A good day for adjudication in Ireland: DNCF Ltd v Genus Homes

Key takeaways from the case:

This case – DNCF Ltd v Genus Homes Ltd [2023] IEHC 490 – shows that the Irish High Courts will not resist the enforcement of an adjudicator’s decision over trivial matters, unless there is an obvious breach of fair procedures such that it would be “unjust” to enforce the immediate obligation to make payment.

The Judgement confirms that the Irish High Court continues to support statutory adjudication in Ireland under the Construction Contracts Act 2013.

Background

The decision reapplies some of the principles defined in Aakon Construction Services Ltd v. Pure Fitout Associated Ltd [2021] IEHC 562, that adjudication is not an iterative process as it is designed to be far more expeditious than arbitration or litigation.

In this case, the payer sought to resist enforcement citing that the adjudicator breached fair procedure by not properly considering the respondent’s defence in relation to a payment certificate:

“in essence, that the adjudicator had regard to issues which had not been raised by the parties and failed to canvass the views of the parties on these issues.” (paragraph 3)

They raised five objections as follows:

Key Issues

The key issues to be decided by the Court were:

The Legal Test to Enforce an Adjudicator’s Decision

While discussing the legal test that governs an application to enforce an adjudicator decision Justice Garrett Simons quoted the judgment of John Paul Construction Ltd v. Tipperary Co-Operative Creamery Ltd [2022] IEHC 3 (Paragraph 10 to 12) thus making it the litmus test to determine the strength of one’s case prior to the application:

“The High Court will not lend its authority to the enforcement of an adjudicator’s decision, even on a temporary basis, where there has been an obvious breach of fair procedures. This restraint is necessary to prevent an abuse of process and to uphold the integrity of the statutory scheme of adjudication. It would, for example, be inappropriate to enforce a decision in circumstances where an adjudicator had refused even to consider a right of set-off which had been legitimately asserted by the respondent. It would be unjust to enforce such a lopsided decision.

Further:

“The High Court will only refuse to enforce an adjudicator’s decision on the grounds of procedural unfairness where there has been a blatant or obvious breach such that it would be unjust to enforce the immediate payment obligation. The court will not be drawn into a detailed examination of the underlying merits of an adjudicator’s decision under the guise of identifying a breach of fair procedures.”

The Judge further mentioned that one contingency that may lead the High Court to refuse the leave to enforce when the adjudicator refused even to consider a defence or right to set off which was legitimately asserted by the respondent. He mentioned paragraphs 15-17 of the decision in John Paul Construction Ltd v. Tipperary Co-Operative Creamery Ltd [2022] IEHC 3 and stressed upon the fact that it is important to differentiate between the adjudicator dismissing a line of defence on the merits and the failure to consider a line of defence.

“The High Court will adopt a pragmatic approach in assessing an allegation that there has been a breach of fair procedures by dint of a failure properly to consider the defence made to a claim. The court will have regard to the adjudicator’s decision in the round: the decision is not to be parsed line-by-line… It is important to distinguish between (i) the rejection of a line of defence as inadmissible, and (ii) the failure to consider a line of defence…. Similarly, it is important to distinguish between (i) the dismissal of a defence on the merits, and (ii) the failure to consider a line of defence…”

The Adjudicator on a Frolic of His Own

The respondent provided a defence that the claim for the set-off was dismissed by the adjudicator as the issues were not raised by the parties. It mentioned that if the adjudicator considers issues not submitted to him then it would be “an adjudicator going off on a frolic of his own” as he will be providing a decision without giving the parties an opportunity to comment on the matters important to his decisions. The Court said if there is such a case then it would be considered a breach of fair procedures (paragraph 11):

“Of course, if an adjudicator has genuinely gone off on a frolic of his own and has reached a decision by reference to a legal or factual point which had not been advanced by either side, and which the parties could not reasonably have anticipated might be considered relevant, then this would reach the threshold of a blatant or obvious breach of fair procedures…”

Case Laws of England and Wales

In its defence, especially in relation to the point of the adjudicator going off in a frolic of his own, the respondent heavily relied upon case laws and cited an impressive body of caselaw from England and Wales, and from Scotland.  Judge Garret Simons commented, while signposting us towards the decision in Aakon Construction Services Ltd v. Pure Fitout Associated Ltd [2021] IEHC 562, that these case laws should be used with care as there are significant differences between the procedures that govern enforcement in all these jurisdictions (paragraph 9):

“As explained in Aakon Construction Services Ltd v. Pure Fitout Associated Ltd [2021] IEHC 562, case law from England and Wales must be approached with a degree of caution. This is because there are significant differences between the legislative schemes adopted in the two jurisdictions. There are also significant differences in the procedure governing the enforcement of an adjudicator’s decision. These distinctions are all too easy to miss in that many of the concepts underlying the UK legislation seem familiar to us. Care must be taken not to lose sight of the distinctive feature of the Construction Contracts Act 2013…”

Is Adjudication Iterative?

The Court considered the paying party’s argument heavily relied upon the assumption that adjudication is iterative but it “is not what the law requires”. The Judge quoted the decision in Aakon Construction Services Ltd v. Pure Fitout Associated Ltd [2021] IEHC 562 and implied that the purpose of adjudication is to be expeditious therefore it would always “be less elaborate than conventional arbitration or litigation.”

Adjudicator Cajoling the Parties

The Judgement highlights an important point that the adjudicator is not obligated to initiate a dialogue with parties and advising them regarding improving their respective cases but it could only be done at his discretion (paragraph 36):

“.., An adjudicator does not have a role in cajoling the parties to elaborate or improve upon their cases. The adjudicator was entitled, consistent with fair procedures, to reach a decision on the basis of the materials put before him by the parties. The adjudicator was not obliged to enter into a dialogue with the employer nor to invite the employer to shore up its defence by adducing further evidence. Indeed, there would be no such obligation on a court of law to do so in similar circumstances.”

Grounds to Refuse Enforcement

Justice Garrett Simons decided that the Courts will only refuse enforcement when there is an obvious breach because otherwise, it would be against the “pay now, argue later” spirit of the Construction Contracts Act 2013 (paragraph 10):

“…The High Court will only refuse leave to enforce an adjudicator’s decision on the grounds of procedural unfairness where there has been a blatant or obvious breach such that it would be unjust to enforce the immediate payment obligation. The logic of the “pay now, argue later” principle is that the appropriate remedy for a party, who is aggrieved by an adjudicator’s decision, will normally be to pursue the issue in subsequent arbitral or court proceedings. In the interim, the party is expected to discharge the sums awarded in the adjudicator’s decision: these payments can be recouped if the arbitral or court proceedings are ultimately successful.”

The Court further commented that the burden of proof lies upon the applicant to prove that there has been a blatant breach of fair procedures and it significantly affected the adjudicator’s decision (paragraph 48):

“The onus is upon the party resisting an application for leave to enforce an adjudicator’s decision to demonstrate that there has been an obvious breach of fair procedures such that it would be unjust to enforce the adjudicator’s decision, even on a temporary basis. The breach must be material in the sense of having had a potentially significant effect on the overall outcome of the adjudication…”

The Court did not find an obvious breach of fair procedures and the adjudicators’ decisions were enforced.

Conclusion

The case would be a guiding light for future applications for enforcement. It also exhibits the Irish Courts’ unwavering support towards maintaining the spirit of the Construction Contracts Act 2013 and adjudication being an “expeditious” dispute resolution process. Other points to note are:

Nouman Qadir MCIOB, PMP, ACIArb is Junior Associate at Quigg Golden Solicitors LLP