Traditionally, injunctions have not been used to stop adjudication proceedings. There are two main reasons for this. Firstly, the adjudication process generally lasts no longer than 35 days. Whilst applications for injunctions can be made very quickly and generally this will be heard by a court at its earliest convenience, there are still likely to be difficulties in bringing it before a court prior to the date of the adjudicator’s decision. Secondly, rather than try and derail the adjudication at the time, an aggrieved party will generally wait for the adjudicator’s decision, and if necessary, commence further proceedings to overturn it.
However, the two recent cases of Twintec v Volkerfitzpatrick and T Clarke v MMaxx Underfloor Heating have caused practitioners to reconsider this position with the courts providing some guidance as to if and when they may grant an injunction application to halt adjudication proceedings.
An injunction is essentially an order of the Court that restrains a party from carrying out a particular act. Failing to comply with an injunction can result in contempt of court which is a very serious offence. Injunctions are therefore a powerful tool and, in the case of adjudication, an injunction could stop it before it has even begun.
Twintec v Volkerfitzpatrick
This case concerned the construction of a warehouse and bottling plant near Bristol. There was already a £170m multi-party dispute under way in court. Volkerfitzpatrick commenced adjudication proceedings against Twintec, claiming £850,000 in relation to alleged poor workmanship.
Twintec applied to the court for an injunction restraining Volkerfitzpatrick from pursuing the adjudication. The application was made on the basis that the timing of the adjudication placed significant pressure on Twintec and its advisors in light of the ongoing litigation proceedings and was only brought in order to cause maximum disruption and heap pressure on to Twintec’s experts.
The court granted the injunction but this was on the basis that the adjudicator had not been validly appointed. However, the court provided some useful guidance on when an injunction would be granted in circumstances where there was not such a ‘technical knockout’. The court confirmed that it would grant an injunction where it was “unreasonable and oppressive” to allow the adjudication to continue. The court indicated that both elements of this test must be present to a fairly high degree. The court also acknowledged that even though Twintec and its advisors would have been placed under “great pressure” by the adjudication, this was not sufficient to meet the high threshold.
For a full discussion of Twintec v Volkerfitzpatrick, please see our previous update which is available to read here.
T Clarke v MMAXX Underfloor Heating
This case came after Twintec and the court shed further light on what amounts to being “unreasonable and oppressive” when considering whether to allow an adjudication to continue.
Here, T Clarke had been appointed to carry out mechanical and electrical works in the redevelopment of a primary school. T Clarke appointed MMAXX as their subcontractor to install underfloor heating and heat pumps as part of the works. The working relationship between the parties deteriorated very quickly, amid concerns that T Clarke had over the conduct of MMAXX.
Over a period of ten months, nine adjudications were started, eight of which were initiated by MMAXX. Of the eight adjudications that MMAXX started, the adjudicator resigned in five of them. MMAXX discontinued during one adjudication and was unsuccessful in another. MMAXX had minor success in one adjudication, albeit it was only awarded £17,000 out of the £185,000 it had put forward in its “significantly exaggerated claim”.
At the end of this ten month period in March 2014, T Clarke applied for an interdict (the Scottish equivalent of an injunction) to prevent MMAXX from commencing any further adjudications. T Clarke submitted that MMAXX had acted improperly in respect of the earlier adjudications and there was a reasonable apprehension that it would continue to do so. Furthermore, Parliament had granted a right to refer genuine disputes to adjudication but that right did not extend to sham disputes. It was claimed that MMAXX’s conduct amounted to an abuse of process and T Clarke had incurred significant irrecoverable expenses in dealing with the adjudications.
The court looked at all the circumstances of the case and considered whether MMAXX’s conduct was “unreasonable and oppressive”. In this case the court refused to grant the interdict on the following bases:
- In the circumstances, there was no clear inference that MMAXX had acted “unreasonably and oppressively”. The majority of their adjudications had failed on a procedural issue and on the evidence it was not clear that the latest referral was an abuse of process.
- To grant the interdict would prohibit MMAXX from initiating any further adjudication, no matter how genuine.
- MMAXX would be significantly prejudiced if it could not take advantage of the quick and cost effective means of dispute resolution provided by adjudication.
- T Clarke had another remedy as it could raise an action seeking damages for abuse of process.
The court acknowledged that a “cloud of suspicion” hung over MMAXX’s conduct but it would only be in the most exceptional circumstances that a court would deprive a party of an express right conferred by Parliament. In the circumstances, T Clarke had failed to prove that MMAXX was deliberately abusing the process and so its application was dismissed.
On the authority of Twintec, the court may grant an injunction to stop an adjudication where there are procedural irregularities. However, the practical application of Twintec is likely to be limited. The facts of the case were unusual in that there were already ongoing litigation proceedings before the court. Accordingly, the parties were able to appear before a judge at very short notice. In ordinary ‘stand-alone’ adjudication proceedings there are likely to be difficulties with obtaining an injunction in such a short time frame.
Whilst the courts have accepted that, in principle, they can deprive a party of their statutory rights to refer a matter to adjudication, each case is very fact specific and it has to be shown that the conduct of the offending party is both unreasonable and oppressive. That test was not met in either of the cases discussed above. It is evident that any party seeking to use an injunction to restrain adjudication proceedings will have to overcome an extremely high threshold and it will only be in the most exceptional of circumstances that a party’s statutory right to adjudicate will be curtailed. Given the court’s reluctance to fetter a party’s statutory rights, it will be interesting to monitor developments in this area to see how extreme the conduct of the offending party must be before the courts deem it to be “unreasonable and oppressive”. When this is coupled with the difficulty of bringing an injunction application within the requisite time frame, it currently appears that it will be virtually impossible to obtain an injunction to stop adjudication proceedings.
In light of the court’s suggestion that a party may have an adequate remedy for this mischief in the already well-established tort of abuse of process, it will also be of considerable interest to see whether a new body of authorities develops in this niche area of construction law.
DWF LLP’s Construction, Infrastructure & Projects team has a wealth of experience advising clients on all areas of construction law including adjudication, litigation and other means of dispute resolution.
If you have any further questions or queries arising out of this article please contact Tom ListerThis information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.