Analysis: Irish court comments on construction contracts adjudicator’s role
Arthur Cox partners Niav O’Higgins, Karen Killoran and Niamh McGovern provide a construction law update following a recent High Court ruling.
In the latest judgment enforcing adjudication decisions, the High Court emphasised that it is not its role to “be drawn into a detailed examination of the underlying merits of the adjudicator’s decision under the guise of identifying a breach of fair procedures”.
The Court again also reminded practitioners to be alert to differences between the Irish and UK statutory schemes. In particular, it noted there are significant differences in the procedure governing the enforcement of an adjudicator’s decision, which has an enhanced status under Irish legislation because it is to be enforced as if it were an order of court. The legislation in Ireland places a “higher premium” on the enforcement of an adjudicator’s decision.
In DNCF Ltd v Genus Homes Ltd  IEHC 490, the contractor sought enforcement of two similar adjudication decisions.
During the adjudication, the employer indicated the works reached substantial completion on 9 December 2022. The employer said the contractor did not submit a final account for review, so the employer carried out a final account review, which showed that the contractor had been overpaid by some €1.6 million. The employer said overpayment had been deliberate, to assist with cashflow. The architect issued an up-to-date certificate in February 2023.
When the adjudicator sought clarification as to the payment position, the employer provided the February 2023 certificate without any detailed breakdown of the calculation of the figures it contained. A detailed breakdown was later provided to the contractor but not the adjudicator.
The adjudicator had to decide whether the February 2023 certificate could be set off against the retention payment the employer owed the contractor.
The adjudicator noted a considerable difference in the sums in the February 2023 certificate as compared to an earlier November 2022 valuation, both in respect of work executed by the contractor and amounts for nominated sub-contractors.
At the heart of the decision was the adjudicator’s statement that no explanation was given for the reductions. The adjudicator queried (rhetorically) whether they were Quantity Surveyor mistakes, or how a contractor could manage a contract if such huge discrepancies occurred over a two-month period.
The adjudicator also considered that, if the February 2023 certificate was a Final Account, surely the employer should have waited for the contractor to produce documents not due until 8 March 2023 if the certificate of Practical Completion was accepted as legitimate.
The adjudicator concluded: “Therefore I will not consider this certificate as providing a possible offset.”
Employer’s arguments against enforcing the adjudicator’s decision
The employer’s key criticism was that the adjudicator had failed to consider a line of defence. Much of the criticism amounted to saying that the adjudicator should have requested further and better particulars as to its defence.
The employer argued that it should have been alerted of the adjudicator’s decision to rely on the absence of a breakdown of figures included the February 2023 certificate. It argued the rhetorical questions should have been put to the parties. It argued that the adjudicator had misunderstood aspects of both parties’ cases, to do with the final account and practical completion. The employer also argued that the wording of the decision indicated that the adjudicator refused even to consider a possible offset.
High Court’s reasons for enforcing the adjudicator’s decision
Mr Justice Simons concluded that there had not been a breach of fair procedures.
Adjudication was not an iterative process, where the adjudicator was under a positive duty to invite the parties to elaborate upon their submissions.
On the facts of the case, the onus lay with the employer to put forward the evidence it thought fit to substantiate its defence. It should have been obvious that the difference in the certificates called for explanation. The parties were ably represented and had been able to formulate detailed submissions in accordance with the timetable directed by the adjudicator.
As for the employer’s submission that the adjudicator had misunderstood legal issues to do with the final account and practical completion date, the Court considered that such issues would go to the substantive merits of the adjudication and would not amount to a breach of fair procedures.
At the outset, Mr Justice Simons noted the relevant legal test: a successful party is entitled to enforce an adjudicator’s decision pro tem (for the time being), with the unsuccessful party having a right to reargue the underlying merits of the payment dispute in subsequent arbitral or court proceedings. However, the High Court has a discretion to refuse leave to enforce an adjudicator’s decision where there is a breach of fair procedures. An example might be where an adjudicator refused even to consider a defence or right of set-off, but that would be different from rejecting a line of defence as inadmissible or dismissing a defence on the merits. These principles had been explained in previous caselaw, which we looked at here.
Some further points to note from this judgment are as follows.
- The adjudication process is, primarily, adversarial in nature. Whereas an adjudicator has discretion to adopt an inquisitorial role, he is not obliged to do so.
- The adjudication process is not iterative: an adjudicator is not required to enter into a dialogue with the parties, nor to provide the parties with an indication of his proposed findings. The adjudication process is intended to be expeditious, and the adjudicator is entitled to make use of his specialist knowledge where appropriate.
- An adjudicator is not necessarily restricted to reaching a conclusion which coincides precisely with the position advocated for by one or other of the parties. Rather, the adjudicator can reach his own conclusions on the basis of the materials before him in respect of which the parties have had an opportunity to make submissions.
- The adjudicator is not required to cajole parties to elaborate or improve upon their cases. Rather, the adjudicator is entitled to reach a decision on the basis of the materials put before him or her by the parties.
Finally, remember the implications of failing to comply with an adjudicator’s decision without good reason. If the party seeking enforcement is entirely successful, as in this case, they can recover full costs of the High Court enforcement proceedings.