What is the status of an adjudicator's decision, in the period following the decision but before a judgment by a court or an award by an arbitrator? Just how "binding" is it? What (if any) effect does a decision have upon the burden of proof in later proceedings? This was just one of the issues considered by the Court of Appeal in the case of Walker Construction (UK) Limited v Quayside Homes Limited & Anor .
What is the status of an adjudicator's decision, in the period following the decision but before a judgment by a court or an award by an arbitrator?
Just how "binding" is it? What (if any) effect does a decision have upon the burden of proof in later proceedings?
This was just one of the issues considered by the Court of Appeal in the case of Walker Construction (UK) Limited v Quayside Homes Limited & Anor .
Walker was a civil engineering contractor, whose business involved carrying out drainage and highway works. Quayside was a developer of residential homes, who had secured planning permission to construct more than 300 homes on land known as Willowbank. Walker tendered for some works at the project, and won what in fact became two contracts (for on-site and off-site works).
At the conclusion of the project, a dispute arose between Walker and Quayside in respect of the final payment that Walker had sought. It centred upon Walker's entitlement to be paid for carrying out remedial works - which it had undertaken pursuant to instructions issued by Quayside's contract administrator - but which Quayside argued were in fact merely the correction of Walker's own defects.
County Court proceedings were commenced, with Walker claiming the sum of £23,572 - representing sums due on applications and the full release of retention. Several months later, Walker started an adjudication in respect of what was essentially the same claim. The adjudicator rejected Quayside's arguments that Walker was not entitled to be paid for the remedial works and found that the defects alleged were probably not defects at all: the problems were likely caused by factors for which Walker was not responsible. Accordingly, and save for a small amount of residual retention (£1,774), Walker's claim in the adjudication was a complete success. The sum awarded in the adjudicator's decision was paid in full by Quayside.
The County Court proceedings were stayed for a period. At the conclusion of the stay, Quayside asserted that there were a number of further defects in the works undertaken by Walker - and threatened a claim for damages in the event that Walker did not put them right (which it did not). Quayside corrected the problems and introduced a counterclaim into the County Court proceedings.
Quayside's counterclaim was for £169,139, which included a claim for £8,941 - reflecting a sum that (Quayside believed) had been paid to Walker pursuant to the adjudicator's decision but which:
- was not the subject of a certificate by the contract administrator;
- in fact related to Walker correcting its own defects.
Attempts were made to settle but to no avail, and the matter rumbled on to trial.
The judgment at first instance
The claim by Quayside for the return of the £8,941 was a key issue at trial, but neither party had adduced any evidence to support it.
Quayside's argument on this point was entirely technical. Its position was that, in the legal proceedings, the adjudicator's decision had no status whatsoever. The burden of proof remained, it argued, where the law placed it originally - and the adjudicator's decision did not change this.
Put another way, Quayside's position was that the court - when considering a claim that had already been the subject of adjudication - was required to turn the clock back to the position prior to the adjudication. Given that Walker had adduced no evidence to explain why it was entitled to be paid the sum in question, Quayside said that it was entitled to the money back as a matter of right.
The trial judge accepted this as a general principle. After struggling to establish what Quayside's cause of action might be for the return of this sum, the judge ultimately found that there was an implied term - in any contract to which the Housing Grants, Construction & Regeneration Act 1996 (the Act) applied. This term was that the contractor would repay any money paid by the employer under the terms of the adjudicator's decision, in respect of which the liability to pay was not substantiated by the contractor in any subsequent legal proceedings. The judge found that this cause of action, i.e. for breach of the implied term, had not been pleaded by Quayside - and this aspect of its claim failed for this reason.
Quayside appealed against the judge's finding, arguing that:
- the decision of the adjudicator was only binding until the legal proceedings were commenced;
- Walker was required to prove its entitlement in the usual way, and the burden of proof in respect of a claim did not shift following an adjudication;
- Walker had failed to adduce any evidence in relation to this element of its claim and, in the absence of a certificate from the contract administrator, there could be no entitlement;
- given that the claim was in fact properly pleaded (as it argued), it was entitled to the money back.
