Adjudication of contract disputes is meant to be a swift and relatively cheap means of achieving justice. However, the High Court has expressed concern that too many adjudicators’ decisions are being challenged on meritless grounds and has laid down a marker that those who pursue such cases will be financially penalised.
Company A had engaged company B to carry out mechanical and electrical work at a Central London hotel. The former disputed the latter’s final bill and, after months of fruitless negotiation, the dispute was put before an adjudicator. He ruled in favour of company B and awarded it £77,993, plus VAT and interest.
Company B launched proceedings to enforce the award but company A challenged the adjudicator’s decision on a number of grounds. Its arguments that the dispute had not crystallised prior to the adjudication, and that elements of the procedure breached rules of natural justice, were, however, rejected as hopeless.
Observing that the adjudicator’s decision should long ago have been honoured, the Court noted judicial concern that such decisions were being too often challenged on unarguable grounds. In those circumstances, company A was ordered to pay interest on the award at an enhanced rate of 6 per cent. Company B’s total award, with VAT and interest, came to £111,088. Company A was also ordered to pay the substantial legal costs of the action on the punitive indemnity basis.