Adjudication
Macob Civil Engineering v Morrison Construction

© Daniel Atkinson 1999

At the heart of the Housing Grants, Construction and Regeneration Act 1996 ("The Act") and the Scheme, is the Adjudicator's decision. Since the enactment of the Act the construction industry has been uncertain as to the exact legal status of an Adjudicators decision and how the court's will react to challenges to a decision.. The answer has been given in the decision in Macob Civil Engineering -v- Morrison Construction (1999) TCC. The Courts have given a robust endorsement of the Act and have shown that they will not allow ingenious legal argument challenging the Adjudicator's decision to defeat the main purposes of the Act.

The Adjudicator had directed the Defendant to pay the Plaintiff £302,366.34 plus VAT and interest, but the Defendant did not comply with the decision. It was argued instead that the Adjudicator's decision was invalid since he had not followed the rules of natural justice, and therefore the decision was not enforceable by the Court. It was alleged for instance that the Adjudicator had failed to give the parties the opportunity to make representations on whether the contract payment provisions complied with the Act.

The Court took a robust view. It was held that although the timetable for Adjudication was very tight and was likely to result in injustice, Parliament must be taken to have been aware of this. It was clear that Parliament had intended that the Adjudication should be conducted in a manner which those familiar with the grinding detail of the traditional approach to the resolution of construction disputes found difficult to accept. The intention of Parliament was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis. This required the decision of Adjudicators to be enforced pending the final determination of the disputes by Arbitration, Litigation or Agreement.

The word "decision" was given its plain and ordinary meaning. It was held that the Adjudicator's decision was still a decision for the purposes of the Act even if the decision was wrong, whether because the Adjudicator erred on the facts or the law, or because in reaching his decision he made a procedural error. It was considered that any other view would substantially undermine the Act. Otherwise a dissatisfied party would be able to keep the successful party out of his money for longer than envisaged by the Scheme.

In this particular case the validity of the Adjudicators decision had been referred to Arbitration, and the Defendant sought a stay of the enforcement proceedings under Section 9 of the Arbitration Act 1996. The reason for this was obvious, since the contract also provided that Arbitral proceedings should not be commenced before practical completion of the sub contract works. Again this was dealt with robustly by the Court.

It was held that in this situation the defendant had two options. The first was to defend the enforcement proceedings on the basis that the purported decision was not binding or enforceable because it was invalid. In the present case this argument failed. The second option was to refer the dispute to Arbitration. What the Defendant could not do was to assert that the decision was a decision for the purpose of a reference to Arbitration, but not a decision pending any revision by the Arbitrator. It was held that once the defendant elected to treat the decision as one capable of being referred to Arbitration, he was bound also to treat it as a decision which was binding and enforceable unless revised by the Arbitrator. The stay was therefore refused.

The Court also gave useful guidance on the enforcement of the Adjudicators decision. It was held that the Court has jurisdiction to grant a mandatory injunction to enforce a Adjudicators decision, but that this would rarely be appropriate to enforce a payment obligation. It was different where the Adjudicator decides that a party should perform some other obligation such as return to site, provide access or inspection facilities, open up work, or carry out specified work. It was held that the usual remedy for failure to pay in accordance with an Adjudicators decision would be to issue proceedings claiming the sum due, followed by an application for summary judgment.

The case is a landmark decision and will have far-reaching effects in the construction industry if not overturned. Many practising Adjudicators recognise the difficulties that the short timescale presents, but despite the judgment also recognise the importance of the parties being able to present their case. If the industry is to have confidence in the adjudication process the parties will expected and should be encouraged to actively partake in the Adjudicator's fact finding process.

It is clear from the judgment that it will be very difficult to challenge an Adjudicator's decision unless he has, for instance, decided a dispute which has not been referred to him or has acted in bad faith. In view of this parties to adjudication will need to take special care in their appointment of Adjudicators and must be alert to protect their interests, if injustice is to be avoided.