High Court refuses to enforce an adjudicator’s decision
12 November 2020
The High Court of Northern Ireland has refused to enforce an adjudicator’s decision, where, in the period since the adjudication, the parties had agreed that the defects which were the subject of the adjudication, would be made good.
This case arose out of works known as “Project Lightning”. M&M Contractors (Europe) Limited (M&M) had been engaged by Virgin Media as main contractor for those works. It then subcontracted certain excavation and reinstatement works to Flexidig Limited (Flexidig).
Flexidig commenced work in February 2017 and left site around June 2018. M&M alleged that the works that Flexidig carried out were incomplete and defective.
An adjudication followed, with the adjudicator deciding that Flexidig should pay the “on account sum” of £462,456.50 to M&M.
M&M started court proceedings to enforce the adjudicator’s decision, but did not promptly pursue them. Instead Flexidig attempted to make good the defective work pursuant to an agreement that had been reached between the parties.
Almost a year later, after Flexidig had attempted to make good as was agreed, M&M sought to enforce the adjudicator’s decision. There was a dispute as to whether the making good attempted by Flexidig had been effective.
Flexdig also alleged bad faith on M&M’s part, with the Judge finding there was some merit in that claim. Virgin Media was apparently content with the quality of at least a substantial proportion of the works which had been carried out by Flexidig, while the email traffic suggested that it was Flexidig that was pushing to have the “defective” work remedied and that it was the M&M that was resisting.
It was also alleged that a director of M&M had told his opposite number in Flexidig that “he intended to instruct other contractors … to run up costs until [Flexidig] was “buried.””
The court was tasked with deciding whether the adjudicator’s decision ought to enforced almost a year after it was given and after substantial remedial works had been carried out.
The Law – Adjudication
The Construction Contracts (Northern Ireland) Order 1997 (the 1997 Order) is the legislation that governs adjudication and payment in "construction contracts" in Northern Ireland.
Under the 1997 Order, a party to a "construction contract" has a statutory right to refer a dispute to adjudication at any time. In an adjudication, an independent adjudicator is appointed and provides a decision within 28 days.
Adjudication was designed to be a speedy and cost effective dispute resolution process, that would provide a cash flow remedy during construction projects. It is now used for much more than payment disputes, with disputes often being referred to adjudication long after projects have completed.
The Law – Estoppel
Estoppel is a legal rule that arises in circumstances in which a party has been induced to act on the basis of a statement or representation made by another party, and that other party then seeks to turn away from that statement or representation.
If an estoppel is proven, the courts will ordinarily prevent a party from seeking to assert a right that contradicts what was previously said or agreed.
The Court found that, having entered into an agreement with Flexidig under which remedial works were carried out, M&M was estopped from enforcing the adjudicator’s decision for the full payment “on account” in respect of those works.
The Judge considered that it would be “both unfair and unjust” to allow M&M “to turn the clock back” to enforce the adjudicator’s decision and obtain payment in respect of works that had since been carried out by Flexidig.
Flexidig was ordered to pay £12,679.52, but there was no argument from either party that that amount was not due. However, the full amount of the adjudicator’s decision was not payable.
Carson McDowell View
This judgment confirms that the High Court in Northern Ireland is a “great supporter” of adjudication that will strive to provide “speedy enforcement” of adjudicator’s decision.
However the Court will carefully consider whether it is appropriate to enforce an adjudicator’s decision in cases where there is a significant delay between the adjudicator’s decision and any enforcement application.
The Judge in this case was influenced by the significant change in circumstances between the adjudicator’s decision and the court hearing, with remedial works having been carried out by Fleixdig. Whilst the agreement between M&M and Flexdig was particular to this case, parties should be aware that what they say and do after an adjudicator’s decision is given may impact on whether the courts will enforce that decision.
It is also worth noting that what was said between the directors of the two companies made it into the evidence considered by the Jugde. It can be a salutary lesson for any party to court proceedings to have his or apparently private conversations aired in a public forum, particularly when (with the benefit of hindsight) he or she may not want to have those conversations repeated.
If you have any queries, the Construction team at Carson McDowell would be happy to help.
*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.