A recent TCC case has highlighted the pitfalls associated with trying to ignore adjudication proceedings.
A recent Technology and Construction Court case illustrates the risks to a responding party of not participating in adjudication proceedings.
The facts of Lobo v Corich & Anor  EWHC 1438 (TCC) were straightforward, if a little unusual.
Facts of the case
The claimant, Mr Lobo, engaged the defendant to carry out certain building works, pursuant to a contract made in May 2010. The contract particulars stated that the contractor’s address was 7 Gunter Grove, or such other as it might notify, failing which, its last known principal business address.
In April 2014, Mr Lobo terminated the contract, sending a notice of termination to the defendant’s address as stated in the contract particulars, as well as to a number of other postal and email addresses believed to be used by the defendant.
In February 2016, Mr Lobo issued a termination certificate, certifying sums due from the defendant to the claimant. The certificate was again delivered to multiple addresses.
The situation escalated. Mr Lobo commenced adjudication proceedings against the defendant in September 2016, obtaining a decision in October 2016.
In February 2017, Mr Lobo was granted summary judgment to enforce that decision in the TCC. Subsequently, the TCC made an interim charging order over a property owned by the defendant in order to secure the judgment.
“It would be dangerous to assume that an adjudicator will do anything other than accept the claim as sound, without a response before him”
At all stages in these proceedings, notices and papers had been served on the defendant at multiple addresses. Yet the defendant neither participated in the adjudication, nor appeared in the court proceedings.
The defendant claimed that it was only in March 2017 that it became aware of the charging order and earlier proceedings.
It sought to have the court orders set aside, arguing that the adjudicator’s decision was reached in breach of principles of natural justice, on the basis that it had proceeded without the defendant being made aware of any aspect of it.
The TCC’s decision
The case came before Justice Edwards-Stuart in the TCC. He rejected the defendant’s arguments, finding that:
- The defendant had known about the adjudication and subsequent proceedings – the defendant would have seen the relevant notices delivered to its various addresses. To the extent that it did not examine their content, this was likely a conscious decision;
- The adjudication proceedings were properly constituted, and the claimant’s notice and referral had been effectively served;
- The earlier court orders should not be set aside: there was no procedural unfairness or breach of natural justice. Furthermore, neither the adjudicator’s decision nor the court orders would have been set aside even if the defendant’s failings were unconscious.
What it means
There are two obvious risks to a responding party of ignoring adjudication proceedings:
- It is likely that the adjudicator will find substantially in the referring party’s favour. It would be dangerous to assume that an adjudicator will do anything other than accept the claim as sound, without a response before him;
- A court will enforce the adjudicator’s decision. It appears from this case that, provided the proceedings were properly served, the responding party’s non-participation will not of itself create grounds to challenge the fairness of the adjudication process (even if borne of unconscious failings).
As such, a responding party should only refuse to participate in proceedings where it has a good reason for doing so; and rather than remain silent, it should mark its position carefully.
The most common reason for a responding party’s refusal to participate is that it considers the adjudicator lacking in jurisdiction to decide the dispute. In such a scenario, the responding party should state its position, and explain the grounds of any jurisdictional challenge in correspondence.
“The bottom line is that the responding party should have a good reason not to participate, grounded in a longer-term strategy; that was not the case here”
If the responding party’s position is properly reserved, then it may raise its jurisdictional arguments in enforcement proceedings.
It is also conceivable that, in some cases, further proceedings seem inevitable, and participation in the adjudication may not benefit the responding party in the longer term. In that case, refusal to participate may be a conservative decision.
The bottom line is that the responding party should have a good reason not to participate, grounded in a longer-term strategy; that was not the case here, where the defendant simply failed to engage with the issues and paid the price.
Hollie Docherty is an associate specialising in construction and engineering law at Fladgate