Stuart Pemble considers the concept of “manifest injustice” in the enforcement of adjudicators’ awards
Key points
- The “manifest injustice” has to be considered by the courts when hearing an application to enforce an award
- There were not going to be opportunities for Estura to revisit the amount due to Galliford Try on an interim basis
Every so often, a judgment comes along that makes lawyers sit up and wonder why no one had spotted the legal point in issue any sooner. One of two things tends to happen. Either the decision suffers from a collective outbreak of jurisprudential amnesia and is promptly ignored. Or a judicial hare is set running that results in everyone acknowledging (with the benefit of hindsight) the judgment as the ground-breaking moment when the law changed.
Edwards-Stuart J’s decision in Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC); [2015] PLSCS 74 has all the hallmarks of being one of these enigmatic cases. An adjudicator had found against Estura, ordering it to pay Galliford Try just under £4m plus VAT. The judge accepted that the law required him to award summary judgment against Estura for the entire amount but he was persuaded not to enforce the decision in its entirety. In only requiring Estura to pay £1.5m of the award within 14 days, with the balance to be stayed, the judge could well have changed the law in relation to adjudication enforcement quite significantly. He has added the concept of the “manifest injustice”, which could be suffered by the paying party, to the mix of issues which the courts have to consider when hearing an application to enforce an award.
The facts
In April 2012, Estura had employed Galliford Try under a JCT design and build contract. By the time of interim application number 60 (for the circa £4m which was the subject of the court hearing), Galliford Try was anticipating a final contract value of £12.66m, nearly £5m more than the original contract sum.
Estura faced a number of problems. First, the contract was caught by the changes to the Housing Grants, Construction and Regeneration Act 1996 (the 1996 Act) which had come into force in October 2011.
Next, it had failed to challenge the application by way of a pay less notice. It was this failure which had resulted in the adjudicator finding against it. In a decision that actually came out just after the adjudicator’s award (but arguably did no more than confirm that the law was the same following the October 2011 changes to the 1996 Act as it was before), the same judge ruled that a failure by an employer to serve a pay less notice in relation to an interim application or certificate meant that the employer was deemed to have agreed to the value of works in that application or certificate (ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC); [2015] PLSCS 72). While the decision in ISG did allow for the employer to revisit the amount due to the contractor in the future, application 60 was the last interim application under the contract. There were not going to be any opportunities for Estura to revisit the amount due to Galliford Try on an interim basis.
Estura’s final difficulty was that, if the award was enforced, it would have paid Galliford Try the full amount of the anticipated final account less only £4,000. Estura was concerned that this would leave Galliford Try with little, if any, incentive ever to present its final account and then negotiate on it. If no final account was presented, Estura would not have an opportunity to challenge the amount claimed in order to crystallise a dispute which could, in turn, be referred to adjudication or be the subject of court or arbitral proceedings. Although the JCT contract did allow for Estura to take the initiative in relation to the final account in the absence of an application, the judge estimated that this could take between six to nine months to resolve.
Estura’s challenge
This left Estura with no option but to refuse to pay and seek to persuade the court to support it when Galliford Try applied for summary judgment.
While it did not succeed entirely, the fact that it was not ordered to pay the full amount of the adjudicator’s award is striking. As Edwards-Stuart J acknowledged, none of the reasons why the courts normally refuse to enforce adjudicators’ awards (such as a jurisdictional challenge) applied in this instance. The only option left was to persuade the judge to stay enforcement of all or part of the award.
Estura referred to a principle first put forward by Judge Toulmin CMG QC in Hillview Industrial Developments (UK) Ltd v Botes Building Ltd [2006] EWHC 1365 (TCC):
“…the purpose of the 1996 Act is to provide a statutory framework which would enable justice to be done between parties to a dispute. It was not intended to cause injustice. This can, in appropriate cases, be dealt with by the grant of a stay. I am satisfied that the jurisdiction in adjudication enforcement cases to grant a stay under the CPR must be limited to cases where there is a risk of manifest injustice.”
Estura’s problems were in part of its own making since it had not served a pay less notice. And, although the evidence was confusing on this issue, Estura was not in a financially strong position.
The judge clearly had some sympathy for its position. He was therefore willing to attach significant importance to Judge Toulmin’s opinion in Hillview and stay the enforcement of a significant proportion of the award. That stay could be varied or lifted if further evidence came to light about Estura’s finances or once Galliford Try had submitted its final account.
Until now, the manifest injustice argument had not created much interest in adjudication circles. The question going forward will be whether its endorsement by Edwards-Stuart J is a one-off or marks a significant change in judicial approach.
Stuart Pemble is a partner at Mills & Reeve
