Can COVID-19 stop Adjudication in a construction dispute?

Posted on: May 14th, 2020

Last month, a decision was handed down in Millchris Developments Ltd v Waters [2020] 4 WLUK 45, which may well be the first decision considering the impact of COVID-19 in a construction dispute.

The Facts

Millchris had carried out works for Waters over two years ago, but ceased trading in November last year.  Waters considered there to be defects in the work and that, consequently, they had been overcharged, so they brought adjudication proceedings in March 2020.

Directions were set by the adjudicator, including evidence required to be served by 3 April 2020 and a site visit booked for 14 April 2020.  Normally, that would not be a problem, but this was during the government’s “lockdown” period, due to the current COVID-19 pandemic.

Millchris sought to postpone the adjudication directions until the lockdown had been relaxed, arguing it was not possible to comply with the timetable at this time.  They issued injunction proceedings, arguing that it would be a breach of the rules of natural justice if the adjudication continued because it could not prepare properly for several reasons, including allegations that:  (i) their solicitor was self-isolating; (ii) this effected collating witness evidence; and (iii) it would not be represented at the site visit and could not appoint an independent expert in time to attend.

Decision

Millchris failed to get the injunction.  The court applied the tests for granting an interim injunction in American Cyanamid Co v Ethicon Ltd [1975] A.C. 396, including: (i) Is there a serious issue to be tried?; (ii) Would damages be an adequate remedy? and (iii) Where is the balance of convenience?  Additionally, the law is clear that a court will only grant an injunction during an adjudication very rarely and in clear cut cases.  

In this case, amongst other things, the following points arose from the court’s decision:

  • It is commonplace for adjudications to contain tight deadlines;
  • Parties have no inherent right to attend a site visit. It could have been recorded, or any specific matters could have been brought to the adjudicator’s attention before the site visit;
  • Remote technology has been widely implemented by professional businesses such that an expert or a solicitor should be able to assist from a distance using appropriate technology, scanning documents digitally if required;
  • More effort should have been made to contact any relevant witnesses.

Conclusion

The reasons for the injunction were essentially not due to COVID-19, so it is too early to conclude that COVID-19 can never be used to argue a breach of natural justice, or lead to an injunction.  Every case will have different facts.  However, in my view, there appears to be a strong determination by the High Court Technology & Construction Court, in particular, to continue with hearings and battle against COVID-19, so one can assume this will be the general trend that Courts will adopt. 

Having said this, it is clear that a site visit will rarely be the basis of a successful natural justice challenge and a party will have to demonstrate that all efforts have been made to contact witnesses and use appropriate technology and software before it can persuade a court to halt an adjudication process. 

This case in fact sends a strong, positive message to the construction sector that not even a global pandemic will deny parties the benefits of adjudication.