Avoiding enforcement of "unfair" adjudication decisions and the perils of an uncertain contract

Avoiding enforcement of "unfair" adjudication decisions and the perils of an uncertain contract

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The recent case of RT Developments Ltd v TW Dixon (Developments) Ltd [2020] 10 WLUK 106 is a bit of a rare outlier for cases involving adjudication.

Generally speaking, it is difficult for a party to prevent the enforcement of an adjudicator’s decision once it has been made. The grounds for doing so are limited and the evidential burden is high. This is of course a deliberate state of affairs and one might argue a desirable one. The intent from its inception has been that adjudication decisions should be carried out promptly and remain in force until such time as the decision is found to have been incorrect, usually by a judge sitting in court. The main reason for this policy of fast enforcement with little scrutiny of the underlying decision is to improve cash flow in the industry. Taken as a whole, the consensus seems to be that adjudications, or even the mere existence of adjudication, have been successful in this regard. Understandably the courts have historically shown little interest in examining the correctness of an adjudicator’s decision at the enforcement stage. To do so would invariably cause delays that deny the victorious party from enjoying the results of the adjudication, thereby rendering one of its main advantages moot.

When enforcement is objected to it is more often than not on the grounds that the adjudicator lacked jurisdiction. Although in recent times arguments for stays of enforcement due to issues of insolvency have also been the subject of much comment and jurisprudence. Far less commonly reported are objections to enforcement on the grounds that it would be “manifestly unfair” for the courts to do so. What would amount to manifestly unfair is always dependent on the specific facts of each case, so RT Developments Ltd v TW Dixon (Developments) Ltd [2020] 10 WLUK 106 serves as a useful example of when the courts have deemed this defence to enforcement to be successful.

Facts of this case taken into consideration when granting a stay were:

  1. The directors and shareholders of the parties in dispute were family members.
  2. There was a history of parties conducting business in an informal manner with one another.
  3. The terms of written contracts, when used (in this case a JCT Minor Works contract), were not in any meaningful sense followed.
  4. The adjudication had dealt with the strict application of payment provisions which had not, until the adjudication, been followed by the parties (a classic smash and grab).
  5. The claimant, despite being the contractor, had been in sole control of arranging the funding and payment of the works, notwithstanding that the obligation to arrange payment is normally the employer's.
  6. The defendant had little to no knowledge of construction practices and had largely been guided by the claimant.
  7. If the sum were paid there was sufficient evidence that the defendant would not be able to recoup payment from the claimant in the event the adjudicator’s decision was overturned at a later date.

It bears consideration that while the judgment in this case, described the circumstances as exceptional, some of the individual facts are not so distinct from many other construction disputes. Therefore the defence of “manifestly unfair” might not be as out of reach as one might first assume. Many construction contracts are loosely followed, sometimes not even understood, by the parties who put them in place and reliance on close personal ties between a family of companies (if not family in the conventional sense) is quite a common occurrence.

It does appear that in this case there was sympathy by the court for the respondent’s ignorance of the contract terms. While there is much to be said of estoppel by the claimant’s conduct in this case, it would not normally be an attractive argument for any party engaged in commercial construction to plead ignorance of payment provisions as being a ground for relief. Rather in this case the determining factor is likely to have been the risk that if enforcement had been granted by the court, the defendant would not have been able to recover its losses at a later trial. The test set in Wimbledon v Vago [2005] EWHC 1086 was found to have been satisfied and this together with the additional factual elements clearly proved sufficient to persuade the court to exercise its discretion. Had the claimant been able to assuage the court of concerns that it could not repay the adjudication award at a later date, then it is much less likely the stay would have been granted, notwithstanding any sympathy held by the court for the defendant.

In addition to potentially being a useful precedent for any party seeking to obtain a stay of enforcement, it is worth noting that the crux of the dispute in this case involved whether or not the building contract between the parties was fixed priced or cost plus. The problem arose due to uncertainty in the formation of the building contract, in particular the status of a commercial agreement that dealt with the funding of the intended works. This question was not resolved in this judgment, but it is evident it could have been avoided altogether if more care had been exercised at the contract formation stage.

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