High Court enforces adjudicator’s decision, reminding parties that adjudication is an option notwithstanding the contractual dispute resolution provisions
The decision of Mr Justice Meenan in Principal Construction Limited v Beneavin Contractors Limited on 16 July 2021 is the latest in a line of recent cases regarding the enforcement of an adjudicator’s decision pursuant to the Construction Contracts Act 2013 (the “Act”). In particular, the Court considered the interaction of the provisions of the Act with the provisions of the contract.
Background
Under the Act, parties to a “construction contract” may refer a payment dispute to adjudication. Such referral may be made “at any time” by serving a notice of intention to refer the payment dispute for adjudication.
Once the adjudication process is concluded and a decision has been delivered, section 6(10) provides that “the decision of the adjudicator shall be binding until the payment dispute is finally settled by the parties or a different decision is reached on the reference of the payment dispute to arbitration or in proceedings initiated in a court in relation to the adjudicator’s decision”.
If payment is not made, the party entitled to receive payment may seek to enforce that decision by way of application to the High Court. Specifically, section 6(11) of the Act provides that “the decision of the adjudicator, if binding, shall be enforceable either by action or, by leave of the High Court, in the same manner as a judgment or order of that Court with the same effect and, where leave is given, judgment may be entered in the terms of the decision”.
Facts
In November 2018, the Applicant (Principal Construction Limited) formally entered into a contract with the Respondent (Beneavin Contractors Limited) to complete the construction of a nursing home (the “Contract”).
The Applicant submitted its final account in the sum of €1,013,186.44 on 18 April 2019, which included a claim for variations in the total sum of €913,940.44. The Respondent ultimately issued a final certificate payment recommendation stating that the Applicant was not due any sum but, instead, the Respondent was due a sum of €116,309.00.
On 5 June 2020, the Applicant issued a notice of adjudication under the Act. On 4 August 2020, the adjudicator issued a decision awarding the Applicant the sum of €643,635.98 (the “Decision”). The Applicant issued High Court proceedings seeking enforcement of the Decision under section 6(11) of the Act.
Issues
The Respondent contested the binding nature and enforceability of the Decision, on the following grounds:
- The wording “if binding” in section 6 (11) of the Act, in effect, makes it easier to resist the enforcement of an adjudicator’s decision in Ireland than in the UK, as these words are not contained in the equivalent UK legislation.
- The adjudicator lacked jurisdiction as the Applicant was barred from referring the matter to adjudication as the validity of the Final Certificate was not challenged within the contractual time limits, in this case, the 10-day period set out in Clause 35 of the 2012 RIAI conditions of contract.
- The adjudicator’s refusal to allow the Respondent to prosecute its counterclaim was made in material breach of natural justice.
Judgment of Mr Justice Meenan
The Court held that it was satisfied that the adjudicator acted within jurisdiction and in accordance with natural justice and therefore, the Decision was enforceable. In reaching his conclusion, Mr Justice Meenan considered the issues below.
“If binding”
Mr Justice Meenan considered that the words ‘if binding’ should be read in the context of the provisions of section 6(10) of the Act, which provides that the decision of the adjudicator ‘shall be binding’ until the payment dispute is finally settled by the parties or a different decision is made at arbitration or in Court. For that reason, the words should be interpreted in a narrow context.
Contractual time limits
The Court considered the Respondent’s submission that the Applicant did not refer the final certificate to arbitration within 10 days as provided for in the Contract, arguing therefore, that the final certificate is binding. The Court drew a distinction between the jurisdiction of the adjudicator to hear a claim, and the adjudicator’s decision on that claim. Crucially, Mr Justice Meenan stated that the jurisdiction of the adjudicator derives, not from the contract, but from the Act. Moreover, the Act, as highlighted by the Court, “confers on a party to a construction contract a clear unfettered right to refer a payment dispute for adjudication”. Accordingly, the Applicant’s failure to challenge the Final Certificate within the time period provided for in the contract does not impact its ability to refer the matter to adjudication under the Act. In contrast, once the payment dispute has been referred, the adjudicator may have regard to the terms of the construction contract itself in reaching its decision.
Counterclaim
The Respondent maintained a counterclaim in respect of liquidated and ascertained damages under the contract in the amount of €134,000, which it sought from the adjudicator. In the Decision, the adjudicator maintained that it had jurisdiction to adjudicate on a single dispute and whilst the Respondent was entitled to plead a full defence including abatement and set-off, the adjudicator considered that the Respondent could not mount a counterclaim which in law was a separate action. The adjudicator relied on a recent UK case of Bresco Electrical Services Ltd (In Liquidation) v. Michael J. Lonsdale (Electrical) Ltd UKSC 25 in reaching this view.
Mr Justice Meenan did not explicitly endorse the Bresco case but was satisfied that, in truth, the adjudicator had considered the substance of the counterclaim in detail and had determined that the reason for the Applicant’s delay was caused by delay on the part of the Respondent.
Key take-aways
The judgment is a useful reminder of the purpose of adjudication; to offer an efficient resolution to keep money and works moving, as a parallel option to the dispute resolution processes set out in construction contracts which may take months or years to conclude.
However, the fact that adjudication may be initiated ‘at any time’, irrespective of contractual time limits, brings with it significant uncertainty for parties against whom disputes may be referred. If cash flow is not an issue for a party who maintains it has a claim for payment, a referring party can wait to refer several payment disputes as part of a composite final account adjudication. Whilst this avoids time and expense being incurred to initiate multiple adjudication processes in respect of disputes arising during the lifetime of a project, instead allowing parties to focus on the completion of the project, it creates significant pressure for the recipient.
We continue to await a decision of the Irish Superior Courts regarding the status of counterclaims in the context of adjudication and an adjudicator’s jurisdiction to make a positive award. Given the differences between Irish and UK legislation, an Irish decision would certainly be welcome to offer clarity to parties involved in adjudication.
