John Paul Construction Ltd v Tipperary Co-Operative Creamery Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Garrett Simons |
| Judgment Date | 11 January 2022 |
| Neutral Citation | [2022] IEHC 3 |
| Docket Number | 2021 No. 262 MCA |
| Court | High Court |
In the Matter of the Construction Contracts Act 2013
[2022] IEHC 3
2021 No. 262 MCA
THE HIGH COURT
Stephen Dowling, SC and Alan Philip Brady for the applicant/contractor instructed by A & L Goodbody LLP
James Burke for the respondent/employer instructed by Flynn O'Driscoll
JUDGMENT of Mr. Justice Garrett Simons delivered on 11 January 2022
These proceedings take the form of an application for leave to enforce an adjudicator's decision pursuant to the Construction Contracts Act 2013. Section 6(11) of the Act provides that an adjudicator's decision can, with the leave of the court, be enforced in the same manner as a judgment or order of the High Court.
The paying party seeks to resist the application for leave to enforce on two broad grounds. First, it is said that the adjudicator failed to comply with the requirements of fair procedures and natural justice. Specifically, it is alleged that the adjudicator “ ignored” the substantive defence put forward by the paying party, and also allowed the claiming party to introduce a “ new claim” during the course of the adjudication process. Secondly, it is said that the adjudicator purported to reopen an issue which he had already decided in an earlier adjudication between the parties.
The Construction Contracts Act 2013 does not designate a decision of an adjudicator as final and conclusive. Rather, it is envisaged that an adjudicator's decision may be superceded by a subsequent decision reached in arbitral or court proceedings. This is provided for under subsections 6(10) and (11) of the Act as follows:
“The decision of the adjudicator shall be binding until the payment dispute is finally settled by the parties or a different decision is reached on the reference of the payment dispute to arbitration or in proceedings initiated in a court in relation to the adjudicator's decision.
The decision of the adjudicator, if binding, shall be enforceable either by action or, by leave of the High Court, in the same manner as a judgment or order of that Court with the same effect and, where leave is given, judgment may be entered in the terms of the decision.”
The special feature of the legislation is that an adjudicator's decision is binding in the interim, unless and until superceded by another decision. Even though the adjudicator's decision is not final and conclusive, it nevertheless gives rise to an immediate payment obligation. The successful party is entitled to enforce the adjudicator's decision forthwith, by invoking a summary procedure, notwithstanding that the adjudicator's decision is amenable to being overreached by a subsequent decision of an arbitrator or a court. This special dispute resolution mechanism is sometimes described by the shorthand “ pay now, argue later”.
The principles governing an application for leave to enforce have been considered in detail in Principal Construction Ltd v. Beneavin Contractors Ltd [2021] IEHC 578 and Aakon Construction Services Ltd v. Pure Fitout Associated Ltd (No. 1) [2021] IEHC 562. In the latter judgment, I summarised the position as follows (at paragraphs 31 to 34):
“In summary, and having regard to the very specific and limited grounds of objection advanced in this case, I am satisfied that the court—in the exercise of its statutory discretion to grant leave to enforce—is required to consider, first, whether the adjudicator's decision comes within the terms of the payment dispute as referred; and, secondly, whether fair procedures, and, in particular, the right of defence, has been respected. As the case law evolves, it will be necessary to address more difficult questions, such as whether errors of law are similarly capable of examination in the context of an application for leave to enforce.
It should be reiterated that the only matter currently before this court is an application for leave to enforce. The role of the court on such an application is narrow, and is circumscribed by the wording of the Construction Contracts Act 2013 which confers binding effect on a “ decision” of an adjudicator, albeit on a provisional basis.
Importantly, however, the legislation envisages that a payment dispute may subsequently come before the court again in a different form, namely, in proceedings “ initiated in a court in relation to the adjudicator's decision” within the meaning of section 6(10) of the Act. The court would have jurisdiction in the context of proceedings of the latter type to embark upon a much fuller consideration of the payment dispute. The legislation thus envisages that the High Court might grant leave to enforce an adjudicator's decision, only to rule in subsequent proceedings that the adjudicator's decision was incorrect and that the paying party has an entitlement to recover any overpayment.
