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The court stops attempts to avoid the consequences of an adjudicator’s decision

  • United Kingdom
  • Construction and engineering - Articles

15-11-2018

Ealing Care Alliance Ltd v London Borough of Ealing [2018] EWHC 2630 (TCC)

Summary

The case considers the enforcement of an adjudicator’s decision and reinforces the established principal that the Courts will not assist parties to avoid the effects of an adjudicator’s decision. The implications of this decision emphasises that if a party disagrees with an outcome at adjudication, to avoid enforcement, it must follow up with legal proceedings, otherwise the adjudicator’s decision will be enforced.

Facts

The dispute arose from a PFI Framework Agreement (the “Agreement”) between Ealing Care Alliance Ltd ( the “Claimant”) and London Borough of Ealing (the “Defendant”). The Agreement was for the provision of care home services which the Claimant was to provide to the Defendant for a term of 27 years.  The Agreement had a benchmarking mechanism built into it to ensure that both parties were protected against the increase or decrease in the cost of the provision of the services. If the event that the benchmarking exercise produced a 10% or greater difference in the cost of the services, an option to elect to proceed with market testing arose.

In March 2017 the parties undertook a benchmarking exercise, this resulted in the parties being in dispute and referring a dispute to adjudication. The adjudicator’s decision provided that the benchmarking exercise had been validly undertaken which meant that either party had the right to require that the services be market tested.

The Defendant served a Notice of Dissatisfaction regarding the adjudicator’s decision and sought to pause the market testing process pending final determination of the issue by the Court. When it became clear that the Claimant was intent with continuing with the market testing, as per the adjudicator’s decision, the Defendant sought to have the following text added to the tender information issued as part of the market testing exercise:

ECA’s right to undertake this market testing process, is the subject of a legal challenge by the Council” and “The Council reserves the right to make further comments in relation to the Market Testing Proposal”.

The Claimant issued Part 8 Proceedings for a declaration that it was entitled to proceed with the market testing without the Defendant’s qualifying wording featuring within the tender documentation.

Decision

The two questions the Technology and Construction Court (“TCC”) had to answer were (1) should the proceedings be stayed and (2) should the TCC grant the declaration?

(1)  Should proceedings be stayed?

Clause 14.2.6 of the Agreement provided that in the event the parties were unable to agree the market testing proposal then the dispute will be referred to adjudication. The Defendant considered that the dispute over the qualifying wording fell within this clause and therefore should be referred to adjudication.

The TCC rejected this logic and held that the dispute between the parties was about the impact of the adjudicator’s decision, not about the market testing proposal itself. The qualifying statement was not related to the substance of the market testing proposal, rather it was an attempt to influence how the adjudicator’s decision was to be enforced. Therefore, the request to stay the adjudication was rejected.

(2)  Should the Grant of Declaration be given?

In answering this question the TCC looked at guidance from Office Depot International v UBS Asset Management (UK) Limited and Others [2018] EWHC 1494 (TCC). In imposing the qualifying statement in the Claimant’s tender information the Defendant sought to hinder the market testing exercise. The Defendant’s argument was that granting the declaration would prevent the parties resolving the true dispute in the case which, they argued, was that they disagreed with the merits of the adjudicator’s decision. This argument was rejected by the TCC. At the time of the TCC’s decision the Defendant had not issued proceedings to challenge the adjudicator’s decision, the Court subsequently decided that there was “no reason not to grant the relief sought because there is another underlying issue between the parties which is not yet before a Court”.

Practical Considerations

In this case, the Defendant sought to indirectly avoid the consequences of the Adjudicator’s decision by preventing the Claimant from proceeding with its contractual right to move to market testing. These attempts were thwarted by the TCC.

Serving a notice of dissatisfaction is unlikely to have to have an impact on whether declaratory relief is or is not granted. Efforts to avoid the decision of an adjudicator should be limited to legal proceedings if a party wishes to avoid the adjudicator’s decision being enforced or to request a stay.