COVID-19: How can a party best prepare for and respond to an adjudication during COVID-19?

We consider the facts and implications of MillChris Developments Ltd v Waters decision, to provide practical tips to prepare for and respond to an adjudication.

27 May 2020

The recent judgment of MillChris Developments Ltd v Waters [2020] 4 WLUK 45 (MillChris Developments Ltd v Waters) clarifies that an adjudication timetable should not be affected by the COVID-19 health crisis if there are clear workarounds which can allow the adjudication to proceed.

 

In this legal update we consider the facts and implications of the MillChris Developments Ltd v Waters decision, and draw from our own experience of the adjudication process during the COVID-19 health crisis to provide parties currently thinking about adjudication with a series of practical tips on how best to prepare for and respond to an adjudication.

MillChris Developments Ltd v Waters

The Facts

In this case an injunction was sought by the contractor to prohibit a home owner from proceeding with an adjudication on the basis that the COVID-19 health crisis adversely affected the contractor’s ability to obtain evidence and therefore respond properly to the claim.

The dispute centred on purported defective works at the home owner’s property. It was also alleged that the home owner had been overcharged for these works by £45,000. The contractor ceased trading in November 2019, and on 23 March 2020 the home owner commenced an adjudication.

 

An adjudicator was appointed and the timetable set, including a site visit to the property in question. The contractor subsequently wrote to the adjudicator on 26 March 2020 saying that that it was not possible to comply with the deadlines set out in the adjudication timetable because of the COVID-19 health crisis. The contractor requested that the adjudication be postponed until the lockdown measures were lifted. The adjudicator responded and said that the adjudication should still proceed but proposed a two week extension to the adjudication timetable.

 

The contractor did not agree to the proposed extension. The contractor submitted that if the adjudication went ahead it would be conducted in breach of the rules of natural justice because:

 

a) it did not have sufficient time to prepare its response due to the COV1D-19 health crisis and because it was no longer trading;

 

b) the contractor’s solicitor had been forced to self-isolate at home which made it difficult to obtain and collate evidence; and

 

c) there was insufficient time to appoint an independent surveyor to attend the site visit, and therefore it would be unfair to the contractor to proceed with this site visit.

 

The Decision

The application was refused and the adjudication allowed to proceed.

The Court has the power to grant an injunction in respect of an on-going adjudication but will do so very rarely (applying Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (in Liquidation) [2018] EWHC 2043 (TCC)).

 

The Court will only grant an injunction in cases where it is satisfied that:

 

a) there was a serious issue to be tried;

 

b) damages would not be an adequate remedy; and

 

c) the balance of convenience lies with the party applying for injunctive relief (the America Cyanamid test) (applying American Cyanamid Co v Ethicon Ltd [1975] A.C. 396).

 

The contractor did not get past the first hurdle. The Judge decided that there was no serious issue to be tried. This was primarily because the contractor had not shown that it had been prevented from preparing for the adjudication. It appeared that the real reason for the inability to obtain evidence was due to the fact that the contractor was unable to contact its former managing director which was unrelated to the issues raised. It was also noted that no attempt had been made to contact the former project manager.

Practical Tips

The COVID-19 health crisis has undoubtedly changed our everyday lives. Consequently, it comes as no surprise that it would also impact a party’s ability to raise and respond to disputes during the COVID-19 health crisis. However, the Courts are clear that this should not mean that access to dispute resolution should be unavailable to a party during this period, especially where there are practical workarounds which can be agreed by the parties. The current successful use by the Courts of virtual hearings is a case in point.

 

Adjudication is a favoured form of dispute resolution in the construction industry, with one of its main advantages being the flexibility it offers in terms of timetable and evidence. It is also a relatively quick process, which can lead to a decision of a dispute within 28 days. This quick turnaround can be vital if a party is experiencing cash flow issues, which is something that is becoming more common during the COVID-19 health crisis.

