The Adjudicator’s Decision – To challenge or not to challenge

In this episode, we explore the final stage of the adjudication process: the adjudicator’s decision. Our hosts unpack what ‘the decision’ actually means, when should parties challenge the decision, and the difference between a flawed decision and an unenforceable one.

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Episode Transcript:

[Music]

David Owens:
Hello again and welcome back to our construction adjudication podcast series, Inside Adjudication. My name is David Owens, and I am joined once again by my colleagues Peter and Aanya. Over the past few episodes we have walked through the key stages of adjudication, from issuing the Notice of Adjudication and preparing the Referral, to responding to a claim.

Today we are talking about what comes at the end of that process: the adjudicator’s decision. This decision is binding and enforceable but not necessarily final. So, should you challenge it? Can you challenge it? And what are the risks of doing so? None of these are easy questions.

Peter, shall we start with what the decision actually means?

Peter Jansen:
Thanks David.

The adjudicator’s decision is intended to be a quick and practical resolution to a construction dispute. It is designed to preserve cash flow and keep projects moving. Under the Housing Grants, Construction and Regeneration Act, the decision is binding until the dispute is finally determined by legal proceedings, arbitration or settlement agreement.

That means you usually have to comply with the decision, even if you think it is wrong. You can still pursue final resolution through the courts or arbitration later but in the meantime, you are expected to pay up or otherwise comply.

Aanya Gujral:
Exactly. The courts have made it very clear that they support enforcement. The philosophy is pay now, argue later. Adjudication is meant to be fast and practical rather than perfect. So even if the adjudicator has got something wrong, whether on the facts or the law, that is not usually a good enough reason to challenge the decision.

So, one thing that we need to consider is when a party can challenge the adjudicator’s decision. Peter, can you help us to find out?

Peter:
Well the answer is that parties should only really challenge in very limited circumstances.

The first ground, of unlimited number, under which a challenge is possible is jurisdiction, the jurisdiction of the adjudicator. If the adjudicator did not have the right to decide the dispute, the decision may not be enforceable. That could be because the dispute hadn’t crystallised, meaning the other party wasn’t properly aware of it and hadn’t had a fair opportunity to respond.

Or it might be because the Notice of Adjudication was unclear, it attempted to refer multiple unrelated disputes or was served on the wrong entity. Another common issue is an invalid appointment, for example, if the referring party applied to the wrong nominating body (here we’re talking about the contract that specified one particular nominating body, and the referring party had replied to a different nominating body) or tried to appoint an adjudicator without serving a Notice.

Aanya:
Another ground that the party may challenge the adjudicator’s decision upon is by saying there was a breach of natural justice. Now, that happens when the process isn’t fair. So, to elaborate for example, if one party isn’t given a proper opportunity to present their case, or if the adjudicator relies on a point that neither party raised and also didn’t give them a chance to respond.

Another example is bias, or even a perception of bias which can also fall under this category of breach of natural justice. And while these challenges are quite difficult to prove, they can succeed where the breach is serious and has a material impact on the outcome.

Peter:

It is worth saying that there are a variety of ways that the adjudicator’s jurisdiction can be challenged, and some are more certain than others.There’s also the possibility of challenging based on fraud, although that’s extremely rare and of course any allegation of fraud has to be specifically set out in the party’s claim.

One further mechanism to be aware of is the slip rule. If the adjudicator makes a clerical or typographical error say, say they transpose a number, or misstate a date, they can usually correct it within a few days of the decision being published. But this only applies to straightforward errors. If you’re dealing with something more substantial, such as an incorrect interpretation of the contract or missed evidence, then that is not something the slip rule can fix.

Aanya:
There is also the option of using the Part 8 procedure in the Technology and Construction Court if there is a short and purely legal point that can be decided quickly. But again, that is not straightforward. The issue that’s being presented to the court must be clear cut and self-contained.

Peter:
It is also important to distinguish between a flawed decision and an unenforceable one. Just because the adjudicator has made a mistake does not mean the decision will not be enforced. The courts have said that speed takes priority over perfection. As long as the adjudicator was asked the right question and gave an answer to it, even if it was a bad answer, the decision will usually stand.

The problem comes when the adjudicator didn’t have the right to make a decision in the right place, because there was some fault in the way that he was appointed.

Aanya:
Yeah, that’s all true and if we’re looking more practically, suppose you have received a decision form the adjudicator and you’re unhappy with it. What do you do next?

The first step is to review it with your lawyer and work out was there a serious issue with jurisdiction? Was there a real denial of natural justice? Or are you just disappointed with the outcome?

If it is the latter, it is often better to comply with that decision and alongside that consider your options. If it’s a payment related dispute, you might be able to look at recovering it in a further ‘true value’ adjudication for example, so it really depends on the circumstances as to what you do next. Litigation or arbitration will be quite costly, so it is worth pausing and assessing what strategy best suits your circumstances.

