Adjudicator’s decisions are funny things. Although the statutory regime that governs adjudication describes them as ‘binding’, this is only “until the dispute is finally determined by legal proceedings, by arbitration or by agreement.”[1]

In this sense, an adjudicator’s decision is temporary. This is in line with the aims of the Construction Act 1996, which was to provide a speedy resolution to disputes (especially payment disputes) and produce a ‘pay now, argue later’ culture.

But does this mean that a party can delay and even avoid paying an adjudicator’s award, if it commences legal proceedings to challenge that award?

Where a party is ordered to pay under an adjudicator’s decision, but refuses or fails to pay, then the receiving party can make an application to the Technology & Construction Court (the TCC) to enforce the award. However, paying parties have tried to delay or avoid enforcement by issuing their own cross claim at the TCC, usually by way of a challenge to the adjudicator’s decision. The paying party would then ask the Court not to enforce the adjudicator’s award until it has made a decision on the paying party’s claim.

Generally speaking, the TCC has refused to do this, on the basis that the whole point of adjudication scheme is that it is ‘pay now, argue later’.

To try and get round this, the paying party tried a slightly different tack in a recent TCC Case[2]. It had lost an adjudication and had been ordered by the adjudicator to pay £180,000 to its contractor. The payment of that money was pursuant to a termination account that had been raised by the contractor after it had terminated its contract with the paying party.

The paying party failed to pay and so the contractor issued enforcement proceedings at the TCC. The paying party tried to counter this by issuing its own cross-claim, asking the TCC to declare that the contract had not been validly terminated (the argument being that, if it had not been validly terminated by the contractor, then the amount due under the termination account was not due).

The contractor applied for summary judgment on its enforcement claim. The paying party responded to this by asking the Court to consolidate the contractor’s claim with its own claim.

If the Court had consolidated the claims, the contractor’s claim for enforcement would have been merged into the paying party’s claim for a declaration, which in turn would have meant that the Court would not have granted the contractor’s application for summary judgment and the contractor’s claim would have become merely a part of the paying party’s claim for a declaration. This would have meant that a decision on the contractor’s claim would not be reached until a decision on the paying party’s claim was also made i.e. precisely what the paying party wanted, and exactly what the contractor did not want.

In short. this was just another way of asking the Court to suspend enforcement of the award pending a decision on the paying party’s own claim. Unsurprisingly, the TCC did not grant the application to consolidate. As the Judge said “It [i.e. the paying party’s application for consolidation] seems to me to be, in effect, little more than a device sought to be set up in order to avoid the consequences of the adjudicator having made a valid decision”.

Conclusion

The paying party had got itself into this position because it had failed to issue a valid payless notice in response the contractor’s interim payment notice. The lesson from this case is that if you fail to serve a payless notice in respect of an interim payment, there is very little prospect of you being able to delay or avoid paying the subsequent adjudicator’s award by launching your own cross claim.

In passing, it is worth noting that a failure to serve a payless notice, in respect of a final payment, may not have such draconian consequences, following another recent TCC case[3]. We will discuss that case in a future blog.

This post was edited by Will Cursham. For more information, email blogs@gateleyplc.com

[1] Section 108(3) of the Housing Grants, Construction and Regeneration Act 1996

[2] Niken Construction v Trigram Carver Street Limited [2016] EWHC 2232 (TCC)

[3] Kilker Projects Ltd v Purton [2016] 14 October 2016 (TCC)


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.