Grombach v Ensign Contractors Ltd [2009] EWHC 3383 (TCC)

Cynthia Jacques and Elise Jacques Grombach (trading as C&E Jacques Partnership) v Ensign Contractors Limited [2009] EWHC 3383 (TCC)

Judgment Date: 22.12.2009

An adjudicator must consider defences properly put forward by a respondent in adjudication. However, it is within an adjudicator's jurisdiction to decide what evidence is admissible and what evidence is helpful in the determination of the dispute referred to that adjudicator. If, within jurisdiction, the adjudicator decides that certain evidence is inadmissible, that will rarely (if ever) amount to a breach of the rules of natural justice. The probable inability of a referring party to repay sums awarded in an adjudicator’s decision following final resolution of the dispute may render it appropriate to grant a stay of execution. It is open to the Court to impose such a stay in relation to part of the judgment sum. On the facts of this case there was a prima facie case that the claimants, who had successfully referred a dispute to adjudication and now sought to enforce an adjudicator’s decision, would be unable to repay a significant part of the judgment sum, and accordingly the Court imposed a stay on execution of that part.

Technology and Construction Court, Mr Justice Akenhead

Facts

The claimant sisters ("the Grombachs") acquired residential apartments in Liverpool with the aim of renovating them. Ensign Contractors Ltd ("Ensign") was engaged by the Grombachs to carry out the renovation works for a contract sum of £339k. The contract between the parties contained an adjudication clause which required compliance with the Scheme for Construction Contracts. There were a number of adjudications between the parties. In Adjudication No. 4, which addressed alleged defects in the works and the value of the final account, the adjudicator found in favour of the Grombachs and awarded them £29k plus VAT. Adjudication No 4 was never enforced because Ensign raised a number of jurisdictional challenges, including disputes as to what disputes had been referred to the adjudicator. By written agreement between the parties it was agreed that the decision in Adjudication No. 4 would be "null and void". The Grombachs therefore initiated Adjudication No. 5, using a different adjudicator than in Adjudication No. 4, which also addressed the value of the final account and highlighted the Grombachs’ assertions that there were substantial defects in the works. In its Response to Adjudication No. 5, Ensign made extensive reference to findings made by the adjudicator in Adjudication No. 4. However, following representations from the Grombachs’ solicitors, the adjudicator in Adjudication No. 5 informed the parties that he would not read or take account of Adjudication No. 4. Adjudication No. 5 went against Ensign, and Ensign was ordered to pay the Grombachs £97k plus VAT and the adjudicator’s fees of £26k. The Grombachs sought enforcement of the award by way of legal proceedings.

Issues

Ensign argued that the adjudicator had failed to apply the rules of natural justice by refusing to read or take into account the decision of the adjudicator in Adjudication No 4. By refusing to do so, the adjudicator must, by inference, have failed to consider or address the arguments or defences put forward by Ensign with reference to that earlier decision. Ensign argued that the adjudicator could not have understood all of the defences which were put forward by Ensign because he had not read the earlier decision.

Ensign also sought stay of any judgment against it on the basis of the allegedly poor financial position of the Grombachs.

Decision

In rejecting Ensign’s arguments the Court found as follows:

• An adjudicator must consider defences properly put forward by a defending party in adjudication. However, it is within an adjudicator's jurisdiction to decide what evidence is admissible and what evidence is helpful in the determination of the dispute referred to that adjudicator. If, within jurisdiction, the adjudicator decides that certain evidence is inadmissible, that will rarely (if ever) amount to a breach of the rules of natural justice.
• Even if the adjudicator’s decision (within jurisdiction) to disregard evidence as inadmissible or of little or no weight was wrong in fact or in law, that decision will not as a consequence breach the rules of natural justice.
• In "natural justice" cases it is necessary to distinguish between a failure by an adjudicator in the decision to consider and address a substantive (factual or legal) defence and an actual or apparent failure or omission to address all aspects of the evidence which goes to support that defence. Adjudication generally involves the exchange of evidence and argument over a short period of time and the production of a decision within a short time span thereafter. It is often not practicable for every aspect of the evidence to be meticulously considered. The adjudicator needs to address the substantive issues, whether factual or legal, but does not need (as a matter of fairness) to address each and every aspect of the evidence. The adjudicator should not be considered to be in breach of the rules of natural justice if the decision does not address each aspect of the evidence adduced by the parties.
• On the facts of this case the adjudicator in Adjudication No 5 had acted within his jurisdiction in deciding that he would have no regard to the decision in Adjudication No 4. In any event, he had not, by not considering that decision, acted in breach of the rules of natural justice in his consideration of the separate substantive points on the evidence and arguments put forward by Ensign in Adjudication No 5. Accordingly, judgment would be entered in favour of the Grombachs.
• The principles as to stay were properly set out in Wimbledon Construction Company 2000 Ltd v Derek Vago. As confirmed by Wimbledon, the probable inability of a claimant to repay sums awarded in an adjudicator’s decision following final resolution of the dispute may render it appropriate to grant a stay. It is open to the Court to impose a stay of execution in relation to part of the enforcement judgment sum. On the facts of this case, there was a prima facie case that the Grombachs would be unable to repay a significant part of the judgment sum, and accordingly a stay would be imposed on execution of £60k of the total judgment sum plus interest.
• The Court would not include the adjudicator’s fees in the judgment sum because if the fees were included in the judgment then there was a risk that Ensign would pay twice if the Grombachs did not in fact pay the fees. Instead, the Court would grant declarations, firstly, that the Grombachs should be indemnified by Ensign against any payment made by the Grombachs to the adjudicator in settlement of his fees and, secondly, that Ensign was obliged to pay the adjudicator’s fees as directed by him in his Decision.

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