The forum for challenges to an adjudicator’s jurisdiction

On 17 August 2023, the Irish High Court delivered judgment in K&J Townmore Construction Limited v Keogh [2023] IEHC 509. The key question for the court was whether a challenge to an adjudicator’s jurisdiction should take place before the adjudication process, by way of judicial review, or after the adjudication process, by way of enforcement proceedings under the Construction Contracts Act 2013 (Act).

The court considered that the case raised a matter of significant public importance, namely: can the legislature’s intention of creating an alternative to litigation be thwarted by one party subjecting the adjudication process to litigation by the back door, i.e. by judicially reviewing the adjudicator’s decision?

The court concluded that appropriate forum for considering jurisdictional issues is enforcement proceedings and not judicial review proceedings.

This decision appears finally to answer the question as to whether an adjudicator’s decision is susceptible to judicial review: it is susceptible in principle, but the High Court will not be inclined to grant leave to an application for judicial review of the decision. 

Background

A sub-contractor referred a payment dispute to adjudication against Townmore, the contractor. An adjudicator was duly appointed. The contractor invited the adjudicator to resign on the grounds that the dispute that the sub-contractor had referred to him was not a payment dispute as defined in the Act, as it was (the contractor alleged) made prematurely and partly related to damages for delay and disruption. The adjudicator issued a non-binding decision concluding that the adjudication would proceed. By way of judicial review, the contractor sought an order quashing the adjudicator’s decision to continue with the adjudication.

The central issue for the court was whether the most appropriate remedy for the contention that the adjudicator lacked jurisdiction was an order by way of judicial review. The contractor contended that it was the most appropriate remedy because, if the adjudicator did not have jurisdiction, the contractor would have to participate in an adjudication process unnecessarily. The sub-contractor argued that the most appropriate remedy was to challenge the adjudicator’s jurisdiction at enforcement proceedings as envisaged by the Act.

Decision

The court had to weigh the superficially-attractive argument that a contractor should not have to participate in an adjudication process that may turn out to have no jurisdiction, against the rationale of the Act and the public interest. The court considered that it was crucial to understand the rationale of the Act in determining whether enforcement proceedings were an appropriate and alternative remedy to judicial review. Twomey J considered that the intention of the legislature was clear in that:

‘30 … every building contractor who is subject to the terms of the Act is entitled to use this quick and cheap dispute resolution procedure to resolve any dispute regarding payments due under the building contract. It seems clear that the Oireachtas regarded it as being a matter of public interest that all builders should be able to benefit from a cheap and fast adjudication process, so that there is little delay in them being paid for work that they have done.’

The rationale for the Act and the public interest prevailed. Twomey J concluded that the appropriate forum for dealing with jurisdictional challenges was enforcement proceedings. His reasons included the following:

1. The Act was designed to provide payments to a party to a construction contract at a prompt pace. The speedy resolution of payment disputes is in the public interest and those involved in the construction industry perform an important role in providing housing and critical infrastructure in the State.
2. A party seeking to challenge an adjudicator’s jurisdiction by way of judicial review might do so for tactical reasons, so as to have the dispute decided by the court or at arbitration.
3. If leave to apply for judicial review were granted, the involvement of judicial review in the process would mean that there would be a significant impact on the time it would take to resolve the dispute (whether by the adjudicator or by a court/arbitrator), thus failing to achieve an aim of the Act. Anecdotally, judicial review could delay the adjudication process by almost one year. This period would increase if appeals were taken.
4. Judicial review had the potential to escalate costs.
5. The Act did not provide for judicially reviewing an adjudicator’s decision, but did provide for enforcement proceedings at which stage jurisdictional challenges could be raised.
6. It was likely that the adjudication process would be stayed if leave to apply for judicial review were granted, and the Act did not contain a provision to extend the 28-day period to reach a decision in the event of judicial review. The court considered that if leave were granted, the jurisdiction of the adjudicator to make a decision would automatically cease at the end of the 28-day period unless the parties otherwise agreed.
7. The adjudication process may result in a resolution acceptable to both parties.
8. A duly-appointed adjudicator is entitled to exercise powers lawfully confirmed.
9. The enforcement machinery provided for in the Act is particularly suitable to the speedy resolution of disputes in construction contracts.
10. In this instance, the dispute was between a private sub-contractor and private contractor, albeit that the adjudicator was appointed under the Act. In essence, the dispute was a private dispute. In such circumstances, a private law remedy was more appropriate rather than a public law remedy of judicial review.

Twomey J concluded that:

’79 … the High Court has made it clear that jurisdictional disputes regarding an adjudicator appointed under the 2013 Act are dealt with at the enforcement proceedings stage of the adjudicative process. For this reason, it seems to this Court that this is the ‘appropriate’ and ‘alternative’ remedy that exists for jurisdictional challenges, rather than a standalone judicial review of the adjudicative process.

80 … it seems to this Court that the intention of the 2013 Act is to provide for a speedy and relatively cheap way of resolving construction disputes (relative, that is, to the very significant cost of High Court litigation). If this means that judicial review is not available to [the contractor] to challenge the Adjudicator’s jurisdiction in advance, but that it must challenge that jurisdiction as part of the enforcement proceedings after the adjudicator’s decision, this appears to be a price, which the Oireachtas regards as worth paying for a cheaper and quicker alternative to litigation. It seems to this Court that [the contractor] is in a similar position to all other parties wishing to challenge an adjudicator’s decision, which is provisionally binding, but can be rendered invalid at the enforcement proceedings stage – albeit that it relates to jurisdiction, rather than how the Adjudicator reached his decision.

81 … permitting a party to a construction contract dispute to impose expensive and slow litigation, in the form of judicial review, on this process would run completely contrary to the intention of the Oireachtas, as well as providing an incentive for employers/main contractors to delay payments to building contractors by judicially reviewing the adjudication process.’

Conclusions

This judgment brings a degree of clarity to the court’s approach to adjudication in the context of judicial review and is another example of the court’s support for adjudication. The court commented that if leave to apply for judicial review was granted this would have amounted to a reversal of the ‘pay now, argue later’ principle into an ‘argue now, pay later’ principle – being exactly the opposite of what was intended by the Act.

Shortly after the commencement of the Act in 2016 commentators raised the question as to whether or not an adjudicator’s decision would be susceptible to judicial review. The consensus was that it would be susceptible.  This judgment appears to provide that, while an adjudicator’s decision is susceptible in principle to judicial review, the High Court will not be inclined to grant the leave required to pursue such a review – because of the time and costs involved, in the context of a process that is intended to be relatively quick and cheap, and because the existing enforcement process provides sufficient protections for adjudicating parties. 

For further information in relation to this topic, please contact Conor Owens, partner, Enda O'Keeffe, partner, Paul Hughes, senior associate, or any member of ALG's Construction & Engineering team.

Date published: 23 August 2023.