Love him (really?) or loathe him, ‘The Donald’ is an ingenious fellow who is never, it seems, prepared to admit he will lose or has lost in anything he does. He may come second, but there is always a reason for it which is out of his control; if everything had been equal, he would have won easily, so, so easily.

This is why I now wear my pink (yes, pink) ‘Trump 2020’ baseball cap on the golf course because I never admit I will not make that 200-yard approach shot to the postage stamp sized green, avoiding the water hazard and sand traps. And if I don’t make that shot, I will make it clear in the 19th hole that the only reason I did not was because the groundsman had not cut the grass properly. Had the grass been cut properly, my ball would have landed 2 feet away, not in the water, and I would have made the beautiful, so, so beautiful birdie put.

Ingenious lawyers

Northumbrian Water Limited v. Doosan Enpure Limited (1) & Tilbury Douglas Construction Limited (2) (14 November 2022)

We lawyers are ingenious bunch, always coming up with clever ideas (well they seem clever at the time) to help our clients and show to our peers how smart we are. Anyway, the latest idea to avoid the enforcement of an adjudicator’s decision for £22.5m did not, on this occasion work, but it was, I agree, ingenious. And given the sum involved it was probably worth a day in court.

So, what happened?

Well, the background is as follows:

• The parties' contract, based on the NEC3 Option C, was for the design, supply, construction, installation, testing, commissioning and putting into operations of an upgrade to the Horsley Water Treatment Works. It included a number of secondary Options and there were the inevitable 'Z' clauses, i.e. bespoke amendments.
• Doosan Enpure and Tilbury Douglas (the Joint Venture or 'JV' partners) were jointly and severally liable to Northumbrian Water (NWL).
• A dispute arose with each side alleging the other was in breach, NWL served a notice of termination and the JV claimed NWL was in repudiatory breach, i.e. the usual claims and cross-claims were made.
• The contract included and arbitration agreement, the procedure being the Institution of Civil Engineers Arbitration Procedure (2012). It also (Option W2) provided for adjudication which applied, by express agreement, to work that would otherwise fall outside of the ambit of the Construction Act 1996. 
• NWL started an adjudication for, amongst other things, £26.1m. The JV denied the claim saying it was owed £1.9m.
• The adjudicator decided in favour of NWL, directing that the JV pay NWL £22.5m plus some other sums.
• The JV paid the adjudicator but did not pay NWL and, instead, served NWL with a Notice of Dissatisfaction which, in essence, said it was a bit unhappy about having to pay £22.5m and it was going to refer its unhappiness or dissatisfaction to arbitration for a final determination of the dispute.
•  NWL wanted its money, so issued court proceedings for summary judgment to enforce the adjudicator's decision and the court issued directions, i.e. a timetable, for the proceedings.

Nothing new in any of this, so what was the ingenious idea?

Well it went like this:

1. The JV issued an application to stay the court proceedings pursuant to section 9 of the Arbitration Act.
2. The JV argued that there were two disputes: first, the one that was dealt by the adjudicator and who awarded NWL £22.5m; and second, the one about the enforcement of that decision. Or, the JV argued, there was one dispute that had to be dealt with by the adjudicator and then by an arbitrator. In any event, the arbitration agreement empowered the arbitrator to enforce the adjudicator's decision by way of a peremptory award or to decide it was unenforceable.

Putting the JV's argument another way, the parties had agreed through their agreement to arbitrate that the enforcement (or not) of an adjudicator's award was a matter for an arbitrator and not for the court. Therefore, a stay (suspension) of the NWL court proceedings to enforce the decision should be granted, i.e. NWL would not get its £22.5m until an arbitrator decided it could.

What did the judge at the TCC think of this ingenious idea?

Mrs Justice O'Farrell DBE was not very enthusiastic about it.

First, the judge had to decide whether or not there was a binding and enforceable adjudication decision because if there was none, there was no need for a stay to arbitration, i.e. there would nothing to 'stay'. Only when she had decided this issue did she deal with the JV's application for a stay as a means of avoiding payment to NWL of £22.5m.

Was there a binding and enforceable decision?