And here at Sharpe Pritchard we often do give that advice to our clients, so if you are ever in doubt, please do get in touch with us.

Peter:
Well exactly and challenging a decision is not cheap. In the last podcast, we talked about a case where an adjudicator’s decision was challenged on the grounds of alleged lack of impartiality, bias. The challenging party lost and had to pay indemnity costs to the referring party and the enforcement. And that’s the risk that parties face if they bring a challenge which is not meritorious.

If you resist enforcement and lose, you might be ordered to pay indemnity costs, which are higher than standard legal costs. You could also harm your reputation with the court and with future adjudicators. So, we often tell clients to weigh up the commercial and reputational risks of proceeding with a challenge to the adjudicator’s decision.

From a practical point of view, if enforcement proceedings are issued in the Technology and Construction Court, the procedure is actually based upon a summary judgement procedure, where the referring parties obtained an adjudicator’s decision which establishes a contractual obligation to pay the summed assailant. And so, armed with an adjudicator’s decision of that nature, the TCC has a fast-track procedure which enables parties to get a summary judgement quickly. It usually takes around 6-10 weeks to get a judgement depending upon the complexity of the material which the court has to deal with.

The court may decide the case on paper submissions alone if the matter is simple and the issues are clear and there’s no dispute of fact, but, if necessary, a short hearing will be listed. The court is well-versed in dealing with these matters urgently under their fast-track procedure.

Aanya:
And also going back to the point that Peter made earlier about the existence of a slip rule. So, if the decision contains a simple mistake like a typo or miscalculation, the adjudicator can usually correct it within a few days. But they cannot reopen the substance of the decision. So, if you think the issue is more than just a clerical error, then you are perhaps into challenge territory that, as I said, getting legal advice on would be advised by us and is something that we do look at quite often.One final point. If you are thinking about challenging a decision, do not wait. Jurisdictional objections must be raised early. And as we’ve mentioned in previous episodes, it’s a good idea to reserve your rights to do so at an early stage in the adjudication process.

If you delay or stay silent during the adjudication and then decide to rely on a jurisdictional argument as by way of challenging the adjudicators decision you will find it much more difficult to get this over the line in your favour with the courts potentially determining that you have waived your right to do so.

David:
Brilliant. Thanks Peter and Aanya for that overview of what an adjudicator’s decision means and when a challenge might be appropriate. As we have heard, there are legal routes to challenge, but they are narrow, and the risks can be significant. Often, as I think Aanya said, the most sensible approach is to comply with the decision, then pursue your case in court or in arbitration if necessary.

Moving on now to our case law update. We now know that adjudication is available “at any time,” but what happens when one party launches several adjudications at once? That can feel obviously overwhelming and maybe even unfair. But is that enough for the courts to intervene? The case we’re going to consider is Beck Interiors v Eros [2024] that explores the limits of what’s allowed when it comes to simultaneous adjudications.

Peter and Aanya, can you take us through the key points?

Peter:

Certainly. Beck sought an injunction to prevent Eros from pursuing four adjudications within a short period on the basis that they were oppressive and coercive. However, the rule in the Act, that adjudication may be commenced at any time prevailed and the court refused and held that launching multiple adjudications is permissible under that statute, unless it demands to unreasonable or oppressive conduct. Courts are reluctant to intervene in adjudications except in exceptional circumstances and to overturn the rule that adjudication may be commenced at any time would need considerable evidence, and considerable evidence to the exceptional circumstances was not provided in this case.

So, Aanya, in situations where multiple adjudications are launched, how can a responding party stay in control?

Aanya:

So, as yourself and David have already mentioned, being hit with multiple adjudications at once can feel overwhelming, but this case shows that the courts won’t step in just because it’s inconvenient. It’s a statutory right that parties can start adjudications whenever they like or at any time.

So, if you’re on the receiving end of this, try to remain strategic. Focus on timing, check whether the disputes can be linked, and think about whether consolidation might be possible. But unless there’s real evidence of unfairness or bad faith, the court is unlikely to intervene as we’ve said.

And going back to a point which I have raised in every single episode so far, preparation is key and what we mean by this is often you’re going to need to seek legal advice at a really early stage to make sure your submissions are all done in a well-presented and organised way, that will help you to be successful in your  case.

So, again what the lawyers will need, so for example us at Sharpe Pritchard, we’re very happy when we are presented with a well-presented and prepared case and that will mean keeping good records and making sure you have everything ready to hand so that we can quickly progress your case and help to ensure that your case is as successful as possible.

David:

Thanks Aanya, that’s brilliant.

In our next episode, we’re shifting focus to the adjudicator themselves, what their role is, what their powers are, and how to appoint the right adjudicator. Thanks for joining us, and we’ll see you next time on Inside Adjudication.