Irish High Court says no to JR in advance of enforcement

When is the last time you saw an adjudicator as party to proceedings in the High Court?

Have you ever heard of the “argue now, pay later principle regarding adjudication?

Did you see the recent opening line “Are there badgers at Solent Airport” last month in England?

If your answers are “never, no and no” then get the kettle on…

The Irish High Court has just released judgment in K&J Townmore Construction Limited and Damien Keogh -v-  Deslend (Mechanical) Limited T/A Cobec Engineering Group 2023/874JR. the opening words of Twomey J sitting are:

“The only people who can litigate in the High Court are paupers or millionaires”

Not a bad start… and I don’t disagree, especially when considering that Ireland has been reported as one of the world’s most expensive places to undertake litigation (See page 267: here)

Twomey gets to the point early that the Construction Contracts Act 2013 was an attempt by the Oireachtas to address the costs of litigation.

Those reading this will be familiar with construction adjudication being (or at least intended to be) an affordable alternative to litigation.

The Issues at Hand

In something I have seen threatened before in the Irish adjudication process, the High Court granted leave for Townmore to undertake a judicial review into to the merits of what was, ostensibly, a payment dispute under a construction contract: one where Townmore sought judgment that an adjudicator did not have jurisdiction.

Twomey, [at para 4] noted that this was ‘matter of significant public importance’ and one which must consider (given the Oireachtas sought to implement adjudication as an alternative to litigation) how might litigation via “the back door” impact this? In other words, how might an early judicial review prior to the conclusion of an adjudication affect the “pay now argue later principle that overshadows adjudication.

It is worth noting that it appear that this was such an important question to be answered, that the Courts convened during their summer holidays to have it heard by way of an urgent application: an attempt to prevent the adjudicator delivering his decision.

Background to Adjudication in Ireland

The reader will most likely already be aware that adjudication introduced via the act was intended to be a more cost effective and timeous method of resolving payment disputes in the Irish construction industry period.

In terms of challenging any adjudicator’s decision, at para 7 it is noted that an aggrieved party can, in effect, challenge/appeal the decision of the adjudicator:

 “The Act does so by providing that the adjudicator’s decision is not enforceable until there is a decision of the High Court to enforce the adjudicator’s decision.”

Facts of this case

In short, some brief facts include that:

·        Townmore were main contractor to Cobec under a contract to provide M&E works

·        Adjudicator decision of 18 July 2023 that he would NOT resign as adjudicator

·        Townmore claimed that he did not have jurisdiction to hear the payment dispute

·        Townmore alleged that it did not haver to participate in adjudication because it lacked jurisdiction:

o  Because the dispute was not a payment dispute; and

o  Because the adjudicator could not hear claims for loss and expense arising from disruption; and

o  Any such award would be a claim in damages so again (not a dispute as to payment)

·        The adjudicator chose to not resign, and proceed

This left the key question for the High Court as to whether its determination of the challenge to the Adjudicator’s jurisdiction should take place before the adjudication process is complete (i.e. prior to enforcement, as is allowed for under the Act) or not.

Entitlement to judicial review

In bringing this case, Townmore sought a determination that judicial review / via certiorari (a writ) was the correct action, whereas “Cobec” argued that the appropriate remedy was by way of enforcement proceedings.

In essence Townmore sought to plead that it is not equitable that it should have to wait to find out that in adjudicator did not have jurisdiction (presumably under enforcement proceedings or other litigation) and that the matter ought to proceed straight to judicial review: In other words, it argued why should it have to participate in an adjudication where an adjudicator does not have jurisdiction, all the way through to enforcement proceedings, when it can have the matter settled at the outset.

Townmore argued that enforcement proceedings did not provide an effective or appropriate remedy because they would occur after the decision of the adjudicator, and went on to argue that any approach contrary to this would be “unlawful” [para.24]. No doubt this pricked a few ears in the benches…

Twomey outlined [at para 25] that it was:

“crucial to understand the rationale for the 2013 Act in the first place, since this is an important factor in this Court’s decision”

 He went on to state that the “unusual provisions” which fall under the Act were in place to:

 “ensure that builders are paid quickly”.

