Enforcement of Adjudication – Make sure you ask the right questions of an Adjudicator!

The recent case of Level 1 Raised Flooring Ltd (“Level 1”) v JM Construction (SW) Ltd (“JMC”) [2023] EWHC 28/41 (TCC) emphasises the importance of asking the right questions when drafting a notice of adjudication.

Since adjudicators’ awards are temporarily binding, enforcement in Court by way of summary judgment may be necessary if the losing party does not comply with the adjudicator’s decision. Failure to ask the right questions of an adjudicator may leave the winning party seeking a summary judgment with nothing to enforce.

Background facts

Level 1 employed JMC under a building contract incorporating the provisions of the JCT Minor Works Contract 2016. Following a dispute, Level 1 purportedly terminated JMC’s employment in November 2021.

Level 1 alleged that immediately prior to the purported termination there was an overpayment made to JMC. Level 1 referred the matter to adjudication to determine, among other things, whether Level 1 was currently entitled to a payment, and, if so, how much.

Adjudicator’s findings

The adjudicator found:

• there had in principle been an overpayment of £67,042.84;
• the termination provisions of the building contract did not provide for payment to be made at the time of the adjudication;
• if JMC’s employment was validly terminated in accordance with the contract, Level 1 was entitled to follow the post-termination contractual procedures, which stated:
  • Level 1 could employ someone else to complete the works;
  • Level 1 did not have to pay any further sums to JMC save for anything properly due following a final account; and
  • a final account had to be prepared determining the amount payable from one party to the other;
• if the termination was valid, in the absence of an express provision in the building contract requiring a valuation of the works and entitling Level 1 to obtain payment at the date of termination, there was no current entitlement to payment.

Claim for summary judgment

Level 1 followed the contract’s post-termination procedure after the adjudication. In March 2023, Level 1 produced an account which included an adjudicator’s ‘award’ of £67.042.84. Level 1 sought enforcement by way of summary judgment of payment of that sum, believing it was a binding valuation by the adjudicator.

JMC argued that:

• an adjudicator has no independent power or inherent jurisdiction to make awards, and the adjudicator’s power to make awards comes directly from the contract in question;
• in his decision, the adjudicator had correctly identified that there was no entitlement to payment at the time of the adjudication; and
• the issue of whether the termination had been lawful or not under the contract was still in dispute.

JMC therefore argued that, as the contractual procedures giving rise to a payment had not been carried out at the time of the adjudication, the adjudicator had not made an ‘award’, but had rather provided a ‘snapshot’ valuation at the time of adjudication.

Court’s refusal to uphold the ‘award’

The Technology and Construction Court has a streamlined approach to enforcement of adjudicators’ decisions given the Government’s objective that adjudication provides a swift form of dispute resolution. The Courts are therefore usually reluctant to interfere with adjudicators’ awards and will generally only refuse to enforce a decision because of either a lack of jurisdiction of the adjudicator or a material breach of natural justice.

However, in this instance the Court decided that what Level 1 purported to be a sum ‘awarded’ by the adjudicator could not be granted via a summary judgment as there was no concrete adjudicator’s decision which could be subject to enforcement. In fact, in his decision, the adjudicator had clearly stated that there was no current entitlement to payment under the contract. Even after Level 1 had followed the contractual procedure for attaining a valuation, the Court awarding the sum was not an indispensable result of the adjudicator’s overall decision, nor an “inevitable and logical” consequence of a valuation under the building contract.

What went wrong?

At first glance it might be hard to see why the Court did not uphold the ‘award’ made by the adjudicator. Level 1 had asked the adjudicator to find that there had been an overpayment at the time of the termination, and the adjudicator found this position to be correct. Clearly, Level 1 intended that, following the adjudication, any deemed overpayment would be an enforceable sum payable by JMC.

Unfortunately for Level 1, its approach was doomed from the start. If it thought the adjudicator could ‘leapfrog’ the contractual process for determining the sum due from JMC, this would have been an overreach of the adjudicator’s jurisdiction. Moreover, this was not the question Level 1 actually asked the adjudicator. This was not an instance of the Court overturning an adjudicator’s decision or refusing to uphold it; the adjudicator had made the decision based on the questions he was asked to answer. The Court found no issue with the adjudicator’s decision, but observed that Level 1 “perhaps thought it was asking for a more comprehensive determination than in fact it was”.

Key takeaways

This case throws up some key lessons for parties who are keen to avoid finding themselves in a similar position to Level 1.

1. It is not for the adjudicator to second-guess the referring party’s desired outcome of an adjudication. Although adjudicators may ask for clarifications as to what they have been asked to determine, as often as not they will simply answer the questions put to them.
2. Parties to construction contracts should ensure they are familiar with the terms of the contract.
3. Parties should be aware of the limits to adjudicators’ jurisdiction, and that these may be dictated by the contract itself.
4. When commencing an adjudication, the referring party should be certain it understands exactly what it wants the adjudicator to find and ensure the notice of adjudication is correctly drafted, as this document is the “cornerstone of both the adjudicator’s jurisdiction and the scope and limit of the referring party’s claim in the adjudication”.

For more information on adjudication, please contact Edwin Coe’s Construction team.

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