This summer, the Technology and Construction Court in London (“the TCC” or “the Court”) handed down the judgment for Home Group Limited v MPS Housing Limited [2023] EWHC 1946 (TCC) (“HGL v MPS”). The judgment criticised the position that some disputes referred to adjudication are so large or so complex that they materially impact a party’s ability to respond fairly to the claim, therefore creating a breach of natural justice. Parties have sought to challenge adjudicators’ jurisdiction on this basis, failing which they have sought to resist enforcement of the adjudication decision. This argument has been tried and tested prior to HGL v MPS – unsuccessfully. This case was no different and reiterated that the Court will rarely accept resistance to enforcement. What was refreshing about the judgment however was the discussion around what really constitutes a complex dispute. Does more money really equate to more complex problems?
This article will provide a summary-insight into the facts and issues in HGL v MPS, as well as a commentary on some of the lessons to be learned from both this case, and Quigg Golden’s own experience.
HGL V MPS
In HGL v MPS, Home Group Limited (“HGL”) sought enforcement of an adjudication decision whereby MPS Housing Limited (“MPS”) was ordered to pay HPL a sum of £6,656,831.94 plus interest, and 85% of the adjudicator’s fee. An earlier adjudication decision had determined that MPS had repudiated the contract by wrongfully terminating it, and this second adjudication was commenced by HGL to recover the sums owed to it pursuant to that termination.
MPS sought to resist enforcement on the basis that it should have been provided with a greater opportunity to digest and respond to the material within HGL’s Referral Notice (“the Referral”). It contended that it did not have the ability to respond fairly to the claim due to the time constraints, and this was a breach of natural justice that had a material impact on the outcome of the adjudication. HGL’s claim was made up of a very high number of work items, each with a relatively low value. The Referral included a large volume of data, including a quantum export report that was comprised of 155 pages, with 76 appendices holding over 200 files. The Referral contained an additional 2,325 files across 327 sub-folders, five witness statements across 88 pages of drafting and hundreds of additional exhibits to those witness statements.
MPS raised three jurisdictional challenges after the Notice of Adjudication was served by HGL, one of which was based on an argument that the case was too large and/or complicated to be the subject of an adjudication. The adjudicator rejected this challenge, amongst the others. Upon receipt of the Referral, and therefore the large volume of data, MPS invited the Adjudicator to reconsider his jurisdiction on the same grounds of complexity, or in the alternative, give MPS sufficient time to review and respond. The adjudicator did not resign, but he did offer an extension for the Decision of 14 days, which would have included a five-day extension for MPS to serve its response to the Referral. HGL was agreeable to this suggestion, however, MPS rejected it “as a result of a strategic decision to maintain its jurisdictional objections”.
During the enforcement proceedings before the Court, MPS made three interrelated submissions to resist enforcement:
The Court rejected all the above arguments, stating that they were without merit. The Court found that MPS’s claim that it did not have access to the relevant material until the last moment to be ill-founded; HGL had provided MPS with a draft of the export report contained in the Referral some two months before the adjudication and had invited MPS to visit its offices to review the quantification of the claim, albeit by way of a sampling process rather than an analysis of every line item, which MPS rejected. The Court expressed that a review of each line item would not be realistic or necessary in any event and included a paragraph on the legal position that an adjudicator is entitled to proceed by way of sampling and/or spot checking when reaching their decision.
The Court also identified that MPS had produced a comprehensive response with a clear agenda for determining the dispute. This observation played a role in deciding against MPS as the identification of the significant areas of dispute and the arguments advanced by MPS, particularly those which successfully undermined high value aspects of HGL’s claim, demonstrated that MPS was able to engage fairly with the claim. The Court ultimately rejected MPS’s position and enforced the adjudication decision by way of summary judgment.
Lessons Learned
This decision was unsurprising and confirmed the position that adjudication decisions will be readily enforced, even if there are errors of procedure, fact, or law. The exceptions to enforcement include where there is a breach of natural justice that leads to a material difference in the outcome, but a finding in favour of that argument will be few and far between. Further, the Court stated that:
“Both complexity and constraint of time to respond are inherent in the process of adjudication, and are no bar in themselves to adjudication enforcement.”
