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Warning to defendants bringing hopeless adjudication challenges

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Summary: The case of AMD Environmental Limited v Cumberland Construction Company [2016], serves as a warning to those seeking to raise unmeritorious challenges to an adjudicator’s decision.

The defendant raised three challenges which the judge criticised as hopeless: he punished the defendant by awarding the claimant its costs on an indemnity basis, together with interest at a rate of 6% pursuant to the Late Payment of Commercial Debts (Interest) Act 1998.

The three challenges were as follows:

  • The subcontract was not in writing.  The judge gave that argument short shrift: the requirement for the contract to be in writing was abolished in October 2011 by the changes to the Construction Act.
     
  • No dispute had crystallised by the date of the notice.  The judge pointed to the five month gap between the claimant’s application for payment and the notice of adjudication.  This gap was sufficient to evidence a crystallised dispute.  The court noted that this was a hopeless argument.  As an alternative way of putting the crystallisation argument the defendant claimed that the adjudicator had breached the rules of natural justice by requesting further information from AMD, which AMD provided.  The court rejected this argument as being contrary to the basic principles of adjudication which allow the adjudicator a wide leeway to seek further information with which to make his decision. 
     
  • The third challenge, that the adjudicator failed to address all the matters in issue, was also dismissed by the court as hopeless.  The judge characterised it as an argument that the adjudicator had got the wrong answer, and therefore his decision should not be enforced.  Of course, this type of argument was ruled out in Carillion v Devonport.

All in all, since all of the challenges were without merit, the judge felt justified in awarding indemnity costs, together with interest at 6%, to the claimant.  This high rate, which was higher than the usual 4 or 5% regularly awarded by the courts, was appropriate because the amount of the decision should have been paid some time ago.

Practical points

Parties who fail to pay the amount of the adjudicator’s decision and then raise unmeritorious or even hopeless challenges can expect to be punished in costs and interest by the courts.  It seems that if you are on the losing end of the adjudicator’s decision, the best course of action is to pay now and argue later. 

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