Injunction stopping adjudication, it’s a rare thing!

Year Published: 2014

I have to say I’ve never been a massive fan of adjudications. Although, I accept they have their place in providing quick interim results. This fast track process could be the difference between a company surviving or not.

I am however a fan of injunctions, or should I say it’s one aspect of my work I really enjoy! I was therefore pleased to read in the recent case of Twintec Limited v Volkerfitzpatrick Limited [2014] EWHC 10 (TCC) that there was a ‘one up’ to injunctions over adjudications.

The case involved a contractor in Volkerfitzpatrick (VFL) and subcontractor in Twintec.

The parties were already involved in court proceedings in relation to the same building project however, VFL decided to commence an adjudication in relation to a discrete issue.

At the time VFL referred the discrete issue to adjudication, the parties were working under a letter of intent. The letter of intent provided that the work would be carried out in accordance with the agreed form of sub-contract until the parties were ready to enter into the sub-contract. Once the parties completed the sub-contract the terms and conditions of the sub-contract would supersede the letter of intent. In essence the sub-contact would be retrospective.

The sub-contract was never completed and critically at the time of the referral to adjudication the parties were still working in accordance with the letter of intent. When VFL referred the matter to adjudication they did so in accordance with the provisions of the sub-contract as referred to in the letter of intent.

The court held they were wrong to do so, which at first glance you might think was wrong as the letter of intent provided for the parties to work in accordance with the sub-contract. However, the court said that the requirement in the letter of intent was to ensure that the parties were not immediately in breach of the sub-contract once it was completed. Remember, that in this case the sub-contract was to be retrospective.

As well as this, the parties were still entitled to refer the matter to adjudication under the letter of intent in accordance with the Scheme for Construction Contracts. In other words there was no need to rely on the adjudication provisions in the sub-contract.

The result

Even though the referral was almost identical to the Scheme for Construction Contracts, the court held that the adjudicator did not have jurisdiction to deal with the adjudication. This was because VFL had made the referral in accordance with the provisions of the sub-contract but this had neither been incorporated nor implied into the letter of intent. The letter of intent being the operative contract until the agreed form of subcontract had been completed.

It followed, although remains a rare occurrence, that an injunction was ordered to prevent the adjudication from continuing.

You may feel this was a case of form over substance and therefore justice was not done. I can see this point of view but agree with the court when addressing this point, that the validity of the adjudicator’s appointment goes to the core of an adjudication. And that has to be so, given the fast track nature of this dispute resolution.

This result does remain a rare occurrence In fact other arguments to support the application for an injunction, namely that the adjudication was: oppressive and unreasonable, that it would undermine the ongoing court proceedings and it was intended to cause maximum disruption, were all rejected by the court.

So what do we learn?

It remains the case that it will be very rare for courts to intervene by providing injunctions to prevent adjudications. However, it would be sensible even if you intend to handle the adjudication in-house, to have the contractual position checked out by your lawyer.

On the other side of the coin if you are on the receiving end of an adjudication, and you do not want it to go ahead, it might be worth having the validity of the referral checked out by your lawyer to see if the jurisdiction can be challenged.

Either way you must act quickly with adjudications!

For more information on adjudications, please contact our Dispute Resolution team on 0161 475 7676.

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