Court hears Black Sheep but upholds contractor’s right to proceed to adjudication

It is becoming almost a matter of routine that some parties who lose an adjudication come up with more and more sophisticated arguments when seeking to resist the enforcement of an adjudicator’s decision that has gone against them. But what about avoiding that altogether by trying to stop an adjudication from starting in the first place?

In the recent case of Mars Black Sheep Hotels Limited ( ‘Black Sheep ‘) v Douglas & Stewart UK Limited
(‘D&S ‘)
which was decided in the Court of Session on 13th August 2109 Lord Doherty recalled an interim interdict previously granted ex parte ( without opposition present) which had prevented a construction company, D&S, from proceeding with an adjudication to establish additional sums allegedly due to it for building work done for hotelier, Black Sheep.

Background

D&S contended that it was due further sums from Black Sheep for work that had been done in addition to the payment of c. £6. 5 million already paid.  D&S gave Black Sheep notice of its intention to suspend performance. Black Sheep reacted by indicating that it was terminating D&S ‘s contract. D&S then served a notice of adjudication followed by a referral. It was only at that point that Black Sheep claimed for the first time that it had been induced to enter into the contract by misrepresentation on the part of D&S.

A court action was then commenced by Black Sheep seeking interdict to prevent the adjudication proceeding, reduction of the contract and payment of £3.8 million with interest from D&S.

Decision

When D&S sought recall of the interdict to allow it to proceed with the adjudication and the matter was fully argued before Lord Doherty, he took the view that although Black Sheep had set out a prima facie case of alleged misrepresentation which had to be considered, he was not convinced that it was a strong prima facie case. When he then looked at the balance of convenience he decided that it favoured the defenders, D&S.

Black Sheep had not raised the challenge to the contract until very late in the day - after the adjudication had been commenced. Parliament intended that parties to construction contracts should have a right to refer disputes to adjudication so that a speedy interim but binding decision could be obtained. Based on earlier legal authorities the judge stated that the court should be ‘… very wary indeed of preventing a party from pursuing a right to adjudication’. In the whole circumstances of this case he was satisfied that the balance of convenience favoured the recall of the interim interdict which would thus allow D&S to proceed with its adjudication.

Black Sheep sought and was granted leave to appeal by Lord Doherty because ‘the decision was an important one for the parties which raised an issue of wider interest’.

Comment

Many will see this case as a brave decision seeking to give effect to the will of Parliament in the particular circumstances of this case. It remains to be seen if the Appeal proceeds and whether the Appeal Court agrees with Lord Doherty’s approach. If the appeal were to  succeed, it is likely to give rise to other such cases which would effectively remove what many consider is the relative speed, low cost and effectiveness of adjudication. Watch this space!

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