The legislation does not oust the High Court's jurisdiction, rather it regulates the timing of the exercise of that jurisdiction. The successful party in an adjudication can seek to enforce the adjudicator's decision immediately, by way of a summary procedure instituted by originating notice of motion. The unsuccessful party must await the outcome of plenary proceedings (or, more typically, arbitral proceedings) before it can recover any overpayment.”
There is a twofold rationale for the High Court having a limited role on an application to enforce. The first plank of the rationale is that an adjudicator's decision does not represent a final and conclusive determination of the rights of the parties. The adjudicator's decision is provisional only. The unsuccessful party is entitled to a full rehearing of the underlying payment dispute—in subsequent arbitral or court proceedings—and has a right to recoup any monies paid pursuant to the adjudicator's decision if successful. The legal effect of an adjudicator's decision is merely to impose an obligation to make a payment in the interim. All of this lessens the need for rigorous judicial intervention at the time of the enforcement application. Certainly, there is no call for the court, on such an application, to carry out a detailed review of the underlying merits of the adjudicator's decision.
The second plank of the rationale reflects the legislative policy underlying the Construction Contracts Act 2013. As discussed in more detail in Aakon Construction Services Ltd (at paragraphs 5 to 10), statutory adjudication is designed to be far more expeditious than conventional arbitration or litigation. The default position is that the adjudicator shall reach a decision within 28 days beginning with the day on which the referral is made.
To achieve this expedition, the adjudication process will, of necessity, be less elaborate than conventional arbitration or litigation. This is not an accident: rather this is the precise purpose of the legislation. The Oireachtas have put in place a special dispute resolution mechanism, at first instance, for construction contracts which is intended to fulfil the need for prompt payments in the construction industry. This does not affect the right of either party to pursue arbitration or litigation thereafter. It would undermine the legislative policy of “ pay now, argue later” were the court to refuse to enforce an adjudicator's decision precisely because the adjudicative process failed to replicate that of conventional arbitration or litigation.
Importantly, the High Court retains a discretion to refuse leave to enforce an adjudicator's decision. This is so notwithstanding that, on a narrow literal interpretation of section 6 of the Construction Contracts Act 2013, there might appear to be an automatic right to enforce once the formal proofs have been met.
The High Court will not lend its authority to the enforcement of an adjudicator's decision, even on a temporary basis, where there has been an obvious breach of fair procedures. This restraint is necessary to prevent an abuse of process and to uphold the integrity of the statutory scheme of adjudication. It would, for example, be inappropriate to enforce a decision in circumstances where an adjudicator had refused even to consider a right of set-off which had been legitimately asserted by the respondent. It would be unjust to enforce such a lopsided decision.
The existence of this judicial discretion represents an important safeguard which ensures confidence in the statutory scheme of adjudication. It should be reiterated, however, that once the formal proofs as prescribed under the Construction Contracts Act 2013 and Order 56B of the Rules of the Superior Courts have been established, then leave to enforce will generally be allowed. The default position remains that the successful party is entitled to enforce an adjudicator's decision pro tem, with the unsuccessful party having a right to reargue the underlying merits of the payment dispute in subsequent arbitral or court proceedings. The onus is upon the party resisting the application for leave to demonstrate that there has been an obvious breach of fair procedures such that it would be unjust to enforce the adjudicator's decision, even on a temporary basis. The breach must be material in the sense of having had a potentially significant effect on the overall outcome of the adjudication.
One inevitable consequence of the existence of this judicial discretion is that parties, in an attempt to evade enforcement, will seek to conjure up breaches of fair procedures where, in truth, there are none. At the risk of belabouring the point, the discretion to refuse to enforce is a narrow one. The High Court will only refuse to enforce an adjudicator's decision on the grounds of procedural unfairness where there has been a blatant or obvious breach such...
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DNCF Ltd v Genus Homes Ltd
...nature and extent of this discretion has been described as follows in John Paul Construction Ltd v. Tipperary Co-Operative Creamery Ltd [2022] IEHC 3 (at paragraphs 10 to 12): “The High Court will not lend its authority to the enforcement of an adjudicator's decision, even on a temporary ba......