Walker had a very different view. Its response to all of this was that:
- if litigation or arbitration was brought, in which the decision of the adjudicator was challenged, that decision did not bind the later tribunal nor did it alter the burden of proof. The judge or arbitrator was required to consider the issue afresh;
- it was not, however, correct to say that it was the mere issue of proceedings to challenge the adjudicator's decision that displaced the decision. In the absence of agreement to the contrary, section 108(3) of the Act provided that there was - until final judgment or award - a valid adjudicator's decision that binds the parties;
- the argument that it was for Walker to prove its entitlement to this element of the claim (again) was inconsistent with this concept;
- in any event, there was no doubt that Walker had carried out the remedial work in question; the dispute centred upon Quayside's position that those works were only necessary due to Walker's own defective work. If Quayside wished to assert this claim, which effectively amounted to a claim against Walker for damages, then it shouldered the associated burden of proof in any event;
- Walker was entitled to be paid for the work that it had done. There was nothing in the suggestion that the absence of a certificate in respect of this work was conclusive as to entitlement.
The Court of Appeal agreed with Walker and found that:
- Walker was not seeking to recover any sum in respect of the works in question: it had already been paid in full pursuant to the adjudication;
- the battleground centred upon Quayside's claim for damages consequent upon Walker's defective work. Quayside did not call any evidence at the trial to support its contention that Walker's works had in fact been defective. Given that the absence of a certificate was not conclusive, there was no basis upon which the Judge could have decided this claim in Quayside's favour.
That dealt with this part of the case fairly easily, which meant that the court did not have to deal with the more difficult question: what is the status of an adjudicator's decision after it has been complied with and the payment made? Just how binding is it? What should a court do when it comes to re-considering a previously adjudicated dispute given that the trial is on any reading "before" the dispute has been "finally determined"?
Viewed another way, during the court proceedings:
- does the adjudicator's decision remain binding and have to be rebutted by the party arguing for a different result; or
- is the dispute to be heard afresh, as if the adjudication had never happened?
While only expressing obiter comments, the Court of Appeal indicated that it was very difficult to accept that an adjudicator's decision has no effect on the burden of proof in subsequent proceedings. This was particularly so, given that section 108(3) of the Act provides that an Adjudicator's decision is binding "until" the final determination by the Court.
Given that the issue had not been argued in detail, the Court of Appeal was reluctant to expressly reject respectable authorities that provided the contrary view (City Inn Limited v. Shepherd Construction Limited  and Coulson on Construction Adjudication (Second Edition)). If the issue had needed to be decided, however, it is easy to see the way the wind was blowing.
In Coulson on Construction Adjudication (Second Edition), the learned author made the following observations (at paragraphs 14.47 onwards):
"A potentially difficult question concerns the status of the adjudicator's decision in any subsequent litigation or arbitration. Let us take, by way of example, a claim advanced by a contractor in adjudication that he was entitled to a 20-week extension of time, and assume that this claim was advanced to the satisfaction of the adjudicator, who decided that 20 weeks was a reasonable entitlement, even though there was an absence of detail that, in arbitration or litigation, might have proved fatal to the whole claim. The employer then says that he wishes to challenge the adjudicator's decision, and there is subsequent litigation between the parties. Is the contractor entitled to rely in his pleaded defence upon the adjudicator's decision in support of his claim for an extension of time of 20 weeks, contending that it was for the employer to demonstrate that the adjudicator was wrong in reaching his decision?
It seems that the unequivocal answer to this question is no ... it would be for the contractor properly to plead and prove his entitlement to the 20-week extension of time".
In the light of the Court of Appeal's obiter comments, the point may not be as unequivocal as once thought. It is difficult to speculate what this could mean in practice. In many cases it will matter little; in others, a shift in the burden of proof could be significant. We must wait for a case in which the point does need to be decided. Given that this argument is now in the arena, one suspects that we will not need to wait too long.