"Extremely rare cases": Injunctions in Adjudication

In Billingford Holdings Ltd & BFL Trade Ltd v SMC Building Solutions Ltd and another [2019] EWHC 711 (TCC), the TCC refused to grant an injunction to halt an ongoing adjudication.  In his decision, Fraser J in the TCC took a particularly narrow view as to when it would be appropriate to grant injunctions in ongoing adjudication proceedings.[1]

Background

Billingford and SMC entered into a construction contract.  A dispute arose between the parties and SMC referred the dispute to an adjudicator.  The adjudicator was appointed by the President of the Royal Institute of Chartered Surveyors ("RICS").  SMC referred the dispute to the appointed adjudicator on the same day that the appointment was notified to the parties.

Billingford disputed the adjudicator's jurisdiction on the ground that the adjudicator had been appointed by the wrong nominating body.  Generally, where an adjudicator is incorrectly nominated or appointed, their decision is unenforceable. 

Despite Billingford's protestations, the adjudicator did felt he could continue with the adjudication.  This was because, according to the decision, Billingford (a) knew that SMC intended to seek a nomination from the RICS and did not demur, and (b) had asked for an extension of time to serve their response to SMC's referral without including the necessary reservation of rights concerning the adjudicator's jurisdiction.

Section 37 of the Senior Courts Act 1981 ("SCA") provides the court with jurisdiction to grant an injunction "in all cases in which it appears to the court to be just and convenient to do so". 

Surely, then, it would be "just and convenient" to seek an injunction to stop an inherently flawed adjudication (resulting in what would be an unenforceable decision) to prevent the parties racking up unnecessary time and expense?  On this basis, Billingford duly applied for an urgent injunction to prevent both SMC and the adjudicator continuing the adjudication.

TCC Decision

In the TCC, Fraser J refused to grant the injunction and held that the adjudicator did have jurisdiction to continue the adjudication. 

Whilst Fraser J did accept that the court has jurisdiction to grant injunctions in ongoing adjudication proceedings (consistent with section 37 SCA), he indicated that this jurisdiction, "will be exercised very sparingly" (quoting Coulson J (as he then was) in Dorchester Hotel Ltd v Vivid Interiors Ltd [2009] EWHC 70 (TCC)).  Fraser J went on to state at paragraph 5 of his decision that, "it is only in extremely rare cases that the TCC will interfere by way of injunctive relief, or the grant of declarations under CPR Part 8 that are akin to injunctions, in ongoing adjudications".

Fraser J noted that there was nothing sufficiently unusual on the facts to justify the grant of an injunction; at paragraph 7 Fraser J described the grounds of Billingford's challenge as "entirely run of the mill".

"Extremely rare cases"

In refusing to grant an injunction in Billingford, Fraser J explained that, "adjudication has to be allowed to continue, so far as possible, free from the interference of the court, and quibbles or challenges to an adjudicator's jurisdiction, should in a conventional case, be taken upon enforcement" (consistent with the seminal decision of the TCC in Macob Civil Engineering v Morrison Construction Ltd [1999] EWHC 254 (TCC)). 

Fraser J justified his narrow approach by reference to the public policy which underpins adjudication as a form of dispute resolution, reminding the parties that the adjudication process is designed to be quick and inexpensive (usually with a decision being reached in 28 – 42 days). He commented that "there is simply no time… to factor in applications to the court, with contested points on jurisdiction, without causing serious disruption and delay to the timetable set down by Parliament for an adjudicator to reach a decision".  In this respect, the decision also seems compatible with the section 37 SCA jurisdiction. In other words, it would be less convenient in the context of the adjudication process to apply for and obtain an injunction than simply to challenge the adjudicator's jurisdiction later at enforcement.

Fraser J did not go on to clarify what test could be fulfilled or what circumstances would justify the grant of an injunction.  We can therefore only take guidance from cases such as Lonsdale and Dorchester Hotel (in which injunctions were granted) as examples of such "extremely rare" cases.  In each of those cases, enforcement of any award was considered to be near-impossible which rendered adjudication practically useless.  The courts may approach this on a case-by-case basis.

What does this mean for you or your business?

This judgment clarified that, in conventional challenges to an adjudicator's jurisdiction, an application for injunctive relief would not be the correct approach.  Instead, the accepted practice would be for the responding party to dispute the adjudicator's jurisdiction when challenging enforcement of the adjudicator's award.  However, a responding party must reserve their rights in respect of the adjudicator's jurisdiction at the earliest opportunity in proceedings.  Any inability to demonstrate that the responding party contested the adjudicator's jurisdiction throughout the process means that resisting enforcement of the adjudicator's decision will be much more difficult, regardless of the legal merit of the challenge.

The underlying message here is that, to save racking up unnecessary time and costs where there has been a mistake in the nomination or appointment of the adjudicator, it would be prudent for the referring party to cease the adjudication and recommence it in in accordance with the contractual process.  This would ensure that any award by the adjudicator would be enforceable.

If you require advice in connection with adjudication proceedings, or indeed any construction related query, please contact chris.hoar@michelmores.com or alan.tate@michelmores.com or any other member of the Construction and Engineering Team.

 

[1] This is despite the case of Lonsdale v Bresco [2018] EWHC 2043 (TCC) where an injunction was granted on the basis that there was no utility in continuing an adjudication because the responding party's insolvency would render any award unenforceable.  For more information on the Lonsdale case, see our article regarding the subsequent Court of Appeal decision (Bresco Electrical Services Limited (in liquidation) v Michael J Lonsdale (Electrical) Limited and Cannon Corporate Limited v Primus Build Limited [2019] EWCA Civ 27) here.