Remember: cash is the lifeblood of the industry.

Binding pending High Court Action / Natural Justice

At para 32 the Court considers Aakon and Principal IEHC 578 in detail and reiterates (from Principal) that while an adjudicators decision is binding, it will not be enforceable prior to a judgement of the High Court (either enforcement or otherwise having the matter opened up) and when in the High Court it may actually become unenforceable (as noted by Meenan J. in Principal) on the ‘grounds of jurisdiction or natural justice’.

As I wrote on the judgement in the case of DNCF Ltd v Genus Homes Ltd [2023] IEHC 490 handed down last week (here) there is a very narrow context under which an adjudicator ‘s decision may be challenged: essentially a grave a breach of natural justice.

The Decision

All things considered, Twomey gets to the nub of the matter, stating:

“It seems to this Court that [Meenan J’s] analysis in [Principal IEHC 578] is exactly what should be done regarding Townmore’s claim, namely that it is the job of the High Court in the course of the enforcement proceedings, to consider whether the adjudicator had jurisdiction to adjudicate on the dispute (whether an initial jurisdiction to make the decision, or that he acted outside his jurisdiction in the course of decision-making).” [para 36]

He continued:

“it seems clear to this Court that when a paying party has an issue in relation to whether a dispute is a ‘payment dispute’ for the purposes of the 2013 Act, or otherwise claims that an adjudicator does not have jurisdiction, as in this case, the appropriate forum in which this issue is resolved is not by way of judicial review, but by way of challenge to the adjudicator’s decision as part of the enforcement proceedings.” [para 38]

In the interests of brevity, some of the other reasons cited for his reasoning includes included:

·        Adjudication is intended to bring about the speedy resolution of payment disputes in building contracts;

·        Adjudication reduces the legal costs for contractors seeking payments allegedly due;

·        The Oireachtas has already considered and provided enforcement mechanism without judicial review;

·        Opening up such cases to judicial review would lead to Employers/main-contractors intentionally delaying payment of builders/sub-contractors;

·        If left to run, the adjudication process may result in an award acceptable to both parties;

·        A duly appointed Adjudicator is entitled to exercise powers lawfully conferred on him [NB a real boon for those seeking to resist jurisdictional challenges)

·        The “existing machinery” is particularly suitable for building contract disputes

In rounding up, the Court noted that:

“Townmore may well feel hard done by, because it has to engage in the Adjudication process, if it turns out that it is successful, at the enforcement proceedings stage, at establishing that the Adjudicator did not have jurisdiction in the first place.” [para 78]

Fair enough, but it seems there is no now alternative for them. It continued:

“the High Court has made it clear that jurisdictional disputes regarding an adjudicator appointed under the 2013 Act are dealt with at the enforcement proceedings stage of the adjudicative process.”

So, Twomey re-iterates that the process is intended to be a “speedy and relatively cheap way of resolving construction disputes (relative, that is, to the very significant cost of High Court litigation)” and that any decision “is not enforceable until there has been a decision of the High Court to that effect” [para 31 referencing Simons J in AAkon]

Twomey also writes that the Oireachtas determined that the public interest favoured a ‘pay  now, argue later’ approach after considering “the competing interests of the various parties to a construction contract dispute” – a fine way of addressing the power/ payment imbalance that arises as a natural consequence of how construction projects operate under a payee and payer relationship, where the payer hold the cards (and the cheque book).

Twomey sums the decision up well in stating that:

“permitting a party to a construction contract dispute to impose expensive and slow litigation, in the form of judicial review, on this process would run completely contrary to the intention of the Oireachtas, as well as providing an incentive for employers/main contractors to delay payments to building contractors by judicially reviewing the adjudication process.”

And that anything otherwise would reverse that “pay now argue later” principle.

Interestingly his parting shot [para 83] was to order the parties to engage to see whether agreement could be reached regarding “all outstanding matters” and without the need for further “court time”.

And that, is a wrap…