Even though adjudication is well established, there are still some lessons that can be learned without trying too hard – as Vision Homes vs Lancsville makes clear
Since I last wrote about adjudication cases in these pages a year ago there have been more than 1,500 of them. The case I focused on then was CJP Builders vs William Verry Ltd. When CJP failed to enforce the adjudicator’s decision last August, its lawyers petitioned to wind it up for non-payment of their own fees. Then in May, for reasons no doubt beyond this case, William Verry entered administration.
This sorry tale confirms two key factors for deciding whether to adjudicate and, if a monetary award is not paid, whether to enforce it. The first is the creditor’s ability and willingness to spend precious cash on chasing debts. The second is the debtor’s ability to pay. So, although adjudication is on the increase (7 August, page 11), even when favourable decisions are unsatisfied they are not necessarily taken to court. It is disastrous if, after investing in an adjudication, the decision proves unenforceable.
It is hard to say how many decisions don’t reach court because they clearly will not be enforced. It is, however, possible to gain a sense of how many have been taken to court and not enforced. Over the 12 months since CJP it has been reported that the courts have declined to enforce adjudicators’ decisions in eight cases. It is unlikely there were many more. That amounts to fewer than 1% of commenced proceedings – just like 2007/08; yet more evidence of adjudication’s success.
Two decisions were not enforced because there was no contract in writing. Had the changes to the Construction Act now passing through parliament been applicable, one would have been enforced despite the contract being partly oral. The other would not, because there was arguably no contract at all.
This sorry taleconfirms two key factors for deciding whether to adjudicate and, if a monetary award is not paid, whether to enforce it
Three decisions were invalid because the adjudicator considered material they should not have (without giving the parties the opportunity to comment) or failed to address part of the responding party’s case. These are cases of adjudicator error, although in one the referring party helped persuade the adjudicator to ignore a claimed deduction.
Two more decisions were not enforced because they decided substantially the same dispute as an earlier adjudication.
The most technical case came earlier this month. It revealed a gap in the legislation that permits concurrent adjudications on substantially the same dispute until a valid decision is made on one of them.
Vision Homes engaged Lancsville Construction to design and build five residential blocks at Paradise Dock in London. Work began, but in summer 2008 the parties agreed to remove the external envelope works from Lancsville’s contract, resulting in a 40% price reduction. Vision then claimed that Lancsville was late in completing its remaining work and sought liquidated damages of £500,000. Lancsville said that the descoping agreement superseded the contractual completion dates and denied Vision any liquidated damages.
Although Mr B’s decision on his expenses was of limited importance, it was outside his jurisdiction and this was fatal to his entire decision
Lancsville served an adjudication notice on Vision seeking a declaration that Vision was not entitled to liquidated damages. Later the same day Vision served an adjudication notice claiming its liquidated damages. The RICS appointed an adjudicator for each, respectively: Mr B and Mr A.
Lancsville invited Mr A to resign, a point it repeated after Mr B gave his decision in Lancsville’s favour. Mr A accepted that Mr B’s decision concerned substantially the same dispute as the one referred to him. He declined to issue a decision on the off chance that Mr B’s decision was invalid (as it proved to be). Instead he proposed to give his decision after any court ruled on Mr B’s decision.
The judge declined to enforce Mr B’s decision because Lancsville, 18 minutes after asking the RICS to appoint Mr B, had sent Vision an amended adjudication notice that included a requested declaration that Vision should pay all of the adjudicator’s charges.
Mr B, in making such a declaration in his decision, acted on the second notice. However, his jurisdiction derived from the first as the applicable rules of the statutory scheme provide for the adjudication notice to precede the request for the adjudicator’s appointment. The second notice did not. Although Mr B’s decision on his expenses was of limited importance, it was outside his jurisdiction and this was fatal to the entire decision. To double the wastage, it was now too late for Mr A to give a decision (Lancsville having declined to agree an extension).
What can we learn from these cases? To protect your right to adjudicate: expressly provide for adjudication in your contract, get your adjudication notice right first time, rely upon all arguments for the payment or whatever it is you are claiming and avoid parallel adjudications on substantially the same dispute. Easier said than done, I know. Lancsville has won leave to appeal.
Rupert Choat is a partner in CMS Cameron McKenna