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Resisting adjudication enforcement on substantive grounds

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Summary: In the recent case of Hutton v Wilson, the court gave guidance on the rare cases when it is appropriate for a losing party to seek to resist adjudication enforcement on substantive grounds, by means of a part 8 application to be heard at the same time as the winning party’s application for summary judgment. The judge concluded that this was appropriate in only one case in one hundred. Usually, to do so is an abuse of process.

We are all familiar with the court’s adjudication enforcement policy. It’s been in place for nearly 20 years. Put simply, if the adjudicator had jurisdiction, and if he or she acted in accordance with the rules of natural justice, the decision will be enforced. When it comes to enforcement, whether the decision is correct is neither here nor there. And quite right too. Anything else would deprive the adjudication process of its very purpose and deny it the power to address the mischief Parliament designed it to correct.

Of course, this puts the court in a difficult position. It sometimes finds itself enforcing decisions that are glaringly wrong; decisions which turn on a simple point of law that the adjudicator has misunderstood; and decisions that the court would overturn at the drop of a hat. And we must not forget that adjudication is an interim binding process; the court will always have the final say, should the parties invite the court to determine the dispute.

In recent years, canny parties on the wrong end of an adjudicator’s decision have been increasingly trying to resist enforcement by commencing separate Part 8 proceedings (claiming declaratory relief) and then asking the court to determine the Part 8 claim at the enforcement hearing. The effect? At what is supposed to be a straightforward enforcement hearing, the court can find itself asked to re-hear the entire substantive dispute. And, if the adjudicator got it wrong, the decision might not be enforced.

The tactic became more popular following Coulson’s decision in Caledonian v Mar City [2015], in which the losing party persuaded him to reconsider the adjudicator’s decision as to whether certain documents could amount to a payment application at the enforcement hearing. Although the court made it clear that it would rarely be appropriate to open up the adjudicator’s decision on enforcement, losing parties nonetheless thought they’d been given the green light to resist decisions they didn’t like, on substantive grounds. 

In the recent case of Hutton Construction v Wilson Properties, the court decided to tackle this tactic head-on. Coulson J, keen to correct the misinterpretation of his decision in Mar City, went to great lengths to stress that only in exceptional circumstances would it be appropriate to merge the conceptually distinct enforcement and Part 8 procedures and enable the losing party to resist enforcement on substantive grounds. Anything else would amount to an abuse of process.

So when is Part 8 an appropriate defence to enforcement? In 1 in 100 cases (more or less)

99 percent of the time, the court will simply enforce the adjudicator’s decision without opening up the decision. But, occasionally, a losing party might be able to persuade the court to hold off enforcement on substantive grounds (raised in separate Part 8 proceedings and referred to in the defence to the losing party’s application for summary judgment). Coulson J laid down a strict test for when this is appropriate:

  • the Part 8 issue must be short and self-contained;
  • the issue must have been contested during the adjudication (and not be something completely new);
  • the issue is capable of being dealt with without oral evidence or significant elaboration; and
  • the issue is one it would be unconscionable for the court to ignore.

That’s the official test. But reading between the lines of the judgment, the “real” test seems to be a practical one, namely: is the issue one that a judge could reasonably expect to deal with in the half-day that he or she probably has set aside for pre-reading and hearing the enforcement application? This was emphatically not the case in Hutton Construction, which Coulson saw as an attempt by the losing party to re-run all of the issues raised in the adjudication, to the judge’s obvious irritation.

The court goes to great lengths to ensure enforcement hearings are heard within 28 days of the application, putting a real strain on its resources, and it clearly does not like wily losing parties taking advantage of that to bring forward their Part 8 proceedings that might otherwise be listed for 3 months down the line.

Nonetheless, Coulson left it open for losing parties to resist enforcement on substantive grounds, in certain circumstances. The door remains ajar.

Did the adjudicator’s decision lack “any rational justification”?

Coulson J gave a few practical examples of when it might be appropriate to resist enforcement on substantive grounds:

  • when the adjudicator’s contractual interpretation “is beyond any rational justification”;
  • when the adjudicator’s calculation of time periods “is obviously wrong”;
  • when the adjudicator’s categorisation of a document as, e.g. a payment notice, “on any view” is not capable of being described as such.

So what else would fall within this category? If points of contractual interpretation are fair game, then presumably nonsensical interpretations of statute or case law would also be a sound basis for resisting enforcement. Interestingly, Coulson J also indicated discomfort with the proliferation of “smash-and-grab” adjudications, and it might well be that the courts are more willing to permit losing parties to resist enforcement in those circumstances.

The common theme is that the adjudicator must have got his decision very wrong indeed. But it’s also important that it is obvious what the right answer should be. It’s no use complaining that the adjudicator’s construction of a contract is wrong if it’s not clear what the proper construction is. It’s also essential that the facts are basically agreed; the court simply does not have time to decide substantial factual matters at an enforcement hearing (and nor is Part 8 appropriate when the facts are in dispute).

Losing parties beware: resistance is futile (and expensive), most of the time

However, for all this talk of “exceptions”, the resounding message of Hutton Construction is that the exceptions will be few and far between; strict enforcement will be the norm. And for practitioners considering whether to resist enforcement on substantive grounds, caution is advised. An unsuccessful challenge may be found to be an abuse of process and the challenger will “almost certainly” have to pay the costs of enforcement on an indemnity basis.

Which isn’t to say that parties on the end of a poor adjudication decision are left without any options. If the issues are not suitable to be heard at an enforcement hearing, they can still be referred to and decided by the court; it’s just that it might take a little longer than 28 days.

 

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