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Defending Adjudication Enforcement by Applying for a Declaration

The usual routes for resisting enforcement of an adjudicator’s decision are a challenge to the adjudicator’s jurisdiction or a contention that the adjudicator has not acted in accordance with the rules of natural justice. However, a further, albeit rare, route was described by Coulson J in Caledonian Modular Ltd v Mar City Developments Ltd (2015). It was possible to resist enforcement by having the court decide, with a different answer by way of declaration, the very question the adjudicator had decided, which in that case was whether a contractor’s payment notice was valid. The defendant in that case counter-claimed for a declaration pursuant to the court procedure known as CPR Part 8. The judge was at pains in the Caledonian Modular case to stress that that this could only be done in exceptional cases where (1) the issue is short and self-contained and (2) requires no oral evidence or any other elaboration other than that which is capable of being provided during a relatively short interlocutory hearing. Enforcement hearings are normally two hours or half a day.

The position may be eased by agreement, for example the claimant may be able to agree that if the defendant succeeds on the declaration, the adjudicator’s decision is not to be enforced and the defendant may be able to agree that if it does not obtain the declaration, the amount decided by the adjudicator is to be paid. The parties may be able to agree what the consequences of a decision on the declaration will be for their dispute. In the recent case Hutton Construction Ltd v Wilson Properties (London) Ltd (2017), the same judge reviewed the authorities with an element of agreement.

Where there is no element of consent, the judge added a third requirement for this means of resisting enforcement to the two from Caledonian Modular: (3) the issue is one which, on a summary judgment application, it would be unconscionable for the court to ignore. The consequences of determining the issue will also need to be clear-cut (as in the situation under discussion they would not be agreed by the parties).

The judge also stated that a defendant taking this route must issue a CPR Part 8 claim setting out the declarations that it seeks or, at the very least, indicate in a detailed defence and counterclaim to the enforcement claim what it seeks by way of final declarations. A prompt Part 8 claim is the best option. Paragraph 9.4.3 of the TCC Guide, which supports a more informal approach, is now to be taken to be superseded by the judgment in the Hutton Construction case. The increased formality is necessary to inform the claimant as to the precise basis of the challenge and declarations sought and to inform the judge, who would be making directions as a purely paper exercise, as to what was going to be involved at the hearing.

As a defendant unsuccessfully taking this route is likely to be an abuse of the court process, an order for indemnity costs against it is likely.

By Peter Sheridan, Partner, Sheridan Gold LLP