Adjudication update

21 July, 2017

 Jon Johnstone Construction Limited v Eagle Building Services Limited (2017) is the latest case to come to the High Court on adjudication enforcement

The Claimant sub contractor applied for payment of just over £50,000 plus VAT under its sub contract. The application was disputed and no payment was made.  The sub contractor made a further application for payment in the same amount the following month.  This time the main contractor gave no response.  The sub contractor sought an adjudicator’s award in respect of the second application.  The adjudicator found against the sub contractor.  It was determined that the first application was valid and so re-applying for the same sum on the same basis was invalid.  The sub contractor then commenced a second adjudication in respect of the first application, on the basis that the main contractor’s response to the March payment application was not a valid payment or pay less notice.

The second adjudicator awarded the sub contractor the full amount of its March application. In doing so he started from the proposition that the first application was valid (as determined by the first adjudication).  Therefore the only question for determination in adjudication number 2 was whether the response was a valid payment notice or pay less notice under the contract.  The second adjudicator determined the response was not a valid response and therefore awarded the sub contractor the full amount of the March application.

In subsequent enforcement proceedings the main contractor sought to challenge the second award on the basis that the second reference concerned the same or substantially the same subject matter and that it was impermissible to re-litigate by serial adjudication. Quite rightly the High Court rejected the main contractor’s defence.  While there was an overlap and a finding of fact relied on in adjudication number 2 it was quite clear the second adjudication concerned a different application for payment and therefore a different point.  Had the sub contractor in adjudication number 1 run an argument that it was entitled to be paid under the first application, alternatively the second application, then the second adjudication would have been impermissible to the extent it sought to re-litigate a matter already determined.  But that is not what happened here.  The fact the second adjudicator felt he was bound by the first adjudicator’s decision on the validity of the first application did not matter as the first adjudicator made no finding on the entitlement to be paid under the first application. 

Challenges to adjudication awards can come in all shapes and sizes, some more creative than others. Consistent with other recent decisions of the High Court the outcome in this case appears to be another victory for common sense as it can’t be right on any sensible reading that an incidental finding of fact would leave a party with no prospect of a remedy in respect of an otherwise sound claim that has not itself been the subject of a referral or determination.