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A Second bite of the cherryBy Jeremy Glover |
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| If you have started proceedings, be they court or arbitration, or
if you are on the receiving end of a claim, can you still refer the
matter to adjudication and obtain an interim remedy? Those who drafted
the TeCSA Adjudication Rules certainly thought there was no difficulty
with this. Rule 4 specifically states that “notice requiring adjudication
may be given at any time notwithstanding that arbitration or litigation
has been commenced in respect of such dispute.” In doing this, the authors
of the Rules simply followed the wording of Section 108(2)(a) of the
HGCRA which itself provided that a party should have the right to give
notice to an intention to refer a dispute to adjudication "at any time". |
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Mr Justice Dyson has now in Herschel Engineering Limited -v- Breen Properties Limited (1), confirmed that this interpretation of the Act is correct. Here the Claimant issued proceedings in the County Court and obtained judgment in default of defence against the Defendant. The Defendant succeeded in its application to have the judgment set aside. The Claimant appealed. Its appeal is yet to be heard. In the interim, the Claimant referred the same dispute to Adjudication. Now, the Defendant took the arguably risky move of not only reserving its position on jurisdiction but also of not taking any active part in an adjudication, on the grounds that the Claimant had already instituted proceedings in the County Court. The Adjudicator twice invited the Defendant to participate. It declined. Such a course must always be risky since by taking part in the Adjudication there is always the chance that the decision may go in your favour. The Claimant having succeeded in persuading the adjudicator of the
merits of its case was forced to take enforcement proceedings where
again the Defendant argued that the TCC should not countenance two concurrent
proceedings in respect of the same cause of action. Alternatively the
Defendant suggested that by starting proceedings in the County Court
the Claimant had waived its right to Adjudicate, in a similar fashion
to a party to an arbitration agreement forfeiting the right to arbitrate
if it takes a step in litigation proceedings(2). |
1. Friday 14 April 2000 |
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The Defendant cited a number of precedents dealing with concurrency in litigation, arbitration and even expert determination proceedings. The rationale behind these date back from the 1882 case of McHenry v Lewis where it was said that it was vexatious to bring two actions where one will do and also that where the remedy and procedure were the same a double action could lead to manifest injustice. Clearly it was recognised that there is no guarantee that any two judges or arbitrators would come up with the same answer. Now there have indeed been a number of cases, for example HHJ Wilcox in A&D Maintenance (in deciding that adjudication provisions survived determination of the contract) or HHJ Thornton QC in Fastrack (in deciding what was and what was not a dispute) where the Court has come to its conclusions by analogy with precedents in the law of arbitration. In Straume v Bradlow, HHJ Behrens QC went as far as to describe Adjudication as being a form of Arbitration However Mr Justice Dyson did not agree that in these circumstances such an analogy was correct. When dealing with something new such as Adjudication, the established law will not always be appropriate. Adjudication is new. It is a creature of statute. The Judge recognised that Parliament had not expressly (or at all) decided that a Party who had commenced proceedings would be prohibited from referring that dispute to Adjudication. Equally the right to Adjudicate is one, which having been imposed by statute, is not a contractual right, which is capable of being waived. Mr Justice Dyson also stated that "the mischief at which the Act is aimed is the delays in achieving finality in litigation or arbitration." Here there had already been considerable delays in the County Court proceedings. The decision of an Adjudicator cannot be final and binding, unless both parties say so. This lack of finality is perhaps the crucial difference. Adjudication was intended to provide an interim solution partly at least to take account of the delay referred to by the Judge. The words of the Act are clear. "At any time" means exactly what it says and there is nothing to prevent a party from commencing adjudication proceedings even if court proceedings are already on foot. It is perhaps an interesting point as to how many parties, if any at all, have considered using adjudication when they are involved in other proceedings. In a lengthy case, tactically there may well be useful advantage to be gained from hiving off one or two particular points and getting a quick decision and perhaps a monetary award when the final hearing date is many months or more away. That said commonsense must prevail. As Mr Justice Dyson made clear, a Judge is most unlikely to enforce an Adjudicator’s decision if the final decision of the Court or other tribunal is close at hand. In discussing whether there should be a stay Mr Justice Dyson makes an equally interesting comment, which is bound to have a practical effect on the approach of those resisting enforcement applications. In a remark, which is strictly obiter, he noted that had there been a real doubt about the Claimant's ability to pay, (and there was no doubt here at all about the financial status of the Claimant), should it lose the court proceedings then he may well have granted a stay until final determination of those court proceedings. Now whether such a defence is only open to those where proceedings have been instituted or whether it is enough for a party to declare such an intention is not clear but it is now likely that there is another way in which a Defendant can attempt to frustrate an Adjudicator's decision, namely to mount a security for costs style attack on the financial probity of their opponent. However some caution should be attached to that view since here Mr Justice Dyson is in direct conflict with HHJ Wilcox who in another recent decision, Absolute Rentals Limited v Gencor Enterprises Limited declined to order a stay on the grounds of the financial impecuniosity of the Claimant. Whilst one of the reasons for this was that he did not think that it was desirable that he did so on the basis of the limited financial information before him, (and there was also a clear conflict about the evidence in respect of the Claimant's financial position) perhaps the more important reason was that he did not think that it was desirable to do so in the context of the application before him. In fact HHJ Wilcox went as far as to say that to do so would "frustrate the scheme". It is also important to note that in making this decision HHJ Wilcox suggested that it was entirely possible that the alleged impecuniosity of the Claimant could well have derived from the default of the Defendant now seeking a stay. This is one of the factors a Court will take into account when there is an application for security for costs before them. However, he also made reference to the comments of Mr Justice Dyson himself in Bouyges v Dahl-Jansen. Adjudication is meant to be a robust and summary procedure and there may well be casualties. Where an Adjudicator makes a decision capable of being enforced HHJ Wilcox certainly seems to be suggesting that that casualty should not be the successful party. The views of HHJ Wilcox certainly seem to be more in keeping with the spirit behind and the actual law in relation to Adjudication. If Mr Justice Dyson's views were to be preferred it could have a potentially stifling effect on the smaller sub contractors who might be reluctant to pursue their remedies under Adjudication fearing that they would be unable to enforce any decision awarded in their favour since they would inevitably face an application for a stay based their financial position. However since there is this divergence of judicial opinion it is not clear which way the courts will go. It will probably take a contested enforcement hearing, where there are full details of the Claimant's financial position to determine that. There is a postscript to all of this. Breen Properties Limited, the unsuccessful Defendant in the Herschel case, who raised unsupported allegations about Herschel's financial position have themselves gone into creditors voluntary liquidation. A neat irony perhaps, but of absolutely no use at all to Herschel.
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2. s9 Arbitration Act 1996 |
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