Adjudication – resisting enforcement of decisions

As a general principle, the court can be expected to uphold and enforce the decisions of adjudicators who have followed the relevant dispute procedure under a construction contract and ensured that natural justice has been allowed for. In fact, resisting enforcement of an adjudication decision is very difficult.

In the case of WRB (N.I.) Ltd v Henry Construction Projects Ltd [2023], WRB as sub-contractor sought to enforce an adjudicator’s decision which the defendant main contractor was resisting.

Background

The dispute arose in regard to a sub-contract under which the defendant had engaged WRB to design, supply, install, test and commission the mechanical, electrical and public health systems for a £2.18m development in London. Of importance was that WRB was a dormant company.

Adjudication

WRB served a notice of adjudication seeking a determination as to the value of an interim payment application. The adjudicator decided that the WRB was owed £120,655.35. The defendant was directed to pay up. However, they failed to do so, and WRB applied to court to enforce the adjudicator’s decision.

The defendant asked the court to stop enforcement pending the adjudication of the defendant’s own cross claims. The defendant argued that WRB was in a difficult financial position, and therefore likely to be unable to pay. It was probable that any sums paid over would not be repaid in the event that the defendant was later to be successful in its own cross claim.

The position of the court

The court can stop the enforcement of a judgment on an adjudication decision if there are “special circumstances which render it inexpedient to enforce the judgment or order.”

Against that, the principle of adjudication is that it is intended as a quick and inexpensive method of arriving at the determination of a construction dispute. As such, in general, adjudicators decisions are to be enforced summarily and the successful party should not be denied payment of sums awarded.

If the court is asked to stop enforcement of an adjudicator’s decision, it will consider any probable inability of the claimant to repay the award, if a later action determines that the defendant is itself due a payment. These can be the kind of special circumstances acceptable to the court to render it appropriate to grant a stay.

Where the claimant is in insolvent liquidation, or where there is no dispute on the evidence that the claimant is insolvent, then a stay of execution will usually be granted.

However, simple evidence of the claimant’s poor financial position would not of itself justify stopping enforcement. This includes where the claimant’s finances are the same or similar to those which applied when the contract was entered into. It also includes where the claimant’s poor financial position is due, either wholly or in significant part, to the defendant’s failure to pay sums which have been awarded by an adjudicator.

The decision

The decision of the court was that there were insufficient grounds to stop enforcement. They accounted for the fact that the defendant had placed the sub-contract with a newly formed dormant company. The financial risks it was raising were the consequence of having contracted with WRB as a dormant company. It would be unfair and contrary to the spirit of the adjudication regime to allow the defendant to avoid liability in regard to the adjudication award on the basis of WRB’s unchanged financial position.

The case illustrates the challenges in resisting enforcement of an adjudicator’s decision.  Adjudication is intended as a quick and inexpensive method of resolving disputes in construction contracts, and the courts are keen to back it.