The judgement in a case centring on whether adjudicators have jurisdiction to order payment showed the ‘commercial approach’ courts are increasingly taking. Lawrence Pearce and Theresa Mohammed explain
In circumstances where the adjudicator had no jurisdiction to order payment, can the court award payment of the adjudicator’s valuation on enforcement? This was a central issue in the recent case, WRW Construction Ltd v Datblygau Davies Developments Ltd (DDD).
The parties entered into a JCT Design and Build 2011 for WRW to carry out the design and build of nine properties in Twickenham. A number of disputes arose between the parties which resulted in three adjudications.
The second of those adjudications focused on the validity of the termination by DDD. The adjudicator found in favour of the developer that the contract was validly terminated and DDD started a third adjudication in respect of the post-termination final account.
In its notice of adjudication, DDD stated that: “DDD is entitled to and claims payment from WRW of the sum of £3,345,790.40 (or such other sum as the adjudicator shall determined [sic] is owed by WRW)… DDD invites the adjudicator to determine the sums due and payable by WRW to DDD and to order payment of such sum by WRW to DDD.”
In response, and interestingly for the purposes of enforcement, WRW claimed that: “The proper valuation of the post-determination final account in accordance with Clause 8.7.4 of the contract leads to a position in which DDD is indebted to WRW. Whilst WRW accept that the adjudicator has no jurisdiction to order payment to be made to WRW, the adjudicator has been asked by DDD to value the post-terminational [sic] final account the adjudicator should conclude that the sum due and payable by WRW to DDD is -£695,035.63.
On the face of it, WRW’s response seemingly made it clear to the parties that the adjudicator was only to reach a decision on the value of the final account and would not have jurisdiction to order payment.
However, the adjudicator‘s decision was: “The total value of the account due to clause 220.127.116.11 is an amount due as a debt from DDD to WRW as is permitted by Clause 8.7.5 in the sum of £568,597.32. I decide that WRW shall pay to DDD the sum of -£568,597.32 (negative) within 7 days of the date of my decision.”
DDD refused to make payment of the sum awarded and WRW started enforcement proceedings.
The key issue in this case is whether the adjudicator had jurisdiction to order payment, particularly in circumstances where the parties had clearly stated otherwise. DDD’s argument was straightforward – there had been no valid order for payment made in the adjudicator’s decision, and a fourth adjudication would be required to make such an order.
What may come as a surprise is that the recorder, Andrew Singer QC, sitting as a judge in the Technology and Construction Court, accepted that the adjudicator did not have jurisdiction – however, he took what many will consider to be the correct ‘commercial approach’ in his judgement. He confirmed that:
“In my judgement, there is no bar… to the court enforcing a temporarily binding valuation in an adjudication award by making an order for payment of the monies due as a result of that valuation. Indeed, in my judgement it would be contrary to principle and established authority for the court to effectively force a party who has the benefit of an award in its favour… to have to commence a further adjudication (to which there is no defence) for the purpose of obtaining an order for payment from the adjudicator, before returning to the court if necessary, for further enforcement proceedings.”
The courts are increasingly in favour of finding a balance between strict interpretation and the commercial reality of a dispute. In circumstances where any fourth and final adjudication would have no defence, it would have been a costly exercise for, ultimately, the same answer the court could reach.
Theresa Mohammed is a partner and Lawrence Pearce an associate at Trowers & Hamlins.