3. Another ground of challenge by TCC was that the adjudicator had exceeded his jurisdiction by purporting to determine issues already determined by a previous binding adjudication decision. However, Simons J held that the adjudicator’s decision did not “trespass upon issues” which had been the subject of his previous determination in the earlier adjudication between the parties.

The Court remarked that a fourth ground, alleging that the adjudicator had acted unfairly by not directing an oral hearing, “was very sensibly withdrawn”.

It is of note that, JPC, in response to TCC’s challenge to the enforcement application, argued that TCC were essentially attempting to “judicially review the adjudicator’s decision through the back door” as the matter was outside of the 3 month time limit for judicial review stipulated by Order 84 of the Rules of the Superior Courts (“RSC”). The Court found that in the present proceedings TCC’s opposition to enforcement failed on the merits of its case “rather than as a result of any supposed failure to comply with the three month time-limit” for judicial review proceedings.

Key findings of the High Court in relation to enforcement applications

Mr Justice Simons had regard to the recent High Court decisions in Principal Construction Ltd v. Beneavin Contractors Ltd [2021] IEHC 578 and Aakon Construction Services Ltd v. Pure Fitout Associated Ltd (No. 1) [2021] IEHC 562 and the key findings of his judgment can be summarised as follows:

(i) Section 6(11) of the Act provides that “an adjudicator’s decision can, with the leave of the court, be enforced in the same manner as a judgement or order of the High Court”;

(ii) Although an adjudicator’s decision / award “is not final and conclusive” it does give “rise to an immediate payment obligation”. Therefore the successful party in an adjudication process can enforce the adjudicator’s decision by invoking a summary procedure, but the decision “may be superseded by a subsequent reached in arbitral or court proceedings”. Therefore it is open to the unsuccessful / paying party in an adjudication process to pursue that matter further and if successful in doing so “will be entitled to recover any overpayment from the other side”. Thus the High Court re-confirmed the “pay now, argue later” approach to the enforcement of adjudication awards;

(iii) The High Court has a “limited role” in the adjudication award enforcement process, Simons J found that the rationale for this is “twofold”:

a. As an adjudicator’s decision is “provisional only” this “lessens the need for rigorous judicial intervention at the time of the enforcement application” and so the Court is not required to “carry out a detailed review of the underlying merits of the adjudicator’s decision”; and

b. The legislative policy underlying the Act is such that the statutory adjudication process is intended “to be far more expeditious than conventional arbitration or litigation” with the “default position” being that a decision will be reached by the adjudicator within 28 days;

Furthermore, Simons J stated that once the formal proofs for enforcement required by the Act and Order 56B of the Rules of the Superior Courts have been established “then leave to enforce will generally be allowed”;

(iv) Notwithstanding point (iii) above, the High Court does retain a “discretion to refuse leave to enforce an adjudicator’s decision” and will exercise this discretion “where there has been an obvious breach of fair procedures” in the adjudication process (the Court noting the example of an adjudicator refusing to consider a right of set-off asserted by a respondent party). However Simons J stressed in his judgment that the Court’s discretion to refuse to enforce an adjudicator’s award is a “narrow one”;

(v) The Court noted that its ability to refuse enforcement will inevitably invite attempts to evade enforcement of adjudicators’ awards by means of complaints that there have been breaches of fair procedures “where, in truth, there are none”. In this regard, Simons J stressed that the High Court would only invoke its discretion where there has been “a blatant or obvious breach” of fair procedures “such that it would be unjust to enforce the immediate payment obligation” and the Court would “not be drawn into a detailed examination of the underlying merits of an adjudicator’s decision under the guise of identifying a breach of fair procedures”;

(vi) Where an allegation of breach of fair procedures is raised the onus remains on the party resisting the enforcement application to demonstrate that there has been a breach of fair procedures. Simons J stated that the Court “will adopt a pragmatic approach in assessing” the allegation and “will have regard to the adjudicator’s decision in the round” however the decision will not “be parsed line-by-line”. The Court noted that there is a distinction to be made between an adjudicator dismissing a defence on its merits and a failure by an adjudicator to consider a line of defence.

(vii) The Court found that on the facts it was not necessary to address the “difficult question” of whether adjudication under the Act is amenable to judicial review under Order 84 of the RSC but noted that the Act is “silent on whether judicial review lies to restrain an adjudicator from reaching a decision on a pending adjudication”.

Takeaways

This decision by the High Court again confirms the Court’s view that it has a limited role in the adjudication award enforcement process. The Court’s remarks on how it will treat claims of breaches of fair procedures are noteworthy and demonstrate that the Court will not entertain a re-examination of the payment dispute at enforcement stage; section 6(10) the Act clearly provides that an adjudicator’s decision may only be challenged in a subsequent arbitration or Court proceedings. The Court’s finding is in keeping with the legislative policy of “pay now, argue later” underpinning the Act.

What is clear from the number of High Court decisions concerning statutory adjudication that have been delivered in the past year is that the statutory adjudication process has been embraced by the construction industry; and, that the Courts are enforcing adjudication decisions and a high bar will need to be met by a party seeking to challenge the adjudication process before the Courts are prepared to refuse enforcement.

 

For further information in relation to this article, please contact Clare Cashin or Michael Cahill.

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