She decided the JV had no defence to the enforcement of the adjudicator's decision because:

1. The JV had not raised any jurisdictional arguments at the time (which is now well-established);
2. Under the parties' contract, an adjudicator's decision became final and binding unless a Notice of Dissatisfaction was served within 4 weeks of the decision. The JV's Notice disputed some but not all of the adjudicator's decision, so the ones not disputed had became final and binding. And by accepting parts of the decision the JV was accepting the underlying validity of the decision. In any event, the JV's Notice did not identify any ground on which the adjudicator's decision would be challenged. For example, the JV did not allege the decision was unenforceable due to a breach of natural justice;
3. The JV had included in its Notice some general reservations of its rights regarding the validity and/or effectiveness of the adjudicator's decision, and "fully reserved" its rights. But the judge said these were far too vague to be effective because they would defeat the purpose of adjudication, relying on the earlier decision in Bresco v. Michael J Lansdale (2019). The fact that Bresco concerned statutory adjudication and not contractual adjudication as in this case, did not change things, i.e. having participated fully in the adjudication without raising any specific of general jurisdictional challenge, it was far too late for the JV to do so now;
4. The parties' contract (clause W2.3(11))  stated that an adjudicator's decision was binding on the parties unless and until revised by the arbitrator. There was no need to apply any qualification to the meaning of the word 'decision' which was to be given its plain and ordinary meaning in the context of adjudication, i.e. had the adjudicator reached a decision on the issue(s) referred to him/her? If 'yes' then it was a decision regardless of whether, for example, s/he had erred on the facts and/or law; and
5. There was the purpose behind construction adjudication and the well-established robust approach to be taken at enforcement, namely decisions are to be enforced "by summary judgment regardless of errors of procedure, fact or law, unless the adjudicator has acted in excess of jurisdiction or in serious breach of natural justice" - Macob v. Morrison (1999); Bouygues v. Dahl-Jensen (2000); and Carillion v. Devonport (2005).

Should the court grant a stay under section 9 of the Arbitration Act 1996?

No, because:

1. The JV's Notice of Dissatisfaction did not challenge the adjudicator's jurisdiction or allege a breach of rules of natural justice. Therefore, the JV could not (because it had become final and binding) challenge the validity of the decision as a 'decision'. It could re-argue before an arbitrator the disputed issues but that was a different matter. Therefore, the adjudicator's decision as a 'decision' was not something that could be referred to arbitration and section 9 of the 1996 Act did not apply;
2. In any event, the parties' had agreed that an adjudicator's decision would be binding unless and until revised by the arbitrator. As such, the adjudicator's decision in favour of NWL was "enforceable as a matter of contractual obligation". Furthermore, to require a party to obtain declaratory relief by way of an arbitration award which could then, in turn, be enforced under section 66 of the Arbitration Act would "deprive [the adjudication decision] of any efficacy"; and
3. The court in Macob v. Morrison (1999) had, in rejecting an "ingenious argument" made it clear that at the enforcement stage, the losing party (JV) had to decide whether to challenge the decision in court (which the JV had not), or to accept the decision as valid and refer it to arbitration for final determination (which the JV could do save to the extent it had already become final and binding). In the meantime, the decision was binding and enforceable unless revised by the arbitrator.

The judge, therefore, enforced the adjudicator's decision, rejecting the JV's application for a stay. 

Conclusion

This is a sensible and pragmatic decision from a highly regarded judge, and is a continuation of the judicial policy of robustness when it comes to enforcing adjudicators decisions. Therefore, the grounds on which one can resist paying out on a decision (however erroneous in fact and/or law one may consider it to be), are increasingly limited. That all being said, Her Honour did note that one must always have regard to the express terms of the parties' contract and any relevant statutory provisions, which means the outcome could have been different if the facts were different.

However, the judge was not referring to 'alternate facts' which brings me back to The Donald and his bid for the 2024 US Presidency. Whether it is The Donald or Ron DeSanctimonious (as the Trump has referred to him) who is chosen as the Republican candidate for 2024, only time will tell. Personally, I doubt The Donald will win, and will come a beautiful, so, so beautiful second. However, I do know that we lawyers will continue to come up with new and ingenious ideas of how to help our clients avoid paying money in accordance with an adjudicator’s decision. Some of these will succeed but, I suspect, the majority will fail.

Now where is my pink Trump 2020 hat, the golf course beckons.