Restraining commencement of adjudication during COVID-19 restrictions: MillChris Developments Ltd v Waters (2020)
The restrictions imposed by the UK Government in order to tackle COVID-19 present a unique set of challenges to parties seeking to conduct…
The restrictions imposed by the UK Government in order to tackle COVID-19 present a unique set of challenges to parties seeking to conduct adjudication proceedings. Those challenges include for the responding party compliance with the special notification conditions often imposed by insurance policies in the event that a Referral Notice is received.
A recent authority has considered the threshold to be met by parties when applying to the Court to prevent an adjudication proceeding. We consider the significance of that decision as well as how parties can seek to comply with the notification requirements of their insurance policies during the current COVID-19 restrictions.
COVID-19 & adjudication – introduction
There has been much debate over the impact of the current COVID-19 restrictions on the ability of parties and adjudicators to fully participate in adjudication proceedings. Whilst those involved in the administration of justice have been considered to be essential workers so that they may continue to send their children to school and may travel to and from court. On the 22nd March 2020, the courts adopted the Protocol Regarding Remote Hearings for use in cases that are short, interlocutory and which do not involve witness to be heard remotely, and this is being used with great effect using a variety of different methods and technologies. However, what is the effect of the current restrictions on adjudication proceedings? Do the current restrictions prevent parties and their insurers from fully preparing their evidence and submissions with the effect that disputes cannot be determined in a manner consistent with the rules of natural justice, and in those circumstances, should adjudicators resign their appointments?
In many cases, adjudications will be capable of being conducted without too much difficulty if the parties behave reasonably and are prepared to be flexible in their approach. Adjudicators and parties who frequently get involved in adjudications will typically have systems in place that will allow the proper conduct of referrals. Evidence and submissions can be served electronically, and even where a meeting with an adjudicator is considered necessary, these can be carried out via video-link or telephone. Nevertheless, the current restrictions may very well impact the ability of parties to collate all relevant documentation, obtain evidence from witnesses and for experts to carry out appropriate investigations in the time available. Adjudicators will naturally need to be alert to the importance of not placing the parties, witnesses and experts at risk of contracting COVID-19. If it is genuinely the case that a party is unable properly to prepare its case, an adjudicator should consider whether the difficulties prevent the conduct of the proceedings in accordance with the rules of natural justice. If not, they should resign. But under what circumstances will the court intervene to prevent an adjudication from proceeding?
Decision in MillChris Developments Ltd V Waters (2020)
In this case, an employer engaged the contractor to carry out works to her property and commenced adjudication proceedings against the contractor for the recovery of an overpayment. An adjudicator was appointed and directions were given for the exchange of evidence and for a site inspection. The contractor contended that it would be impossible to comply with those directions due to the COVID-19 restrictions. In response, the adjudicator decided to proceed with the adjudication but suggested that there be a two week extension of time to the timetable.
The contractor brought an application for an injunction to restrain the employer from proceeding with the adjudication. It was argued that in light of the COVID-19 restrictions, the adjudication proceedings would be conducted in breach of the rules of natural justice.
Whilst the court acknowledged a jurisdiction to restrain an adjudication from proceeding, it would only exercise that jurisdiction in exceptional circumstances. In order for an injunction to be granted the court had to be satisfied that there was a serious issue to be tried in that the adjudication would necessarily be conducted in breach of natural justice with the inevitable consequence that it would be unenforceable. Whilst recognising that that granting an injunction on that basis would be unprecedented, the court would intervene if, for example, the adjudicator had made it clear that they only intended to hear from one party in the adjudication. On the facts of the present case, the threshold for granting the injunction had not been met.
The nature of adjudication meant that issues had to be addressed within a short time scale. The contractor had failed to explain why papers could not be transported or scanned over to the solicitor or anyone else instructed with the matter. The reason given for the contractor’s inability to adduce evidence had nothing to do with the COVID-19 restrictions. Their former managing director could not deal with the matter within the short time available. If the applicant could have accepted the adjudicator's offer of a two-week extension to the adjudication process this could have overcome any difficulties in obtaining the necessary evidence. Finally, the parties to an adjudication had no right to be present at a site visit. The adjudicator could therefore conduct the site visit on his own. Whilst the employer was likely to be present as it was her property, arrangements could be made for the visit to be recorded or for the employer to list specific matters for the adjudicator's attention beforehand. Accordingly, the injunction would not be granted and the adjudication should proceed
Impact of special notification conditions
Consideration of the impact of COVID-19 on adjudication proceedings raises the corollary issue of compliance with the notification conditions found in policies of insurance. For obvious reasons, parties seeking an indemnity under a policy of insurance in connection with a referral to adjudication are commonly subject to strict notification provisions. Those notification conditions commonly include a requirement to inform insurers within a matter of days of a receipt of Referral Notice, failure to comply with which may entitle insurers to refuse an indemnity to a related claim.
Businesses may have offices closed at present and may also be experiencing staff absences due to sickness, self-isolation or furlough. Such circumstances could make compliance with notifications difficult. Nonetheless, we recommend that insured parties remain mindful of the special notification requirements provided by their policies of insurance and endeavour to comply so far as possible in the circumstances. We anticipate that insurers will consider on a case by case basis the difficulties presently faced by policyholders when responding to instances where a special notification condition has been breached. Where a responding party discovers that a special notification condition has inadvertently not been met, it is recommended that the party contacts its brokers and insurers so as to minimise the period of any breach of condition.
Adjudicators are likely to be alive to the difficulties faced by parties to adjudications in preparing their evidence and are likely to be sympathetic to attempts by referring parties to ambush their opponents by suggesting appropriate extensions of time. Whilst they should be aware of the need to resign their appointment if a dispute cannot be determined in accordance with the usual rules of natural justice, the parties would be well advised to recognise the need for them to adopt a reasonable and flexible approach in order to overcome any perceived difficulties. Should they fail to so, or in the absence of compelling evidence the perceived difficulties are incapable of being overcome, a court is unlikely to intervene.
At the same time, responding parties should keep a close eye on the notification conditions of any relevant policies of insurance. Wherever possible, a responding party should endeavour to comply with those conditions and the tight notification timetable they often require.