| Date | 3 March 1999 |
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| Judgment | Macob Civil Engineering Limited -v- Morrison Construction Limited, TCC 12 February 1999 |
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| The Issue | Enforcement of adjudicator's decisions. |
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| Implication |
The court is likely to treat adjudicator's decisions as binding and enforceable pending final resolution of the dispute by arbitration or litigation. |
printWe finally have an answer. An adjudicator's decision has been taken to the court and despite every complaint and excuse by the losing party, the court has enforced the decision. The adjudication provisions of the Housing Grants, Construction and Regeneration Act have worked with admirable simplicity. Or have they? The judgment handed down by the Honourable Mr Justice Dyson on 12 February 1999 in the case of Macob Civil Engineering-v-Morrison Construction gives a flavour of how complex the enforcement of adjudicator's decisions may become. Macob was a groundwork sub-contractor for Morrison on a retail development in Camarthen, South Wales. It alleged that Morrison had failed to make payment in accordance with the contract and referred the matter to an adjudicator. The adjudicator published his decision to the effect that Morrison should forthwith pay Macob £302,000 plus VAT, interest and fees. Morrison refused to comply contending that the adjudicator's decision was invalid and unenforceable and that the matter should be referred to arbitration. Macob applied to the court for enforcement of the adjudicator's decision. The adjudicator's decision was noteworthy in two respects. Firstly, having satisfied himself that the contract between the parties did not comply fully with the requirements of the Construction Act, the adjudicator decided that the relevant provisions of the government's Scheme for Construction Contracts must apply. Using this scheme the adjudicator was able to calculate the final date for payment for the relevant interim valuation, and in turn was able to conclude that Morrison's notice of intention to withhold payment was out of time. In other words, faced with both a claim and cross-claim from the parties the adjudicator limited his enquiry, as he was entitled, to the mechanics, not the merits, of the cross-claim. There will of course be occasions when this will prove to be a thoroughly unsatisfactory resolution of a disputed account. Dependent upon the value of works which remain to be carried out, the paying party need only correctly re-issue its notice of intention to withhold payment against the subsequent interim application to render the adjudication and its enforcement pointless. Similar observations may apply to a cross-claim or set-off which is first raised after the adjudicator's decision, but before payment. Secondly the adjudicator purported to issue his decision peremptorily under paragraph 23(1) of the Scheme for Construction Contracts which states: "In his decision the adjudicator may, if he thinks fit, order any of the parties to comply peremptorily with his decision or any part of it". The adjudicator added that in the event of non-compliance with his decision, he gave permission under Section 42 of the Arbitration Act 1996, as modified by the Scheme, for either party to apply to the court for an order requiring such compliance. What difference does this make? Does a peremptory decision carry more weight then any other adjudicator's decision? No one seems to know. Mr Justice Dyson commented that "it may be that Parliament intended that the court should be more willing to grant a mandatory injunction in cases where the adjudicator has made a peremptory order than where he has not". If this was indeed the intention of Parliament, then it has fallen at the first fence. Mr Justice Dyson noted that a mandatory injunction to enforce a payment obligation would carry with it the potential for contempt proceedings. Whilst he considered that the court could enforce the decision under Section 42, he concluded that the court should be slow to grant a mandatory injunction to enforce a decision requiring a payment of money. "It is difficult to see why the sanction for failure to pay in accordance with an adjudicator's decision should be more draconian than for failure to honour a money judgment entered by the court". A further obstacle to be overcome concerned the arbitration agreement between the parties. The usual remedy for failure to pay in accordance with an adjudicator's decision, will be to issue proceedings claiming the sum due followed by an application for summary judgment. Will the recalcitrant party be able to thwart those proceedings by applying to the court for a stay (effectively a halt to proceedings) under Section 9 of the Arbitration Act? Following the case last year of Halki Shipping Corporation-v-Sopex Oils it was thought that this indeed might be the case. Clearly this clashes with the requirement of the Act and Scheme that a decision of an adjudicator is binding pending the final resolution of the dispute by arbitration or otherwise. Mr Justice Dyson decided that there was nothing in Halki preventing him from refusing to grant a stay under Section 9 of the Arbitration Act. His reasoning was wonderfully perverse. Once Morrison had elected to treat the adjudicator's decision as one capable of being referred to arbitration, it was bound also to treat it as a decision which was binding and enforceable. Despite all of these queries this judgment paves the way for adjudication. Morrison's complaint that the adjudicator's decision was invalid and unenforceable on the grounds of a breach of the rules of natural justice was quickly dismissed by the judge who saw that the procedures of the scheme may well result in injustice but that Parliament must be taken to have been aware of this. He characterised adjudication as an intervening provisional stage in the dispute resolution process. Similarly, the notion that any challenge upon the validity of an adjudicator's decision would render that decision unenforceable was quickly dismissed. The judge noted that if such an argument had been held to be correct, it would have substantially undermined the effectiveness of the scheme for adjudication. Macob had not claimed a money judgment. This made no difference. It was entitled to a declaration that the adjudicator's decision was binding until finally determined, and that by failing to pay, Morrison was in default.
CJ-9909
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