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Refusing to pay up? You'll need a good case

16 September 2016. Published by Julia Edwards, Associate

TCC enforces adjudicator's decision, finding no breach of natural justice or jurisdiction.

Adjudication is a popular form of dispute resolution in the construction industry and is usually a quick and cost effective process. Nevertheless, an unsuccessful party at adjudication may challenge the decision in subsequent enforcement proceedings if it can be determined that the adjudicator has acted in breach of their jurisdiction or the rules of natural justice. The recent TCC case of Ground Developments Ltd v FCC Construccion SA and others [2016] EWHC 1946 considered the parameters of when such defences could be used and highlights the futility of "simply scrabbling around to find some argument, however tenuous, to resist payment".

An adjudicator was asked to decide on an outstanding payment that Ground Developments Ltd (the "sub-contractor") sought from FCC Construccion SA and others ("the JV") arising out of a disputed contract for ground engineering works. Prior to the sub-contractor commencing work in August 2015, discussions had already taken place surrounding the terms and conditions of the NEC3 sub-contract, yet no formal contract had been entered into and signed by the parties. The sub-contractor sought to confirm the terms by which it would carry out the works in a letter sent in early September 2015, which received no response from the JV. The adjudicator decided that the terms and conditions in the sub-contractor's letter formed the basis of the parties' contract and awarded payments to the sub-contractor in accordance with those terms.

At subsequent enforcement proceedings the JV put forward seven separate grounds by which it argued that the adjudicator had breached the rules of natural justice and exceeded his jurisdiction. The court rejected all of these and the adjudicator's decision was enforced. In consideration of whether the adjudicator had breached natural justice Fraser J adopted the approach used by Chadwick LJ inCarillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358 and reiterated that the courts would only uphold this defence in the "plainest case". To seek to run such a defence in cases otherwise would "likely to lead to a substantial waste of time and expense". Moreover, in dealing with the argument that the adjudicator had decided on more than one dispute at the same time Fraser J held that the position adopted by the JV's counsel was "verging upon, if not completely unarguable".

This is a positive decision in support of the adjudication process and is likely to be of interest to any party considering enforcement proceedings or, indeed, any party seeking to resist enforcement who may be prompted to reflect upon whether the credibility of their position really does justify throwing further money away on lawyers and court fees.

To see the full judgment of this case, please click here