Macob Civil Engineering Ltd v Morrison Construction Ltd [QBD (TCC)]

JurisdictionEngland & Wales
CourtQueen's Bench Division (Technology and Construction Court)
JudgeDyson J.
Judgment Date12 February 1999
Neutral Citation[1999] EWHC 30 (TCC)
Date12 February 1999

Queen's Bench Division (Technology and Construction Court).

Dyson J.

Macob Civil Engineering Ltd
and
Morrison Construction Ltd

Delia Dumaresq (instructed by Morgan Cole) for the plaintiff.

Stephen Furst QC and Michael Bowsher (instructed by Wragge & Co) for the defendant.

The following cases were referred to in the judgment:

Drake & Scull Engineering Ltd v McLaughlin & Harvey plcUNK (1992) 60 BLR 102

Halki Shipping Corp v Sopex Oils Ltd [1998] CLC 583; [1998] 1 WLR 726

Lissenden v CAV Bosch LtdELR [1940] AC 412

R v WicksELR [1998] AC 92

Construction — Adjudication — Arbitration — Scheme for Construction Contracts — Adjudicator issued peremptory decision for payment under construction contract — Whether decision enforceable despite challenge — Whether challenge to decision was dispute referable to arbitration — Whether and how decision enforceable by court — Housing Grants, Construction and Regeneration Act 1996, Part II — Arbitration Act 1996, s. 9, 42.

This was an application by a subcontractor seeking to enforce the award of an adjudicator under Pt. II of the Housing Grants, Construction and Regeneration Act 1996 and the Scheme for Construction Contracts.

The plaintiff entered into a contract with the defendant to carry out groundworks as subcontractor. Clause 27 of the contract provided for any dispute to be submitted to and settled by an adjudicator. The decision of the adjudicator was to be enforceable as a matter of contractual obligation and any dissatisfaction with a decision of the adjudicator could be referred to arbitration. The contract was a construction contract for the purposes of Pt. II of the Housing Grants, Construction and Regeneration Act 1996 and because it did not comply in all respects with the requirements of s. 108(1)–(4) of the Act, the adjudication provisions of the Scheme for Construction Contracts made under the Act applied.

The plaintiff alleged that the defendant had failed to make a payment and required the dispute to be referred to an adjudicator. The adjudicator held that the contract failed to provide an adequate payment mechanism and that in accordance with s. 110(3) of the Act the provisions of the Scheme applied. On that basis the defendant's notice of intention to withhold payment was out of time. He directed the defendant to make payment to the plaintiff. He purported to issue his decision peremptorily under para. 23(1) of the Scheme and gave permission under s. 42 of the Arbitration Act 1996 (as modified by para. 24 of the Scheme) for either party to apply to the court for an order requiring compliance. The plaintiff sought to enforce the decision by action. The defendant challenged the decision on the merits and also argued that the decision was invalid and unenforceable on grounds that the adjudicator was guilty of procedural error in conducting the adjudication in breach of the rules of natural justice. The defendant also required the decision to be referred to arbitration under the contract and accordingly sought a stay of proceedings under s. 9 of the Arbitration Act 1996.

Held declaring that the decision of the adjudicator was binding on the defendant until the dispute arising from the decision was finally determined by arbitration, proceedings or agreement and that the defendant was required by the decision to pay the sums identified by the adjudicator in accordance with the Scheme and was in default:

1. The intention of Parliament in enacting the Scheme was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis and requiring the decisions of adjudicators to be enforced pending the final determination of disputes. Accordingly even if there was challenge to the validity of the adjudicator's decision, it remained binding and enforceable until any challenge to it was finally determined. A decision whose validity was challenged remained a decision within the meaning of Pt. II of the Housing Grants Construction and Regeneration Act 1996, Pt. I of the Scheme and cl. 27 of the contract.

2. The arbitrator did have power under the contract to determine disputes relating to adjudicator's decisions. Once the defendant elected to treat the decision as capable of being referred to arbitration it was bound to treat it as binding and enforceable unless revised by the arbitrator. However the defendant had elected to argue that the decision was not binding and enforceable pending revision by the arbitrator, and therefore could not also treat the decision as one capable of being referred to arbitration. Thus the defendant could not seek a stay under s. 9 of the Arbitration Act 1996 on the basis that there was a dispute as to whether the adjudicator's decision was a valid decision.

3. The court could enforce the decision under s. 42 of the Arbitration Act 1996. The agreement in cl. 27 to refer disputes arising out of the adjudicator's decision to arbitration did not amount to an agreement that s. 42 should not apply. That section contemplated an agreement expressly directed to the s. 42 power. A general reference of disputes to arbitration was insufficient.

4. Although the court had jurisdiction to grant a mandatory injunction to enforce an adjudicator's decision, the usual remedy for failure to pay in accordance with an adjudicator's decision would be to issue proceedings followed by an application for summary judgment. There would have to be some special reason, apart from s. 42, for the court to grant a mandatory injunction to enforce a decision requiring the payment of money by one contracting party to another.

JUDGMENT

Dyson J:

Introduction:

1. This is the first time that the court has had to consider the adjudication provisions of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”). The plaintiff entered into a contract with the defendant to carry out groundworks as subcontractor at a retail development known as Greyfriars in Camarthen, South Wales. The plaintiff alleged that the defendant failed to make payment in accordance with its application No. 6 and required the dispute to be referred to an adjudicator. Mr Eric Mouzer FRICS, FCIArb was duly appointed. On 6 January 1999, he published his decision. He directed that the defendant forthwith pay the plaintiff £302,366.34 plus VAT, accrued interest of £2,849.70 continuing at the daily rate of £66.27 until payment, and fees of £2,197.75. He purported to issue his decision peremptorily under para. 23(1) of the Scheme for Construction Contracts (“the Scheme”), adding that, in the event of non-compliance with his decision, he gave permission under s. 42 of the Arbitration Act 1996, as modified by para. 24 of the Scheme, for either party to apply to the court for an order requiring such compliance.

2. The defendant has not complied with the adjudicator's decision. It contends inter alia that the decision is invalid and unenforceable on the grounds that the adjudicator was guilty of procedural error in conducting the adjudication in breach of the rules of natural justice. By a letter dated 13 January 1999, the defendant gave notice to the plaintiff requiring the reference to arbitration of disputes arising out of or in connection with the adjudicator's decision.

3. The plaintiff seeks to enforce the decision in this court. The defendant has issued a summons to stay the plaintiff's proceedings under s. 9 of the Arbitration Act 1996, on the grounds that the contract contains a valid arbitration clause which, properly construed, applies to all of the disputes that have been raised as to the decision of the adjudicator. These proceedings raise questions as to the enforceability in the courts of an adjudicator's decision in circumstances where the contract contains a clause by which the parties agree to refer to arbitration disputes about a decision. In short, it is submitted on behalf of the plaintiff that the existence of such a clause does not affect the enforceability of an adjudicator's decision. On behalf of the defendant, it is said that, if the dispute concerns the...

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