What Happens if I Ignore an Adjudication?
Introduction
In England and Wales, parties to construction contracts enjoy a statutory right to adjudicate disputes pursuant to section 108 of the Housing Grants, Construction and Regeneration Act 1996 (providing that certain conditions are met). Many standard form buildiing contracts contain a contractual right to refer a dispute to adjudication.
This means that an adjudication can be started by one party unilaterally, without the other party having prior knowledge of it, and without having consented to it.
In this article, Hamshaw explains whether the party against whom the adjudication has been started can simply ignore it, and what the likely consequences of ignoring it might be.
Ignoring the Adjudication Proceedings
The first step in commencing an adjudication is for one party (the Referring Party) to send to the other party (the Responding Party) a Notice of Intention to Refer a Dispute to Adjudication. This briefly sets out the nature of the dispute, and puts the Responding Party on notice than an adjudication about that dispute is about to be started.
The Responding Party does not have to do anything in response to that notice, although it is normally the case that internal investigations into the dispute will commence and the Responding Party will start the process of instructing a solicitors to provide advice and representation.
The next step is that an Adjudicator will be appointed, and will usually contact the parties to provide some directions as to how the adjudication will progress. Often, the Adjudicator will send out his/her terms of business, and ask both parties to acknowledge and/or sign them.
Again, the Responding Party does nto have to do anything at this stage, although it is normal to respond to the Adjudicator in order to confirm receipt and provide details of those who will represent the Responding Party going forward.
After that, the Referring Party will send its Referral Notice to the Adjudicator and the Responding Party. This document will set out the Referring Party’s case fully, and will usually be accompanied by supporting documents.
It is intended that the Responding Party prepares its own document (and exhibits) in response to that Referral Notice, setting out the Responding Party’s case on the dispute and explaining to the Adjudicator why the Referring Party is not entitled to what it has asked for.
However, there is nothing which compels the Responding Party to do so. There is no statute which mandates a response to the Referral Party, and the Adjudicator has no powers to compel the Responding Party to provide a response.
If the Responding Party does not respond, the adjudication process will simply continue in the Responding Party’s absence. In other words, the Adjudicator will still make a decision on the dispute, just without the benefit of the Responding Party’s alternative version of events.
The obvious, and significant, disadvantages of not taking any action in the adjudication are therefore that:
the adjudication will continue regardless
the Adjudicator will only hear one side of the dispute, and is therefore more likely to make a decision in favour of the Referring Party
Ignoring the Adjudicator’s Decision
Decisions by Adjudicators are interim-binding. This means that they should be complied with, unless and until the dispute is heard (and resolved) in court or arbitration.
But what if (whether they participated in the adjudication or not) the losing party ignores the Adjudicator’s decision?
The courts in England and Wales have developed a special, fast-track, procedure that allows the winning party to go to court and obtain a judgment in its favour on the back of the Adjudicator’s decision, without having to go through the process of proving its case to the court.
Therefore, if a Responding Party ignores the Adjudicator’s decision, the Referring Party is likely to go to court and ask the court to enforce the decision. The Responding Party cannot ignore the court’s enforcement.
Application to the Court
To enforce an Adjudicator’s decision, the winning party must make an application to the court.
The winning party, who will become the claimant, should make the application to the Technology and Construction Court (regardless of the value of the Adjudicator’s decision).
The court generally won’t interfere with the Adjudicator’s decision, unless it can be proven that the Adjudicator lacked jurisdiction or that there was a serious breach of natural justice.
Section 9 of the TCC Guide outlines the process for enforcement.
Documents Required
The claimant needs to prepare and submit to the TCC the following documents:
Claim Form: this should summarise the outcome of the Adjudicator’s decision, and state the relief sought.
Particulars of Claim: the particulars of claim should provide the details supporting the application.
Notice of Application: this should be in Form N244 and include a request for an abridgement of time, meaning a shortened period for the defendant to respond.
Witness Statement: a witness statement must support the claim form and application, providing evidence of the Adjudicator’s decision and the circumstances that justify enforcement. The decision itself should be provided as an exhibit to the statement.
These documents should each have the following wording written on their face: "paper without notice adjudication enforcement claim and application for the urgent attention of a TCC judge."
The Court’s Process
Once the TCC receives the application, a Judge typically reviews the documents within three working days.
The Judge will issue directions (i.e. steps that the parties must take, and deadlines by which they must be taken), which will usually include setting deadlines for the defendant’s acknowledgment of service, submission of evidence, and a hearing date.
The hearing is usually scheduled within six to eight weeks of the judge’s directions. Most hearings last less than half a day.
If the defendant ignores or refuses to comply with the directions, the court might enter judgment in default or might allow the claimant to bring the hearing forward for a quicker resolution.
At least two working days before the hearing, the parties must send an agreed bundle of documents to the court for use at the hearing. For a normal hearing (which will last less than half a day) the lawyers must exchange (and send to the court) skeleton arguments at least one working day before the hearing.
During the hearing, the Judge will decide whether to enforce the Adjudicator’s decision. The court may issue an immediate verbal judgment (also referred to as an ex tempore judgment) or it might reserve judgment to be prepared in writing and provided to the parties at a later date.
Conclusion
In summary, ignoring an adjudication is unlikely to achieve anything more than delaying the inevitable.
Whilst the Adjudicator cannot compel a Responding Party to participate, he/she can still make a decision and that decision is more likely to be in the Referring Party’s favour if the Responding Party remains silent.
Once a decision has been made, enforcing it in the courts is a well-trodden path, involving applying for summary judgment, submitting key documents to the court, and following specific timelines set by the court.
The TCC is generally supportive of Adjudication, and so will normally enforce a decision unless it is clear that there are jurisdictional issues, or natural justice violations.
If you are a Responding Party considering ignoring an adjudication (or an Adjudicator’s decision), or you are a Referring Party that needs to enforce an Adjudicator’s decision that is being ignored, contact Hamshaw today. We may be in a position to offer a fixed fee for Adjudication enforcement work.