Construction Case Update - Adjudication - Part 3 of 2018

1. Introduction The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 3 of 2018. Kenneth T. Salmon Consultant Solicitor and Katy Ormston Trainee Solicitor at Slater Heelis LLP. The law is stated at May 2018 and covers cases about enforcement by way of winding up petition, jurisdiction, natural justice and stay of execution. 2. Enforcement of judgment debt based on adjudicator’s decision—use of winding up petition Victory House General Partner Ltd, Re company 6 The company had engaged the contractor for the development and conversion of an office building into a hotel. There was a disagreement over the amount due and payable under the contract by the company to the contractor. The contractor had served an interim payment application IA30. A dispute over payment of which was referred to adjudication. The adjudicator found in favour of the contractor and awarded the sum sought. The contractor obtained summary judgment for the sum awarded. The company paid a sum on account in excess of £8.5 million, although the contractor believed the value of the works to be in excess of £11 million. There was then a second adjudication in which the adjudicator was asked to value the contractor’s works up to and including interim payment application IA31. The second adjudicator valued the works at less than the gross sum due on the previous application IA30 and which was also less than had already been paid. Thus he valued the IA31 at nil. The contractor petitioned for the winding-up of the company after its refusal to pay the balance of the judgment debt arising from the first adjudication decision. The company submitted that if it paid the judgment debt it would immediately become entitled in the law of restitution to be repaid that sum, resulting in a cross-claim, which made it inappropriate to order its winding up for non-payment of the judgment debt. Morgan J held that where a debt was bona fide disputed on substantial grounds, a petition was normally to be regarded as inappropriate, and as being an abuse of process and one that should be dismissed. This case was, however, not one of a disputed debt, but a judgment debt. In the case of Re Bayoil SA, 7 a company applied for a petition to be dismissed or stayed on the ground that it had a genuine and serious counter-claim. The Court of Appeal considered that the established rule about disputed debts applied to disputed cross-claims and held that the rule was essentially the same unless there were exceptional circumstances

making it appropriate to allow a petition to proceed even where there was a disputed cross-claim. In that case, the Court of Appeal found that the presence of an interim award in favour of a petitioner did not amount to a special circumstance. Following Re Bayoil SA , it was necessary to consider whether the employer’s cross-claim in restitution was a bona fide claim on substantial grounds. Held: there was no doubt but that it was, and what was more, it was a claim that was likely to succeed. There were no special circumstances in the case to take it outside the general rule and the petition was dismissed. 3. Jurisdiction - correct interpretation of the Scottish Scheme Pentland Investments Limited v Aitken Turnbull Architects Limited 8 The pursuer (“Pentland”) engaged the defender (“Aitken Turnbull”) to act as project architect for remedial works on the Raeburn Hotel, Edinburgh. Pentland noted defects with the kitchen floors and further defects following this and claimed payment from Aitken Turnbull, which denied liability. Pentland referred the matter to adjudication and Mr Hunter was appointed as adjudicator. Mr Hunter had also been appointed as the adjudicator in a dispute between Pentland and the structural engineer on the same project. Aitken Turnbull did not consent to the adjudicator’s appointment and invited Mr Hunter to resign. Mr Hunter did not resign from the adjudication noting that the adjudication with the structural engineer was separate from the dispute between Pentland and Aitken Turnbull. Aitken Turnbull continued the adjudication under reservation of its position. Following the adjudicator’s decision, Pentland sought enforcement proceedings in Sheriff Court. Sheriff Ross held that parties may not refer multiple disputes to a single adjudicator under a single adjudication, as the adjudicator will lack jurisdiction under s108 of the Act. If another dispute arises between the same parties or if one party has a dispute under a different contract then a separate adjudication must be started. S108 of the Act does not directly regulate the relationship of two simultaneous adjudications. The question before the Court was whether there was anything in the legislation that prevents a party simultaneously referring multiple related disputes in multiple referrals to a single adjudicator. The Court considered English authority on this 9 in which Coulson J held that under regulation 8(1) of the Scheme in England and Wales an adjudicator cannot adjudicate two disputes under the same contract in different adjudications at the same time without consent of the parties. The Scottish Scheme is substantially the same. Regulation 8(2) of the Scottish Scheme further expressly allows an adjudicator to hear multiple adjudications on related disputes under different contracts at the same time


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