Latest on Adjudication: No Quibbling!
The High Court in Ireland enforced two adjudicators’ decisions in McGurran Civils ROI Limited v K&J Townmore Construction Limited  IEHC 355 in a judgment which again showed the Court’s support for the adjudication process, emphasising some of the ramifications of the “pay now, argue later” principle which underpins adjudication.
The background was that the applicant (McGurran) obtained two adjudicators’ decisions relating to two construction projects. When the sums were not paid, the parties attempted to agree a schedule of payments but negotiations failed and the applicant applied to the High Court to enforce the decisions.
The respondent (K&J Townmore) did not challenge the validity of the decisions or raise objections around the fairness of the adjudication procedures. Instead, it opposed enforcement because it sought minor reductions in the amounts awarded.
The High Court in Ireland again reinforces the ‘pay now, argue later’ principle
In the High Court, Mr Justice Simons granted the application to enforce both decisions, for the reasons set out below.
- While the respondent sought to “quibble in respect of minor matters”, the proper approach would have been either to pay, or to consent to enforcement of, whatever amount was not in dispute. By contrast, the respondent’s approach resulted in a prolonged hearing with potential costs’ exposure.
- The first award included interest of €18.37 per day until the principal sum was paid. The respondent argued that, given that a part payment of the principal sum had been made, the daily rate of interest should have been abated to take account of this. This was rejected: the adjudicator’s award had not made provision for abatement or staged payments, but had instead directed the full sum to be paid in seven days.
- The adjudication decisions required the respondent to pay certain amounts plus VAT to reimburse the applicant for payments it had previously lodged to cover the adjudicators’ fees. The respondent argued that it should not have to reimburse the VAT element because the applicant could recover the VAT amount it had previously lodged as a trading expense. The Court disagreed, considering the adjudicators’ decisions to be clear. It was a matter for the applicant to ensure that its VAT returns reflected the reimbursement to avoid double-counting.
- The respondent argued that an initial payment it made should be partly credited first to the older debt, with the result that one of the adjudicator’s awards was now paid. The judge did not accept this argument: if there was a presumption an older debt was paid first (a question on which the Court did not adjudicate) it was rebutted by correspondence showing the respondent had meant the payment to go towards discharging the amounts awarded on the other decision.
- The respondent complained that the applicant had not sent a formal solicitor’s letter before applying to the High Court for enforcement. The Court considered that failure to send a warning letter is normally relevant if the respondent can say it would have reacted in a way that would have ended the need for legal proceedings. Here, the respondent was still in default of payment when appearing before the court. In any case, the applicant had given ample warning of its intention to pursue proceedings. Mr Justice Simons noted that there is no requirement for such a warning to be in a formal solicitor’s letter and, notably:
“… to issue a warning letter has to be seen in the context of the very tight timelines prescribed for adjudication. … There is no obligation upon the party seeking to enforce an adjudicator’s award to give repeated warning to the defaulting side of an intention to issue proceedings.”
- Costs of the enforcement application were awarded to the applicant because its application was successful. However, the Court required the applicant to pay 10% of its costs relating to one of the awards because it had initially overstated the amount awarded. This had not prejudiced the respondent and the error was innocent and quicky rectified. However, Mr Justice Simons considered it “important that a party seeking to enforce an adjudicator’s award should state their claim with precision”.
Here the respondent’s arguments were rejected. However, the judgment is interesting in that it gives a strong indication that it is not appropriate at all to resist enforcement in order to pursue “a dispute at the margins”.
This is consistent with the well-established legal principle that the circumstances in which Courts will not enforce an adjudicator’s decision are very limited.
To quote Mr Justice Simons, “there is little point in putting the adjudicator under the cosh to produce a decision within a matter of weeks, only for there to be a delay of months, or even years, thereafter in the enforcement of that decision. The Act seeks to ensure that an adjudicator’s decision may be enforced promptly by making it binding upon the parties on a provisional basis. This is the so-called “pay now, argue later” principle”.