Adjudication enforcement

Adjudication is not always the quickest or cheapest way to resolve construction disputes. In the case of Amec Capital Projects -v- Whitefriars City Estates, it is recorded that the parties had spent over £270,000 in conducting two adjudications in an attempt to resolve payment disputes between them.
The court refused enforcement of both adjudications, leaving the parties counting the cost and no further forward in resolving matters between themselves.
His Honour Judge Toulmin QC commented that if either arbitration or court proceedings in the Technology and Construction Court had been started in May 2003, when the first adjudication had commenced, the parties would probably have had a hearing and a decision on the merits of the case by now.
Amec had been engaged under a letter of intent to carry out certain preconstruction services for Whitefriars in connection with a building development in Tudor Street, London.
The letter of intent formed the basis of a contract between the parties incorporating the JCT 1998 standard form with Contractor's Design. The letter had provided that the parties would negotiate a second stage tender for the main building works.
Amec carried out preconstruction services on site for a period of approximately three months. At that point, however, Whitefriars determined Amec's contract because the parties could not agree on the second stage tender. By that stage Amec had submitted invoices for £204,000 that had been paid, and further invoices for a sum in excess of £500,000 that had not been paid.
Negotiations between the parties failed to resolve the impasse in connection with these payments and almost two years later Amec gave notice of adjudication for the wrongful withholding of monies due to it in the sum of approximately £500,000 plus VAT. An adjudicator was duly nominated by the Royal Institute of British Architects (RIBA), who decided in favour of Amec for the full amount. Whitefriars failed to comply with that decision which then came before His Honour Judge Lloyd QC on enforcement proceedings.
Judge Lloyd refused to grant enforcement of the decision. He held that an alternative adjudicator had been named in the contract between the parties, and, therefore, the adjudicator appointed by RIBA had not been validly appointed and had no jurisdiction to make the decision.
It emerged soon after that hearing, however, that the adjudicator named in the contract between the parties had sadly died some time before the dispute had been referred to adjudication. Armed with that knowledge, Amec recommenced the adjudication applying to RIBA a second time for the appointment of an adjudicator, suggesting that the first adjudicator might be renominated in the interests of saving time and costs. RIBA duly obliged and a second adjudication, essentially on the same facts, was commenced.
This time however, Whitefriars responded with a notice of a withholding and a counterclaim. It advised that since the contract had been terminated between the parties, the situation that prevailed was that Amec would not be entitled to any further payment until another contractor completed the works. Whitefriars suggested that Amec would only become entitled to the difference, if any, between what it would have earned by completing the contract and what Amec's breach had cost the employer.
This brazen approach appeared to ignore the fact that the determination had been brought about by both parties' failure to agree terms for the carrying out of the building works. Whitefriars also indicated that it would bring a substantial counterclaim, which it valued in the amount of £1.2m.
Amec refuted allegations that it was in repudiatory breach of the preconstruction contract and repeated that its final account had been submitted for more than two years and that in the absence of any response or a valid withholding notice at that time, the account had become payable.
The adjudicator rejected Whitefriars' counterclaim and set-off, saying that it was a separate and independent claim and, therefore, outside his present jurisdiction. He ordered that Whitefriars should pay Amec the full amount claimed plus VAT. Once again, Whitefriars refused, and the parties appeared in court for enforcement of the adjudicator's decision.
Whitefriars resisted enforcement on a number of grounds. It complained that the reappointment of the earlier adjudicator had led to a serious risk of bias. Judge Toulmin noted that while it might have made good sense for RIBA to appoint a different adjudicator on the second occasion, he was not ready to conclude that, taken in isolation, there was a real possibility that the adjudicator was biased in reaching his decision in the second adjudication merely because he had already reached a decision on the same or similar facts.
A further objection from Whitefriars was, however, to be regarded more seriously. Whitefriars complained that the adjudicator had not disclosed to the parties advice that he had received from his legal advisers in the first adjudication in relation to the withholding issue.
Judge Toulmin noted that when an adjudicator is seeking advice from a third party, it is essential that he informs the parties how he has formulated the question and that he discloses the substance of the advice giving the parties an opportunity to comment on it before he reaches his decision. This had not happened in the present case and this was contrary to natural justice.
In conclusion therefore, the decision of the second adjudication was not enforced for reasons that were quite independent of the underlying merits of the case, proving that it is the very fast track nature of adjudication which may on occasion prove to be its undoing.