Adjudication
Hershel Engineering Ltd v Breen Property Ltd (2000)TCC

© Daniel Atkinson   2000      28 December 2000

In Herschel Engineering Ltd v Breen Property Ltd (2000) TCC the issue was the propriety of a reference to adjudication pursuant to Section 108 of the Housing Grants, Construction and Regeneration Act 1996 of a dispute which, at the time of the reference, is already the subject of pending court proceedings.  Breen contended that in such circumstances it is not open to a party to refer a dispute to adjudication, and that any decision which an adjudicator purports to make should not be enforced by the Court.  Herschel sought summary judgment of the sums which the Adjudicator decided were due to it.

Breen had two main arguments.  First it argued that the Court should not countenance two concurrent proceedings in respect of the same cause of action.  Since the county court proceedings were started before adjudication, the Court should have granted an injunction to restrain Herschel from proceeding with the adjudication.  Breen relied on several decided cases in relation to arbitration and court proceedings.

The Honourable Mr Justice Dyson held that there was not a close analogy between the position of an arbitrator and that of an adjudicator.  Where a dispute falls within the scope of an arbitration clause, the claimant may refer it to arbitration, or, in breach of the arbitration clause, he may refer it to the court.  If he takes the latter course, the proceedings may be stayed to arbitration.  Adjudication was different.  The decision of an adjudicator is not final and cannot give rise to any estoppel.  Once the county court has given judgment, then, unless overturned on appeal, its decision does give rise to an estoppel.  Likewise in relation to the final award of an arbitrator.

Section 108(2)(a) of the Act expressly states that a party may refer a dispute to an adjudicator "at any time".  It was held that if parliament intended that a party should not be able to refer a dispute to adjudication once litigation or arbitration proceedings had been commenced, this would have been expressly stated.  There was no obvious reason why Parliament should have intended to draw a distinction between cases where litigation or arbitration proceedings had been started before a dispute was referred to an adjudicator, and those where the proceedings had been started only after the adjudication had been completed.  The mischief at which the Act was aimed was the delays in achieving finality in arbitration or litigation.  It is inherent in the adjudication scheme that a defendant will or may have to defend the same claim first in adjudication, and later in court or in an arbitration.  It was held that it was not self-evident that it was more oppressive for a party to be faced with both proceedings at the same time, rather than sequentially.  Section 108(2)(a) should be given its plain and natural meaning.

Breen's second argument was that a party may waive or repudiate an arbitration agreement by the issue of proceedings in court.  He is put to an election.  It was argued by analogy that by starting proceedings in the County Court, Herschel had waived or repudiated the benefit of the adjudication provisions contained in the contract.  It was held that there was no question of a party being put to his election or committing a breach of contract if he refers a dispute both to adjudication and to the court or an arbitrator.  They are not mutually exclusive routes to dispute resolution.

The only issue therefore was whether the court should grant a stay of execution pending final determination of the county court proceedings.  The stay was not granted, since there was no real prejudice to Breen being required to pay immediately and there was no reason to keep Herschel out of its money any longer.  There was no evidence that Herschel would be unable to repay Breen if the County Court decision differed form the Adjudicators.  Judge Dyson stated that if the position had been otherwise and there was a real doubt as to Herschel's ability to repay if it lost in the County Court, then he would probably have granted a stay of execution pending the final determination of the county court proceedings.  Clearly this is an aspect of law that will need to be developed.  

For the above reasons, the application for summary judgment succeeded.