Top 5 Cases Of 2023: Adjudication – Corporate and Company Law

Nathaniel Buckingham and Hayley Russell discuss our Top
5 Adjudication cases of 2023 and highlight some of the key
commercial lessons arising.

Background

In 2023, adjudication remained a popular process for resolving
disputes within the construction industry. Some of these disputes
ultimately required input from the courts, which provide us with
many interesting and relevant cases. We have highlighted some of
the key commercial lessons arising from them below.

Topics include the use of ‘without prejudice’ material,
evidence, natural justice, administration, and insolvency. Links to
case judgements, where available, are provided in the headlines
below should you wish to read the full case details. We also
discussed these cases in detail in our recent Top 5 Adjudication
Cases of 2023 Webinar, watch the full recording here.

1. AZ v BY

The Technology and Construction Court (TCC) considered whether
an adjudicator’s decision was rendered unenforceable due to the
consideration of ‘without prejudice’ material. During the
adjudication, AZ presented communications made by BY, at an earlier
meeting, that were inconsistent with the contractual position BY
were presenting at the adjudication.

The TCC granted BY’s declaration that the communications
referred to were ‘without prejudice’. It held that the
disclosure of the without prejudice material created an
“inevitable question mark” over whether the
adjudicator was inadvertently or unconsciously biased. In the
circumstances, the TCC held that the resulting decision breached
the rules of natural justice and could not be upheld.

This highlights that without prejudice material cannot be
introduced into an adjudication. The key issue was whether having
seen the material, there was a real risk of a lack of impartiality
on the part of the adjudicator. The decision did not need to be
primarily founded upon the material for the decision to be rendered
unenforceable. Parties should review materials submitted by the
other side carefully, and if without prejudice material is
identified, they should challenge reliance on that material. You
can also read more on this case in our previous article.

2. J A Ball (in Administration) (“JAB”) v St Philips
Homes (Courthaulds) Ltd (“SPH”)

The TCC considered when an adjudicator’s award would breach
the rules of natural justice, and when a company in administration
would be entitled to enforce an adjudicator’s award.

The TCC held that the adjudicator’s award was unenforceable,
having breached the rules of natural justice because:

1. the adjudicator reached the decision on a
   “novel” basis, of which neither party had
   notice;




2. parties were not provided with the opportunity to respond to
   the adjudicator’s novel reasoning; and




3. this concerned a “determinative” part of the
   dispute.

JAB was facing a cross claim. SPH argued JAB’s
administration status meant they should be treated as a company in
liquidation, which would likely mean they were unable to enforce
adjudication awards. JAB disagreed as no notice of distribution had
been issued yet.

The TCC held JAB’s administration status meant it should be
treated as a company in liquidation. The court stated that had they
found the adjudicator’s decision to be enforceable, they would
have delayed enforcement by six months to allow SPH to pursue its
cross claim.

This case serves as a reminder that insolvent companies will
often struggle to enforce adjudication awards, particularly when
facing a cross claim, however “there is no hard and fast
rule” preventing enforcement. Each case will depend on
the particular circumstances. An insolvent company would need to
offer clear and substantial security for both the principal sum and
costs to persuade a court to enforce an adjudicator’s decision
in its favour. You can read more on this case in our previous article.

3. Sudlows v Global Switch

The Court of Appeal considered the binding nature of a previous
adjudicator’s decision.

The TCC had previously decided that the adjudicator in the sixth
adjudication, was incorrect to consider himself bound by the
decision of the previous adjudicator. The Court of Appeal held that
the TCC had failed to apply the test of whether the disputes were
the same, or substantially so, and was therefore incorrect in their
determination.

The Court of Appeal commented that the disputes in the fifth and
sixth adjudication both concerned who was contractually responsible
for defective ductwork and were therefore, substantially the same.
The court felt the TCC decision ignored the binding nature of an
adjudicator’s decision as prescribed in s108 of the Housing,
Grants, Construction and Regeneration Act 1996.

This case demonstrates the courts will generally respect the
binding nature of previous decisions on later adjudications and
will aim to leave the policing of serial adjudication debates to
adjudicators. Whether or not disputes are the same or substantially
the same is a matter of “fact and degree“, with
each case decided on its own facts. You can read more on this case
in our previous article.

4. Home Group Limited (“HGL”) v MPS Housing
(“MPS”)

The court considered to what extent substantial quantities of
evidence provided during an adjudication could amount to a breach
of natural justice, preventing enforcement of an adjudicator’s
decision.

MPS challenged enforcement of an award made to HGL at an
adjudication, on the grounds there had been a breach of natural
justice. MPS argued they had insufficient time to review the
substantial materials provided with HGL’s referral and submit a
response within 19 days.

The court found, on the facts, that MPS’ claim was without
merit as:

1. Adjudication decisions must be enforced even if they contain
   errors of procedure, fact, or law;




2. An adjudication decision will not be enforced if it is reached
   in breach of natural justice and the breach is material, in that it
   has led to a material difference in the outcome;




3. Both complexity and constraint of time to respond are inherent
   in the process of adjudication and are no bar in themselves to
   adjudication enforcement; and




4. In cases involving significant amounts of data, an adjudicator
   is entitled to proceed by way of spot checks and/or sampling.

The judge placed emphasis on the fact that prior to the
adjudication, HGL submitted their expert report and invited MPS to
visit their offices to inspect some of the documents. The judge
felt there was little excuse for declining HGL’s offer to
access the underlying material.

This case highlights that parties should take the opportunity to
understand their respective cases prior to an adjudication. A
responding party, wherever possible, needs to engage with the
material. It is another case that demonstrates the courts in
England and Wales have little sympathy for so-called
“ambush” claims, where large volumes of evidence
and witness statements are given with limited timeframes for a
response. Although the time periods, in this case, were tight given
the volume of material, they were longer than usual, and we always
advise proceeding as though you are not going to get an extension
of time on your deadline provided and not to have unrealistic
expectations about how long it will take to review the
material.

5. Alun Griffiths (Contractors) Limited
(“AGC”) v Carmarthenshire County Council
(“CCC”)

The court considered whether to enforce an adjudicator’s
decision or grant a stay of execution, in circumstances where the
Council intended to pursue a true value adjudication. The
adjudicator had awarded AGC £3,317,487.55 which they sought
to enforce at court. CCC sought a stay based on the alleged
insolvency of AGC and the inadequacy of AGC’s parent company
guarantee, from Tarmac Holdings Limited, to safeguard CCC’s
position.

The court held that Tarmac had a “substantial positive
net-asset position“. There was no evidence provided that
their accounts were incorrect or on further investigation,
demonstrated insolvency. Given that Tarmac had an overall healthy
net-asset position, the judge went so far as to say it was
“fanciful to suggest that the group would not support its
cash requirements and that Tarmac will not be able to repay a
judgment sum of circa £3 million in the event that it is
called upon to do so“.

This case highlights that parties seeking a stay of execution,
based on the insufficiency of a parent company guarantee, will
require clear evidence of the guarantor’s likely inability to
pay debts as they fall due. You can read more on this case in our
previous article.

If you have any questions regarding the above cases, please get
in touch with our expert Construction, engineering and
infrastructure disputes team.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.