 

Drawing from the judgment of MillChris Developments Ltd v Waters, our own experience of acting for parties referring and responding to adjudications, and where members of the team have acted as adjudicator, during the COVID-19 health crisis, we set out the following practical tips on how parties can best use the flexibility available and prepare for and respond to an adjudication:

 

1) Promptly make the adjudicator aware of any issues which may affect your ability to respond, and request an extension to the adjudication timetable, with reasons, as soon as possible. When responding to such requests, act reasonably. An adjudicator’s overriding objective is generally to give each of the parties a fair opportunity to put its case across and will take a dim view of either party appearing to seek an unfair advantage on the back of logistical issues. At the end of the day, the more unfair the advantage the greater the opportunity for challenge, so fairness in process is usually in everyone’s interests. Also, inevitably, the pressure on responding shifts with each submission from one party to the other and acting unreasonably in agreeing directions has a habit of backfiring.

 

2) Make use of the electronic resources available to you but pay extra care if relying solely on them. Sending documents in hard copy may prove difficult during the COVID-19 health crisis. We therefore recommend that the parties agree a workable process of document exchange as soon as possible. This could be via email or use of a Data Room. However, many adjudicators will still require hard copies and will be reluctant to try and cobble together the electronic bundle for fear of missing something. So you may still need to build in time for the production and delivery of documents which can prove more challenging with COVID-19 related restrictions. An adjudicator and parties will usually be happy to receive electronic versions of submissions with hard copies following a day or so later. If you are going to rely exclusively on electronic documents, do ensure they are very simply navigable.

 

3) Only include documentation which is considered to be 'essential' to the dispute. In the recent case of TPS Investments (UK) Limited v Tucker [2020] (unreported) the Court has provided some commentary on the preparation of electronic bundles for use in applications/trials. Even though this case did not involve an adjudication, the key message from the Court in respect of electronic bundles is that early preparation is important, and that parties should only include documentation which is considered to be 'essential' to the dispute. Parties should keep this in mind when using electronic resources to prepare for and respond to an adjudication.

 

4) Consider a virtual meeting. Meetings are reasonably common although adjudication decisions reached on documents only are still by far the most common. The COVID-19 health crisis has encouraged the use of virtual technology and it may well be that meetings become more common as they become far less expensive. Our experience to date with virtual hearings / meetings has been very positive. A key issue for adjudicators is how submissions and any evidence adduced is recorded so it is important to give that careful thought before seeking or arranging a meeting. Site visits are rare but if vital to the dispute in question, such as the viewing of alleged defects, it is difficult to see how this could be effectively done using video conferencing alone, as someone has to operate the camera and both parties will want to see that is done fairly. It is more likely that if a site visit is required parties will need to plan on the basis that social distancing rules will need to be followed as on any construction site.

 

5) Draft clear and concise documents to tell 'the story'. This is something that the parties should be doing regardless of the COVID-19 health crisis. However, care should be taken in cross referencing documents, in particular where a document has already been referred to in the dispute. This will help to avoid duplication of the documents and will focus the adjudicator’s attention on your submissions. In particular, try to avoid the scenario where the adjudicator is required to refer to multiple documents to piece together the facts. This is hard enough with hard copy documents but can be very challenging when using electronic documents, in particular for the less 'tech savvy' adjudicator with only one screen.

 

6) Be proactive in contacting parties who you may need to rely on when referring and responding to an adjudication. Sometimes adjudications can land as a surprise to some parties. However, more often than not parties are alive to the fact that a dispute is brewing and an adjudication may be coming in. As soon as you are aware that an adjudication may be landing, ensure that you contact any third party that you may need to rely on in providing evidence or expert advice and ask that they confirm their availability as best they can. This maybe a previous project manager, an employee of the business and/or an expert.

 

7) Get on top of document management early. It is now more important than ever to keep clear electronic records relevant to your contract in an easily accessible folder on a server. If you do end up in a dispute which has been referred to adjudication you do not want to waste any time in locating any key or relevant documents relating to the dispute because of poor document management.

 

This legal update was written by Laura Murray. If you would like to discuss this briefing, or how we can assist, please speak to Richard Adams or Jessica Evans in the construction team or your usual Burges Salmon contact.

Key contact

Richard Adams

Richard Adams Partner

  • Construction and Engineering
  • Construction Disputes
  • Infrastructure

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