Although, in the same breath the Court did recognise that a combination of complexity and time constraints may, in some cases, give rise to a valid challenge. The threshold remains high however, as where an adjudicator can deliver broad justice to the parties, the Court will still be extremely reluctant to reject enforcement.
Yardsticks for Complexity
In HGL v MPS, the Court offered what you might call yardsticks to measure the complexity of disputes. One of those yardsticks was coined as being “vanilla” and the other the “kitchen sink”. So, what separates the two? Is it the value in dispute? Is it the number of items in dispute? Both? Actually. . . It’s neither.
The answer doesn’t lie in the value of the dispute, or the number of items. In HGL v MPS, there was in or around £9million in dispute, with £6,565,831.94 being awarded to HGL by the Adjudicator, excluding VAT or interest. Despite the very high volume of individual work items, the very high value of the dispute, and MPS’s contentions that the Adjudicator should have resigned “on the grounds of complexity”, the Court rather amusingly stated that this was:
“in reality a vanilla ‘final account’”
What made it so vanilla? The claim, although large, was easily divided into 21 subcategories and was only concerned with the quantum, not the issue of the termination which was dealt with in the first adjudication, nor was this dispute concerned with any delay or extension of time claim. Further, the Court expressed that a review of every line item in dispute was unnecessary in these proceedings as adjudicators are entitled to sample and/or spot check items when assessing the quantum, this is considered appropriate especially in the context of adjudication as the role of the adjudicator is to achieve broad, speedy, and interim justice for the parties, not a perfect or final solution.
So, what type of dispute throw the kitchen sink at the adjudicator or the responding party? Kitchen sink adjudications involve complex claims concerned with delay and extensions of time, as well as money. These disputes require careful analysis of the chronology of the construction project and critical path analysis; which often means that delay and disruption experts are required as well as legal representatives. Entitlement and quantum will be in dispute, which was not the case for the vanilla HGL v MPS where entitlement was decided in the first adjudication, and the quantum claim followed shortly thereafter. It is important to be aware that just because an adjudication falls under this kitchen sink category, that does not mean that there is grounds to resist enforcement. In HGL v MPS, the Court took this opportunity to remind us of Akenhead J’s statement in HS Works Limited v Enterprise Management Services Limited [2009] EWHC 729 (TCC) that:
“Parliament provided for ‘any’ relevant dispute to be referable to adjudication and must have envisaged that there would be simple as well as immensely detailed and complex disputes which can arise on a construction contract.”
Quigg Golden Insight
I recently represented a referring party in an adjudication with similar works to HGL v MPS – both concerned maintenance and repair works, and both disputes involved many works items, in our case well over 9,000 orders comprising of many individual works items that our client sought to recover costs for. We were successful in that adjudication, and considering that decision in conjunction with the guidance provided by the Court in HGL v MPS, there are a few points we would note:
Whilst the Court in HGL v MPS showed support for a sample-led methodology when quantifying claims with high volumes of works items, we would strongly suggest avoiding sample-led quantification where possible or provide as large a sample as practicable. The first thing a responding party will attack is any alleged or perceived lack of substantiation and small samples leave the doors wide open for this type of criticism. Whilst an adjudicator may be more forgiving of a sample-led method, especially in the spirit of rough justice and speedy solutions, there is absolutely no guarantee that this will be the case. We always say the side with the best records win – so have the evidence to hand.
In terms of the complexity of the dispute, I would follow the TCC’s reasoning and agree that our adjudication fell into the vanilla category despite the large value of items and money in dispute. That is not to say that the claim was not nuanced, or that it was a guaranteed home-run – but that the claim was easily categorised into a small number of headings and didn’t require critical path analysis, expert witnesses, or other technical demands. On the flip, we also see disputes with comparatively lower sums attached to them but with many more nuanced issues requiring much more legwork from both us and our clients before and during the adjudication process. Of course, there are also “smash and grab” adjudications where the value in dispute could be into six or seven figures, but the adjudication itself is very simple as it does not require submissions on the actual items in dispute, only on non-compliance with statutory payment provisions.
So, taking all the above into consideration, it can be argued that more money does not equate to more problems – certainly not in the context of construction adjudication anyway.
To discuss any of the issues raised in this article, please contact Emma Payne at: Emma.Payne@QuiggGolden.com
Published 20 February 2024
