Herschel Engineering Ltd v Breen Property Ltd

Factual and Procedural Background

The Plaintiff entered into a contract with the Defendant in June 1999 for electrical and other work at a specified address for a sum of £33,871. The contract contained a clause providing for disputes to be referred to adjudication under the Housing Grants, Construction and Regeneration Act 1996 ("the 1996 Act"). The Defendant refused to pay two invoices submitted as stage payments. The Plaintiff commenced proceedings in the county court seeking judgment for the unpaid sums. The Plaintiff obtained judgment in default of defence, which the Defendant successfully applied to set aside, gaining unconditional permission to defend. The court stayed the proceedings for 28 days to consider adjudication, and the Plaintiff appealed this decision.

Meanwhile, the Plaintiff initiated adjudication proceedings, nominating an adjudicator who later resigned due to fee disputes. The Defendant applied for an injunction to restrain adjudication, but the application was never heard. The Plaintiff issued a fresh notice of adjudication, and a new adjudicator was appointed who decided in favour of the Plaintiff, ordering the Defendant to pay specified sums plus VAT, interest, and costs. The Defendant did not participate in the adjudication. The Plaintiff then applied for summary judgment to enforce the adjudicator's decision, to which the Defendant responded by pleading that it was being vexed by concurrent proceedings over the same subject matter.

Legal Issues Presented

1. Whether a party may validly refer a dispute to adjudication under section 108 of the 1996 Act when court proceedings concerning the same dispute are already pending.
2. Whether commencing court proceedings amounts to a waiver or repudiation of the right to refer disputes to adjudication under the contract or statute.
3. Whether the court should grant a stay of execution of the adjudicator’s decision pending the final determination of the county court proceedings.

Arguments of the Parties

Defendant's Arguments

• The court should not allow concurrent proceedings concerning the same cause of action; since the county court proceedings predated the adjudication, an injunction should have been granted to restrain the adjudication.
• The Plaintiff waived or repudiated the right to adjudication by commencing court proceedings first.
• Relied on case law to support the principle that a party should not pursue the same relief in different tribunals simultaneously, including McHenry v Lewis, Royal Bank of Scotland Ltd v Citrusdale Investments Ltd, and Doleman & Sons v Ossett Corporation.
• Argued that the adjudicator’s jurisdiction is incompatible with pending court proceedings and that the Plaintiff should be restrained from enforcing the adjudicator’s decision.

Plaintiff's Arguments

• Section 108(2) of the 1996 Act expressly permits referral to adjudication "at any time," including when court proceedings are pending.
• Adjudication is a statutory, interim dispute resolution mechanism distinct from arbitration or litigation, and the principles governing arbitration do not apply.
• The commencement of court proceedings does not waive or repudiate the right to adjudication since the right is imposed by statute and is not purely contractual.
• The 1996 Act contemplates concurrent adjudication and litigation/arbitration proceedings and intends adjudication decisions to be provisional pending final resolution by court or arbitration.

Table of Precedents Cited

Court's Reasoning and Analysis

The court acknowledged the well-established legal principle that a party should not pursue the same claim in multiple proceedings simultaneously, as this is oppressive and risks inconsistent decisions. This principle is well-founded in cases involving concurrent court proceedings or arbitration and court proceedings.

However, the court distinguished adjudication from arbitration, emphasizing that adjudication is a statutory interim process with decisions that are binding only temporarily until final resolution by court or arbitration. Unlike arbitration, adjudication rights are imposed by statute and can be exercised "at any time" under section 108(2) of the 1996 Act, including when court proceedings are pending.

The court found no statutory or contractual basis to prevent a party from referring disputes to adjudication while litigation is ongoing, nor to treat commencing court proceedings as a waiver or repudiation of the right to adjudication. The statutory scheme contemplates concurrent adjudication and litigation/arbitration, with adjudication intended to provide a quick, provisional determination to alleviate delays inherent in litigation or arbitration.

The court acknowledged potential hypothetical abuses, such as using adjudication opportunistically during litigation delays, but noted that such situations would be addressed by the court’s discretion, including the possibility of staying enforcement of adjudication decisions.

Finally, the court considered whether to stay enforcement of the adjudicator’s decision pending the outcome of the county court proceedings. It declined to grant a stay, reasoning that if the Defendant’s appeal succeeds, the judgment would be restored, causing no prejudice. If the appeal fails, the trial would likely be delayed for months, and withholding the funds awarded by adjudication would contradict the 1996 Act’s intent. No evidence suggested the Plaintiff would be unable to repay if the adjudication award was overturned.

Holding and Implications

The court granted summary judgment in favour of the Plaintiff, allowing enforcement of the adjudicator's decision despite concurrent pending court proceedings.

The court held that under the 1996 Act, a party may validly refer a dispute to adjudication "at any time," including when litigation is pending, and that commencing court proceedings does not waive or repudiate the right to adjudication. The decision confirms the statutory nature of adjudication as an interim dispute resolution mechanism that can run concurrently with litigation or arbitration.

The court refused to stay execution of the adjudicator’s decision pending the final resolution of the county court proceedings, emphasizing the legislative purpose of prompt dispute resolution and the absence of prejudice to the Defendant.

This ruling clarifies that adjudication under the 1996 Act operates independently of court proceedings and that parties cannot rely on traditional principles against concurrent proceedings to avoid adjudication enforcement. No new precedent was established beyond applying the statutory scheme as enacted.