Challenging adjudicator’s decisions: Pay now, argue later?

It is possible to appeal an adjudicator’s decision, but it difficult to stop it being enforced at all, because the Technology and Construction Court usually adopts a ‘pay now, argue later’ approach. However, the case of Kingsmead Homes Ltd v Laycock Mechanical Services Ltd is an exception, in which the TCC allowed a contractor to resist enforcement of an adjudicator’s decision by using the Civil Procedure Rules (or CPR).

The background

Kingsmead Homes Ltd, the contractor, subcontracted Laycock Mechanical Services Ltd to carry out plumbing and electrical works. The dispute arose when Kingsmead deducted liquidated damages from the contract sum on the basis of alleged delay.

Laycock commenced an adjudication challenging those deductions. The adjudicator found in Laycock’s favour and awarded Laycock £27,895.26, on the basis that no contractual completion date had been agreed in the contract. Due to there being no fixed date, the adjudicator determined that the liquidated damages provisions had not been triggered and substituted a ‘reasonable time’ for completion instead.

Kingsmead refused to pay the award. Consequently, Laycock issued enforcement proceedings in order to enforce the adjudicator’s decision in accordance with the usual ‘pay now, argue later’ principle. In response, Kingsmead brought a CPR Part 8 claim for a declaration that the adjudicator’s decision was unenforceable because it was based on an error in law. A Part 8 claim heard alongside enforcement proceedings may, in some circumstances, provide a route to resist summary enforcement.

The judgment

The TCC decided in favour of Kingsmead and declined to enforce the adjudicator’s decision.

The TCC held that the adjudicator had focused exclusively on whether an August 2023 programme of works was part of the contract. He rejected that version, but he then failed to look at an earlier July 2023 programme that Kingsmead had emailed to Laycock as an attachment alongside the contractual documents.

The express terms of the subcontract stated: ‘Commencement and completion: see attached programme.’ The TCC concluded that although the July 2023 programme had not been physically attached to the final signed subcontract, a reasonable observer would conclude that it had been incorporated by reference.

The TCC rejected Laycock’s argument that this was a new point not argued before the adjudicator and so should be ignored: Kingsmead had argued in its adjudication response that “the attached programme” gave rise to a completion date although it was referring to the August 2023 programme.

In deciding whether it was appropriate to intervene, the judge applied an established four-stage test derived from the TCC Guide.

1. Clear error: By failing to consider the effect of the July 2023 programme, the adjudicator made a clear error and, as a result, reached the wrong conclusion that no contractual completion date had been agreed.

2. Short and self-contained issue: The dispute concerned a short and self-contained issue of contractual interpretation (i.e. whether the July 2023 programme was incorporated to give rise to a contractual completion date).

3. No oral evidence required: This issue could be determined by reference to the contractual documents and email correspondence, without the need for oral evidence or extensive factual enquiry.

4. Unconscionability: it would be unconscionable for the TCC to ignore the adjudicator’s error. Laycock argued that Kingsmead should not be permitted to rely on the July 2023 programme because its case during the adjudication had focused on a different programme. The judge rejected this, because the approach carried real prospects of producing a materially different result from the outcome reached by the adjudicator.

In reaching its decision, the TCC emphasised that this was a legal issue concerning the contractual effect of documents provided prior to execution, rather than an attempt to re-open findings of fact made in the adjudication.

Key takeaways

The decision demonstrates that, although the TCC will generally favour enforcement of adjudicators’ decisions, it may intervene where the requirements of the Part 8 exception are satisfied – including where there is a material error on a short, self-contained issue capable of determination without oral evidence, which is material to the outcome. It also confirms that a document does not need to be physically attached to a signed contract in order to be incorporated. Clear wording in the contract and surrounding communications, viewed objectively, may be sufficient to incorporate a programme or other document by reference.

More broadly, the case illustrates that a properly framed Part 8 claim may provide an effective route to resist enforcement where the dispute turns on a short, self-contained point of law or contractual interpretation and where it would be unconscionable for the court to ignore a material error in the adjudicator’s reasoning. The point will usually need to first be raised before the adjudicator.

This article was co-authored by Sofia Garcia.

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