Challenging an adjudicator’s decision – Reserve your right to do so carefully

The recent case of Platform Interior Solutions Ltd v ISG Construction Ltd [2020] EWHC 945 (TCC) concerned an adjudicator’s decision which was challenged by the subcontractor when the contractor sought payment. This is not uncommon and parties to adjudication proceedings often reserve their right to challenge the enforceability of the adjudicator’s decision. In this case, the court considered when a party can effectively reserve the right to challenge an award and whether payment of the adjudicator’s fees waives that right. 

Background and adjudication 

In January 2018, ISG Construction Ltd (ISG) engaged a joinery subcontractor, Platform Interior Solutions Ltd (Platform), to carry out works on ISG’s redevelopment of a hotel in Edinburgh. In October 2019, Platform commenced an adjudication, claiming that ISG had wrongfully terminated the subcontract and that it was owed over £620,000 plus VAT in respect of interim payment applications and outstanding retention. 

The adjudication proceeded promptly and in December 2019, the adjudicator found that Platform’s purported termination of the subcontract was unlawful and that ISG was accordingly entitled to terminate the subcontract. She then decided what sum was due from ISG to Platform under the subcontract, being the difference between the value of works that Platform had performed at the date of termination and the cost to ISG to complete the work. The adjudicator calculated that ISG owed Platform over £410,000 plus VAT. 

Challenge and payment of adjudicator’s fees 

When Platform made a demand for payment, ISG refused to pay, challenging the enforceability of the adjudicator’s decision. ISG argued that the adjudicator’s decision was “invalid and unenforceable” in relation to the valuation of Platform’s works and that payment should not be made to Platform. 

Importantly, ISG made payment of the adjudicator’s fees, whilst reserving its right to challenge the validity and enforceability of the adjudicator’s award. ISG’s email to the adjudicator of 23 December 2019 stated: 

“For the avoidance of doubt payment of your invoice does not constitute agreement that your decision is correct nor does it constitute agreement or acceptance that your decision is valid or enforceable. Accordingly we fully reserve all rights available to us to challenge the validity and enforceability of your decision and all rights available to us to resist any attempt to enforce the same.” 

In January 2020, Platform issued proceedings in the Technology and Construction Court to enforce the adjudicator’s decision. In February 2020, ISG issued separate declaratory relief proceedings challenging the adjudicator’s decision which were heard separately. 

Waiver of right to challenge 

At the enforcement hearing, Platform argued, as a threshold issue, that by paying the adjudicator’s fees ISG waived any right to challenge the validity of the adjudicator’s decision. Platform argued that the reservation of position made in ISG’s email of 23 December 2019 was an ineffective general reservation. 

Platform referred to the Court of Appeal decision in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27 182 ConLR 1 where Coulson J discussed the ineffectiveness of general reservations. He stated that the purpose of adjudication under the Housing Grants, Construction and Regeneration Act 1996, a fast and effective means of dispute resolution under construction contracts, would be “substantially defeated” if a party could simply reserve its position on jurisdiction in general terms at the start of an adjudication, participate fully in the process and then, having lost the adjudication, raise a jurisdictional point to resist enforcement of the adjudicator’s decision. A challenge to the adjudicator’s jurisdiction should be made “appropriately and clearly” and preferably on the basis of a specific objection or objections, rather than as a general reservation of position. 

The Court’s decision 

The judge considered that whilst the payment of an adjudicator’s fees might amount to an election to treat an adjudicator's decision as valid, here it would be wrong to do so. The judge distinguished Coulson LJ’s judgment in Bresco on the basis that in Bresco general and unspecified objections to the jurisdiction of an adjudicator were made during the course of the adjudication. 

In this case, ISG’s complaint was a complaint of breach of natural justice which was and could only be made at the conclusion of the adjudication, after the decision had been made. ISG had made it clear that it was reserving its position when the payment of fees was made. 

The judge also stated that as a matter of public policy, it would be incorrect to discourage payment of adjudicator’s fees if payment of those fees were to amount to a waiver of the right to challenge the adjudicator’s decision. 

The Court went on to consider ISG’s enforcement challenges and rejected them all. Although ISG had not waived its right to challenge the adjudicator’s decision, its challenges failed. 

Going forward 

If reserving the right to challenge an adjudicator’s decision, you should be mindful of when to do so and should avoid making a general reservation at the commencement or during the course of an adjudication. Instead, you should reserve your right to challenge the adjudicator’s decision on the basis of appropriate and specific objections. These are likely to arise following the conclusion of the adjudication after the decision has been made.

This article was originally published on 17 June 2020 and updated in July 2020.

Please do not hesitate to contact any member of the Construction team if you have any queries.