Adjudication and Covid-19 – the show must go on!
There is a very high threshold for injunctions to be granted to prevent an adjudication going ahead. So it is perhaps unsurprising that one was refused in the recent case of MillChris Developments Limited v Waters.
In this case the contractor made an application on the basis that the adjudication would be conducted in breach of the rules of natural justice, if it went ahead, because:
- it did not have sufficient time to prepare for it as a result of the Covid-19 outbreak; and
- it was no longer trading.
The contractor (MDL) was engaged by Ms Water to carry out works to her home. These works commenced in September 2017 and MDL ceased trading in November 2019.
On 23 March 2020, Ms Waters commenced an adjudication claiming an over payment and defective works. The adjudicator produced a timetable for the adjudication for the submission of evidence and a site visit.
MDL claimed that it could not comply with the timetable deadlines because of the Covid-19 outbreak and that the adjudication should be postponed until the lockdown measures were lifted.
The adjudicator disagreed with MDL, deciding that the adjudication should proceed, but proposed a two-week extension to the timetable. MDL did not agree to the extension.
Instead MDL made an application for an injunction to restrain the adjudication from proceeding. Specifically in relation to the Covid-19 impact, MDL's position was on the basis that:
- its solicitor had been forced to self-isolate at home, making it difficult to obtain evidence from those with knowledge of the dispute; and
- it would be unfair to proceed with the site visit where none of its representatives were able to attend and there was insufficient time to appoint an independent surveyor to be present.
The Judge rejected the application for an injunction on the following bases:
- In determining whether an injunction should be granted in this case, the question was whether there was a serious issue to be tried in that the adjudication would necessarily be conducted in breach of natural justice with the inevitable consequence that it would be unenforceable. A grant of an injunction on that basis was unprecedented.
- In any adjudication, issues had to be addressed within a short time scale.
- There had been no explanation as to why papers could not be transported or scanned to the solicitor or anyone else instructed in the matter.
- MDL could not obtain evidence because it had been unable to contact its former managing director and no attempt had been made to contract its former project manager for the adjudication; it was not to do with Covid-19.
- MDL could have accepted the two-week extension to ease these concerns.
- There was no automatic right for MDL to be present at the site visit, which could be recorded or MDL could provide specific matters for the adjudicator's attention beforehand.
What does this mean?
As stated in our previous insight any party trying to exploit the current situation will not be looked on favourably by any tribunal. This seems to be the case here with the Court indicating that the real reason MDL could not obtain evidence was its own lack of contact with former employees.
Whilst the statutory timeframe to conduct an adjudication is tight, parties should look to work together and with the Adjudicator to agree a sensible timetable, as all parties will encounter similar difficulties due to the Covid-19 outbreak and the restrictions that have been put in place. Adjudicators will undoubtedly be aware of these issues and mindful of possible breaches of natural justice due to not:
- giving a party a reasonable opportunity to respond to submissions or evidence by the other party; and
- having sufficient time to reach a fair and impartial decision within the timescales agreed by the parties.
However, referring parties should also be live to these issues when considering requests to extend the timetable. If reasonable requests are refused an Adjudicator could consequently decide that it is likely that the rules of natural justice will be breached and resign, wasting time and costs.
In terms of conducting adjudications in the current situation:
- though it may take parties more time to gather evidence and put submissions together, a lot of adjudications are dealt with only on paper anyway and most with electronic submissions. Therefore electronic only submissions should not cause many problems (although this may depend on the size of such submissions);
- if a hearing is required, this can be conducted by way of a video call, as is happening with court and arbitration hearings and mediations; and
- the court provided useful guidance on holding site visits in this case.
So although adjudications could take longer, they still remain a quick and efficient way to try and resolve disputes and get cash into a business during the current crisis. If adjudication is unsuitable or unavailable for your dispute (for example if the Construction Act does not apply) then mediation and court or arbitration proceedings can still be used to resolve your disputes.
See our updates below on using these processes through the crisis:
Covid-19: Without prejudice meetings and mediation during the crisis
Covid-19: Impact on court hearings