Construction Adjudication Cases: Part 1 of 2020

1) Fraud - Need to Plead - PBS Energo AS v Bester Generacion UK Ltd [2020] EWCA Civ 404 This was an appeal against the decision of Pepperall J (“the judge”) dated 17 April 2019[6] in which he dismissed the appellant's claim for summary judgment in the sum of £1.7 million odd, together with interest. The claim had been made to enforce the decision of an adjudicator, Mr Douglas Judkins, dated 7 December 2018. The judge had found that the respondent could properly argue that the adjudicator's decision had been procured by fraud. Although permission to appeal was granted on two limited grounds only, the case provided a further opportunity, following the decision in Gosvenor London Ltd v Aygun Aluminium UK Ltd[2] to address the interface between the 'pay now, argue later' philosophy of construction adjudication, and allegations of fraud raised on enforcement applications. Gosvenor was a case where the allegations of fraud could and should have been raised in the underlying adjudication. In this case, on the judge's findings, that would not have been possible. There was a further relevant consideration. Mr Judkins' decision was properly based on an earlier adjudicator's decision that the appellant had been entitled to terminate the relevant sub-contract. In the meantime, in a TCC judgment concerned with all the disputes between the appellant and the respondent, Cockerill J found the appellant had not been entitled to terminate but that the respondent had lawfully terminated the sub-contract.That alone was a sufficient ground to refuse to enforce the decision of Mr Judkins; i n effect the appeal was principally about costs.

There had been two adjudications. In the first, Mr Simon Tolson decided that the appellant had been entitled to terminate the subcontract between the parties. In the second, Mr Judkins valued the works prior to termination. In a parallel set of proceedings in the TCC, the appellant had claimed a final valuation of the works based on the wrongful termination by the respondent, and the latter counterclaimed seeking a declaration that it had lawfully terminated the subcontract. Cockerill J found for the respondent on all issues[1]. The appellant now sought enforcement of Mr Judkins award and the respondent resisted on the ground that the award had been procured by fraud. The Judge declined to enforce the award and that gave rise to this appeal. The law as to fraud in adjudication was summarised as follows: " 23 a) If the allegations of fraud were made in the adjudication then they were considered (or will be deemed to have been considered) by the adjudicator in reaching his decision, and cannot subsequently amount to a reason not to enforce the decision. 23 b) The same principle applies if the allegations of fraud were not made in the adjudication but could and should have been made there. 23 c) If the adjudicator's decision was arguably procured by fraud, or where the evidence on which the adjudicator relied is shown to be both material and arguably fraudulent (as here) then, on the assumption that the allegations of fraud could not have been raised in the adjudication itself, such allegations can be a proper ground for resisting enforcement.”

[6] [2019] EWHC 996 (TCC) [7] [2018] EWCA Civ 2695 [8] [2020] EWHC 223 (TCC)

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